AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2002
DELAWARE 2836 25-1741849
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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706 GIDDINGS AVENUE, SUITE 1C
ANNAPOLIS, MARYLAND 21401-1472
(410) 990-9501
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(5) OFFERING PRICE(5) REGISTRATION FEE
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Common stock, $0.01 par value per
share................................. 25,075,033(1) $3.25 $ 81,493,857.25 $ 7,497.43
Common stock, $0.01 par value per
share................................. 16,393,316(2) $3.25 $ 53,278,277.00 $ 4,901.60
Common stock, $0.01 par value per
share................................. 1,602,174(3) $3.25 $ 5,207,065.50 $ 479.05
Common stock, $0.01 par value per
share................................. 103,559(4) $3.25 $ 336,565.75 $ 30.96
Totals.................................. 43,174,082 $3.25 $140,315,766.50 $12,909.04
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(1) These shares are currently outstanding and being offered by certain of our stockholders.
(2) These shares are issuable upon the conversion of 15,372 outstanding shares of Class B Exchangeable Preferential Non-Voting Stock of our subsidiary, 6543 Luxembourg S.A., which are presently convertible. We are registering these shares of common stock for resale after the conversion of the Class B Exchangeable Preferential Non-Voting shares.
(3) These shares are issuable upon the exercise of an outstanding share purchase warrant, which is exercisable at E0.23 per share and expires on July 31, 2003. We are registering these shares of common stock for resale after the exercise of the share purchase warrant.
(4) These shares are issuable upon the exercise of an outstanding share purchase warrant, which is exercisable at $1.725 per share and expires on July 31, 2003. We are registering these shares of common stock for resale after the exercise of the share purchase warrant.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 2002
PROSPECTUS
43,174,082 SHARES
MYMETICS CORPORATION
COMMON STOCK
This prospectus relates to the resale by the selling stockholders identified in this prospectus of:
- 25,075,333 shares of our currently outstanding common stock;
- 16,393,316 shares of our common stock underlying the conversion of 15,372 outstanding shares of Class B Exchangeable Preferential Non-Voting Stock of our subsidiary, 6543 Luxembourg S.A.; and
- 1,705,733 shares of our common stock underlying the exercise of share purchase warrants.
We will not receive any proceeds from the sale of our common stock by the selling stockholders.
The selling stockholders identified in this prospectus, or their pledgees, donees, transferees or other successors-in-interest, may offer the shares from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. We do not know when or in what amounts a selling stockholder may offer shares for sale. The selling stockholders may sell some, all or none of the shares offered by this prospectus.
Our common stock is quoted on the OTC Bulletin Board under the trading symbol "MYMX." On May 13, 2002, the closing high and low prices for our common stock were $3.25 and $3.25 per share, respectively. (May 13, 2002 was the most recent date on which shares of our common stock were traded.)
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF COMMON STOCK.
TABLE OF CONTENTS
PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Forward-Looking Statements.................................. 14
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Capitalization.............................................. 15
Selling Stockholders........................................ 16
Selected Consolidated Financial Data........................ 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 23
Management.................................................. 32
Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 38
Certain Relationships and Related Party Transactions........ 38
Description of Capital Stock................................ 40
Principal Stockholders...................................... 43
Plan of Distribution........................................ 44
Shares Eligible for Future Sale............................. 45
United States Tax Consequences to Non-United States
Holders................................................... 46
Legal Matters............................................... 48
Experts..................................................... 48
Where You Can Find More Information......................... 48
Index to Financial Statements............................... F-1
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Our principal executive offices are located at 706 Giddings Avenue, Suite 1C, Annapolis, Maryland 21401-1472 and our telephone number is (410) 990-9501.
In this prospectus, unless the context indicates otherwise, the terms "Mymetics," "we," "us" and "our" refer to Mymetics Corporation and its subsidiaries.
PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the risk factors and consolidated financial statements and related notes before deciding to invest in our common stock.
THE COMPANY
We are a holding company conducting business through our subsidiaries, 6543 Luxembourg S.A., a joint stock company organized in 2001 under the laws of Luxembourg, and Mymetics S.A. (formerly Hippocampe S.A.), a company organized in 1990 under the laws of France. We were incorporated in July 1994, pursuant to the laws of the Commonwealth of Pennsylvania. In November 1996, we reincorporated under the laws of the State of Delaware and changed our name to "ICHOR Corporation." In July 2001, we changed our name to "Mymetics Corporation." 6543 Luxembourg S.A. is our majority-owned subsidiary, and Mymetics S.A. is a 99.9%-owned subsidiary of 6543 Luxembourg S.A. We acquired 99.9% of the outstanding stock of Mymetics S.A. in March 2001, pursuant to a share exchange transaction. For more details on this share exchange transaction see our Information Statement on Schedule 14C filed with the Securities and Exchange Commission on April 26, 2001.
We currently do not make, market or sell any products or services, and thus, we have no revenues. We believe that our research and development activities, and the resulting intellectual property will lead to the creation of commercially viable products, which can generate revenues for us in the future. If financially favorable terms are available, we may license our intellectual property to third parties. If we fail to develop our intellectual property, we are unlikely to generate significant revenues.
We own all of the outstanding voting stock of 6543 Luxembourg S.A. There are also 15,372 shares of Class B Exchangeable Preferential Non-Voting Stock, or Preferential Shares, of 6543 Luxembourg S.A. currently outstanding, which are convertible into 16,393,316 shares of our common stock. Holders of the Preferential Shares do not have any voting rights with respect to 6543 Luxembourg S.A. However, pursuant to a Voting and Exchange Trust Agreement dated March 28, 2001, the holders of the Preferential Shares are entitled to vote on all matters to be voted on by the holders of our common stock to the same extent as if they had converted the Preferential Shares into shares of our common stock. See "Description of Capital Stock - Preferred Stock."
Our operating subsidiary, Mymetics S.A., is a biotechnology research and development company devoted to fundamental and applied research in the areas of human and veterinary biology and medicine. Our primary objective is to develop therapies to treat certain retroviruses (which are described below), including human immunodeficiency virus, or HIV, the virus that leads to acquired immunodeficiency syndrome, or AIDS. Additional applications of our research include potential treatments and/or vaccines for animal AIDS, human and animal oncoviral leukemias, multiple sclerosis and organ transplantation. To date, we have conducted our fundamental research in Europe.
Our research strategy is to organize and manage a collection of public and private best-in-class research teams, each of which has its own unique focus. We have segmented our primary research into modules, each of which is then outsourced, under our direct supervision, to high-level, specialized and complementary public and private research teams. We retain all intellectual property rights on the joint research and we apply for domestic and international patents whenever justified. As agreed and coordinated by us, the joint research teams are authorized to co-publish their results.
SCIENCE OVERVIEW
Virus. A virus is a noncellular organism consisting of deoxyribonucleic
acid, or DNA, or ribonucleic acid, or RNA, and a protein coat. During the free
and infectious stage of their life cycle, viruses do not perform the usual
functions of living cells, such as respiration and growth. Rather, when viruses
enter a living plant, animal or bacterial cell, they utilize the host cell's
chemical energy and synthesizing ability to replicate. After the replication of
the viral components by the infected host cell, virus particles are released and
the
host cell is often destroyed. The approximately 2,450 viral species identified to date are divided into about 75 groups. One of these groups consists of retroviruses, to which HIV belongs. Retroviruses contain a reverse transcriptase that copies viral RNA back into DNA (the reverse of what usually occurs when DNA is copied into RNA).
HIV. HIV is a type of retrovirus, a virus of the family Retroviridae that has RNA as its nucleic acid and uses the enzyme reverse transcriptase to copy its genome into the DNA of the host cell's chromosomes. Once inside the T cell, HIV uses the cell's machinery to copy its RNA into DNA by means of the reverse transcriptase. HIV is characterized by an inability to mount a normal immune response and is the cause of the fatal illness known as AIDS.
Two strains of HIV have been identified, HIV-1 and HIV-2. The genetic material of these two strains is approximately 60% identical. Each strain contains a number of subtypes, which are slight genetic variations of the virus. At least 32 sub types have been identified to date. These variations result from the high mutation rate of HIV's genetic material. Most variations occur in the gene encoding the GP120 protein, and these mutations can alter the protein's structure. HIV-1 or Type 1 classified as a lentivirus is a subgroup of retroviruses that have been isolated and recognized as the cause of a disease that induces AIDS. HIV-1, like most viruses and all bacteria, plants and animals, has genetic codes made up of DNA, which uses RNA to build specific proteins. HIV's genetic material is the RNA itself. HIV inserts its own RNA into the host cell's DNA, preventing the host cell from performing its natural functions and transforming it into an HIV factory.
AIDS. AIDS is a fatal epidemic disease caused by an HIV infection (HIV-1 or HIV-2). In most cases, HIV slowly attacks and destroys the immune system, the body's defense against disease, leaving the infected individual vulnerable to malignancies and infections that eventually cause death. Propagation of HIV results from the invasion of the host cell and its use of the host cell's protein synthesis capability. The immune system's response (antibodies and cellular immune response) is usually sufficient to temporarily delay progress of the infection and reduce levels of the virus in the blood. Virus replication continues, however, and gradually destroys the immune system by infecting and destroying critical white blood cells known as CD4 cells.
The main cellular target of HIV is a special class of white blood cells critical to the immune system, known as helper T lymphocytes, or T4 helper cells. These cells play a principal role in normal immune responses by stimulating or activating virtually all of the other cells involved in immune protection. These cells include B lymphocytes, the cells that produce antibodies needed to fight infection; cytotoxic T lymphocytes, which destroy cells infected with a virus; and macrophages and other effector cells, which attack invading pathogens. Once HIV has entered the helper T cell, it can impair the functioning of or destroy the cell. A hallmark of the onset of AIDS is a drastic reduction in the number of helper T cells in the body. HIV also can infect other cells, including certain monocytes and macrophages, as well as brain cells. Among those cells are CD4, HIV's preferred target cells due to a docking molecule called cluster designation 4, or CD4, on their surfaces. Cells with this molecule are known as CD4-positive, or CD4+, cells. These cells normally orchestrate the immune response, signaling other cells in the immune system to perform their special functions. Destruction of CD4+ lymphocytes is the major cause of the immunodeficiency observed in AIDS, and decreasing CD4+ lymphocyte levels appear to be the best indicator of morbidity in these patients. As the infection progresses, the immune system's control of HIV levels weakens, the level of the virus in the blood rises and the level of critical T cells declines to a fraction of their normal level.
Viral Envelope of HIV. The viral envelope of HIV is covered with mushroom-shaped spikes that enable the virus to attach itself to the target cell. The cap of each "mushroom" is comprised of GP120 molecules and its stem is comprised of GP41 molecules. GP120 is a glycoprotein that protrudes from the surface of HIV and binds to the CD4 receptor of the CD4+ T-cells. In a two-step process that allows HIV to breach the membrane of T-cells, the GP120-CD4 complex refolds to reveal a second structure that binds to CCR5 or CXCR4, one of several chemokine co-receptors used by the virus to gain entry into T cells. GP41 is a glycoprotein embedded in the outer envelope of HIV and plays a key role in HIV's infection of cells by carrying out the fusion of the viral and cell membranes.
Immune System. The immune system functions to protect the body against infection and foreign substances, including viruses and bacteria. This defensive function is performed by the body's white blood cells (leukocytes) and by a number of accessory cells, including B lymphocytes, the cells that produce the antibodies needed to fight infection, and cytotoxic T lymphocytes, which destroy cells infected with viruses. When an immunocompetent cell recognizes foreign material or a biological invader presented by the macrophages, it normally induces a response. This recognition function relies on the immune system's ability to recognize specific foreign molecular configurations, generically referred to as antigens. T4 lymphocytes, as the central cells of the immune system, specifically recognize foreign invaders presented by macrophages. After specific recognition of a presented antigen, T4 lymphocytes play a major role in the immune response, producing interleukine-2, or IL-2, a central interleukine that activates all of the accessory cells previously described and the overall immune response.
BUSINESS STRATEGY
We have not yet developed an actual product or generated any revenues. Our current objective is to develop a platform of both therapeutic compounds and vaccines that can be commercialized either by our production of these compounds and vaccines ourselves or by licensing our intellectual property to third parties on financially favorable terms.
We have made a series of discoveries about how the body's immune system responds to retroviruses, specifically HIV. The foundation of our platform technology and potential product pipeline is our discovery of a subtle mimicry between the virus and the host cells. By understanding the precise dynamics of the virus's GP41 and the host cell's IL-2, we believe we have the potential to design and develop specific therapeutic molecules and antibodies to disrupt or even prevent HIV. In addition to targeting HIV and AIDS, we hope to apply our findings to the potential treatment or even prevention of a range of additional diseases, including certain oncoviruses like leukemia.
Some biotechnology firms are focusing on slowing or impeding the progress of HIV once it has infected the body's host cells. Other biotechnology firms are attempting to develop therapies that prevent the virus from fusing with host cells. If the virus cannot fuse, it cannot reproduce, and the body's immune system then succeeds in arresting the invasion. Our approach is also based on the concept of preventing viral fusion. Our scientific strategy is unique in that its design is based on a series of discoveries involving mimicry and, in particular, on the inter-reaction between the viral envelope glycoprotein GP41 and the host cell's IL-2. We have discovered that a piece of the virus closely resembles or "mimics" the host cell's IL-2. By exploiting this mimicry, the virus unlocks the host cell and gains access to the cell's machinery. The body's immune system responds to the invasion, but fails to differentiate between the viral GP41 and the host cell's IL-2. As a result, we believe that the immune system attacks the GP41 and the IL-2 with equal vigor. The unfortunate consequence is that the body, in turning on itself, undercuts its own defenses. By better understanding these precise dynamics, we believe we will be able to design and develop specific therapeutic molecules and antibodies to disrupt the mimicry, prevent HIV from entering the host cell and enable the body's immune system to recognize HIV. Our current scientific strategy is to create therapeutic peptides and antibodies to disrupt the mimicry, block the fusion, and condition the body's immune system to recognize GP41 as separate and distinct from IL-2. If this can be accomplished, the body's immune system should be able to identify and attack the virus, instead of the healthy cells.
THERAPEUTIC AND VACCINAL USE OF THE MIMICRY DISCOVERY
Our current research modules focus on the following four fields:
- Fundamental research. We believe that our analysis of the GP41/IL-2 mimicry will enable us to explain, in large part, the main AIDS-associated disorders: drop of peripheral IL-2, decrease of non- infected T helper lymphocytes, lymphoproliferation disorders and a2 microglobulin increase and hypergammaglobulinemia.
- Therapeutic molecules. We believe that, based on the host-virus autoimmune mimicry we are studying, an application involving the development of particular synthetic peptides and monoclonal
antibodies (some of which have already been developed) would inhibit the fusion between HIV and its target cell in an infected subject. Well designed therapeutic molecules would prevent the virus from binding to the target cell and inhibit its attempts to reproduce. Having demonstrated that the transmission of HIV depends on the viral load, and that no transmission has been observed below 1,500 viral copies/ml., treatment with therapeutic agents may provide a strategy to control AIDS epidemicity. This application would complement available antiretroviral drugs, or may even provide a substitute for the available antiretroviral drugs.
- Therapeutic and preventive vaccines. We believe that our discovery of the host-virus autoimmune mimicy opens the door to novel therapeutic and preventive vaccine strategies for both humans and animals. We also believe that specific preventive vaccines we are working to develop would be universal for both HIV-1 and HIV-2, and would provide an all-strain prevention.
- AIDS cartridge. We have developed a number of therapeutic immunocartridges that might help patients infected with AIDS by reducing the viral load. These immunocartridges have been tested and approved by the Ethics Committee for the Treatment of Systemic Lupus Erythematosus and Hemophilia A. Our research has demonstrated that the anti IL-2 antibodies in HIV infected subjects recognize some sites of IL-2 that are crucial for its bioactivity. Therefore, we believe that the development of an "AIDS cartridge" could be effective in the restoration of the immune system (CD4/CD8-viral load) of HIV infected subjects.
We currently have several prototypes potentially capable of commercialization, including:
- Therapeutic molecules (pharmacological agents) -- administered to infected subjects to prevent cell infection by HIV.
- Therapeutic vaccines (immunotherapeutic agents) -- administered to infected subjects to orient the immune system into recognizing the transmembrane glycoprotein of the virus and not the host's IL-2.
- Preventive vaccines -- administered to healthy subjects to prevent infection by HIV.
- AIDS cartridge -- administered to infected subjects to selectively remove the identified immunosuppressive antibodies present in the serum of AIDS patients.
GENERAL INFORMATION
We are incorporated under the laws of the State of Delaware. We have a registered office at 1209 Orange Street, Wilmington, Delaware, United States 19801, and a principal executive office located at 706 Giddings Avenue, Suite 1C, Annapolis, Maryland 21401-1472. Our common stock is quoted on the OTC Bulletin Board operated by the National Association of Securities Dealers, Inc.
We intend to form a new United States subsidiary during the second quarter of 2002. This new subsidiary will focus on applying our research and development to target products and on business development. We believe that this tiered structure has numerous advantages, including greater access to grants, subsidies, intellectual property and public and private research teams. To date, activities such as design of the prototype molecule, synthesis and in-vitro experiments have been and will continue to be conducted mainly in Europe, while pre-clinical studies, toxicological trials, regulatory affairs, investigational new drug applications, or IND applications, Phase I, II, and III clinical trials, and new drug applications, or NDAs, will, after the creation of the United States subsidiary, be conducted mainly in North America.
SECURITIES REGISTERED
The securities being registered by the registration statement to which this prospectus relates are as follows:
Securities offered.......................... 43,174,082 shares of our common stock
Percentage of our outstanding shares
represented by offering(1)................ 85%
Common stock to be outstanding after the
offering(1)............................... 50,977,695
Use of proceeds............................. We will not receive any proceeds from the
sale of our common stock by selling
stockholders. See "Use of Proceeds."
Risk factors................................ An investment in the shares involves a high
degree of risk. See "Risk Factors."
OTC Bulletin Board trading symbol........... MYMX
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(1) This number assumes the issuance of 16,393,316 shares of our common stock upon the conversion of 15,372 outstanding Preferential Shares of our subsidiary, 6543 Luxembourg S.A., and the issuance of 1,705,733 shares of our common stock upon the exercise of an equal number of outstanding share purchase warrants. This number does not include approximately 263,750 shares of our common stock issuable upon the exercise of certain outstanding and fully vested stock options.
EXCHANGE RATES
Consistent with the location of our current research activities, beginning
January 1, 1999, we adopted the Euro (E) as our corporate currency. Accordingly,
except where otherwise expressly noted, the financial information contained in
the registration statement of which this prospectus is a part is provided in
Euros (E). See Note 1 "Foreign Currency" to the Consolidated Financial
Statements contained in the registration statement of which this prospectus is a
part for further explanation. As of May 20, 2002, 1 Euro was convertible into
0.921302 United States Dollars. If, as expected, we form a United States
subsidiary, and such subsidiary results in a majority of our expenditures being
stated in U.S. Dollars rather than in Euros, we may change our corporate
currency back to the U.S. Dollar ($).
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table reflects summary consolidated financial data for our fiscal years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively and for the three month periods ended March 31, 2002 and 2001 (unaudited), respectively. The summary consolidated financial data set forth below should be read along with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto included elsewhere in this prospectus.
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999 1998 1997
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(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues..... 26 13 47 42 14
Research & Development
Expenses............. 482 101 94 70 20
General &
Administrative
Expenses............. 1,034 351 37 38 34
Loss from continuing
operations........... (15,701)(2) (1,314) (99) (68) (40)
COMMON SHARE DATA(1)
Loss from continuing
operations per common
share................ (0.37) (0.04) (0.00) (0.00) (0.00)
Weighted average common
shares outstanding
(in thousands)....... 42,460(3) 33,311 33,311 33,311 33,311
BALANCE SHEET DATA
Working capital........ 565 (652) (24) (40) (46)
Total assets........... 1,692 625 146 77 43
Long-term
obligations.......... 242 242 242 138 70
Total stockholders'
equity............... 693 (765) (257) (158) (90)
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2002 2001
(UNAUDITED) (UNAUDITED)
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(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues..... 5 3
Research & Development
Expenses............. 232 114
General &
Administrative
Expenses............. 250 127
Loss from continuing
operations........... (556) (3,352)(2)
COMMON SHARE DATA(1)
Loss from continuing
operations per common
share................ (0.01) (0.10)
Weighted average common
shares outstanding
(in thousands)....... 49,263(3) 33,586
BALANCE SHEET DATA
Working capital........ (20) 565
Total assets........... 1,315 1,692
Long-term
obligations.......... 242 242
Total stockholders'
equity............... 162 693
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(1) Basic and diluted common share data is the same.
(2) This amount reflects the value of 6,001,693 warrants we issued to MFC Merchant Bank S.A. in 2001 in connection with a credit facility provided by MFC Merchant Bank S.A. The intrinsic value of the beneficial conversion feature of these warrants was calculated to be E14,063 as of March 28, 2001 using the Black-Scholes model. This value is not necessarily indicative of the value of our common stock, or our business as a whole.
(3) The increase in 2001 reflects the shares and warrants granted as fees in connection with the share exchange in March 2001, the credit facility entered into in 2001 and the private placement completed in June 2001.
RISK FACTORS
An investment in our common stock involves significant risks. You should carefully consider the risks described below and the other information in this prospectus, including our consolidated financial statements and related notes, before you decide to invest in our common stock. If any of the following risks actually occur, our business prospects, financial condition or results of operations could be materially harmed, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are those that we currently believe may materially affect our company. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect our company.
WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT TO GENERATE OPERATING LOSSES FOR THE FORESEEABLE FUTURE.
We currently are engaged in research and development activities and do not have any commercially marketable products. The product research and development process requires significant capital expenditures, and we have no other sources of revenue to offset these expenditures. Accordingly, we expect to generate additional operating losses for the foreseeable future.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FUND OUR RESEARCH EFFORTS AND TO FULLY DEVELOP AND MARKET COMMERCIALLY VIABLE PRODUCTS. WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO OBTAIN ADDITIONAL CAPITAL WHEN NEEDED OR THAT SUCH CAPITAL WILL BE AVAILABLE ON FAVORABLE TERMS. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE CANNOT RAISE ADDITIONAL CAPITAL WHEN NEEDED.
The costs associated with our future research and the development of our intellectual property will be substantial. We expect that our existing capital resources will satisfy our capital requirements through approximately December 2002. However, since we do not have any current sources of revenue, substantial additional capital will likely be needed to continue the development and attempted commercialization of our intellectual property. We are unable to estimate with precision the amount of additional capital we may require. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. Currently, we have no commitments for any additional financing, and there can be no assurance that additional financing will be available when needed or, if available, that such capital will be available on favorable terms.
The availability of, and the need for, future capital will depend on many factors, including:
- continued scientific progress in our research and development program;
- results of pre-clinical tests and any clinical trials;
- the time and cost involved in obtaining regulatory approvals;
- future collaborative relationships; and
- the cost of manufacturing and marketing.
If adequate funds are not available, we may be required to curtail or cease operations.
IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR RESEARCH AND INTELLECTUAL PROPERTY, WE MAY NEVER GENERATE SIGNIFICANT REVENUES OR ACHIEVE PROFITABILITY.
Our current objective is to develop vaccine and therapeutic compounds and specific therapies for certain retroviral diseases or diseases with a viral autoimmune content. All of our potential products and production technologies are in the research or development stages and no revenues have been generated from product sales. Our first products and applications will target human and animal AIDS. We will not become profitable, if ever, unless we develop our intellectual property to a level where it can be licensed to third parties on financially favorable terms or applied in the creation and development of one or more commercial products capable of generating significant revenues. We may be unable to develop our intellectual property to the necessary level. Even if we are able to further develop our intellectual property, we may be unable to license
it to third parties on financially favorable terms, if at all, or we may not be able to develop commercially viable products on our own.
Although our due diligence has indicated that our research and discoveries regarding "mimicry" may lead to important discoveries in the scientific community regarding the HIV infection process, other discoveries may be necessary to develop an effective vaccine. We may never be able to develop our research and intellectual property into a commercially profitable product.
Our success will depend on our ability to:
- develop intellectual property that will effectively treat or prevent HIV and/or other diseases;
- effectively commercialize our research through collaborative relationships;
- prepare acceptable protocols necessary to obtain regulatory approvals;
- effectively conduct and conclude clinical trials;
- effectively establish the commercial viability of one or more products; and
- effectively establish marketing and manufacturing relationships.
If we are unable to commercialize our current research, we do not have other products from which to derive revenue. As a result, we may not become profitable and the value of our stock could decline.
WE MUST OVERCOME SIGNIFICANT OBSTACLES TO SUCCESSFULLY DEVELOP AND MARKET PRODUCT CANDIDATES.
The development of product candidates is subject to significant risks of failure, which are inherent in the development of new medical products and products based on new technologies. These risks include:
- delays in pre-clinical testing, product development, clinical testing or manufacturing;
- unplanned expenditures for product development, clinical testing or manufacturing;
- failure of the technologies and products being developed to provide medical benefits or an acceptable safety profile;
- failure to receive regulatory approvals;
- emergence of equivalent or superior products;
- inability to manufacture (directly or through third parties) product candidates on a commercial scale;
- inability to market products due to third-party proprietary rights;
- inability to find collaborative partners to pursue product development; and
- failure of future collaborative partners to successfully develop products.
If one or more of these risks materializes, our research and development efforts may not result in any commercially viable products.
COMMERCIALIZATION OF OUR INTELLECTUAL PROPERTY AND CREATION OF VIABLE PRODUCTS WILL REQUIRE COLLABORATIONS WITH OTHERS. IF WE ARE UNABLE TO FIND COLLABORATORS IN THE FUTURE, WE MAY NOT BE ABLE TO DEVELOP PROFITABLE PRODUCTS.
Our strategy for the research, development and commercialization of products requires us to enter into contractual arrangements with corporate collaborators, licensors, licensees and others. We do not have the funds to develop products on our own, and intend to depend on collaborators to develop products on our behalf. If collaborative relationships cannot be secured, we may not be able to continue our development programs.
Moreover, we could become involved in disputes with collaborative partners,
which could lead to delays or the termination of development programs and
time-consuming, expensive and distracting litigation or arbitration. Even if we
fulfill our obligations under a collaborative agreement, a collaborative partner
may
terminate the agreement or fail to fulfill its obligations under the collaborative agreement. If any collaborative partner were to terminate or breach an agreement with us, or otherwise fail to complete its obligations in a timely manner, our ability to successfully commercialize our intellectual property could be adversely affected.
IF WE ARE UNABLE TO DEMONSTRATE THE RESULTS OF OUR RESEARCH IN CLINICAL TRIALS, OR IF CLINICAL TRIALS ARE DELAYED, WE MAY NOT BE ABLE TO OBTAIN REGULATORY CLEARANCE TO MARKET OUR PRODUCTS IN THE UNITED STATES OR IN FOREIGN COUNTRIES ON A TIMELY BASIS, IF AT ALL.
Assuming we are able to successfully develop our research into potential products, such products will require regulatory approval. Before obtaining regulatory approvals for the commercial sale of any of the products under development, pre-clinical studies and clinical trials must demonstrate that the product is safe and effective for use in each target indication. If any of the products fail in clinical trials, the approval of the United States Food and Drug Administration, or the FDA, and similar agencies operating in foreign countries, will not be obtained for such products, and we will not be able to generate revenues from such products.
Clinical testing is a long, expensive and uncertain process. We are uncertain that the data collected from the clinical trials will be sufficient to support approval by the FDA or any foreign regulatory authorities, that the clinical trials will be completed on schedule or, even if the clinical trials are successfully completed on schedule, that the FDA or any foreign regulatory authorities will ultimately approve the product for commercial use.
Clinical trials could be delayed for a variety of reasons, including:
- delays in enrolling volunteers;
- lower than anticipated retention rate of volunteers in the trials; and
- serious adverse events related to the products being developed.
Our research is presently focused on developing a vaccine against HIV. Trials will be conducted on animals prior to humans. Results of animal trials, even if successful, may not be relevant for determining the protective effect of any potential vaccine against HIV infection in humans. In addition, results from early clinical trials are not necessarily indicative of future results. A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in late stage clinical trials even after promising results in early stage development. Furthermore, pre-clinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approvals. Negative or inconclusive results or interpretations could cause the trials to be unacceptable for submission to regulatory authorities.
POLITICAL OR SOCIAL FACTORS MAY ADVERSELY IMPACT REVENUES BY DELAYING OR IMPAIRING OUR ABILITY TO MARKET OUR PRODUCTS.
We are focused on developing vaccines and products for the treatment and prevention of HIV. Products developed to address the HIV/AIDS epidemic have been, and may continue to be, subject to competing and changing political and social pressures. The political and social response to the HIV/AIDS epidemic has been highly charged and unpredictable. Such political and social forces may serve to delay or prevent introduction of our products into the marketplace or to place restrictions upon the pricing, availability and marketing of such products.
IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS, WE MAY BE UNABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS.
We are dependent on the principal members of our management and scientific staff. In order to successfully complete our research and development activities and our commercialization plans, we will need to hire personnel with experience in clinical testing, governmental regulation, manufacturing, marketing and finance. We may not be able to attract and retain personnel on acceptable terms given the intense competition for such personnel among high-technology enterprises, including biotechnology, pharmaceutical and healthcare companies, universities and non-profit research institutions. Our failure to successfully attract and retain such personnel may result in our inability to develop and commercialize our products.
IF WE FAIL TO ENTER INTO SUCCESSFUL MARKETING ARRANGEMENTS WITH THIRD PARTIES, WE MAY NOT BE ABLE TO COMMERCIALIZE PRODUCTS.
We do not currently have any sales or marketing infrastructure, and we do not have significant experience in marketing, sales and distribution. Generation of revenues and future profitability will depend in part on our ability to enter into successful marketing arrangements with third parties. If we are unable to enter into third-party marketing and sales arrangements, we may be unable to commercialize our products. Even if we enter into such arrangements, the companies who enter into marketing arrangements with us may be unable to market our products successfully.
IF WE DO NOT SUCCESSFULLY COMPETE IN THE DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS AND KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, WE WILL BE UNABLE TO CAPTURE AND SUSTAIN A MEANINGFUL MARKET POSITION.
The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. We are aware of several companies actively engaged in research and development in areas related to our research focus. Many of these companies are addressing the same diseases and disease indications that we are addressing. As a result of this intense competition, any products that we develop may become obsolete before we are able to recover the expenses incurred in their development. Moreover, many of these companies, either alone or together with their collaborative partners, have substantially greater financial resources and larger research and development staffs. These competitors, either alone or together with their collaborative partners, also have significantly greater experience in:
- developing products;
- undertaking pre-clinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
IF OUR INTELLECTUAL PROPERTY DOES NOT ADEQUATELY PROTECT PRODUCT CANDIDATES, WE MAY ENCOUNTER MORE DIRECT COMPETITION, WHICH COMPETITION COULD ADVERSELY IMPACT REVENUES.
Our success depends in part on our ability to:
- obtain and maintain patents or rights to patents;
- protect trade secrets;
- operate without infringing upon the proprietary rights of others; and
- prevent others from infringing on our proprietary rights.
We will be able to protect proprietary rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. The patent position of biotechnology companies involves complex legal and factual questions and, therefore, enforceability cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. Thus, any patents that are owned or licensed from third parties may not provide adequate protection against competitors. Pending patent applications, those applications that we may file in the future, or those applications that we may license from third parties, may not result in patents being issued. Also, patent rights may not provide adequate proprietary protection or competitive advantages against competitors with similar technologies. The laws of certain foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary know-how. Protection of trade secrets and know-how is sought, in part, through confidentiality and proprietary information agreements and customary principles of "work-for-hire." These agreements may not provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of confidential and proprietary information. Failure to protect proprietary rights could seriously impair our competitive position.
IF THIRD PARTIES CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS, WE MAY BECOME SUBJECT TO SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR WE MAY BE PREVENTED FROM MARKETING OUR PRODUCTS.
The areas in which we have focused our research and development have a number of competitors, and many of these competitors have a number of issued patents and pending patent applications. In most cases, patent applications in the United States are maintained in secrecy until the patents issue. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made. Commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. In the event of such infringement, we may be prevented from pursuing certain product development or commercialization and may be required to obtain a license for the use of the proprietary rights or patents. We may also be required to pay damages for past infringement.
The biotechnology and pharmaceutical industries have been characterized by extensive litigation regarding patents and other intellectual property rights. The defense and prosecution of intellectual property lawsuits, U.S. Patent and Trademark Office interference proceedings and related legal and administrative proceedings in the United States and in foreign countries involve complex legal and factual questions. As a result, such proceedings are costly and time consuming to pursue and their outcome is uncertain.
Litigation may be necessary in the future to:
- enforce patents that we own or license;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the proprietary rights of others.
We believe our technology has been independently developed and does not infringe upon the proprietary or intellectual property rights of others. We cannot, however, guarantee that our technology does not, and will not in the future, infringe upon the rights of third parties. We may become involved in legal proceedings and disputes relating to the proprietary information of others from time to time in the ordinary course of our business. If we become involved in any litigation, interference or other administrative proceedings, we will incur substantial expense, and the efforts of technical and management personnel will be significantly diverted. An adverse determination may subject us to loss of proprietary position or significant liabilities, or require licenses that may not be available from third parties. As a result, we may be restricted or prevented from manufacturing and selling one or more products. To the extent licensing arrangements are even available, costs associated with these arrangements may be substantial and may include ongoing royalties.
WE CANNOT BE SURE THAT ANY FUTURE OR CURRENTLY PENDING PATENT APPLICATIONS RELATING TO OUR PRODUCTS WILL ISSUE ON A TIMELY BASIS, IF EVER.
Since patent applications in the United States are generally maintained in secrecy until the patents issue, and since publication of discoveries in the scientific or patent literature often lag behind actual discoveries, we cannot be certain that we were the first to develop the inventions covered by each of our pending patent applications or that we were the first to file patent applications for such inventions. Even if patents are issued, the degree of protection afforded by such patents will depend upon:
- the scope of the patent claims;
- the validity and enforceability of the claims obtained in such patents; and
- our willingness and financial ability to enforce and/or defend them.
EVEN IF WE OBTAIN REGULATORY APPROVAL TO MARKET AND SELL OUR PRODUCTS, WE WILL BE SUBJECT TO ONGOING REGULATORY REVIEW, WHICH WILL BE EXPENSIVE AND MAY EFFECT OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS.
Even if regulatory approval for a product is secured, such approval may be
subject to limitations on the indicated uses for which the product may be
marketed and sold. Such limitations may restrict the size of the available
market for the product or contain requirements for costly post-marketing
surveillance studies.
Manufacturers of medical products are subject to continued review and periodic inspections by the FDA and other regulatory authorities. The subsequent discovery of previously unknown problems with the product, clinical trial subjects, or with the manufacturer or its manufacturing facility may result in the imposition of restrictions on the product or manufacturer, including withdrawal of the product from the market. If we or any of our collaborative partners fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
IF OUR PRODUCTS ARE NOT ACCEPTED BY THE MARKET, WE ARE NOT LIKELY TO GENERATE SIGNIFICANT REVENUES OR BECOME PROFITABLE.
Even if we are able to successfully develop a viable product and obtain regulatory approval of such product, such product may not gain market acceptance among physicians, patients, healthcare payors and the general medical community. The degree of market acceptance of any medical product depends on a number of factors, including:
- demonstration of clinical efficacy and safety;
- cost-effectiveness;
- potential advantages over alternative therapies;
- reimbursement policies of government and third-party payors;
- effectiveness of marketing and distribution capabilities; and
- the success of physician education programs.
Physicians will not recommend therapies using products until clinical data or other factors demonstrate their safety and efficacy as compared to other drugs or treatments. Even if the clinical safety and efficacy of therapies using the products are established, physicians may elect not to recommend the therapies for other reasons, including whether the mode of administration of products is effective for certain indications.
IF THE RAW MATERIALS NECESSARY TO CONDUCT OUR RESEARCH AND MANUFACTURE OUR PRODUCTS ARE NOT AVAILABLE, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED.
We believe we will have access to sufficient quantities of raw materials to conduct and advance our research. We utilize third-party collaborators, licensors, licensees and others to conduct research on our behalf, and we rely on these third parties to provide the necessary materials to conduct such research. If we or our third-party collaborators are unable to obtain the necessary materials to conduct such research, our business, financial condition and results of operations may be adversely affected.
UPON THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART, 25,075,033 SHARES OF OUR COMMON STOCK, WHICH ARE CURRENTLY OUTSTANDING BUT "RESTRICTED" AS DEFINED IN RULE 144 OF THE SECURITIES ACT OF 1933, WILL NO LONGER BE RESTRICTED, AND WILL BECOME FREELY TRADEABLE IN THE PUBLIC MARKETS. IN ADDITION, 16,393,316 SHARES OF OUR COMMON STOCK THAT ARE ISSUABLE UPON THE CONVERSION OF PREFERENTIAL SHARES OF OUR SUBSIDIARY, 6543 LUXEMBOURG S.A., AND 1,705,733 SHARES OF COMMON STOCK THAT ARE ISSUABLE UPON THE EXERCISE OF OUTSTANDING SHARE PURCHASE WARRANTS ARE BEING REGISTERED FOR RESALE PURSUANT TO SUCH REGISTRATION STATEMENT, AND THUS, WILL BE FREELY TRADEABLE UPON THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT. THE INTRODUCTION OF THESE SHARES INTO THE PUBLIC TRADING MARKET MAY CAUSE OUR STOCK PRICE TO DECLINE.
The shares being registered by the registration statement of which this prospectus is a part are not currently freely tradeable in the public market. Upon the effective date of the registration statement, these shares will be freely tradeable and may be sold in the public market (except that shares held by any of our affiliates will be subject to the volume, manner of sale and certain other limitations of Rule 144). The sale of these shares into the public trading market by the selling stockholders could have an adverse effect on our stock price, especially if a substantial number of these shares are sold at or close to the same time. In
addition, the sale of these shares could impair our future ability to raise capital through the issuance of additional equity securities.
WE MAY BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS.
We face an inherent risk of exposure to product liability suits in connection with vaccines being tested in human clinical trials and products we may market and sell in the future. We may become subject to product liability suits, for example, if our products cause injury or if vaccinated individuals subsequently become infected with the diseases such vaccines where designed to prevent. Regardless of merit or eventual outcome, product liability claims are expensive to defend and may result in decreased demand for our products, injury to our reputation, withdrawal of clinical trial volunteers and loss of revenues.
OUR STOCK PRICE MAY EXPERIENCE SIGNIFICANT VOLATILITY, WHICH COULD ADVERSELY AFFECT THE VALUE OF YOUR INVESTMENT.
The market price of our common stock, like that of the common stock of many other development stage biotechnology companies, may be highly volatile. In addition, the stock market has experienced extreme price and volume fluctuations. This volatility has significantly affected the market prices of securities of many biotechnology and pharmaceutical companies for reasons frequently unrelated to or disproportionate to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.
THE ISSUANCE OF ADDITIONAL EQUITY SECURITIES MAY DILUTE YOUR INVESTMENT.
We currently have outstanding 49,271,962 shares of common stock (assuming the conversion of all the outstanding Preferential Shares of our subsidiary, 6543 Luxembourg S.A., into 16,393,316 shares of our common stock), 1 share of Special Voting Preferred Stock, options to purchase an aggregate 263,750 shares of common stock and warrants to purchase an aggregate 1,705,733 shares of common stock. We are authorized to issue up to 80 million shares of common stock and 5 million shares of preferred stock without additional stockholder approval. The issuance of additional common stock or preferred stock will dilute our stockholders' percentage ownership, and, depending on the offering price of such stock, may also serve to dilute the value of such ownership interest.
THE MARKET FOR OUR COMMON STOCK IS VERY LIMITED.
Our common stock is currently traded only on the OTC Bulletin Board operated by the National Association of Securities Dealers, Inc. Accordingly, we cannot provide assurances as to the future liquidity of our common stock or the price at which you would be able to sell your shares in any available market.
WE CURRENTLY DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR SHARES.
We have not declared or paid any dividends on our shares of common stock. We intend to retain future earnings, if any, that may be generated from our operations to finance our future operations and expansion and do not plan to pay dividends to holders of our common stock in the reasonably foreseeable future. Any decision as to the future payment of dividends will depend on the results of our operations and financial position and such other factors as our board of directors, in its discretion, deems relevant. Furthermore, our ability to declare or pay dividends may be limited in the future by the terms of any then-existing credit facilities, which may contain covenants that restrict the payment of cash dividends.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements, expressed or implied, by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
- marketing and commercialization of our products under development;
- estimates of future revenue and profitability;
- expectations regarding expenses, including research and development expenses; and
- estimates regarding capital requirements and the need for additional financing.
In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "can," "would," "expect," "plan," "anticipate," "believe," "estimate," "intend," "project," "predict," "potential" and other similar expressions. These statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on forward-looking statements. We discuss many of these risks in greater detail under the heading "Risk Factors." Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus.
You should read this prospectus and the documents that we reference in this prospectus completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the selling stockholders. Any proceeds from the sale of our common stock offered pursuant to this prospectus will be received by the selling stockholders.
DIVIDEND POLICY
We have not declared or paid any dividends on our shares of common stock. We intend to retain future earnings, if any, that may be generated from our operations to finance our future operations and expansion and do not plan for the reasonably foreseeable future to pay dividends to holders of our common stock. Any decision as to the future payment of dividends will depend on the results of our operations and financial position and such other factors as our board of directors, in its discretion, deems relevant.
CAPITALIZATION
The following table sets forth our capitalization at March 31, 2002: (a) on an actual basis (assuming the conversion of all outstanding Preferential Shares of 6543 Luxembourg S.A. into 16,393,316 shares of common stock, all of which are being registered for resale in this offering) and (b) as adjusted to give effect to the issuance of 1,705,733 shares of common stock upon the exercise of share purchase warrants which are being registered for resale in this offering. This table should be read in conjunction with our financial statements and related notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other financial data appearing elsewhere in this prospectus.
PRO FORMA AS
ACTUAL ADJUSTED
-------- ------------
(EUROS IN THOUSANDS)
Stockholders' Equity:
Common stock, E0.0114 par value; 80,000,000 shares
authorized; 49,271,962 shares outstanding (actual);
50,977,695 shares outstanding (pro forma as adjusted)..... E 562 E 581
Additional paid-in capital.................................. 17,422 17,971
Deficit accumulated during the development stage............ (17,391) (17,391)
Cumulative translation adjustment........................... 100 100
-------- --------
Total Stockholders' Equity.................................. E 693 E 1,261
======== ========
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SELLING STOCKHOLDERS
The following table lists each selling stockholder owning shares of our common stock and:
- The number of shares of our common stock owned by each selling stockholder prior to this offering;
- The number of shares of our common stock owned by each selling stockholder and being registered for sale by such selling stockholder in this offering;
- The number of shares of our common stock owned by each selling stockholder after this offering, assuming the sale of all shares of our common stock being registered for sale by such selling stockholder; and
- The percentage of common stock owned by each selling stockholder after this offering, assuming each selling stockholder sells all of the shares of our common stock being registered for sale by such selling stockholder.
COMMON SHARES COMMON SHARES COMMON SHARES PERCENTAGE OF
OWNED PRIOR TO BEING OWNED AFTER COMMON SHARES
SELLING STOCKHOLDERS OFFERING REGISTERED OFFERING AFTER OFFERING(2)
-------------------- -------------- ------------- ------------- ------------------
Martine Reindle.................. 8,222,653 8,222,653 0 0%
Rush & Co........................ 34,000 34,000 0 0%
Yorktown Securities Inc. ITF
Mutual Custodial............... 423,125 423,125 0 0%
The Dividend Trust Committee of
the Board of Directors of MFC
Bancorp Ltd.................... 9,016,293 3,377,646 5,638,647 11.06%
MFC Merchant Bank S.A............ 3,661,166 3,383,333 277,833 .55%
Peter Hediger.................... 30,000 30,000 0 0%
Marco Burri...................... 5,000 5,000 0 0%
Arthur D. Humphreys Jr........... 50 50 0 0%
Gerlach & Co..................... 1,249,871 1,249,871 0 0%
Ernst Lubke...................... 2,829,546 2,829,546 0 0%
Dr. Karen Van Ness............... 777,382 777,382 0 0%
Christian Rochet................. 277,138 277,138 0 0%
Jean-Paul Royet.................. 259,989 259,989 0 0%
Alain Chevalier.................. 155,890 155,890 0 0%
Jean-Daniel Noir................. 118,749 118,749 0 0%
Ms. Catherine Brentini........... 17,981 17,981 0 0%
Dominique Palacios............... 10,019 10,019 0 0%
Ms. Malin Noren.................. 9,221 9,221 0 0%
Gwennael Gentric................. 3,041 3,041 0 0%
Aralis Participations S.A........ 297,221 297,221 0 0%
Dr. Takashi Onouchi.............. 333,583 333,583 0 0%
Masayoshi Watanabe............... 83,396 83,396 0 0%
Hiroshi Kamano................... 10,019 10,019 0 0%
Leonardo Castellana.............. 10,019 10,019 0 0%
Christian Rochet................. 1,249,871 1,249,871 0 0%
Marcuard Cook & Cie S.A.......... 1,002,456 1,002,456 0 0%
Pear Tree Investments Ltd........ 133,000 133,000 0 0%
Jean Paul Abgottspon............. 10,000 10,000 0 0%
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COMMON SHARES COMMON SHARES COMMON SHARES PERCENTAGE OF
OWNED PRIOR TO BEING OWNED AFTER COMMON SHARES
SELLING STOCKHOLDERS OFFERING REGISTERED OFFERING AFTER OFFERING(2)
-------------------- -------------- ------------- ------------- ------------------
Themel Syvestre.................. 5,000 5,000 0 0%
Felix Knecht..................... 5,000 5,000 0 0%
Bruno Busch...................... 5,500 5,500 0 0%
Dr. Pierre-Francois Serres....... 5,000 5,000 0 0%
Howald United.................... 40,000 40,000 0 0%
Michel Schmid.................... 5,000 5,000 0 0%
Arsene Charles Ernest Wenger..... 20,000 20,000 0 0%
Kwan-Hyun Han.................... 16,667 16,667 0 0%
Alain Gremeaux................... 8,667 8,667 0 0%
Additional selling stockholders
to be identified (1)........... 2,231,983 650,000 1,581,983 3.1%
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(1) These shares are held of record by Cede & Co. as nominee for these stockholders.
(2) This assumes the issuance of 16,393,316 shares of our common stock upon the conversion of 15,372 outstanding Preferential Shares and the issuance of 1,705,733 shares of our common stock upon the exercise of an equal number of outstanding share purchase warrants.
We are also registering for sale by the selling stockholders the shares of common stock issuable upon the conversion of all outstanding Preferential Shares of 6543 Luxembourg S.A. The following table lists each selling stockholder owning all outstanding Preferential Shares and:
- The number of all outstanding Preferential Shares owned by each selling stockholder prior to this offering;
- The number of shares of our common stock into which the all outstanding Preferential Shares held by each selling stockholder are convertible, which shares of common stock are being registered for sale by such selling stockholder in this offering;
- The number of shares of common stock owned by each selling stockholder after this offering, assuming the conversion of all outstanding Preferential Shares and the sale of all shares of common stock being registered for sale by such selling stockholder; and
- The percentage of common stock owned by each selling stockholder after this offering, assuming each selling stockholder sells all of the shares of common stock being registered for sale by such selling stockholder.
PREFERENTIAL COMMON
SHARES OWNED SHARES OF COMMON STOCK SHARES OWNED PERCENTAGE OF
PRIOR TO UNDERLYING PREFERENTIAL SHARES AFTER COMMON SHARES
SELLING STOCKHOLDERS OFFERING AND BEING REGISTERED OFFERING AFTER OFFERING
-------------------- -------------- ------------------------------ ------------ ----------------
Dr. Pierre-Francois
Serres.................. 10,436 11,129,367 0 0%
Patrice Pactol............ 2,004 2,137,146 0 0%
Bertrand Favreau.......... 2,004 2,137,146 0 0%
Bernadette Daout.......... 120 127,973 0 0%
Yves Bush................. 400 426,576 0 0%
Doria Troiani............. 408 435,108 0 0%
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We are also registering for sale 1,705,733 shares of common stock issuable upon the exercise of share purchase warrants owned by MFC Merchant Bank S.A. The following table lists the share purchase warrants owned by MFC Merchant Bank S.A. and:
- The number of shares of common stock underlying the share purchase warrants, which shares of common stock are being registered for sale by MFC Merchant Bank S.A. in this offering;
- The number of shares of common stock owned by MFC Merchant Bank S.A. after the offering, assuming the sale of all shares of common stock being registered for sale by MFC Merchant Bank S.A.; and
- The percentage of common stock owned by MFC Merchant Bank S.A. after this offering, assuming MFC Merchant Bank S.A. sells all of the shares of common stock being registered for sale by MFC Merchant Bank S.A.
COMMON SHARES COMMON SHARES PERCENTAGE OF
UNDERLYING SHARE STOCK OWNED COMMON SHARES
SELLING STOCKHOLDER PURCHASE WARRANTS AFTER OFFERING AFTER OFFERING
------------------- ----------------- ----------------- --------------------
MFC Merchant Bank S.A............. 1,705,733 277,833 .55%
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The following selling stockholders have had the following relationships with us over the past three years:
- Martine Reindle beneficially owns 17.29% of our common stock.
- MFC Bancorp Ltd. beneficially owns, indirectly through its wholly-owned subsidiary, MFC Merchant Bank S.A., 9.98% of our outstanding common stock.
- MFC Merchant Bank S.A. either directly or through its affiliates, has provided us with financing from time to time over the past three years. We presently have a credit facility with MFC Merchant Bank S.A. See "Certain Relationships and Related Party Transactions." MFC Merchant Bank S.A. also beneficially owns 9.98% of our common stock. We entered into a Services Agreement with MFC Merchant Bank S.A. on May 31, 2001. See "Certain Relationships and Related Party Transactions."
- Dr. Pierre-Francois Serres is a member of our board of directors, our Chief Scientific Officer, and beneficially owns 22.61% of our common stock. Dr. Serres was a founder of our subsidiary, Mymetics S.A., and has previously served as our Chief Executive Officer and President.
- Patrice Pactol is a member of our board of directors and beneficially owns 4.36% of our common stock.
- Peter Hediger and Felix Knecht are employees of MFC Merchant Bank S.A., which beneficially owns 9.98% of our outstanding common stock.
- Marco Burri, Jean Paul Abgottspon and Michel Schmid were previously employees of MFC Merchant Bank S.A.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table reflects selected consolidated financial data for our fiscal years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively, and for the three month periods ended March 31, 2002 and 2001 (unaudited), respectively. The selected consolidated financial data set forth below should be read along with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto included elsewhere in this prospectus.
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues.................. 26 13 47 42 14
Research & Development Expenses..... 482 101 94 70 20
General & Administrative Expenses... 1,034 351 37 38 34
Loss from continuing operations..... (15,701)(2) (1,314) (99) (68) (40)
COMMON SHARE DATA(1)
Loss from continuing operations per
common share...................... (0.37) (0.04) (0.00) (0.00) (0.00)
Weighted average common shares
outstanding (in thousands)........ 42,460(3) 33,311 33,311 33,311 33,311
BALANCE SHEET DATA
Working capital..................... 565 (652) (24) (40) (46)
Total assets........................ 1,692 625 146 77 43
Long-term obligations............... 242 242 242 138 70
Total stockholders' equity.......... 693 (765) (257) (158) (90)
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FOR THE THREE FOR THE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2002 2001
------------- -------------
(EUROS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
OPERATING DATA
Operating revenues.......................................... 5 3
Research & Development Expenses............................. 232 114
General & Administrative Expenses........................... 250 127
Loss from continuing operations............................. (556) (3,352)(2)
COMMON SHARE DATA(1)
Loss from continuing operations per common share............ (0.01) (0.10)
Weighted average common shares outstanding (in thousands)... 49,263(3) 33,586
BALANCE SHEET DATA
Working capital............................................. (20) 565
Total assets................................................ 1,315 1,692
Long-term obligations....................................... 242 242
Total stockholders' equity.................................. 162 693
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(1) Basic and diluted common share data is the same.
(2) This amount reflects the value of 6,001,693 warrants we issued to MFC Merchant Bank S.A. in 2001 in connection with a credit facility provided by MFC Merchant Bank S.A. The intrinsic value of the beneficial conversion feature of these warrants was calculated on March 28, 2001, to be E14,063 using the Black-Scholes model. This value is not necessarily indicative of the value of our common stock, or our business as a whole.
(3) The increase in 2001 reflects the shares and warrants granted as fees in connection with the share exchange in March 2001, the credit facility entered into in 2001 and a private placement completed in June 2001.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2002 and 2001, and for the years ended December 31, 2001, 2000 and 1999, respectively, should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere herein. References to a year are to our fiscal years ended December 31 of each such calendar year. Our actual results may differ materially from those anticipated in any forward-looking statements included in this discussion as a result of various factors, including those set forth under "Risk Factors."
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
Revenues for the three months ended March 31, 2002 were E5,000 compared to E3,000 for the three months ended March 31, 2001.
Expenses decreased to E561,000 for the three months ended March 31, 2002 from E3,355,000 for the three months ended March 31, 2001. Research and development expenses increased to E232,000 in the three months ended March 31, 2002 from E114,000 in the comparative period of 2001 as a result of an increase in research activities. General and administrative expenses increased to E250,000 in the three months ended March 31, 2002 from E127,000 in the comparative period of 2001 primarily as a result of expansion of our management team to include a Chief Executive Officer, a Chief Scientific Officer and a Vice-President of Development, and the additional use of consultants. Bank fees were nil for the three months ended March 31, 2002 compared to E3,054,000 over the comparative period in 2001, primarily as a result of a reverse purchase transaction that occurred last year.
We reported a net loss of E556,000, or E0.01 per share, for the three months ended March 31, 2002, compared to E3,352,000, or E0.10, for the three months ended March 31, 2001.
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED
DECEMBER 31, 2000
Revenues for the year ended December 31, 2001 were E26,000 compared to E13,000 for the year ended December 31, 2000. This increase resulted primarily from an increase in interest income from nil for the year ended December 31, 2000 to E26,000 for the year ended December 31, 2001. This was offset by a decrease in sales for the year ended December 31, 2001, which were nil compared to E13,000 for the year ended December 31, 2000, primarily as a result of decreased contract research activity.
Costs and expenses increased to E15,727,000 for the year ended December 31, 2001, compared to E1,326,000 for the year ended December 31, 2000. Most of this increase was due to an increase in bank fees, which increased to E14,063,000 for the year ended December 31, 2001 from E806,000 for the year ended December 31, 2000. Research and development expenses increased to E482,000 for the year ended December 31, 2001 from E101,000 for the year ended December 31, 2000 as a result of an increase in research activities. General and administrative expenses increased to E1,034,000 for the year ended December 31, 2001 from E351,000 for the year ended December 31, 2000, primarily as a result of the expenses related to the reverse purchase transaction that occurred in March 2001, the private placement that closed in June 2001 and expenses associated with our repositioning as a biotech company, including adding additional members to our board of directors, engaging a public relations and investor relations firm and obtaining the services of new management.
We reported a net loss of E15,701,000, or E0.37 per share, for the year ended December 31, 2001, compared to a net loss of E1,314,000, or E0.04 per share, for the year ended December 31, 2000.
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED
DECEMBER 31, 1999
Revenues for the year ended December 31, 2000 decreased to E13,000 from E47,000 for the year ended December 31, 1999, primarily as a result of a decrease in sales revenue due to decreased contract research activity.
Costs and expenses increased to E1,326,000 for the year ended December 31, 2000 from E143,000 for the year ended December 31, 1999. This increase was primarily the result of an increase in bank fees from nil for the year ended December 31, 1999 to E806,000 for the year ended December 31, 2000. In addition, research and development expenses increased to E101,000 for the year ended December 31, 2000 from E94,000 for the year ended December 31, 1999 as a result of an increase in research activities, and general and administrative expenses increased to E351,000 for the year ended December 31, 2000, from E37,000 for the year ended December 31, 1999, primarily as a result of higher administrative expenses relating to an increase in research activities and fees and expenses associated with our credit facilities.
We reported a net loss of E1,314,000, or E0.04 per share, for the year ended December 31, 2000, compared to a net loss of E99,000, or E0.00 per share, for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of E674,000 as of March 31, 2000, compared to cash of E888,000 as of December 31, 2001.
Net cash used by operating activities was E466,000 for the three months ended March 31, 2002, compared to E117,000 for the three months ended March 31, 2001. An increase in accounts payable provided cash of E152,000 for the three months ended March 31, 2002 compared to E153,000 for the three months ended March 31, 2001. Net cash used by operating activities was E2,000,000 for the year ended December 31, 2001, compared to cash provided of E145,000 for the year ended December 31, 2000. A decrease in accounts payable used cash of E508,000 for the year ended December 31, 2001 compared to an increase of accounts payable providing cash of E546,000 for the year ended December 31, 2000.
Investing activities provided cash of E223,000 for the three months ended March 31, 2002 compared to using cash of E103,000 for the same period last year. Short term investment provided cash of E278,000 for the three months ended March 31, 2002 compared to using cash of E82,000 for the three months ended March 31, 2001. Investing activities used cash of E237,000 for the year ended December 31, 2001, compared to E250,000 for the year ended December 31, 2000. Short term investment used cash of E205,000 for the year ended December 31, 2001, compared to E122,000 for the year ended December 31, 2000.
Financing activities provided cash of E12,000 for the three months ended March 31, 2002 compared to E200,000 in the same period last year. The revolving term facility is in the principal amount of up to E1.3 million and matures on August 31, 2002. At March 31, 2002, we had borrowed an aggregate of E232,000 pursuant to this revolving term facility. Financing activities provided cash of E2,840,000 for the year ended December 31, 2001, compared to E254,000 for the year ended December 31, 2000. Proceeds from issuance of common stock provided cash of E2,724,000 for the year ended December 31, 2001. Increases in borrowing pursuant to a revolving term facility and other short term advances provided cash of E116,000 for the year ended December 31, 2001, compared to E384,000 for the year ended December 31, 2000. The revolving term facility is in the principal amount of up to E1.3 million and matures on August 31, 2002. As of December 31, 2001, we had borrowed an aggregate of E228,000 pursuant to this revolving term facility.
We expect that we will require substantial additional capital in order to continue our research and development, and later to conduct clinical studies and regulatory activities necessary to bring our potential products to market and to establish production, marketing and sales capabilities. We anticipate that our operations will require approximately E5.5 million in the year ending December 31, 2002. We will seek to raise the required capital from lenders and/or equity or debt issuances. However, there can be no assurance that we will be able to raise additional capital to finance our operations on satisfactory terms, or at all. In the event that we are not able to obtain such additional capital, we would be required to restrict or even halt our operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As at December 31, 2001, we were exposed to market risk from changes in interest rates which could affect our financial condition and results of operations. We have not entered into derivative contracts for our own account to hedge against such risk.
Interest Rate Risk. Fluctuations in interest rates may affect the fair value of financial instruments sensitive to interest rates. An increase in interest rates may decrease the fair value and a decrease in interest rates may increase the fair value of such financial instruments. We have debt obligations which are sensitive to interest rate fluctuations. The following tables provide information about our exposure to interest rate fluctuations for the carrying amount of such debt obligations as of March 31, 2002, December 31, 2001 and December 31, 2000 and expected cash flows from these debt obligations.
EXPECTED FUTURE CASH FLOW
THREE MONTH PERIOD ENDED MARCH 31, 2002
CARRYING FAIR
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- ----- ---- ---- ---- ---- ---- ----------
(IN THOUSANDS)
Debt obligations(1)............... E232 E232 E232 E-- E-- E-- E-- E--
|
EXPECTED FUTURE CASH FLOW
YEAR ENDED DECEMBER 31, 2001
CARRYING FAIR
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- ----- ---- ---- ---- ---- ---- ----------
(IN THOUSANDS)
Debt obligations(1)............... E228 E228 E228 E-- E-- E-- E-- E--
|
EXPECTED FUTURE CASH FLOW
YEAR ENDED DECEMBER 31, 2000
CARRYING FAIR
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- ----- ---- ---- ---- ---- ---- ----------
(IN THOUSANDS)
Debt obligations(1)............... E384 E384 E384 E-- E-- E-- E-- E--
|
(1) Debt obligations consist of obligations we assumed (as successor to Mymetics S.A.) with respect to notes payable.
BUSINESS
THE COMPANY
We are a holding company conducting business through our subsidiaries 6543 Luxembourg S.A., a joint stock company organized in 2001 under the laws of Luxembourg, and Mymetics S.A. (formerly Hippocampe S.A.), a company organized in 1990 under the laws of France. We were incorporated in July 1994 pursuant to the laws of the Commonwealth of Pennsylvania. In November 1996, we reincorporated under the laws of the State of Delaware and changed our name to "ICHOR Corporation." In July 2001, we changed our name to "Mymetics Corporation." 6543 Luxembourg S.A. is our majority-owned subsidiary, and Mymetics S.A. is a 99.9%-owned subsidiary of 6543 Luxembourg S.A. We acquired 99.9% of the outstanding stock of Mymetics S.A. in March 2001, pursuant to a share exchange transaction. For more details on this share exchange transaction, see our Information Statement on Schedule 14C filed with the Securities and Exchange Commission on April 26, 2001.
We currently do not make, market or sell any products or services, and thus, we have no revenues. We believe that our research and development activities and the resulting intellectual property will lead to the creation of commercially viable products, which can generate revenues for us in the future. If financially favorable terms are available, we may license our intellectual property to third parties. If we fail to develop our intellectual property, we are unlikely to generate significant revenues.
DEVELOPMENT OF THE COMPANY
From our inception in 1994 to December 1997, we operated in the environmental services industry, focusing on thermal treatment (in Florida), remediation services (in Florida and Pennsylvania) and waste oil recycling (in Illinois). In February 1995, we completed an initial public offering. In 1998 and 1999, after disposing of our thermal treatment, remediation services and waste oil recycling businesses, we provided consulting services to an industrial customer in Europe. In June 1999, we acquired a majority interest in Nazca Holdings Ltd., whose business involved the exploration for, and development of, groundwater resources in Chile. Following the disposal of our interest in Nazca in July 2000, we did not have an operating business.
In March 2001, we acquired substantially all of the shares of Mymetics S.A. in consideration for shares of our common stock and Preferential Shares of our subsidiary, 6543 Luxembourg S.A, which are convertible into shares of our common stock. Mymetics S.A. was, and continues to be, a biotechnology research and development company.
We own all the outstanding voting stock of 6543 Luxembourg S.A. There are also 15,372 Preferential Shares of 6543 Luxembourg S.A. currently outstanding, which are convertible into 16,393,316 shares of our common stock. Holders of the Preferential Shares do not have any voting rights with respect to 6543 Luxembourg S.A. However, pursuant to a Voting and Exchange Trust Agreement dated March 28, 2001, the holders of the Preferential Shares are entitled to vote on all matters to be voted on by the holders of our common stock to the same extent as if they had converted the Preferential Shares into shares of our common stock. See "Description of Capital Stock -- Preferred Stock."
MYMETICS S.A.
Our operating subsidiary, Mymetics S.A., is a biotechnology research and development company devoted to fundamental and applied research in the areas of human and veterinary biology and medicine. Our primary objective is to develop therapies to treat certain retroviruses (which are described below) including HIV, the virus that leads to AIDS. Additional applications of our research include potential treatments and/or vaccines for animal AIDS, human and animal oncoviral leukemias, multiple sclerosis and organ transplantation. To date, we have conducted our fundamental research in Europe.
We intend to form a new United States subsidiary during the second quarter of 2002. This new subsidiary will focus on applying our research and development to target products and on business development. We believe that this tiered structure has numerous advantages, including greater access to
grants, subsidies, intellectual property and public and private research teams. To date, activities such as design of the prototype molecule, synthesis and in-vitro experiments have been and will continue to be conducted mainly in Europe, while pre-clinical studies, toxicological trials, regulatory affairs, IND applications, Phase I, II, and III clinical trials, and NDAs will, after the creation of the United States subsidiary, be conducted mainly in North America.
Our research strategy is to organize and manage a collection of public and private best-in-class research teams, each of which has its own unique focus. We have segmented our primary research into modules, each of which is then outsourced, under our direct supervision, to high-level, specialized and complementary public and private research teams. We retain all intellectual property rights on the joint research and we apply for domestic and international patents whenever justified. As agreed and coordinated by us, the joint research teams are authorized to co-publish their results.
SCIENCE OVERVIEW
Virus. A virus is a noncellular organism consisting of DNA or RNA and a protein coat. During the free and infectious stage of their life cycle, viruses do not perform the usual functions of living cells, such as respiration and growth. Rather, when viruses enter a living plant, animal or bacterial cell, they utilize the host cell's chemical energy and synthesizing ability to replicate. After the replication of the viral components by the infected host cell, virus particles are released and the host cell is often destroyed. The approximately 2,450 viral species identified to date are divided into about 75 groups. One of these groups consists of retroviruses, to which HIV belongs. Retroviruses contain a reverse transcriptase that copies viral RNA back into DNA (the reverse of what usually occurs when DNA is copied into RNA). Retroviruses include spumaviruses, oncoviruses (causing cancers) and lentiviruses (viruses with a slow pathogenic action, e.g. AIDS-associated lentiviruses).
HIV. HIV is a type of retrovirus, a virus of the family Retroviridae, that has RNA as its nucleic acid and uses the enzyme reverse transcriptase to copy its genome into the DNA of the host cell's chromosomes. Once inside the T cell, HIV uses the cell's machinery to copy its RNA into DNA by means of the reverse transcriptase. HIV is characterized by an inability to mount a normal immune response and is the cause of the fatal illness known as AIDS.
Two strains of HIV have been identified, HIV-1 and HIV-2. The genetic material of these two strains is approximately 60% identical. Each strain contains a number of subtypes, which are slight genetic variations of the virus. At least 32 subtypes have been identified to date. These variations result from the high mutation rate of HIV's genetic material. Most variations occur in the gene encoding the GP120 protein, and these mutations can alter the protein's structure. HIV-1 or Type 1 classified as a lentivirus is a subgroup of retroviruses that have been isolated and recognized as the cause of a disease that induces AIDS. HIV-1, like most viruses and all bacteria, plants and animals, has genetic codes made up of DNA, which uses RNA to build specific proteins. HIV's genetic material is the RNA itself. HIV inserts its own RNA into the host cell's DNA, preventing the host cell from performing its natural functions and transforming it into an HIV factory.
AIDS. AIDS is a fatal epidemic disease caused by an HIV infection (HIV-1 or HIV-2). In most cases, HIV slowly attacks and destroys the immune system, the body's defense against disease, leaving the infected individual vulnerable to malignancies and infections that eventually cause death. Propagation of the HIV results from the invasion of the host cell and HIV's use of the host cell's protein synthesis capability. The immune system's response (antibodies and cellular immune response) is usually sufficient to temporarily arrest progress of the infection and reduce levels of the virus in the blood. Virus replication continues, however, and gradually destroys the immune system by infecting and destroying critical white blood cells known as CD4 cells.
The main cellular target of HIV is a special class of white blood cells critical to the immune system, known as helper T lymphocytes, or T4 helper cells. These cells play a principal role in normal immune responses by stimulating or activating virtually all of the other cells involved in immune protection. These cells include B lymphocytes, the cells that produce antibodies needed to fight infection; cytotoxic T lymphocytes, which destroy cells infected with virus; and macrophages and other effector cells, which
attack invading pathogens. Once HIV has entered the helper T cell, it can impair the functioning of or destroy the cell. A hallmark of the onset of AIDS is a drastic reduction in the number of helper T cells in the body. HIV also can infect other cells, including certain monocytes and macrophages, as well as brain cells. Among those cells are CD4, HIV's preferred target cells due to a docking molecule called CD4 on their surfaces. Cells with this molecule are known as CD4+ cells. These cells normally orchestrate the immune response, signaling other cells in the immune system to perform their special functions. Destruction of CD4+ lymphocytes is the major cause of the immunodeficiency observed in AIDS, and decreasing CD4+ lymphocyte levels appear to be the best indicator of morbidity in these patients. As the infection progresses, the immune system's control of HIV levels weakens, the level of the virus in the blood rises and the level of critical T cells declines to a fraction of their normal level.
Viral Envelope of HIV. The viral envelope of HIV is covered with mushroom-shaped spikes that enable the virus to attach itself to the target cell. The cap of each "mushroom" is comprised of GP120 molecules and its stem is comprised of GP41 molecules. GP120 is a glycoprotein that protrudes from the surface of HIV and binds to the CD4 receptor of the CD4+ T-cells. In a two-step process that allows HIV to breach the membrane of T-cells, the GP120-CD4 complex refolds to reveal a second structure that binds to CCR5 or CXCR4, one of several chemokine co-receptors used by the virus to gain entry into T cells. GP41 is a glycoprotein embedded in the outer envelope of HIV and plays a key role in HIV's infection of cells by carrying out the fusion of the viral and cell membranes. GP160 is a glycoprotein, which is the precursor of HIV envelope proteins GP120 and GP41.
Immune System. The immune system functions to protect the body against infection and foreign substances, including viruses and bacteria. This defensive function is performed by the body's white blood cells (leukocytes) and by a number of accessory cells, including B lymphocytes, the cells that produce the antibodies needed to fight infection, and cytotoxic T lymphocytes, which destroy cells infected with viruses. When an immunocompetent cell recognizes foreign material or a biological invader presented by the macrophages, it normally induces a response. This recognition function relies on the immune system's ability to recognize specific foreign molecular configurations, generically referred to as antigens. T4 lymphocytes, as the central cells of the immune system, specifically recognize foreign invaders presented by macrophages. After specific recognition of a presented antigen, T4 lymphocytes play a major role in the immune response, producing IL-2, a central interleukine that activates all of the accessory cells previously described and the overall immune response.
BUSINESS STRATEGY
Our current objective is to develop a platform of both therapeutic compounds and vaccines. We have made a series of discoveries about how the body's immune system responds to retroviruses, specifically HIV. The foundation of our platform technology and product pipeline is our discovery of a subtle mimicry between the virus and the host cells. By understanding the precise dynamics of the virus's GP41 and the host cell's IL-2, we believe we have the potential to design and develop specific therapeutic molecules and antibodies to disrupt or even prevent the disease. In addition to targeting HIV and AIDS, we hope to apply our findings to the potential treatment or even prevention of a range of additional diseases, including certain oncoviruses like leukemia.
Some biotechnology companies are focusing on slowing or impeding the
progress of the virus once it has infected the body's host cells. Other
biotechnology firms are attempting to develop therapies that prevent the virus
from fusing with host cells. If the virus cannot fuse, it cannot reproduce, and
the body's immune system then succeeds in arresting the invasion. Our approach
is also based on the concept of preventing viral fusion. Our scientific strategy
is unique in that its design is based on a series of discoveries involving
mimicry and, in particular, on the inter-reaction between the viral envelope
glycoprotein GP41 and the host cell's IL-2. We have discovered that a piece of
the virus closely resembles or "mimics" the host cell's IL-2. By exploiting this
mimicry, the virus unlocks the host cell and gains access to the cell's
machinery. The body's immune system responds to the invasion, but fails to
differentiate between the viral GP41 and the host cell's IL-2. As a result, we
believe that the immune system attacks both of them with equal vigor. The
unfortunate consequence is that the body, in turning on itself, undercuts its
own defenses. By better
understanding these precise dynamics, we believe we will be able to design and develop specific therapeutic molecules and antibodies to disrupt the mimicry, prevent HIV from entering the host cell and enable the body's immune system to recognize HIV. Our current scientific strategy is to create therapeutic peptides and antibodies to disrupt the mimicry, block the fusion, and condition the body's immune system to recognize GP41 as separate and distinct from IL-2. If this can be accomplished, the body's immune system should be able to identify and attack the virus, instead of the healthy cells.
The Discovered Molecular Mimicry Between Trimeric GP41 AND IL-2. We have discovered a molecular mimicry between the trimeric ectodomain of the transmembrane protein of immunosuppressive lentiviruses (HIV-SIV-FIV) and IL-2. Our initial results were published with the French Academy of Sciences in November 2000.
Autoimmune Consequences For HIV Infected Patients. We have found some of the expected autoimmune consequences of the described virus-host molecular mimicry in HIV infected subjects. As expected, HIV positive sera recognize human IL-2, and cross-reactivity was found between the structurally and physically antigenic analogous sites of GP41 (HIV-1) and human IL-2. The tests included 2,352 HIV+ and HIV-sera, and the results demonstrated that 100% of HIV+ patients (stages II, III and IV) were positive for the anti IL-2 response. The first results were presented in the Journal of Autoimmunity in 2001 and were also presented in a poster session at the Cold Springs Harbor, New York meeting on infectious disease in December 2001.
THERAPEUTIC AND VACCINAL USE OF THE MIMICRY DISCOVERY
Our current research modules focus on the following four fields:
- Fundamental research. We believe that our analysis of the GP41/IL-2 mimicry may enable us to explain, in large part, the main AIDS-associated disorders: drop of peripheral IL-2, decrease of non-infected T helper lymphocytes, lymphoproliferation disorders and a2 microglobulin increase and hypergammaglobulinemia. Some of the possible effects of the tridimensional GP41 (HIV-1)/human IL-2 molecular mimicry on the AIDS-associated disorders are being evaluated by our research teams.
- Therapeutic molecules. We believe that, based on the mimicry, an application involving the development of particular synthetic peptides and monoclonal antibodies (some of which have already been developed) would inhibit the fusion between HIV and its target cell in an infected subject. Well-designed therapeutic molecules would prevent the virus from binding to the target cell, inhibiting its attempts to reproduce. Having demonstrated that the transmission of HIV depends on the viral load, and that no transmission has been observed below 1,500 viral copies/ml., treatment with therapeutic agents may provide a strategy to control AIDS epidemicity. This application would complement available antiretroviral drugs, or may even provide a substitute for the available antiretroviral drugs.
- Therapeutic and preventive vaccines. We believe that our discovery of the host-virus autoimmune mimicy opens the door to novel therapeutic and preventive vaccine strategies for both humans and animals. We believe that our specific preventive vaccine would be universal for both HIV-1 and HIV-2, and would provide an all-strain prevention.
- AIDS cartridge. We have developed a number of therapeutic immunocartridges that would help patients infected with AIDS by reducing the viral load. These immunocartridges have been tested and approved by the Ethics Committee for the Treatment of Systemic Lupus Erythematosus and Hemophilia A. Our research has demonstrated that the anti IL-2 antibodies in HIV infected subjects recognize some sites of IL-2 that are crucial for its bioactivity. Therefore, we believe that the development of an "AIDS cartridge" could be effective in the restoration of the immune system (CD4/CD8-viral load) of HIV infected subjects.
We currently have several prototypes potentially capable of commercialization, including:
- Therapeutic molecules (pharmacological agents) -- administered to infected subjects to prevent cell infection by HIV.
- Therapeutic vaccines (immunotherapeutic agents) -- administered to infected subjects to orient the immune system into recognizing the transmembrane glycoprotein of the virus and not the host cell's IL-2.
- Preventive vaccines -- administered to healthy subjects to prevent infection by HIV.
- AIDS cartridge -- administered to infected subjects to selectively remove the identified immunosuppressive antibodies present in the serum of AIDS patients, using some peptides that have been tested for activity.
KEY STAFF
Peter P. McCann, Ph.D., a senior corporate executive and research scientist with 25 years of experience in the pharmaceutical and biotech industry, was named our President and Chief Executive Officer and appointed to our board of directors in February 2002. Dr. McCann was previously employed by Marion Merrell Dow Inc., where he served in a number of senior executive capacities. He then served as President of British Biotech Inc., the North American operating unit of British Biotech Pharmaceuticals (the largest biotech company in Europe) from 1993-1998. In this capacity, he established British Biotech Inc. in Annapolis, Maryland, where he directed the company's Phase II and Phase III clinical trials of two major cancer drugs at more than 200 medical centers in the United States and Canada. Dr. McCann served as Interim President of the University of Maryland Biotechnology Institute, one of the 13 operating units of the University System of Maryland, from 1998-1999. From 1999-2001, Dr. McCann served as President and Chief Executive Officer of Oncostasis, Inc., a genomics-based cancer therapeutics company created to identify and develop new therapies. We entered into an employment agreement with Dr. McCann on March 18, 2002.
Joseph D. Mosca, Ph.D., an experienced research and development scientist in the field of immunology and AIDS virology, was named our Vice President of Development in March 2002. Dr. Mosca joined the faculty of the Johns Hopkins University in 1982 and, subsequently, the staff of the Henry M. Jackson Foundation in Rockville, Maryland in 1989. From 1996 to 2000, Dr. Mosca held a number of management positions at Osiris Therapeutics in Baltimore, Maryland, the last of which was Director of Gene Delivery. Most recently, he served as Executive Director of Research at Stemron Corporation in Gaithersburg, Maryland. We entered into an employment agreement with Dr. Mosca on March 18, 2002.
Dr. Pierre-Francois Serres is an experienced research and development scientist in the field of immunology and AIDS. Dr. Serres became our Chief Scientific Officer on February 7, 2002, and has been a member of our board of directors since March 28, 2001. Dr. Serres previously served as our Chief Executive Officer and President, and was the founder, Chief Executive Officer and President of our subsidiary, Mymetics S.A. Dr. Serres began his career as a professor and researcher at the medical faculty of the University of Lyon in France. From 1975 and prior to founding Mymetics S.A., he held various teaching and research positions at French medical universities and biomedical institutes, among them the Institut Pasteur in Lyon, France. We entered into an employment agreement with Dr. Serres on May 3, 2001.
RESEARCH AND DEVELOPMENT EXPENSES
For the year ended December 31, 2001, we were focused on research and development and, as a result, did not generate any revenues or engage in any marketing activities. We spent E232,000 on research and development expenses for the three months ended March 31, 2002 and E482,000 for the year ended December 31, 2001.
INTELLECTUAL PROPERTY
We are the exclusive owner of intellectual property relating to our core research, which is focused toward the development of novel HIV therapeutics. Particularly, we own one issued European patent and six pending French patent applications. We also filed two Patent Cooperation Treaty, or PCT, applications that claim priority to two of our French applications, and two national phase United States patent applications based on the PCT applications. Recently, one of our United States applications was allowed by the United
States Patent and Trademark Office. Additionally, we have one pending United States provisional application, own three French patents, and have five patent applications pending in France. We own one European patent that is related to one of the French patents. We also have one U.S. patent that has been allowed, but not yet issued, and two U.S. patents pending, one of which is provisional patent application. We have also filed the U.S. patent that has been allowed and one of the pending patent applications as international applications under the Patent Cooperative Treaty. These applications are currently pending.
We rely primarily on a combination of patent, copyright, trademark and trade secret laws, as well as contractual restrictions, to protect our intellectual property. These legal protections afford limited protection. We generally require employees, strategic research partners and consultants with access to our intellectual property to execute confidentiality agreements. Despite our efforts to protect our intellectual property, unauthorized parties may attempt to copy the research and research methods that form the basis of our intellectual property. The laws of many countries do not afford the same level of protection as those provided by United States intellectual property laws. Litigation may be necessary to protect and enforce our rights in our intellectual property.
COMPETITION
We have not yet developed an actual product or generated any revenues. Our future competitive position depends on our ability to successfully develop our intellectual property, and either to use our intellectual property to produce one or more products capable of generating significant revenues or to license our intellectual property to third parties on financially favorable terms. Although we believe the results of our research and development activities to date have been favorable, there are numerous entities and individuals conducting research and development activities in the area of human and veterinary biology and medicine. All of these persons and entities are potential competitors. While many of these individuals and entities have greater financial, manufacturing, technical, human resource, marketing and distribution capabilities, and greater experience in conducting pre-clinical and clinical trials and in obtaining regulatory and FDA approvals, we believe that our technologies nonetheless provide us with a competitive advantage.
Further, we may face significant competition in the design and development of some of our therapeutic compounds and preventive vaccines.
Therapeutic Molecules (pharmacological agents). The biopharmaceutical industry is intensely competitive, especially in the field of HIV. If we are successful in developing and proving our therapeutic agents, we will compete with existing developed and approved therapies. The FDA has approved sixteen antiviral drugs to treat HIV and AIDS, which fall into two categories depending on whether they target one or two viral enzymes: either HIV protease or reverse transcriptase, or RT. RT drugs aim to block reverse transcriptases and prevent transcription of the virus's generic material from RNA to DNA. There are two classes of RT drugs: nucleoside analogues inhibitors and non-nucleoside inhibitors. The approved nucleoside analogues inhibitors include drugs such as Retrovir (ziduvodine; AZT), Videx (didanosine; ddl), Hivid (zalcitabine; ddc), Zerit (stavudine; d4T), Epivir (larnivudine; 3TC), Combivir (ziduvodine + lamivudine), Ziagen (abacavir; ABC). These drugs are manufactured by companies such as Glaxo Wellcome Plc, Bristol-Myers Squibb Company, Roche Holding AG and BioChem Pharma Inc. The approved non-nucleoside inhibitors include drugs such as Viramuno (nevlrapine), Rescriptor (delavirdine), Sustiva (efavirenz; EFV) which are produced by Boehringer Ingelhelm GmbH, Pharmacia & Upjohn Inc. and E. I. Du Pont de Nemours and Company. The objective of approved protease inhibitor drugs is to prevent the assembly of new virus particles. The approved protease inhibitors include drugs such as Invirase (saquinavir), Fortovase (saquinavir), Norvir (ritonavir), Crixivan (indinavir), Viracept (nellinavir) and Agenerase (amprenavir), which are manufactured by companies including Roche Holding AG, Abbot Laboratories, Merck & Co. Inc., Agouron Pharmaceuticals Inc., Vertex Pharmaceuticals Incorporated and Glaxo Wellcome Plc.
Both HIV protease and RT drugs have demonstrated their efficacy in terms of HIV blood concentration and HIV-positive period and are used to slow the progression of the disease. Furthermore, efficacy has been higher with drug combinations. None of these drugs are, however, a cure and mutations of HIV's envelope produce viral strains resistant to both classes of drugs. These drugs also produce toxic side effects on the
peripheral nervous system and gastrointestinal tract. Non-compliance on combination therapies and interruptions in dosing could have an effect on and trigger accelerated viral replication.
If successful in developing and validating our therapeutic molecules, we believe there are significant existing and future markets for the treatment of HIV and AIDS. There can be no assurance that currently approved drugs or products developed in the future for the treatment of HIV/AIDS by our competitors (which may include Roche Holding AG, Abbot Laboratories, Merck & Co. Inc., Agouron Pharmaceuticals Inc., Vertex Pharmaceuticals Incorporated, Glaxo Wellcome Plc, Bristol-Myers Squibb Company, Trimeris, Inc., Progenics, Inc., and BioChem Pharma Inc.) will not be effectively marketed and sold. We believe, however, that our unique approach and fundamental understanding of molecular mimicry will provide an advantage over existing and future competitors.
Therapeutic Molecules (immunotherapeutic agent). We believe that our targeted immunotherapeutic vaccines may be innovative within the field of therapeutic research related to AIDS.
Preventive Vaccines. We are conducting research aimed at developing a universal preventive vaccine for the HIV-1 and HIV-2 viruses, which vaccine will provide protection against all viral strains.
The worldwide vaccine market is dominated by four large multinational companies: Merck & Co., SmithKline Beecham Plc, Wyeth Lederle Vaccines & Pediatrics (a division of American Home Products Corporation), and Aventis S.A. Pasteur. Companies such as The Immune Response Corporation, VaxGen Inc., Trimeris, Inc., and Progenics Pharmaceuticals, Inc. also are developing preventive vaccines.
We believe that while these companies have greater financial, manufacturing, technical, human resource, marketing and distribution capabilities, and greater experience in conducting pre-clinical and clinical trials and in obtaining regulatory and FDA approvals, our technologies nonetheless provide us with a competitive advantage. Our innovative approach to vaccine development is based on the observed immunological cross-reactivity (or mimicry) between the well-preserved, antigenic and immunodominant domain of GP41 and IL-2, and relies on the observation of expected autoimmune consequences in HIV infected subjects.
We believe our approach is most promising in comparison with the approaches that have been pursued so far, including:
- Sub-unit vaccine: a technology addressing a piece of the outer surface of HIV, such as GP160 or GP120, produced by genetic engineering.
- Live vector vaccine: a live bacterium or virus such as vaccinia (used in the smallpox vaccine) modified so it cannot cause disease, but can transport into the body one or more genes that makes one or more HIV proteins.
- Vaccine combination: an example includes a "prime-boost strategy," use of a recombinant vector vaccine to induce cellular immune responses followed by booster shots of a sub-unit vaccine to stimulate antibody production.
- Peptide vaccine: chemically synthesized pieces of HIV proteins (peptides) known to stimulate HIV-specific immunity.
- Virus-like particle vaccine (pseudovirion vaccine): a non-infectious HIV look-alike that has one or more, but not all, HIV proteins.
- DNA vaccine: direct injection of genes coding for HIV proteins.
- Whole-killed virus vaccine: HIV that has been inactivated by chemicals, irradiation or other means rendering it non-infectious.
- Live-attenuated virus vaccine: live HIV from which one or more apparent disease-promoting genes of the virus have been deleted.
Cartridge. We believe our cartridge or therapeutic plasmapheresis is significantly different from the cartridges being developed and provided by competitors. The more specific technique for antibody removal is
known as immunoadsorption, yet all existing systems are non-specific in removal of antibodies, which limits their effectiveness and may have serious side effects. Current immunoadsorption systems selectively remove antibodies by the interposition of affinity columns in the devices. These cartridges are expensive, large, require trained technicians and are not protein specific. In addition, the cartridge is based on a biocompatible membrane based on a discovery of antibody binding, which perform a highly specific extra-corporeal immunoadsorption. When specific (as compared with selective) there is the definitive advantage of removing only the targeted pathogenic antibodies while leaving the other antibodies essential to the patients normal immune systems, and defense against infection. Our main competitor with respect to cartridges appears to be Aethlon Medical with its HIV Hemopurifier.
GOVERNMENT REGULATION
We contract with third parties to perform research projects related to our business. These third parties are located in various countries and are subject to the applicable laws and regulations of their respective countries. Accordingly, regulation by government authorities in the United States and foreign countries is a significant factor in the development, manufacture and marketing of our proposed products and in our ongoing research and product development activities. Any products that we develop will require regulatory approval by government agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinical studies and clinical trials and other approval procedures of the United States Food and Drug Administration, or FDA, and similar regulatory authorities in foreign countries. In addition, various federal and state statutes and regulations will also govern or influence testing, manufacturing, safety, labeling, storage and record-keeping related to such products and their marketing. The process of obtaining these approvals and the subsequent substantial compliance with appropriate federal and state statutes and regulations require the expenditure of substantial time and financial resources. The success of our business will depend on our ability to obtain and maintain the necessary regulatory approvals.
Preclinical studies generally are conducted on laboratory animals to evaluate the potential safety and the efficacy of a product. In the United States, we must submit the results of preclinical studies to the FDA as a part of an IND, which application must become effective before we can begin clinical trials in the United States. An IND becomes effective 30 days after receipt by the FDA unless the FDA objects to it. Typically, clinical evaluation involves a time-consuming and costly three-phase process.
Phase I. Refers typically to closely monitored clinical trials and includes the initial introduction of an investigational new drug into human patients or normal volunteer subjects. Phase I clinical trials are designed to determine the metabolism and pharmacologic actions of a drug in humans, the side effects associated with increasing drug doses and, if possible, to gain early evidence on effectiveness. Phase I trials also include the study of structure-activity relationships and mechanism of action in humans, as well as studies in which investigational drugs are used as research tools to explore biological phenomena or disease processes. During Phase I clinical trials, sufficient information about a drug's pharmacokinetics and pharmacological effects should be obtained to permit the design of well-controlled, scientifically valid, Phase II studies. The total number of subjects and patients included in Phase I clinical trials varies, but is generally in the range of 20 to 80 people.
Phase II. Refers to controlled clinical trials conducted to evaluate the effectiveness of a drug for a particular indication or indications in patients with a disease or condition under study and to determine the common short-term side effects and risks associated with the drug. These clinical trials are typically well-controlled, closely monitored and conducted in a relatively small number of patients, usually involving no more than several hundred subjects.
Phase III. Refers to expanded controlled clinical trials, which many times are designated as "pivotal trials" designed to reach end points that the FDA has agreed in advance, if met, would allow approval for marketing. These clinical trials are performed after preliminary evidence suggesting effectiveness of a drug has been obtained. They are intended to gather additional information about the effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for
physician labeling. Phase III trials can include from several hundred to several thousand subjects depending on the specific indication being treated.
The FDA closely monitors the progress of each of the three phases of clinical trials that are conducted in the United States and may, at its discretion, reevaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDA's assessment of the risk/benefit ratio to the patient. We have not yet conducted any clinical trials and are currently focused on research.
Once Phase III trials are completed, drug developers submit the results of preclinical studies and clinical trials to the FDA, in the form of an NDA, for approval to commence commercial sales. In response, the FDA may grant marketing approval, request additional information or deny the application if the FDA determines that the application does not meet the predetermined study end points and other regulatory approval criteria. Furthermore, the FDA may prevent a drug developer from marketing a product under a label for its desired indications, which may impair commercialization of the product.
If the FDA approves the new drug application, the drug becomes available for physicians to prescribe in the United States. After approval, the drug developer must submit periodic reports to the FDA, including descriptions of any adverse reactions reported. The FDA may request additional studies, known as Phase IV trials, to evaluate long-term effects. We will be required to comply with similar regulatory procedures in countries other than the United States.
In addition to studies requested by the FDA after approval, a drug developer may conduct other trials and studies to explore use of the approved compound for treatment of new indications. The purpose of these trials and studies and related publications is to broaden the application and use of the drug and its acceptance in the medical community.
We will have to complete an approval process, similar to the one required in the United States, in virtually every foreign target market in order to commercialize our product candidates in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. Approvals (both foreign and in the United States) may not be granted on a timely basis, or at all. In addition, regulatory approval of prices is required in most countries other than the United States. We face the risk that the resulting prices would be insufficient to generate an acceptable return to us or our collaborators. A failure to obtain or maintain the necessary regulatory approvals will have an materially adverse effect on our business.
EMPLOYEES
As of May 21, 2002, we had a total of eight full-time employees, five of which work for our subsidiary, Mymetics S.A. There are no collective bargaining agreements in effect. We believe that relations with our employees are good.
PROPERTIES
Mymetics Corporation currently leases approximately 120 square feet of office space in Annapolis, Maryland, in which our North American administrative activities are conducted. The current rent is approximately $1,000 per month, and the lease expires on April 14, 2003, unless earlier terminated by either party on 90 days' prior notice. Mymetics S.A. currently leases approximately 170 square meters of office space in Saint-Genis Laval, France, in which our European administrative activities are conducted. The current rent is approximately E1,641 per month, and the lease expires on January 31, 2006. Apart from those two leases, we do not own or lease any real property. All of our research activities are conducted at the properties of third parties with whom we contract to perform research projects.
LEGAL PROCEEDINGS
We are subject to routine litigation incidental to our business. We do not believe that the outcome of any such litigation will have a material adverse effect on our business or financial condition.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table shows specific information about our executive officers and directors as of May 21, 2002.
NAME AGE CURRENT POSITION WITH THE COMPANY
---- --- ---------------------------------
Dr. Peter P. McCann.................. 58 Chief Executive Officer, President and Director
John M. Musacchio.................... 54 Chief Operating Officer, Chief Financial
Officer, Secretary and Director
Dr. Pierre-Francois Serres........... 52 Chief Scientific Officer and Director
Dr. Joseph D. Mosca.................. 48 Vice President of Development
Patrice Pactol....................... 41 Director
Robert Demers........................ 64 Director
Michael K. Allio..................... 38 Director
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Dr. Peter P. McCann became our Chief Executive Officer, President and a member of our board of directors on February 7, 2002. Dr. McCann previously was employed with Marion Merrell Dow Inc., where he served in a number of senior executive capacities. From 1993 to 1998, Dr. McCann served as President of British Biotech Inc., the North American operating unit of British Biotech Pharmaceuticals (the largest biotech company in Europe). In this capacity, he established British Biotech Inc. in Annapolis, Maryland, where he directed the company's Phase II and Phase III clinical trials of two major cancer drugs at more than 200 medical centers in the United States and Canada. Dr. McCann served as Interim President of the University of Maryland Biotechnology Institute, one of the 13 operating units of the University System of Maryland, from 1998-1999. From 1999-2001, Dr. McCann served as President and Chief Executive Officer of Oncostasis, Inc., a genomics-based cancer therapeutics company created to identify and develop new therapies.
John M. Musacchio has been our Chief Operating Officer, Chief Financial Officer and a member of our board of directors since May 16, 2001, and our Secretary since May 26, 2001. Mr. Musacchio is currently a Vice President of MFC Bancorp Ltd., an independent financial services group which beneficially owns 9.98% of our outstanding common stock. He has held this position with MFC Bancorp Ltd. since 1998. Prior to joining MFC Bancorp Ltd., Mr. Musacchio held senior executive positions with PDG Environmental, Inc. and its successors. He has 25 years of industrial and professional service business operating experience on an international scale, having held positions as principal, director and officer in both private and publicly traded companies. His management experience includes the segments of operations, marketing, corporate development and planning.
Dr. Pierre-Francois Serres became our Chief Scientific Officer on February 7, 2002 and has been a member of our board of directors since March 28, 2001. Dr. Serres previously served as our Chief Executive Officer and President. From 1990 until March 2001, Dr. Serres was the founder, Chief Executive Officer and President of our subsidiary, Mymetics S.A. He is also the founder and co-manager of Scericia S.C.E.R, which performs studies and research in clinical immunology. Prior to that he worked as a scientific manager at Indicia Diagnostics S.A.
Joseph D. Mosca, Ph.D., became our Vice President of Development on March 18, 2002. Dr. Mosca is an experienced research and development scientist in the field of immunology and AIDS virology. Dr. Mosca joined the faculty of the Johns Hopkins University in 1982, and, subsequently, the staff of the Henry M. Jackson Foundation in Rockville, Maryland in 1989. From 1996 to 2000, Dr. Mosca held a number of management positions at Osiris Therapeutics in Baltimore, Maryland, the last of which was Director of Gene Delivery. Most recently, he served as Executive Director of Research at Stemron Corporation in Gaithersburg, Maryland.
Patrice Pactol became a member of our board of directors on March 28, 2001. From 1995 until becoming a member of our board of directors, Mr. Pactol was a director and the coordinator for bioinformatics and computing of our subsidiary, Mymetics S.A. Prior to that he was a consultant in veterinary and human biology and a sales executive for a pharmaceutical company.
Robert Demers became a member of our board of directors on July 19, 2001. Since 1992, Mr. Demers founded and served as the Chief Executive Officer of Demers Conseil Inc., a member of the Montreal Stock Exchange, the Toronto Stock Exchange and the Investment Dealer Association of Canada. Prior to that, he served as the President of Maison Placements Canada Inc., an institutional research firm. He has served as the Chairman of the Quebec Securities Commission and as President and Governor of the Montreal Stock Exchange. He has served as a director of numerous public and private companies, as well as several non- profit organizations.
Michael K. Allio became a member of our board of directors on July 19, 2001. Mr. Allio is an independent business consultant concentrating on advising his clients on strategic, business development and process improvement projects. From 1995 to 2000, Mr. Allio was the Vice President and Principal of TracRac Incorporated, a design and fabrication company. Prior to his tenure at TracRac Incorporated, he was the Vice President and Senior Consultant of Robert J. Allio & Associates, Inc., a management consulting firm, and Manager of Creative Promotions for Revlon Incorporated.
DIRECTOR COMPENSATION
Employee directors are not compensated for their role as directors. Our outside directors receive an annual fee of $7,500, a fee of $750 for each meeting they attend, and a fee of $250 for each committee meeting they attend. All directors receive reimbursement for their actual expenses incurred in attending such meetings.
In addition, pursuant to our 2001 Stock Option Plan, all directors are entitled to receive stock options pursuant to the terms and provisions of such plan. Upon election as director, each director receives an option to purchase 10,000 shares of our common stock. For each subsequent year of service after the initial year, each director receives an option to purchase an additional 1,250 shares of our common stock. During the fiscal year ended December 31, 2001, 100,000 stock options were granted to directors under our 2001 Stock Option Plan. Of these 100,000 stock options, 50,000 were granted to Michael Allio pursuant to a consulting arrangement described below.
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
Our board of directors is divided into three classes, with the members of each class serving for a staggered three-year term. Our board of directors currently consists of two Class I directors, two Class II directors and two Class III directors. At each annual meeting of stockholders, a class of directors is elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The term of our Class I directors (Messrs. Allio and Demers) expires at the annual meeting of stockholders to be held in 2004. The term of our Class II directors (Messrs. Musacchio and Pactol) expires at the annual meeting of stockholders to be held in 2002. The term of our Class III directors (Messrs. McCann and Serres) expires at the annual meeting of stockholders to be held in 2003. This classification of our board of directors may delay or prevent a change in control of our company or our management. See "Description of Capital Stock -- Delaware Anti-Takeover Law and Provisions of Our Certificate of Incorporation and Bylaws."
Our board of directors currently has two committees: an audit committee and a nominating committee.
The audit committee of our board of directors currently consists of Patrice Pactol, Michael K. Allio and Robert Demers, who is the chairman of the committee. The audit committee, among other responsibilities, reviews our internal accounting procedures and external reporting process, and consults with and reviews the services provided by Peterson Sullivan, PLLC, our independent public accountants.
The nominating committee of our board of directors currently consists of John M. Musacchio, Dr. Pierre-Francois Serres and Michael K. Allio. The nominating committee, among other responsibilities,
confers, advises and makes recommendations to our board of directors with respect to (a) nominations to fill vacancies on our board of directors, (b) director compensation and (c) charters for, and appointments to, committees of our board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2001, we did not have a compensation committee nor any other committee performing similar functions. Dr. Serre's employment agreement and compensation package for fiscal year 2001 were negotiated by Mr. Musacchio on behalf of our board of directors. After our annual stockholder meeting in July 2001, our board of directors reviewed the compensation terms for Dr. Serres and did not recommend any changes to the employment agreement. None of our executive officers serves as a member of our board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information for the last three fiscal years regarding the annual compensation earned by Jim Soo Choi, who served as our President until March 28, 2001, and Dr. Pierre-Francois Serres, who became our President and Chief Executive Officer on March 28, 2001. No executive officer, other than Dr. Serres, received aggregate annual consideration (salary and bonus) from us in excess of $100,000 (E108,542 based on the exchange rate on May 20, 2002) during the fiscal year ended December 31, 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------- -----------------------------
AWARDS PAYOUTS
------------ ------------
SECURITIES ALL
UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
--------------------------- ---- ------- ----- ------------ ------------
Dr. Pierre-Francois Serres(1)...... 2001 E86,181 -- 10,000 E1,630(3)
2000 E73,176(2) -- -- --
1999 E35,817(2) -- -- --
Jim Soo Choi(1).................... 2001 -- -- -- --
2000 -- -- -- --
1999 -- -- -- --
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(1) Mr. Choi was our President from December 1999 to March 28, 2001 and was replaced by Dr. Pierre-Francois Serres, who became our President and Chief Executive Officer on March 28, 2001.
(2) This represents amounts paid to Dr. Serres by our subsidiary, Mymetics S.A., prior to our acquisition of Mymetics S.A.
(3) Dr. Serres received E1,630 for his participation on the board of directors of our subsidiary, Mymetics S.A., prior to our acquisition of Mymetics S.A.
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes the stock options granted to Dr. Pierre-Francois Serres during the fiscal year ended December 31, 2001, including the potential realizable value over the 10 1/2-year term of the options, based on assumed rates of stock appreciation of 5% and 10%, compounded annually. The potential realized value at assumed annual rates of stock price appreciation for the option term represents hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The 5% and 10% assumed annual rates of stock price appreciation are required by the rules of the Securities and Exchange Commission and do not represent our estimate or projection of our future common stock prices. Potential realizable value is based upon a fair market value of $3.15 for our common stock on the grant date
of the options, which fair market value is equal to the closing price of our common stock on the date of grant. Actual gains, if any, on stock option exercises are dependent on the future performance of our common stock and overall stock market conditions. The actual value realized may be greater or less than the potential realizable value set forth in the table. Mr. Choi, who served as our President until March 28, 2001, did not receive any options to purchase our common stock during the fiscal year ended on December 31, 2001.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------- ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED TO OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR 2001 PRICE DATE 5% ($) 10% ($)
---- -------------------- ------------------ -------- ---------- ---------- ----------
Dr. Pierre-Francois
Serres............. 10,000 10% $3.15 1/19/12 $21,077 $54,190
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 2001
Dr. Pierre-Francois Serres, our only named executive officer who holds any stock options, did not exercise any options during 2001. The following table provides information concerning the number and value of unexercised options held by Dr. Serres at December 31, 2001.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2001 DECEMBER 31, 2001(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
Dr. Pierre-Francois
Serres................... -- -- 10,000(1) -- --(3) --(3)
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(1) These options are fully vested and currently exercisable at $3.15 per share.
(2) The value of unexercised in-the-money options held at December 31, 2001 represents the total gain which an option holder would realize if he or she exercised all of the in-the-money options held at December 31, 2001, and is determined by multiplying the number of shares of common stock underlying the options by the difference between an assumed fair market value per share and the per share option exercise price. An option is in-the-money if the exercise price per share of the option is below the assumed fair market value per share.
(3) The fair market value of the stock underlying Dr. Serres's options was $2.26 per share on December 31, 2001, based on the closing market price of our common stock on such date. The exercise price of Dr. Serres's options is $3.15 per share. Accordingly, none of Dr. Serres options were in-the-money on December 31, 2001.
2001 STOCK OPTION PLAN
In June 2001, our board of directors and stockholders adopted our 2001 Stock Option Plan, which authorizes aggregate grants of up to 5,000,000 shares of common stock to our officers, directors, employees and consultants. Awards under the plan may be in the form of options which qualify as "incentive stock options" under the meaning of Section 422 of the Internal Revenue Code and options which do not so qualify. The purpose of the plan is to promote our interests and those of our stockholders by (a) attracting and retaining employees, officers, directors and consultants and advisors of outstanding ability, (b) motivating such persons, by means of performance-related incentives, to achieve longer-range performance goals, and (c) enabling such persons to participate in our long-term growth and financial success. The plan is administered by an administrator consisting of at least three members of our board of directors, two of whom must be non-employees. Subject to the provisions of the plan, the administrator is responsible for awarding stock grants to selected participants and determining the amount, type, exercise price and vesting period of options comprising such grants. The exercise price of the option shares must be paid in full at the time of exercise, and is payable in cash and/or shares of our common stock. Incentive stock options granted under the
plan must be exercised within 10 years after the date of grant while non-qualified stock options must be exercised within 10 1/2 years after the date of grant. As of March 31, 2002, we had granted options to purchase 100,000 shares of common stock under the 2001 Stock Option Plan, all of which are currently exercisable.
1995 QUALIFIED INCENTIVE STOCK OPTION PLAN
In August 1996, we adopted our 1995 Qualified Incentive Stock Option Plan,
which plan authorized aggregate grants of up to 150,000 shares of common stock
to key managerial employees. The plan was terminated in March 2001. Accordingly,
while no additional options may be granted under such plan, all issued and
outstanding options remain exercisable. The plan provided for awards of
"incentive stock options." The purpose of the plan was to promote our interests
and those of our stockholders by (a) attracting and retaining key managerial
employees of outstanding ability, (b) motivating such persons, by means of
performance-related incentives, to achieve longer-range performance goals, and
(c) enabling such persons to participate in our long-term growth and financial
success. The plan was administered by the compensation committee appointed by
our board of directors, which committee consisted of a minimum of two and a
maximum of three members of our board of directors, each of whom was
disinterested as defined in Rule 16b-3 under the Securities Exchange Act of
1934. Subject to the provisions of the plan, our compensation committee was
responsible for awarding stock grants to selected participants and determining
the amount, type, exercise price and vesting period of options comprising such
grants. The exercise price of the option shares must be paid in full at the time
of exercise, and is payable in cash and/or shares of our common stock. All
options must be exercised within 10 years after the date of grant. As of March
31, 2002, there were 100,000 shares of common stock outstanding under our 1995
Qualified Incentive Stock Option Plan, all of which are currently exercisable.
1994 AMENDED STOCK OPTION PLAN
In November 1996, we adopted our 1994 Amended Stock Option Plan, which plan authorized aggregate grants of up to 350,000 shares of common stock to eligible employees, consultants and directors. Our 1994 Amended Stock Option Plan was terminated in March 2001. Accordingly, while no additional options may be granted under the plan, all issued and outstanding options remain exercisable. The plan provided for the issuance of non-qualified stock options. The purpose of the plan was to promote our interests and those of our stockholders by (a) attracting and retaining key managerial employees of outstanding ability, (b) motivating such persons, by means of performance-related incentives, to achieve longer-range performance goals, and (c) enabling such persons to participate in our long-term growth and financial success. The plan was administered by the compensation committee appointed by our board of directors which consisted of a minimum of two directors. Subject to the provisions of the plan, our compensation committee was responsible for awarding stock grants to selected participants and determining the amount, type, exercise price and vesting period of options comprising such grants. The exercise price of the option shares must be paid in full at the time of exercise, and is payable in cash and/or shares of common stock. All options must be exercised within 10 years after the date of grant. As of March 31, 2002, there were 63,750 options outstanding under our 1994 Amended Stock Option Plan, all of which are currently exercisable.
EMPLOYMENT AGREEMENTS
On May 3, 2001, we entered into an employment agreement with Dr. Serres, pursuant to which he receives a monthly salary of E7,622 and customary benefits. In addition, Dr. Serres may participate in our 2001 Stock Option Plan, as well as receive discretionary bonuses as approved by our board of directors. The term of the employment agreement continues until terminated by either party upon three months' prior notice. If we terminate Dr. Serres without "cause" (as defined in the agreement) or if Dr. Serres dies or resigns as a result of a change in control, the employment agreement, which is governed by French law, provides for continuation payments to Dr. Serres equal to his monthly base salary for a period of 24 months. In addition, Dr. Serres will also have certain rights under the National Collective Bargaining Agreement for the Pharmaceutical Industry (Convention Collective Nationale de l'Industrie Pharmaceutique).
On March 18, 2002, we entered into an employment agreement with our Chief Executive Officer, Dr. McCann, pursuant to which he receives an annual salary of $170,000 and customary benefits. In addition, Dr. McCann may participate in our 2001 Stock Option Plan, as well as receive discretionary bonuses as approved by our board of directors. The employment agreement provides for an initial term of one year, with automatic one-year renewal periods unless either we or Dr. McCann elect to terminate the agreement by providing 60 days' prior notice. If we terminate Dr. McCann during the initial one-year term without "cause" (as defined in the agreement), the employment agreement, which is governed by Delaware law, requires us to continue to pay Dr. McCann's base salary for the greater of the remainder of the initial one-year term or six months. If we terminate Dr. McCann without cause during a renewal period, we must continue to pay Dr. McCann his base salary for a period of 24 months from the date of such termination. In addition, if Dr. McCann resigns due to a substantial change in ownership or in the membership of our board of directors, we must continue to pay Dr. McCann his base salary for a period of one year following the date of such resignation.
On March 18, 2002, we entered into an employment agreement with our Vice President of Development, Dr. Joseph D. Mosca, pursuant to which Dr. Mosca receives an annual salary of $125,000 and customary benefits. In addition, Dr. Mosca may participate in our 2001 Stock Option Plan, as well as receive discretionary bonuses as approved by our board of directors. The employment agreement provides for an initial term of one year, with automatic one-year renewal periods unless either we or Dr. Mosca elect to terminate the agreement by providing 60 days' prior notice. If we terminate Dr. Mosca during the initial one-year term without "cause" (as defined in the agreement), the employment agreement, which is governed by Delaware law, requires us to continue to pay Dr. Mosca his base salary for the greater of the remainder of the initial one-year term or six months. If we terminate Dr. Mosca without cause during a renewal period, we must continue to pay Dr. Mosca his base salary for a period of 12 months from the date of such termination.
CONSULTING AGREEMENT WITH MICHAEL K. ALLIO
In August 2001, we entered into a consulting agreement with Michael K. Allio, one of our directors. Pursuant to this agreement, Mr. Allio agreed to provide us with strategic management consulting services. Mr. Allio's engagement under this agreement includes, without limitation, developing the scope of the business, establishing a European-North American operations team, directing and coordinating initial corporate identity and branding efforts, and crafting a coherent business plan. Furthermore, Mr. Allio's services include assisting us in establishing a viable United States identity and entity and exploring strategic partnerships in the United States, Europe and possibly elsewhere. In consideration for those services, Mr. Allio receives $12,000 per month, plus reimbursement for reasonable business expenses. Pursuant to the consulting agreement, Mr. Allio was also granted options to purchase 50,000 shares of our common stock at an exercise price of $2.50 per share, all of which are currently vested. The consulting agreement may be terminated by either party on 15 days' prior written notice. In addition, in the event that shares of our common stock are listed in the future on the Nasdaq National Market, we have agreed to grant Mr. Allio options to purchase 100,000 shares of common stock (at an exercise price equal to the fair market value of such shares at the time of any such grant), which options will be fully vested upon issuance.
SERVICES AGREEMENT WITH MFC MERCHANT BANK S.A.
In May 2001, we entered into a services agreement with MFC Merchant Bank S.A. pursuant to which MFC Merchant Bank S.A. agreed to provide us with the services of Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer and Secretary. In consideration for such services, we agreed to pay MFC Merchant Bank S.A. E5,000 per month.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is quoted on the OTC Bulletin Board under the trading symbol "MYMX." We changed our trading symbol from ICHR to MYMX in July 2001 following the corporate name change from ICHOR Corporation to Mymetics Corporation. The following table sets forth the quarterly high and low sale price per share of our common stock for the periods indicated. The prices represent inter-dealer quotations, which do not include retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
FISCAL QUARTER ENDED HIGH LOW -------------------- ----- ----- 2000: March 31.................................................... $3.25 $1.50 June 30..................................................... 2.00 0.50 September 30................................................ 0.59 0.49 December 31................................................. 3.44 0.38 2001: March 31.................................................... $3.25 $1.88 June 30..................................................... 3.50 2.35 September 30................................................ 4.10 2.50 December 31................................................. 3.95 2.00 2002: March 31.................................................... $3.85 $2.15 |
The closing price of our common stock on May 13, 2002 was $3.25 per share. (May 13, 2002 was the most recent date on which shares of our common stock were traded.)
STOCKHOLDERS
At May 21, 2002, we had approximately 52 holders of record of our common stock, some of which are securities clearing agencies and intermediaries.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During 2001, there were no transactions (or series of similar transactions), and there are currently no proposed transactions (or series of similar transactions), to which we were, are or will be a party in which the amount involved exceeds $60,000 and in which any of our directors, executive officers or holders of more than 5% of our common stock, or an immediate family member of any of the foregoing, had or will have a direct or indirect interest, other than the transactions described below.
We believe that we have executed all of the transactions set forth below on terms no less favorable to us than we could have obtained from unaffiliated third parties. It is our intention to ensure that all future transactions, including loans, between us and our officers, directors and principal stockholders and their affiliates are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.
CREDIT FACILITY WITH MFC MERCHANT BANK S.A.
MFC Merchant Bank S.A. currently beneficially owns approximately 9.98% of the outstanding shares of our common stock. MFC Merchant Bank S.A. is a wholly-owned subsidiary of MFC Bancorp Ltd. Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer, Secretary and a member of our board of directors, is currently a Vice President with MFC Bancorp Ltd.
In December 2000, we assumed the rights and obligations of a credit facility which our subsidiary, Mymetics S.A., previously entered into with MFC Merchant Bank S.A. The credit facility is a revolving term facility which allows us to borrow a principal amount of up to E1,300,000, of which E228,000 is currently outstanding, at an interest rate of LIBOR plus 4%. The credit facility requires all funds borrowed to be used for working capital and general corporate activities and for paying the fees and expenses associated with registering and maintaining our patents. The credit facility matures on August 31, 2002. The credit facility is secured by a blanket lien on all of our property, assets and undertakings, including, all of our existing and future pecuniary claims and all of our current and future patents covering technology used, or to be used, in the field of human and animal AIDS. Additionally, we are prohibited from creating any additional liens on our property or assets so long as the credit facility is in effect. As partial consideration of the credit facility, we granted MFC Merchant Bank S.A. warrants to purchase 6,828,468 shares of our common stock for E.23 per share. The warrants provided that MFC Merchant Bank S.A. was entitled to convert the warrants into shares of our common stock in an amount equal to the maximum allowable principal balance under the credit facility including unpaid interest plus the arrangement and retainer fees. The warrants are exercisable during a three-year period beginning in August 2000 at approximately E.23 per common share. During 2001, MFC Merchant Bank S.A. exercised warrants to acquire 1,176,294 common shares in exchange for the arrangement fee and the retainer fee plus E52 in accrued interest. MFC Merchant Bank S.A. also exercised warrants to acquire 3,250,000 common shares for cash in December 2001.
SHARE EXCHANGE WITH THE STOCKHOLDERS OF MYMETICS S.A.
In March 2001, we entered into a share exchange with the former stockholders of our subsidiary, Mymetics S.A., whereby we issued shares of our common stock and Preferential Shares of our subsidiary, 6543 Luxembourg S.A., to the former stockholders of Mymetics S.A. in exchange for 99.9% of the outstanding shares of Mymetics S.A. Some of the former stockholders of Mymetics S.A., rather than receiving shares of our common stock directly, opted to receive Preferential Shares of our subsidiary, 6543 Luxembourg S.A., which are convertible into shares of our common stock. Pursuant to the share exchange:
- Ms. Martine Reindle, who beneficially owns more than 5% of our common stock, received 4,291,365 shares of our common stock;
- Mr. Ernst Lubke, who beneficially owns more than 5% of our common stock, received 1,249,871 shares of our common stock;
- Dr. Pierre-Francois Serres, our Chief Scientific Officer and a member of our board of directors, received 10,436 Preferential Shares of our subsidiary, 6543 Luxembourg S.A., which are convertible into 11,129,368 shares of our common stock; and
- Mr. Patrice Pactol, a member of our board of directors, received 2,004 Preferential Shares of our subsidiary, 6543 Luxembourg S.A., which are convertible into 2,137,146 shares of our common stock.
MFC Merchant Bank S.A. acted as an advisor in connection with the share exchange and, in consideration thereof, was issued 2,025,144 shares of our common stock. In addition, in connection with the share exchange, we entered into a Voting and Exchange Trust Agreement dated March 28, 2001 with our subsidiary, 6543 Luxembourg S.A. and MFC Merchant Bank S.A. MFC Merchant Bank S.A. serves as the trustee under the Voting and Exchange Trust Agreement and is paid customary fees and expenses in relation thereto. The terms of this Voting and Exchange Trust Agreement are described in more detail under "Business -- The Company."
COMPENSATION AND SERVICES AGREEMENTS
In May 2001, we entered into a services agreement with MFC Merchant Bank S.A. pursuant to which MFC Merchant Bank S.A. agreed to provide us with the services of Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer, Secretary and a member of our board of directors. The terms of this services agreement are described in more detail under "Management -- Services Agreement with MFC Merchant Bank S.A."
We have entered into compensation arrangements with certain of our directors. The terms of these arrangements are described in more detail under "Management -- Employment Agreements."
In August 2001, we entered into a Consulting Agreement with Mr. Allio, a member of our board of directors. The terms of this consulting arrangement are described in more detail under "Management -- Consulting Agreement with Michael K. Allio."
PRIVATE PLACEMENT
In June 2001, we sold 1,333,333 shares of our common stock in a private placement exempt from the registration requirements of the Securities Act of 1933 under Regulation S promulgated thereunder. MFC Merchant Bank S.A. acted as a placement agent in connection with the placement of the shares and received warrants to purchase 103,559 shares of common stock at $1.725 per share. As of the date of this prospectus, none of these warrants have been exercised.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Certificate of Incorporation, as amended, authorizes us to issue of up to 80 million shares of common stock, par value $0.01 per share, and up to 5 million shares of preferred stock, par value $0.01 per share. As of May 21, 2002, 49,271,962 shares of our common stock were outstanding and held of record by approximately 52 stockholders (assuming the conversion of 15,372 Preferential Shares into 16,393,316 shares of common stock), and one share of Special Preferred Voting Stock was outstanding. In addition, as of May 21, 2002, there were 263,750 shares of common stock subject to outstanding options and 1,705,733 shares of common stock subject to outstanding warrants.
Our subsidiary, 6543 Luxembourg S.A., has 15,372 Preferential Shares outstanding, which are convertible into 16,393,316 shares of our common stock. As described below, the holders of the Preferential Shares are entitled to vote on all matters to be voted on by our stockholders to the same extent as if they had converted the Preferential Shares into shares of our common stock pursuant to a Voting and Exchange Trust Agreement dated March 28, 2001.
The following description of our capital stock does not purport to be complete and is subject to, and qualified in its entirety by, our Certificate of Incorporation and Bylaws, copies of which have been incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and by the provisions of applicable Delaware law.
COMMON STOCK
The holders of our common stock are entitled to one vote per share. Except as otherwise provided in the Delaware General Corporation Law or our Certificate of Incorporation or Bylaws, any corporate action that is to be taken by a vote of the stockholders shall be authorized upon receiving the affirmative vote of a majority of the votes cast by all stockholders entitled to vote thereon. Currently, our Certificate of Incorporation and Bylaws contain no supermajority voting requirements. However, pursuant to the provisions of the Delaware General Corporation Law, our board of directors may, without a vote of the stockholders and at any time, amend our Bylaws to, among other things, provide for a supermajority voting requirement. Our board of directors has no present intent to do so. The Certificate of Incorporation does not provide for cumulative voting with respect to the election of directors. Any action which may be approved by a stockholder vote may also be accomplished by partial written consent.
The holders of our common stock are entitled to receive dividends, whether in cash, stock or other property, declared and paid from time to time by our board of directors, subject only to any preference of any preferred stockholders. Our board of directors is not required at any time to declare and pay any dividends. In the event of our liquidation, the holders of common stock will share pro rata in any distributions subject only to the rights of our creditors and the rights of any preferred stockholders.
The common stock has no conversion provisions, no sinking fund provisions and no redemption provisions. The holders of the common stock have no preemptive or conversion rights. Once issued and fully paid, the common stock will not be subject to any assessment.
PREFERRED STOCK
Under our Certificate of Incorporation, 5,000,000 shares of undesignated preferred stock are authorized for issuance. Of the shares of preferred stock authorized, one share of Special Voting Preferred Stock is currently outstanding. This share of Special Voting Preferred Stock was issued in connection with the 2001 share exchange transaction among us, 6543 Luxembourg S.A. and the former stockholders of Mymetics S.A. As described in our Certificate of Incorporation, the holder of the Special Voting Preferred Stock is entitled to vote on all matters that the holders of our common stock are entitled to vote on to the same extent as if the holder of the Special Voting Preferred Stock held a number of shares of our common stock equal to the number of shares of common stock into which all outstanding Preferential Shares of 6543 Luxembourg S.A. are then convertible. Presently, all of the outstanding Preferential Shares of 6543 Luxembourg S.A. are convertible into 16,393,316 shares of our common stock, and thus, the holder of the Special Voting Preferred Stock is entitled to 16,393,316 votes on all matters voted on by our common stockholders.
The Special Voting Preferred Stock was created in order to provide the former stockholders of Mymetics S.A. who opted to receive Preferential Shares of 6543 Luxembourg S.A. to vote on matters to the same extent as if they converted their Preferential Shares into shares of our common stock. In furtherance of this purpose, we entered into a Voting and Exchange Trust Agreement with 6543 Luxembourg S.A., MFC Merchant Bank S.A and the former stockholders of Mymetics S.A. who hold Preferential Shares of 6543 Luxembourg S.A. Under the Voting and Exchange Trust Agreement, MFC Merchant Bank S.A. was appointed trustee and was issued the single share of Special Voting Preferred Stock. MFC Merchant Bank, as the holder of the Special Voting Preferred Stock, is entitled to vote on each matter that our holders of common stock are entitled to vote on to the same extent as if it held shares of common stock equal to the number of shares of common stock into which all outstanding Preferential Shares of 6543 Luxembourg S.A. are then convertible. The Voting and Exchange Trust Agreement provides a mechanism under which the holders of Preferential Shares may instruct MFC Merchant Bank (as Trustee) how to vote the particular votes conferred by the Special Voting Preferred Stock. The Voting and Exchange Trust Agreement further contains certain "insolvency put rights" whereby each Preferential Share is automatically exchanged for an amount equal to the then current market price of 1,066.44 (or the then current conversion multiplier) shares of our common stock if we suffer certain types of insolvency or liquidation events.
In order to further implement the 2001 share exchange and the voting arrangement described above, we entered into a Shareholder Agreement with the holders of Preferential Shares of 6543 Luxembourg S.A., pursuant to which the holders of the Preferential Shares were granted the right, at any time and at their option, to require 6543 Luxembourg S.A. to exchange the Preferential Shares for shares of our common stock at an initial exchange ratio of 1,066.44 for one, so that each Preferential Share is exchangeable for 1,066.44 shares of our common stock. The exchange ratio is adjusted upward in the event that we undertake a stock split or consolidation, issue stock dividends or otherwise change our share capital. The holders of Preferential Shares also were granted the right to receive dividends, if and when declared, equivalent to dividends paid on the number of our shares of common stock into which they are convertible.
Finally, also in connection with the 2001 share exchange transaction, we entered into a Support Agreement imposing certain limitations on our ability to declare or pay dividends or restructure our capital stock and obligating us to issue shares of our common stock to 6543 Luxembourg S.A. and the holders of Preferential Shares. For more detailed information on the share exchange and these related documents, see our Information Statement on Schedule 14C filed with the Securities and Exchange Commission on April 26, 2001.
Our board of directors has the authority to issue additional preferred stock in one or more series and to establish the rights and restrictions granted to or imposed on any unissued shares of preferred stock and to fix the number of shares constituting any series without any further vote or action by the stockholders. Our board
of directors has the authority, without approval of the stockholders, to issue preferred stock that has voting and conversion rights superior to the common stock, which could have the effect of delaying or preventing a change in control. We currently have no plans to issue any shares of preferred stock.
WARRANTS
In connection with the 2001 share exchange transaction among us, the former stockholders of Mymetics S.A. and 6543 Luxembourg S.A., we issued warrants to MFC Merchant Bank S.A., as partial payment of underwriting fees. Those warrants grant MFC Merchant Bank S.A. the right to purchase up to 6,828,468 shares of our common stock at an exercise price of E0.23 per share. In addition, MFC Merchant Bank S.A. acted as a placement agent in connection with a private placement we completed in June 2001. In consideration of its placement agent services, we granted MFC Merchant Bank S.A. a warrant to purchase 103,559 shares of our common stock at $1.725 per share. As of May 21, 2002, there were warrants to purchase 1,705,733 shares of common stock outstanding. All of these share purchase warrants expire on July 31, 2003.
DELAWARE ANTI-TAKEOVER LAW AND PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Provisions of Delaware law and our Certificate of Incorporation and Bylaws could make it more difficult for a third party to acquire us or to remove our incumbent officers and directors. These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited acquisition proposal outweigh the disadvantages of discouraging such proposals because, among other things, negotiation could result in an improvement of the terms of any such acquisition.
We are not subject to Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years following the date the person becomes an interested stockholder, unless the business transaction or combination in which the person became an interested stockholder is approved in a prescribed manner. Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. In general, an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporation's voting stock.
Our Bylaws provide that stockholder action can be taken at an annual or special meeting of stockholders or by written consent. Our Bylaws provide that special meetings of stockholders can be called only by the board of directors. Our board of directors is classified into three classes of directors serving staggered three-year terms. In accordance with the Delaware General Corporation Law, directors serving on classified boards of directors may only be removed from office for cause. These provisions may have the effect of delaying, deferring, or preventing a change in control.
As permitted by the Delaware General Corporation Law, we have included a provision in our Certificate of Incorporation and Bylaws to eliminate the personal liability of our officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors, other than in cases of fraud or other willful misconduct. In addition, our bylaws provide that we are required to advance expenses to our officers and directors as incurred in connection with proceedings against them for which they may be indemnified.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is CIBC Mellon Trust Company. The transfer agent's address is 2100 University Street, Suite 1600, Montreal, Quebec H3A 2A6.
PRINCIPAL STOCKHOLDERS
The following table sets forth information about the beneficial ownership of our common stock as of May 21, 2002, by: (a) each of our named executive officers; (b) each of our directors; (c) each person known to us to be the beneficial owner of more than 5% of our outstanding voting securities (assuming the conversion of 15,372 Preferential Shares of 6543 Luxembourg S.A. into 16,393,316 shares of our common stock); and (d) all of our executive officers and directors as a group. The following is based solely on statements and reports filed with the Securities and Exchange Commission or other information we believe to be reliable.
There were 49,271,962 shares of our common stock outstanding on May 21, 2002. This assumes the conversion of all 15,372 outstanding Preferential Shares of 6543 Luxembourg S.A. into 16,393,316 shares of our common stock, since, pursuant to a voting trust and exchange agreement dated March 28, 2001, the holders of the Preferential Shares are currently entitled to vote on matters before our stockholders as if they held the shares of common stock issuable upon the conversion of the Preferential Shares. We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all common shares that they beneficially own, subject to applicable community property laws.
In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of May 21, 2002, are deemed outstanding. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------- -------------------- ----------------
MFC Bancorp Ltd. ......................... Common Shares 5,089,066(1) 9.98%
Millennium Tower
21st Floor
Handelskai 94-96
1200 Vienna, Austria
MFC Merchant Bank S.A. ................... Common Shares 5,089,066(2) 9.98%
Kasernenstrasse 1
9100 Herisau, Switzerland
Martine Reindle........................... Common Shares 8,519,874(3) 17.29%
CP 18-1295 Mies, Switzerland
Ernst Lubke............................... Common Shares 3,126,767(3) 6.35%
Route du Muids
CH-1273 Arzier, Switzerland
Peter P. McCann(4)........................ Common Shares -- *
Chief Executive Officer, President and
Director
Dr. Pierre-Francois Serres(4)............. Common Shares 11,144,367(5) 22.61%
Chief Scientific Officer and Director
John M. Musacchio(4)...................... Common Shares 130,050(6) *
Chief Operating Officer, Chief Financial
Officer, Secretary and Director
Patrice Pactol(4)......................... Common Shares 2,147,146(7) 4.36%
Director
Robert Demers(4).......................... Common Shares 10,000(8) *
Director
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NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------- -------------------- ----------------
Michael K. Allio(4)....................... Common Shares 60,000(9) *
Director
All executive officers and directors as a
group (6 persons)....................... Common Shares 13,491,563 27.26%
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* Denotes less than one percent.
(1) Includes 3,383,333 shares of common stock and 1,705,733 share purchase warrants indirectly owned through MFC Merchant Bank S.A., a wholly-owned subsidiary of MFC Bancorp Ltd., each of which share purchase warrants entitles the holder to purchase one share of common stock.
(2) Includes 3,383,333 shares of common stock and 1,705,733 share purchase warrants, each of which entitles the holder to purchase one share of common stock.
(3) Includes 297,221 shares of common stock owned by Aralis Participations S.A. Martine Reindle is the Chairperson, a substantial equityholder and a member of the board of directors of Aralis Participations S.A. Ernest Lubke is an officer, a substantial equityholder and a member of the board of directors of Aralis Participations S.A. Accordingly, Ms. Reindle and Mr. Lubke may be deemed to have or share voting and/or investment power over the shares of common stock owned by Aralis Participations S.A.
(4) Address is c/o Mymetics Corporation, 706 Giddings Avenue, Suite 1C, Annapolis, Maryland 21401-1472.
(5) Includes 10,000 shares of common stock which Dr. Serres presently has the right to acquire pursuant to vested stock options granted under our 2001 Stock Option Plan, and 11,129,367 shares of our common stock issuable upon the conversion of 10,436 Preferential Shares of 6543 Luxembourg S.A. presently held by Dr. Serres.
(6) Includes 20,000 shares of common stock which Mr. Musacchio presently has the right to acquire pursuant to vested stock options granted under our 1994 Stock Option Plan, 100,000 shares of common stock which Mr. Musacchio presently has the right to acquire pursuant to vested stock options granted under our 1995 Stock Option Plan and 10,000 shares of common stock which Mr. Musacchio presently has the right to acquire pursuant to vested stock options granted under our 2001 Stock Option Plan.
(7) Includes 10,000 shares of common stock which Mr. Pactol presently has the right to acquire pursuant to vested stock options granted under our 2001 Stock Option Plan, and 2,137,146 shares of our common stock issuable upon the conversion of 2,004 Preferential Shares of 6543 Luxembourg S.A. presently held by Mr. Pactol.
(8) Represents 10,000 shares of common stock which Mr. Demers presently has the right to acquire pursuant to vested stock options granted under our 2001 Stock Option Plan.
(9) Represents 60,000 shares of common stock which Mr. Allio presently has the right to acquire pursuant to vested stock options granted under our 2001 Stock Option Plan.
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling stockholders after the date of this prospectus. The shares may be sold from time to time:
- directly by any selling stockholder to one or more purchasers;
- to or through underwriters, brokers or dealers;
- through agents on a best-efforts basis or otherwise; or
- through a combination of such methods of sale.
The selling stockholders may offer the shares at various times in one or more of the following transactions:
- in the over-the-counter market;
- in transactions other than market transactions;
- in connection with short sales of shares of our common stock;
- by pledge to secure debts or other obligations;
- in connection with the writing of non-traded and exchange-traded call options, in hedge transactions and in settlement of other transactions in standardized or over-the-counter options;
- purchases by a broker-dealer as principal and resale by the broker-dealer for its account; or
- in a combination of any of the above.
The selling stockholders may sell shares at market prices then prevailing, at prices related to prevailing market prices, at negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell shares. If this happens, broker-dealers will either receive discounts or commissions from the selling stockholder, or receive commissions from purchasers of shares for whom they have acted as agents. Selling stockholders may be deemed to be underwriters with respect to the shares sold by them. Broker-dealers who act in connection with the sale of these shares of common stock also may be deemed to be underwriters. Profits on any resale of the common stock as a principal by these broker-dealers, and any commissions received by the broker-dealers, may be deemed underwriting discounts and commissions under the Securities Act of 1933.
No underwriting commissions or finder's fees have been or will be paid to us. The selling stockholders will pay all broker-dealer commissions and related selling expenses associated with the sale of the common stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, we had 32,941,446 shares of common stock outstanding, of which 25,075,033 were "restricted securities" under and as defined in Rule 144 under the Securities Act of 1933. All of these restricted securities are being registered for sale pursuant to the registration statement of which this prospectus is a part. As a result, upon the effectiveness of this registration statement, all of these shares will be freely tradable, except that shares held by any of our affiliates will be subject to the volume, manner of sale and certain other limitations of Rule 144 described below. In general, affiliates include officers, directors and 10% stockholders.
As of the date of this prospectus, there are 16,393,316 shares of our common stock issuable upon the conversion of 15,372 outstanding Preferential Shares of our subsidiary, 6543 Luxembourg S.A. These shares of common stock are being registered for resale by the registration statement of which this prospectus is a part. As a result, upon the effectiveness of this registration statement and conversion of the Preferential Shares, all of these shares of common stock will be freely tradeable, except that shares held by any of our affiliates will be subject to the volume, manner of sale and certain other limitations of Rule 144.
As of the date of this prospectus, there were outstanding warrants to purchase a total of 1,705,733 shares of our common stock, all of which are being registered for sale pursuant to this prospectus. As a result, upon the effectiveness of this registration statement, all of the 1,705,733 shares of common stock issuable upon exercise of these warrants will be freely tradable, except that shares held by any of our affiliates will be subject to volume, manner of sale and certain other limitations of Rule 144.
RULE 144
Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 promulgated under the Securities Act of 1933. Sales of the restricted securities in the public market, or the availability of such shares for sale, could adversely affect the market price of the common stock. In general, under Rule 144, as in effect on the date of this prospectus, any person, including any of our affiliates, who has beneficially owned restricted securities for at least one year would be entitled to sell within any three month period a number of shares that, together with sales of any securities with which such person's sales must be aggregated, does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding; or
- the average weekly trading volume of the common stock during the four calendar weeks preceding the date on which the notice of the sale on Form 144 is filed with the Securities and Exchange Commission.
Sales of restricted securities under Rule 144 are also subject to certain requirements with respect to manner of sale, notice and the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at anytime during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner that was not an affiliate, is entitled to sell shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
STOCK OPTIONS
We expect to file a registration statement under the Securities Act covering approximately 5,000,000 shares of common stock reserved for issuance under our 2001 Stock Option Plan in the future. Once this registration statement is filed and becomes effective, any shares acquired upon the exercise of options granted under these plans also will be freely tradable in the public market. However, such shares held by affiliates still will be subject to the volume limitation, manner of sale, notice and public information requirements of Rule 144.
UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain material United States federal income tax consequences to a non-United States holder of the ownership and disposition of our common stock. As used in this prospectus, the term non-United States holder is a person other than:
- a citizen or individual resident of the United States for United States federal income tax purposes;
- a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision of the United States;
- an estate whose income is included in gross income for United States federal income tax purposes regardless of its source; or
- a trust, in general, if it is subject to the primary supervision of a court within the United States and which has one or more United States persons who have the authority to control all substantial decisions of the trust.
This discussion does not address all aspects of United States federal income taxation that may be relevant in light of a non-United States holder's particular facts and circumstances, such as being a United States expatriate, and does not address any tax consequences arising under the laws of any state, local or non-United States taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect.
Accordingly, each non-United States holder should consult a tax advisor regarding the United States federal, state, local and non-United States income and other tax consequences of acquiring, holding and disposing of shares of our common stock.
DIVIDENDS
We have never paid dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. In the event, however, that we do pay dividends on our common stock, any dividend paid to a non-United States holder of common stock generally will be subject to United States withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. To claim the benefit of a lower rate under an income tax treaty, a non-United States holder must properly file an Internal Revenue Service Form W-8BEN, or successor form, claiming an exemption from, or reduction in, withholding under the applicable income tax treaty.
Dividends received by a non-United States holder that are effectively connected with a United States trade or business conducted by the non-United States holder are exempt from such withholding tax, provided that such non-United States holder files an Internal Revenue Service Form W-8ECI, or successor form. However, those effectively connected dividends, net of certain deductions and credits, are taxed at the same graduated rates applicable to United States persons.
In addition to the graduated tax described above, dividends received by a corporate non-United States holder that are effectively connected with a United States trade or business of the corporate non-United States holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.
A non-United States holder of common stock that is eligible for a reduced rate of withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts currently withheld by filing an appropriate claim for refund with the Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-United States holder generally will not be subject to United States federal income tax on any gain realized upon the sale or other disposition of our common stock unless:
- the gain is effectively connected with a United States trade or business of the non-United States holder (which gain, in the case of a corporate non-United States holder, must also be taken into account for branch profits tax purposes);
- the non-United States holder is an individual who holds his or her common stock as a capital asset (generally, an asset held for investment purposes) and who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or
- we are or have been a "United States real property holding corporation" for United States federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the holder's holding period for our common stock. We have determined that we are not and do not believe that we will become a "United States real property holding corporation" for United States federal income tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Dividends paid to you may be subject to information reporting and United States backup withholding tax. If you are a non-U.S. holder, you will be exempt from such backup withholding tax if you provide a Form W-8BEN or otherwise meet documentary evidence requirements for establishing that you are a non-U.S. holder or otherwise establish an exemption. If you are a U.S. Holder, you will be exempt from back up withholding if you provide a completed and executed form W-9 and the IRS has not advised us that you are subject to back up withholding, or you meet certain other exemptions from back up withholding.
The gross proceeds from the disposition of our common stock may be subject to information reporting and backup withholding tax. If you sell your common stock outside the United States through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then the United States backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if you sell your common stock through a non-U.S. office of a broker that:
- is a United States person;
- derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States;
- is a "controlled foreign corporation" for United States federal income tax purposes; or
- is a foreign partnership, if at any time during its tax year:
- one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or
- the foreign partnership is engaged in a United States trade or business, unless the broker has documentary evidence in its files that you are a non-U.S. person and certain other conditions are met or you otherwise establish an exemption.
If you receive payments of the proceeds of a sale of our common stock to or through a United States office of a broker, the payment is subject to both United States backup withholding and information reporting unless you are a non-U.S. person and provide a Form W-8BEN certifying that you are a non-U.S. person or you are a U.S. person and you provide a complete and executed Form W-9, and the IRS has not advised us that you are subject to back up withholding, or you otherwise establish an exemption.
You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the U.S. Internal Revenue Service.
LEGAL MATTERS
Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania, will pass on the validity of the common stock offered in this offering.
EXPERTS
The consolidated financial statements included in this prospectus, except as they pertain to periods unaudited, have been audited by Peterson Sullivan, PLLC, Seattle, Washington, independent certified public accountants, and are included in the prospectus in reliance on the report given on the authority of such firm, as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the common stock we are offering by this prospectus. This prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. We are also required to file annual, quarterly and special reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over the Internet at the SEC's web site at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 450 Fifth Street N.W., Washington, D.C. 20549; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You may also obtain copies of these reports directly from us by sending a written request to us at our principal offices located at 706 Giddings Avenue, Suite 1C, Annapolis, Maryland 21401-1472.
MYMETICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-2 Consolidated Balance Sheets, December 31, 2001 and 2000 and March 31, 2002............................................ F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2001, 2000 and 1999, and the Period from May 2, 1990 (Inception) to December 31, 2001...................................................... F-4 Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2002, and 2001, and the Period from May 2, 1990 (Inception) to March 31, 2002...................................................... F-5 Consolidated Statement of Changes in Stockholders' Equity for Period from May 2, 1990 (Inception) to March 31, 2002...................................................... F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999, and the Period from May 2, 1990 (Inception) to December 31, 2001.................. F-7 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 and the Period from May 2, 1990 (Inception) to March 31, 2002........................ F-8 Notes to Consolidated Financial Statements.................. F-9 |
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders Mymetics Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Mymetics Corporation (a development stage company; formerly Ichor Corporation) and Subsidiary as of December 31, 2001 and 2000, and the related consolidated statements of operations and comprehensive loss, changes in shareholders' equity, and cash flows for the years ended December 31, 2001, 2000 and 1999, and for the period from May 2, 1990 (inception) to December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mymetics Corporation (a development stage company; formerly Ichor Corporation) and Subsidiary as of December 31, 2001 and 2000, and the results of their operations and their cash flows for the years ended December 31, 2001, 2000 and 1999, and for the period from May 2, 1990 (inception) to December 31, 2001, in conformity with accounting principles generally accepted in the United States.
/s/ PETERSON SULLIVAN PLLC
--------------------------------------
Peterson Sullivan PLLC
Seattle, Washington
March 8, 2002
|
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
AND THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS)
THREE MONTHS U.S. DOLLARS
ENDED (IN THOUSANDS;
MARCH 31, INFORMATION ONLY) YEAR ENDED YEAR ENDED
2002 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2001 2001 2000
------------ ----------------- ------------ ------------
ASSETS
Current Assets
Cash................................. E 674 $ 791 E 888 E 185
Short-term investments............... 76 315 354 149
Receivables.......................... 89 44 49 64
Loan fees............................ -- -- -- 87
Prepaid expenses..................... 52 28 31 11
-------- -------- -------- -------
Total current assets.............. 891 1,178 1,322 496
Patents and Other...................... 215 143 161 129
Goodwill, net.......................... 209 187 209 --
-------- -------- -------- -------
E 1,315 $ 1,508 E 1,692 E 625
======== ======== ======== =======
LIABILITIES
Current Liabilities
Accounts payable..................... E 588 $ 388 E 436 E 646
Taxes and social costs payable....... 85 74 83 109
Note payable......................... 232 203 228 384
Other................................ 6 9 10 9
-------- -------- -------- -------
Total current liabilities......... 911 674 757 1,148
Payable to Shareholders................ 242 216 242 242
Shareholders' Equity
Common stock, E.0114 par value;
80,000,000 shares authorized;
issued and outstanding 49,271,962
at March 31, 2002, 49,261,962 at
December 31, 2001, and 33,311,361
at December 31, 2000.............. 562 501 562 119
Additional paid-in capital........... 17,430 15,528 17,422 806
Deficit accumulated during the
development stage................. (17,947) (15,500) (17,391) (1,690)
Accumulated other comprehensive
income............................ 117 89 100 --
-------- -------- -------- -------
162 618 693 (765)
-------- -------- -------- -------
E 1,315 $ 1,508 E 1,692 E 625
======== ======== ======== =======
|
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999,
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
TOTAL
ACCUMULATED
DURING
U.S. DOLLARS DEVELOPMENT STAGE
(IN THOUSANDS; (MAY 2, 1990 TO
INFORMATION ONLY) DECEMBER 31,
2001 2001 2000 1999 2001)
----------------- -------- ------- ----- -----------------
Revenues
Sales............................ $ -- E -- E 13 E 47 E 224
Interest......................... 23 26 -- -- 26
-------- -------- ------- ----- --------
23 26 13 47 250
Expenses
Research and development......... 429 482 101 94 844
General and administrative....... 922 1,034 351 37 1,615
Bank fee......................... 12,525 14,063 806 -- 14,869
Interest......................... 70 79 16 -- 95
Amortization..................... 45 51 52 12 194
Other............................ 16 18 -- -- 18
-------- -------- ------- ----- --------
14,007 15,727 1,326 143 17,635
Loss before income tax provision... (13,984) (15,701) (1,313) (96) (17,385)
Income tax provision............... -- -- 1 3 6
-------- -------- ------- ----- --------
Net loss........................... (13,984) (15,701) (1,314) (99) (17,391)
Other comprehensive income
Foreign currency translation
adjustment....................... 89 100 -- -- 100
-------- -------- ------- ----- --------
Comprehensive loss................. $(13,895) E(15,601) E(1,314) E (99) E(17,291)
======== ======== ======= ===== ========
Basic and diluted loss per share... $ (.33) E (.37) E (.04) E(.00) E (.51)
======== ======== ======= ===== ========
|
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
TOTAL
ACCUMULATED
DURING
THREE MONTHS THREE MONTHS DEVELOPMENT STAGE
ENDED ENDED (MAY 2, 1990 TO
MARCH 31, MARCH 31, MARCH 31,
2002 2001 2002)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ -------------- -----------------
Revenues
Sales........................................... E -- E -- E 224
Interest........................................ 5 3 31
----- ------- --------
5 3 255
Expenses
Research and development........................ 232 114 1,076
General and administrative...................... 250 127 1,865
Bank fee........................................ -- 3,054 14,869
Interest........................................ 9 19 104
Amortization.................................... 1 41 195
Other........................................... 69 -- 87
----- ------- --------
561 3,355 18,196
Loss before income tax provision.................. (556) (3,352) (17,941)
Income tax provision.............................. -- -- 6
----- ------- --------
Net loss.......................................... (556) (3,352) (17,947)
Other comprehensive income
Foreign currency translation adjustment........... 17 -- 117
----- ------- --------
Comprehensive loss................................ E(539) E(3,352) E(17,830)
===== ======= ========
Basic and diluted loss per share.................. E(.01) E (.10) E (.52)
===== ======= ========
|
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 2001
AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS)
ADDITIONAL
DATE OF NUMBER OF PAID-IN
TRANSACTION SHARES PAR VALUE CAPITAL
----------- ---------- --------- ----------
Balance at May 2, 1990............................... E -- E --
Shares issued for cash............................. June 1990 33,311,361 119 --
Net losses to December 31, 1998.................... -- -- --
---------- ---- -------
Balance at December 31, 1998......................... 33,311,361 119 --
Net loss for the year.............................. -- -- --
---------- ---- -------
Balance at December 31, 1999......................... 33,311,361 119 --
Bank fee........................................... -- -- 806
Net loss for the year.............................. -- -- --
---------- ---- -------
Balance at December 31, 2000......................... 33,311,361 119 806
Effect on capital structure resulting from reverse
purchase......................................... March 2001 8,165,830 354 (354)
Issuance of stock purchase warrants for bank fee... March 2001 -- -- 14,063
Issuance of shares for bank fee.................... March 2001 1,800,000 21 (21)
Issuance of shares for bank fee.................... June 2001 225,144 3 (3)
Issuance of shares for cash........................ June 2001 1,333,333 15 2,109
Exercise of stock purchase warrants in repayment of
debt............................................. June 2001 1,176,294 13 259
Exercise of stock purchase warrants for cash....... December 2001 3,250,000 37 563
Net loss for the year.............................. -- -- --
Translation adjustment............................. -- -- --
---------- ---- -------
Balance at December 31, 2001......................... 49,261,962 562 17,422
Issuance of shares for cash (unaudited)............ March 2002 10,000 -- 8
Net loss for the period (unaudited)................ -- -- --
Translation adjustment (unaudited)................. -- -- --
Balance at March 31, 2002 (unaudited)................ 49,271,962 E562 E17,430
========== ==== =======
|
DEFICIT ACCUMULATED
ACCUMULATED OTHER
DURING THE COMPREHENSIVE
DEVELOPMENT STAGE INCOME TOTAL
----------------- ------------- --------
Balance at May 2, 1990...................................... E -- E -- E --
Shares issued for cash.................................... -- -- 119
Net losses to December 31, 1998........................... (277) -- (277)
-------- ---- --------
Balance at December 31, 1998................................ (277) -- (158)
Net loss for the year..................................... (99) -- (99)
-------- ---- --------
Balance at December 31, 1999................................ (376) -- (257)
Bank fee.................................................. -- -- 806
Net loss for the year..................................... (1,314) -- (1,314)
-------- ---- --------
Balance at December 31, 2000................................ (1,690) -- (765)
Effect on capital structure resulting from reverse
purchase................................................ -- -- --
Issuance of stock purchase warrants for bank fee.......... -- -- 14,063
Issuance of shares for bank fee........................... -- -- --
Issuance of shares for bank fee........................... -- -- --
Issuance of shares for cash............................... -- -- 2,124
Exercise of stock purchase warrants in repayment of
debt.................................................... -- -- 272
Exercise of stock purchase warrants for cash.............. -- -- 600
Net loss for the year..................................... (15,701) -- (15,701)
Translation adjustment.................................... -- 100 100
-------- ---- --------
Balance at December 31, 2001................................ (17,391) 100 693
Issuance of shares for cash (unaudited)................... -- -- 8
Net loss for the period (unaudited)....................... (556) -- (556)
Translation adjustment (unaudited)........................ -- 17 17
Balance at March 31, 2002 (unaudited)....................... E(17,947) E117 E 162
======== ==== ========
|
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999,
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS OF EUROS)
TOTAL
ACCUMULATED
DURING
DEVELOPMENT STAGE
(MAY 2, 1990 TO
DECEMBER 31,
2001 2000 1999 2001)
-------- ------- ---- -----------------
Cash Flows From Operating Activities
Net loss......................................... E(15,701) E(1,314) E(99) E(17,391)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Amortization.................................. 51 52 12 194
Fees paid in warrants......................... 14,063 -- -- 14,063
Fee paid in common stock...................... -- 806 -- 806
Changes in current assets and liabilities, net
of effects from reverse purchase
Receivables................................... 53 7 (47) (11)
Accounts payable.............................. (508) 546 38 138
Taxes and social costs payable................ (26) 55 26 83
Other....................................... 68 (7) (1) 27
-------- ------- ---- --------
Net cash provided by (used in) operating
activities............................... (2,000) 145 (71) (2,091)
Cash Flows From Investing Activities
Patents and other................................ (45) (128) -- (235)
Short-term investments........................... (205) (122) (27) (354)
Cash acquired in reverse purchase................ 13 -- -- 13
-------- ------- ---- --------
Net cash used in investing activities....... (237) (250) (27) (576)
Cash Flows From Financing Activities
Proceeds from the issuance of common stock....... 2,724 -- -- 2,843
Borrowings from shareholders..................... -- -- 104 242
Increase in note payable and other short-term
advances...................................... 116 384 -- 500
Loan fees........................................ -- (130) -- (130)
-------- ------- ---- --------
Net cash provided by financing activities... 2,840 254 104 3,455
Effect of exchange rate changes on cash............ 100 -- -- 100
-------- ------- ---- --------
Net increase in cash........................ 703 149 6 888
Cash, beginning of period.......................... 185 36 30 --
-------- ------- ---- --------
Cash, end of period................................ E 888 E 185 E 36 E 888
======== ======= ==== ========
|
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS)
TOTAL
ACCUMULATED
DURING
THREE MONTHS THREE MONTHS DEVELOPMENT STAGE
ENDED ENDED (MAY 2, 1990 TO
MARCH 31, MARCH 31, MARCH 31,
2002 2001 2002)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------- ---------------- -----------------
Cash Flows From Operating Activities
Net loss..................................... E(556) E(3,352) E(17,947)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Amortization.............................. 1 41 195
Fees paid in warrants..................... -- 3,054 14,063
Fee paid in common stock.................. -- -- 806
Changes in current assets and liabilities,
net of effects from reverse purchase
Decrease (increase) in receivables........ (40) 12 (51)
Increase (decrease) in accounts payable... 152 153 290
Increase (decrease) in taxes and social
costs payable........................... 2 (24) 85
Other................................... (25) (1) 2
----- ------- --------
Net cash provided by (used in) operating
activities........................... (466) (117) (2,557)
Cash Flows From Investing Activities
Patents and other............................ (55) (34) (290)
Short-term investments....................... 278 (82) (76)
Cash acquired in reverse purchase............ -- 13 13
----- ------- --------
Net cash used in investing activities... (223) (103) (353)
Cash Flows From Financing Activities
Proceeds from the issuance of common stock... 8 -- 2,851
Borrowings from shareholders................. -- -- 242
Increase in note payable and other short-term
advances.................................. 4 200 504
Loan fees.................................... -- -- (130)
----- ------- --------
Net cash provided by financing
activities........................... 12 200 3,467
Effect of exchange rate changes on cash........ 17 -- 117
----- ------- --------
Net increase in cash.................... (214) (20) 674
Cash, beginning of period...................... 888 185 --
----- ------- --------
Cash, end of period............................ E 674 E 165 E 674
===== ======= ========
|
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL EURO AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying interim financial statements of Mymetics Corporation (the "Company") and the related notes as of March 31, 2002 and for the three months ended March 31, 2002 and 2001 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of the Company, contain all adjustments necessary to present a fair statement of the results of the interim periods presented. All adjustments made during the three month period ended March 31, 2002, were of a normal, recurring nature. The amounts presented for the three month period ended March 31, 2002, are not necessarily indicative of the results of operations for a full year.
REVERSE PURCHASE TRANSACTION
The Company exchanged approximately 33 million of its common shares for 99.9% of the outstanding shares of Hippocampe SA ("Hippocampe") on March 28, 2001. This transaction has been accounted for as a reverse purchase with Hippocampe as the continuing entity. The Company changed its name from Ichor Corporation in 2001. Ichor Corporation, a United States entity, had no significant operations and its net shareholders' deficiency of E247 consisted of current monetary assets and liabilities amounting to E50 and E297, respectively, at the purchase date. As part of the reverse purchase transaction, E247 was recorded as goodwill. The Company's results of operations have been consolidated beginning April 1, 2001.
The goodwill was amortized over a five-year life using the straight-line method. However, in accordance with Statement of Financial Accounting Standards No. 142, the Company will no longer amortize goodwill after December 31, 2001. Amortization of this goodwill amounted to E38 in 2001. Beginning in 2002, goodwill will be tested for potential impairment at least annually.
The following unaudited pro forma information presents the results of operations of the Company as if this transaction had taken place on January 1, 2000. The pro forma information is not necessarily indicative of the results that would have occurred had the transaction taken place at the beginning of the periods presented. Further, the pro forma information is not necessarily indicative of future results.
DECEMBER 31
------------------
2001 2000
-------- -------
Revenues.................................................... E 29 E 64
Net loss.................................................... E(16,019) E(2,058)
Basic loss per share........................................ E (.38) E (.05)
|
DEVELOPMENT STAGE COMPANY
Hippocampe was created in 1990 as a French company for the purpose of engaging in research and development of human health products. All of Hippocampe's activities have been conducted in France. Its main research efforts have been concentrated in the prevention and treatment of the AIDS virus. Hippocampe has established a network over the past eleven years enabling it to work with education centers, research centers, pharmaceutical laboratories and biotechnology companies.
These financial statements have been prepared treating the Company as a development stage company. As of December 31, 2001, the Company had not performed any clinical testing and a commercially viable product is not expected for several more years. As such, the Company has not generated significant revenues. Revenues reported by the Company consist of incidental serum by-products of the Company's research and
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
development activities and interest income. For the purpose of these financial statements, the development stage started May 2, 1990, which is the date when Hippocampe was originally organized in France.
FOREIGN CURRENCY
Consistent with the location of its present activities, beginning January 1, 1999, the Company adopted the Euro as its corporate currency. Accordingly, the Company prepared its 2001, 2000 and 1999 financial statements in Euros. The financial statements for prior years were prepared using French francs as the reporting currency and were restated in Euros for each period presented using the Official Fixed Conversion Rate of E1 = FRF 6.55957. Therefore, the financial statements for prior years depict the same trends that would have been presented had they been presented in French francs. However, because they were originally prepared using French francs, they are not necessarily comparable to financial statements of a company which originally prepared its financial statements in a European currency other than the French francs and restated them in Euros. All assets, liabilities, revenues and expenses have been reported using the above exchange rate, and no foreign exchange gains or losses have been recorded in relation to exchanging French francs.
As a result of the reverse purchase, the 2001 financial statements include the U.S. operations of the Company which were translated from U.S. dollars to Euros. As a result of this translation, E100 exchange gain has been included as part of comprehensive loss. No income tax has been provided on this gain because of available U.S. income tax losses.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany accounts and transactions have been eliminated.
CASH
Cash balances are occasionally in excess of insured amounts. Interest paid was E42 in 2001 and none in either 2000 or 1999. Income tax paid in 2001, 2000 and 1999 was nil.
SHORT-TERM INVESTMENTS
Short-term investments consist of certificates of deposit stated at cost. The fair value approximates cost based on the length to maturity and interest rate.
REVENUE RECOGNITION
The Company records the sale of products when the products are delivered and the Company has only a security interest in the products should a customer default on payment.
PATENTS
Patents represent fees paid to the French patent office. These fees are stated at historical cost and are amortized over five years.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
TAXES ON INCOME
The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized in the Company's financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the period. The weighted average number of shares was 42,459,784 for the year ended December 31, 2001, and 33,311,361 for both 2000 and 1999, 49,262,518 for the three months ended March 31, 2002 and 33,585,685 for the three months ended March 31, 2001. The weighted average number of shares for the period May 2, 1990 through December 31, 2001, was 34,095,573 and 34,409,516 for the period May 2, 1990 through March 31, 2002. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities. Warrants and options were not included in the computation of diluted earnings per share because their effect would be anti-dilutive.
STOCK-BASED COMPENSATION
Compensation expense for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee is required to pay for the stock. There is no stock-based compensation included in these consolidated financial statements.
ESTIMATES
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," is to be applied starting with years beginning after December 15, 2001. This standard addresses how intangible assets, other than those acquired in a business combination, should be accounted for. Goodwill and intangible assets that have indefinite useful lives will no longer be amortized but will be tested annually for impairment.
Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," is effective for years beginning after June 15, 2002. This standard addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and associated retirement costs.
Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," is effective for years beginning after December 15, 2001. This standard supersedes the previous standard on this issue as well as others which dealt with accounting for discontinued operations and the elimination of an exception to consolidation.
Management has not determined the effect, if any, these standards may have on the Company's consolidated financial statements.
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. RECEIVABLES
2001 2000
---- ----
Trade receivables........................................... E 37 E 37
Refunds due from suppliers.................................. 6 6
Value added tax............................................. 31 55
Other....................................................... 9 --
---- ----
83 98
Allowance for doubtful accounts............................. (34) (34)
---- ----
E 49 E 64
==== ====
|
No collateral was required for the above receivables and they are expected to be collected in the normal course.
NOTE 3. TAXES AND SOCIAL COSTS PAYABLE
2001 2000
---- ----
Social security and other social benefits................... E75 E 97
Income tax.................................................. -- 2
Value added tax............................................. 3 8
Other....................................................... 5 2
--- ----
Social security and other social benefits................... E83 E109
=== ====
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NOTE 4. TRANSACTIONS WITH AFFILIATES
During 2000, Hippocampe agreed to pay a fee in common stock of the Company to MFC Merchant Bank SA ("MFC Bank") for locating Ichor and assisting with the reverse purchase discussed in Note 1. The parent of MFC Bank was an Ichor shareholder. The common shares were not issued in 2000. According to the agreement, MFC Bank was to receive 4% of Ichor's issued and outstanding common shares on a fully diluted basis which was calculated in 2000 to be 50,625,590 shares. The fair value of the shares at the measurement date, amounting to E806 (which may not be indicative of the value of the Company as a whole), was included in additional paid-in capital at December 31, 2000. In 2001, a total of 2,025,144 common shares were issued to MFC Bank which resulted in E24 being reclassified to common stock based on the par value of the shares.
In July 2000, Hippocampe entered into a revolving term credit facility with MFC Bank which was assumed by the Company. The facility allowed the Company to borrow up to E1,300 at LIBOR plus 4% (approximately 7.35% at December 31, 2001) repayable on August 2002, as extended, and is collateralized by all of the Company's assets plus any future patents. The Company borrowed E228 and E384 under this facility as of December 31, 2001 and 2000, respectively. The fair value of this note approximates carrying value because the note is short-term and has a market rate of interest. MFC Bank had also advanced E400 to the Company in 2000 under an open account which was paid in 2001.
In connection with the term credit facility, the Company agreed to pay MFC Bank an arrangement fee of E130 and E10 per month for nine months as a retainer fee. The arrangement fee was amortized over the original term of the loan and the retainer fee was expensed monthly beginning August 2000.
In March 2001, the Company granted warrants under the agreements with MFC Bank which entitle MFC Bank to purchase 6,001,693 of the Company's common shares. The warrants allow MFC Bank to convert to
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares an amount equal to the maximum of the credit facility including unpaid interest plus the arrangement and retainer fees. The warrants are exercisable within a three-year period beginning August 2000 at approximately E.2319 per common share. The intrinsic value of the beneficial conversion feature amounting to E14,063 (which may not be indicative of the value of the Company as a whole) was calculated on March 28, 2001, the grant date, using the Black-Scholes model. This amount was recorded as paid-in capital of E14,063 and allocated to bank fee expense in 2001. During 2001, MFC Bank exercised warrants to acquire 1,176,294 common shares in exchange for the arrangement fee and the retainer fee plus E52 in accrued interest. MFC also exercised warrants to acquire 3,250,000 common shares for cash in 2001.
In June 2001, the Company issued additional warrants to MFC Bank to purchase 103,559 common shares at U.S. $1.725 per share exercisable during a three-year period. These warrants were issued in connection with MFC Bank's placement of 1,333,333 of the Company's common shares. The warrants were valued at E118 based on the fair value of the placement fees rendered and was a cost of the placement. None of these warrants have been exercised.
Sales to a shareholder were none in 2001, E9 in 2000 and E29 in 1999. Trade receivables include E23 from this shareholder at both December 31, 2001 and 2000.
The amounts payable to shareholders bear no interest, have no collateral, and are repayable upon the Company becoming profitable. Since the timing of the Company becoming profitable cannot be determined, the fair value of the amounts payable to shareholders cannot be determined. The Company is not expected to become profitable in the near-term, therefore, the amounts payable to shareholders have been classified as long-term.
During 2001, the Company incurred fees to its Chairman of E82 for director fees and for consulting from a company owned by him, and E27 from a company owned by the former CFO of the Company. Accounts payable at December 31, 2001, includes E14 of these fees.
NOTE 5. INCOME TAXES
The reconciliation of income tax on income computed at the federal statutory rates to income tax expense is as follows:
2001 2000 1999
------- ----- ----
U.S. Federal statutory rates on loss from operations........ E(5,338) E(446) E(21)
Tax differential on foreign loss............................ -- -- (12)
Nondeductible fee paid in warrants.......................... 4,781 -- --
Effect of U.S. tax on French losses......................... 550 -- --
Nondeductible fee paid in common stock...................... -- 275 --
Change in valuation allowance............................... (6) 172 36
Other....................................................... 13 -- --
------- ----- ----
Income tax expense.......................................... E -- E 1 E 3
======= ===== ====
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MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax asset is composed of the following:
DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
Difference in book and tax basis of amounts payable to
shareholder and payable to MFC Bank....................... E 82 E 218
Legal and similar fees deducted for French tax purposes in
2001...................................................... -- 43
Net operating loss carryforward............................. 173 --
----- -----
255 261
Less valuation allowance for deferred tax asset............. (255) (261)
----- -----
Net deferred tax asset...................................... E -- E --
===== =====
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The Company's provision for income taxes was derived from U.S. and French operations. The Company had no net operating loss carryforwards as of December 31, 2001, in France and E509 in the United States which expire in year 2021.
NOTE 6. STOCK OPTION PLANS
1994 AMENDED STOCK OPTION PLAN
The Company's 1994 stock option plan provides for the issuance of up to 350,000 shares of the Company's common stock to employees and non-employee directors. The following table summarizes information with respect to this plan:
WEIGHTED
AVERAGE
NUMBER EXERCISE
SHARES PRICE
-------- ---------
Outstanding at December 31, 1999............................ 193,750 U.S.$1.55
Canceled -- Reusable........................................ (120,000) 2.00
-------- ---------
Outstanding and exercisable at December 31, 2001 and 2000... 73,750 U.S.$ .82
======== =========
Reserved for future grants at December 31, 2001............. 265,000
========
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1995 QUALIFIED INCENTIVE STOCK OPTION PLAN
The Company's board of directors approved a stock option plan on August 15, 1996 which provides for the issuance of up to 150,000 shares of the Company's common stock to key employees. The following table summarizes information with respect to this plan:
WEIGHTED
AVERAGE
NUMBER EXERCISE
SHARES PRICE
------- --------
Outstanding and exercisable at December 31, 2001, 2000 and
1999...................................................... 100,000 U.S.$.75
======= ========
Reserved for future grants at December 31, 2001............. 50,000
=======
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2001 QUALIFIED INCENTIVE STOCK OPTION PLAN
The Company's board of directors approved a stock option plan on June 15, 2001, which provides for the issuance of up to 5,000,000 shares of the Company's common stock to employees and non-employee
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
directors. The weighted average fair value of these options at the grant date was E2.24 per option. The following table summarizes information with respect to this plan.
WEIGHTED
AVERAGE
NUMBER EXERCISE
SHARES PRICE
--------- ---------
Granted..................................................... 100,000 U.S.$2.86
---------
Outstanding and exercisable at December 31, 2001............ 100,000 U.S.$2.86
========= =========
Reserved for future grants at December 31, 2001............. 4,900,000
=========
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Almost all options have an expiration date ten years after issuance.
PROFORMA INFORMATION
Had compensation expense been recognized on the basis of fair value of the options granted under the plans, proforma net income and per share data would have been as follows compared to the amounts reported:
TOTAL ACCUMULATED
DURING DEVELOPMENT
STAGE (MAY 2, 1990
TO DECEMBER 31,
NET LOSS 2001 2001)
-------- -------- ------------------
As reported............................................ E(15,701) E(17,391)
Proforma............................................... E(15,922) E(17,612)
Loss per share -- as reported
Basic and fully diluted................................ E (.37) E (.51)
Loss per share -- proforma
Basic and fully diluted................................ E (.38) E (.52)
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The fair value of each option granted was estimated for proforma purposes on the grant date using the Black-Scholes Model (use of this Model for proforma purposes is not intended to indicate the value of the Company as a whole). The assumptions used in calculating fair value are as follows:
2001
--------------
Risk-free interest rate..................................... 4.5%
Expected life of the options................................ 8 years
Expected volatility......................................... 63.91%-160.97%
Expected dividend yield..................................... 0%
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There is no proforma effect for 2000 and 1999.
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company leases property under noncancelable operating leases through January 2006. Future minimum lease payments under noncancelable operating leases are as follows:
2002........................................................ E 7 2003........................................................ 7 2004........................................................ 7 2005........................................................ 7 2006........................................................ 1 Total rent expense per year was E7 for 2001, 2000 and 1999. |
The Company is involved in various matters of litigation arising in the ordinary course of business. In the opinion of management, the estimated outcome of such issues will not have a material effect on the Company's financial statements.
MYMETICS CORPORATION
Up to 43,174,082 Shares of Common Stock
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the securities being registered are being paid by MFC Bancorp Ltd. on behalf of the selling stockholders. All amounts are estimates except the Securities and Exchange Commission registration fee.
Securities and Exchange Commission registration fee......... $ 12,909.04
Printing and engraving expenses............................. $ 75,000.00
Legal fees and expenses..................................... $125,000.00
Accounting fees and expenses................................ $ 2,500.00
Transfer Agent and Registrar fees........................... $ 10,000.00
Miscellaneous fees and expenses............................. $ 22,500.00
-----------
Total..................................................... $247,909.04
===========
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ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation, under specified circumstances, to indemnify its directors, officers, employees or agents against expenses (including attorney's fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by them in connection with any action, suit or proceeding brought by third parties by reason of the fact that they were or are directors, officers, employees or agents of the corporation, if such directors, officers, employees or agents acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reason to believe their conduct was unlawful. In a derivative action, i.e., one by or in the right of the corporation, indemnification may be made only for expenses actually or reasonably incurred by directors, officers, employees or agents in connection with the defense or settlement of an action or suit, and only with respect to a matter as to which they shall have acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine upon application that the defendant directors, officers, employees or agents are fairly and reasonably entitled to be indemnified for such expenses despite such adjudication of liability.
Article 6 of our Certificate of Incorporation (as amended) and our bylaws provide us with the power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he or she is or was our director, officer, employee or agent or is or was serving at our request as a director, officer, employee or agent of another domestic or foreign corporation, partnership, joint venture trust or other enterprise. We will indemnify our directors, officers, employees and agents against expenses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, if they acted in good faith and in a manner they reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe their conduct was unlawful. The termination of any action or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner that they reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had reasonable cause to believe that their conduct was unlawful.
A similar standard of care is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of
II-1
such an action and court approval is required before there can be any indemnification where the person seeking indemnification has been found to be liable to us.
Our Certificate of Incorporation provides for indemnification only as authorized in a specific case upon a determination that the person seeking indemnity has met the applicable standard of conduct. Said determination can be made by the majority vote of disinterested members of the board of directors, by independent legal counsel or by the stockholders.
We will pay the litigation expenses of a director, officer, employee or agent as they are incurred. We may pay any expenses incurred in defending any action or proceeding in advance of the final disposition of the action or proceeding upon our receipt of an undertaking by or on behalf of any director, officer, employee or agent to repay the amount if it is ultimately determined that they are not entitled to be indemnified by us.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
Article 7 of our Certificate of Incorporation (as amended) provides that our directors will not have personal liability for monetary damages for any breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, which makes directors liable for unlawful dividends or unlawful stock repurchases or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit.
We do not currently maintain directors and officers insurance. The indemnification requirement might have a significant adverse effect on us and our stockholders in the event of a substantial judgment or settlement with respect to a director, officer, employee or agent entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding our sales of unregistered securities since January 1, 1999. These issuances were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as transactions by an issuer not involving any public offering.
- On December 7, 1999, we issued 97,206 shares of our preferred stock to Drummond Financial Corporation in consideration of loans made to us by Drummond Financial Corporation. These shares were valued at approximately $10 per share.
- In December 2000, we issued 3,247,060 shares of common stock in connection with the conversion of 324,706 shares of our preferred stock. The remaining 240,000 outstanding shares of our preferred stock were redeemed for an aggregate consideration of $2.2 million.
- In March 2001, we entered into a share exchange with the former stockholders of our subsidiary, Mymetics S.A. We agreed to issue 33,311,361 shares of common stock to the former stockholders of Mymetics S.A. in exchange for 99.9% of the outstanding shares of Mymetics S.A. Some of the former stockholders of Mymetics S.A., rather than receiving shares of our common stock directly, opted to receive Preferential Shares of our subsidiary, 6543 Luxembourg S.A., which are convertible into shares of our common stock. Accordingly, of the 33,311,361 shares mentioned above, 16,393,316 shares
II-2
represent the number of our shares of common stock into which the Preferential Shares of 6543 Luxembourg S.A. that are held by former Mymetics S.A. stockholders are convertible. MFC Merchant Bank S.A. acted as an advisor in connection with the share exchange and, in consideration thereof, received 2,025,144 shares of common stock and warrants to purchase 6,828,468 shares of common stock.
- In June 2001, we sold 1,333,333 shares of common stock at E1.77 per share for aggregate consideration of E2,360,000. These shares were sold to various investors residing outside of the United States. MFC Merchant Bank S.A. purchased 411,166 of these shares (for their own account and on behalf of their clients), and acted as placement agent in connection with this private placement. In consideration of its services as placement agent, MFC Merchant Bank S.A. received warrants to purchase 103,559 shares of our common stock at an exercise price of $1.725 per share.
- In July 2001, we granted each of John M. Musacchio, Robert Demers, Dr. Pierre-Francois Serres, Patrice Pactol and Michael K. Allio options to purchase 10,000 shares of common stock at $3.15 per share. These options were granted under our 2001 Stock Option Plan.
- On August 31, 2001, we granted Michael K. Allio options to purchase 50,000 shares of our common stock at $2.50 per share in connection with a Consulting Agreement we entered into with Mr. Allio.
- In December 2001, we issued 3,250,000 shares of common stock to MFC Merchant Bank S.A. at E0.23 per share for aggregate consideration of E942,500 in connection with the exercise of warrants by MFC Merchant Bank S.A.
- At various times during the last three fiscal years we have granted stock options to our directors, officers and employees. The exercise price for each of these options is equal to the fair market value of our common stock on the date of grant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Share Exchange Agreement dated December 13, 2001, between
Mymetics Corporation and the stockholders of Mymetics S.A.
listed on the signature page thereto (incorporated by
reference to the Information Statement on Schedule 14C filed
with the Securities and Exchange Commission on April 26,
2001).
2.2 Share Exchange Agreement dated December 13, 2001, between
Mymetics Corporation and the stockholders of Mymetics S.A.
listed on the signature page thereto (incorporated by
reference to the Information Statement on Schedule 14C filed
with the Securities and Exchange Commission on April 26,
2001).
2.3 Revised Purchase Agreement dated July 28, 1999, between
Mymetics Corporation and the majority stockholders of Nazca
Holdings Ltd. (incorporated by reference to the report on
Form 8K/A filed with the Securities Exchange Commission on
August 13, 1999).
2.4 Purchase Agreement dated October 17, 1998, between Mymetics
Corporation and the majority stockholders of Nazca Holdings
Ltd. (incorporated by reference to the report on Form 8-K
filed with the Securities Exchange Commission on October 22,
1998).
2.5 Amendment to the Agreement dated October 17, 1998, between
Mymetics Corporation and the majority stockholders of Nazca
Holdings Ltd. (incorporated by reference to the report on
Form 8K/A filed with the Securities Exchange Commission on
April 15, 1999).
3(i) Articles of Incorporation (as amended through May 10, 2002)
(incorporated by reference to the report on Form 10-Q for
the quarter ended March 31, 2002, filed with the Securities
and Exchange Commission on May 15, 2002).
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II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3(ii) By laws (incorporated by reference to the report on Form
10-Q for the quarter ended June 30, 2001, filed with the
Securities and Exchange Commission on August 14, 2001).
4 Form of specimen stock certificate.
5 Opinion of Cohen & Grigsby, P.C. as to the legality of the
securities being registered (to be filed by amendment).
9 Voting and Exchange Trust Agreement dated March 28, 2001,
among Mymetics Corporation, 6543 Luxembourg S.A. and MFC
Merchant Bank S.A.
10.1 Employment Agreement dated March 18, 2002, between Mymetics
Corporation and Dr. Joseph D. Mosca (incorporated by
reference to the report on Form on 10-Q for the quarter
ended March 31, 2002, filed with the Securities and Exchange
Commission on May 15, 2002).
10.2 Employment Agreement dated March 18, 2002, between Mymetics
Corporation and Peter McCann (incorporated by reference to
the report on Form 10-K for the fiscal year ended December
31, 2001, filed with the Securities and Exchange Commission
on March 29, 2002).
10.3 Mymetics Corporation 2001 Stock Option Plan (incorporated by
reference to the report on Form 10-K for the fiscal year
ended December 31, 2001, filed with the Securities and
Exchange Commission on March 29, 2002).
10.4 Consulting Agreement dated August 31, 2001, between Mymetics
Corporation and Michael Allio.
10.5 Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Robert Demers.
10.6 Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Michael K. Allio.
10.7 Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and John M.
Musacchio.
10.8 Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Patrice Pactol.
10.9 Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Dr.
Pierre-Francois Serres.
10.10 Services Agreement dated May 31, 2001, between Mymetics
Corporation and MFC Merchant Bank S.A. (incorporated by
reference to the report on Form 10-Q for the quarter ended
June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001).
10.11 Employment Agreement dated May 3, 2001, between Mymetics
Corporation and Dr. Pierre-Francois Serres (incorporated by
reference to the report on Form 10-Q for the quarter ended
June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001).
10.12 Indemnification Agreement dated March 28, 2001, between
Mymetics Corporation and MFC Bancorp Ltd. (incorporated by
reference to the report on Form 10-Q for the quarter ended
June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001).
10.13 Shareholder Agreement dated March 28, 2001, among Mymetics
Corporation, the Holders of Class B Exchangeable
Preferential Non-Voting Shares of 6543 Luxembourg S.A.
signatory thereto and 6543 Luxembourg S.A.
10.14 Support Agreement dated March 28, 2001, between Mymetics
Corporation and 6543 Luxembourg S.A.
10.15 Assignment Agreement dated December 29, 2000, among Mymetics
Corporation, Mymetics S.A. and MFC Merchant Bank S.A.
(incorporated by reference to the Information Statement on
Schedule 14C filed with the Securities and Exchange
Commission on April 26, 2001).
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II-4
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.16 Preferred Stock Conversion Agreement dated December 21,
2000, between Mymetics Corporation and Dresden Papier GmbH
(incorporated by reference to the report on Form 10-K for
the fiscal year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 14, 2001).
10.17 Preferred Stock Conversion Agreement dated for reference
December 21, 2000, between Mymetics Corporation and Med Net
International Ltd. (incorporated by reference to the report
on Form 10-K for the fiscal year ended December 31, 2000,
filed with the Securities and Exchange Commission on March
14, 2001).
10.18 Preferred Stock Redemption and Conversion Agreement dated
for reference December 21, 2000, between Mymetics
Corporation and Sutton Park International Ltd. (incorporated
by reference to a Schedule 13D/A filed by MFC Bancorp Ltd.
with the Securities and Exchange Commission on January 2,
2001).
10.19 Credit Facility Agreement dated July 27, 2000, between
Mymetics Corporation and MFC Merchant Bank S.A.
(incorporated by reference to the Information Statement on
Schedule 14C filed with the Securities and Exchange
Commission on April 26, 2001).
10.20 Agreement dated for reference May 15, 2000, between Mymetics
Corporation and Maarten Reidel (incorporated by reference to
the report on Form 8-K/A filed with the Securities Exchange
Commission on August 9, 2000).
10.21 1995 Qualified Incentive Stock Option Plan (incorporated by
reference to the Registration Statement filed on Form S-8
with the Securities and Exchange Commission on November 8,
1996).
10.22 Amended 1994 Stock Option Plan (incorporated by Reference to
the Registration Statement filed on Form S-8 on November 8,
1996).
11 Statement Regarding Calculation of Per Share Earnings.
21 Subsidiaries of the Registrant (incorporated by reference to
the report on Form 10-K for the fiscal year ended December
31, 2001, filed with the Securities and Exchange Commission
on March 29, 2002).
23.1 Consent of Peterson Sullivan, PLLC, Independent Accountants.
23.2 Consent of Cohen & Grigsby, P.C. (included in Exhibit 5.1).
24 Power of attorney (included on signature page of this
registration statement).
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(b) Financial Statement Schedule
All information for which provision is made in the applicable accounting regulations of the SEC is either included in our financial statements or is not required under the related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Item 512(a) of Regulation S-K. The undersigned Registrant hereby
undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in
II-5
the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Item 512(b) of Regulation S-K. The undersigned Registrant hereby undertakes
that, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Item 512(h) of Regulation S-K. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the indemnification provisions
described herein, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 512(i) of Regulation S-K. The undersigned Registrant hereby undertakes
that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Mymetics Corporation has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, Pennsylvania, on May 22, 2002.
MYMETICS CORPORATION
By: /s/ JOHN M. MUSACCHIO
------------------------------------
John M. Musacchio
Chief Operating Officer, Chief
Financial Officer, Secretary and
Director
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and severally appoints, John M. Musacchio, as his attorney-in-fact, with full power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and any and all registration statements filed pursuant to Rule 462 under the Securities Act of 1933, as amended, in connection with or related to the offering contemplated by this registration statement and its amendments, if any, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said registration statement.
Pursuant to the requirements of the Securities Act of 1933, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ PETER P. MCCANN President, Chief Executive Officer May 22, 2002
------------------------------------------------ and Director (Principal Executive
Peter P. McCann Officer)
/s/ JOHN M. MUSACCHIO Chief Operating Officer, Chief May 22, 2002
------------------------------------------------ Financial Officer, Secretary and
John M. Musacchio Director (Principal Financial and
Accounting Officer)
/s/ DR. PIERRE-FRANCOIS SERRES Chief Scientific Officer and May 22, 2002
------------------------------------------------ Director
Dr. Pierre-Francois Serres
/s/ PATRICE PACTOL Director May 22, 2002
------------------------------------------------
Patrice Pactol
/s/ ROBERT DEMERS Director May 22, 2002
------------------------------------------------
Robert Demers
/s/ MICHAEL K. ALLIO Director May 22, 2002
------------------------------------------------
Michael K. Allio
|
II-7
Exhibit 4
[LOGO OF MYMETICS CORPORATION]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF
$0.01 EACH OF
---------------------------------MYMETICS CORPORATION---------------------------
transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of the Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to all the provisions of the Certificate of Incorporation of the Corporation, as now or hereafter amended, to all of which the holder hereof by acceptance hereof assents. This Certificate is not valid unless countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its authorized officers.
Dated:
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
Countersigned
CIBC Mellon Trust Company
Transfer Agent
By:-----------------------
Authorized Officer
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO ANY STOCKHOLDER UPON REQUEST A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING AND OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according or applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT -- as tenants by the entireties --------------------- ----------------
JT TEN -- as joint tenants with (Cust) (Minor)
right of survivorship and under Uniform Gift to Minors Act
not as tenants in common
------------------------------------------------
(State)
|
Additional abbreviations may also be used though not in the above list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OR ASSIGNEE
-------------------------------------------------------------------------shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
-----------------------------------------------------------------------Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated: _______________________
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS STOCK CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A PARTICIPANT IN A SECURITIES TRANSFER ASSOCIATION RECOGNIZED SIGNATURE PROGRAM.
EXHIBIT 5
COHEN & GRIGSBY, P.C.
ATTORNEYS AT LAW
TELEPHONE (412) 297-4900
FAX (412) 209-0672
URL:http//www.cohenlaw.com
May 21, 2002
Mymetics Corporation
706 Giddings Avenue, Suite 1C
Annapolis, MD 21401-1472
RE: MYMETICS CORPORATION REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have acted as counsel to Mymetics Corporation, a Delaware corporation (the "COMPANY"), in connection with the Company's Registration Statement on Form S-1 (the "REGISTRATION STATEMENT") which is being filed with the Securities and Exchange Commission (the "SEC") on May 21, 2002, under the Securities Act of 1933, as amended (the "ACT").
The Registration Statement relates to the proposed sale from time to time of up to an aggregate of 43,174,083 shares of the Company's common stock (collectively, the "SHARES") by certain selling shareholders. The selling shareholders acquired the Shares in connection with various private placement transactions exempt from the registration requirements of the Act.
For purposes of this opinion, we have examined the Registration Statement, the Good Standing Certificate dated May 10, 2002 issued by the Secretary of the State of Delaware with respect to the Company, and such other documents as we deemed necessary for the purpose of rendering this opinion. With respect to the foregoing documents, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to the originals of all documents submitted to us as certified or reproduced copies.
As a further basis for this opinion, we have made such inquiry of the Company as we have deemed necessary or appropriate for the purposes of rendering this opinion and have relied on an Officer's Certificate issued by the Company's Secretary.
Based on the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.
2. The Shares have been duly authorized for issuance, and are validly issued, fully paid and non-assessable.
COHEN & GRIGSBY, P.C.
Mymetics Corporation
May 21, 2002
We are attorneys who are admitted to the Bar of the Commonwealth of Pennsylvania, and we express no opinion as to the laws of any other jurisdiction, other than the corporate laws of the Commonwealth of Pennsylvania, the State of Delaware and the United States of America. Our examination of law relevant to the matters covered by this opinion is limited to Federal law, Delaware law, and Pennsylvania law.
This opinion is given as of the date hereof and is limited to the facts, circumstances and matters set forth herein and to laws currently in effect. No opinion may be inferred or is implied beyond matters expressly set forth herein, and we do not undertake or assume any obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any change in law which may hereafter occur.
This opinion is furnished for your benefit only and may not be used or relied upon by any other person or entity or in connection with any other transaction without our prior written consent.
We hereby consent to the references to this Firm under the heading "Legal Matters" in the Registration Statement and in the related Prospectus and to the filing of this opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ COHEN & GRIGSBY, P.C. |
Exhibit 9
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT dated for reference the 28th day of March, 2001.
AMONG:
ICHOR CORPORATION, a corporation organized under the laws of the State of Delaware in the United States (hereinafter referred to as "ParentCo")
AND:
6543 LUXEMBOURG S.A., a corporation organized under the laws of Luxembourg (hereinafter referred to as "LuxCo")
AND:
MFC MERCHANT BANK S.A., a bank organized under the laws of Switzerland
(hereinafter referred to as "Trustee")
WHEREAS in connection with a share exchange agreement (the "Share Exchange Agreement") dated for reference December 13, 2000 among ParentCo and certain shareholders of Hippocampe S.A., ParentCo agreed to execute and deliver and cause LuxCo to execute and deliver a voting and exchange trust agreement substantially in the form of this Agreement which contemplates that ParentCo will cause LuxCo to issue exchangeable preferential non voting shares of class B to certain holders of securities of Hippocampe S.A. contemplated in the Share Exchange Agreement;
NOW THEREFORE in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the following terms shall have the following meanings:
"AFFILIATE" of any person means any other person directly or indirectly controlled by, or under control of, that person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control of"), as applied to any person, means the possession by another person, directly or indirectly, of the power to direct or cause the direction of the management and policies of that first mentioned person, whether through the ownership of voting securities, by contract or otherwise.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of ParentCo to effect the automatic exchange of LuxCo Exchangeable Preferred Shares for ParentCo Common Shares pursuant to section 5.12.
"BENEFICIARIES" means the registered holders from time to time of LuxCo Exchangeable Preferred Shares, other than ParentCo and its Affiliates.
"BENEFICIARY VOTES" has the meaning ascribed thereto in section 4.2.
"CURRENT MARKET PRICE" means, in respect of a ParentCo Common Share on any date, the Luxembourg Franc Equivalent of the average of the closing bid and asked prices of ParentCo Common Shares during a period of 20
consecutive trading days ending not more than three trading days before such date on the OTC B.B., or, if the ParentCo Common Shares are not then quoted on the OTC B.B., on such other stock exchange or automated quotation system on which the ParentCo Common Shares are listed or quoted, as the case may be, as may be selected by the board of directors of LuxCo for such purpose; provided, however, that if in the opinion of the board of directors of LuxCo the public distribution or trading activity of ParentCo Common Shares during such period does not create a market which reflects the fair market value of a ParentCo Common Share, then the Current Market Price of a ParentCo Common Share shall be determined by the board of directors of LuxCo, in good faith and in its sole discretion, and provided further that any such selection, opinion or determination by the board of directors of LuxCo shall be conclusive and binding.
"EXCHANGE RIGHT" has the meaning ascribed thereto in section 5.1.
"INDEMNIFIED PARTIES" has the meaning ascribed thereto in section 9.1
"INSOLVENCY EVENT" means the institution by LuxCo of any proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the consent of LuxCo to the institution of bankruptcy, insolvency or winding-up proceedings against it, or the filing of a petition, answer or consent seeking dissolution or winding-up under any bankruptcy, insolvency or analogous laws, and the failure by LuxCo to contest in good faith any such proceedings commenced in respect of LuxCo within 30 days of becoming aware thereof, or the consent by LuxCo to the filing of any such petition or to the appointment of a receiver, or the making by LuxCo of a general assignment for the benefit of creditors, or the admission in writing by LuxCo of its inability to pay its debts generally as they become due, or LuxCo not being permitted, pursuant to solvency requirements of applicable law, to redeem any Retracted Shares pursuant to section 7.6 of the Shareholder Agreement.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Shareholder Agreement.
"LIQUIDATION EVENT" has the meaning ascribed thereto in section 5.12(b).
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in section 5.12(c).
"LIST" has the meaning ascribed thereto in section 4.6.
"LUXCO EXCHANGEABLE PREFERRED SHARES" means the exchangeable preferential non voting shares of class B in the capital of LuxCo;
"LUXEMBOURG FRANC EQUIVALENT" means, in respect of an amount expressed in a
currency other than Luxembourg Francs (the "Foreign Currency Amount") at any
date, the product obtained by multiplying: (a) the Foreign Currency Amount; by
(b) the noon spot exchange rate on such date for such foreign currency expressed
in Luxembourg Francs as reported by the U.S. Federal Reserve Bank or, in the
event such spot exchange rate is not available, such exchange rate on such date
for such foreign currency expressed in Luxembourg Francs as may be deemed by the
board of directors of LuxCo to be appropriate for such purpose.
"NOTICE EVENT" has the meaning ascribed thereto in section 7.17.
"OFFICER'S CERTIFICATE" means, with respect to ParentCo or LuxCo, as the case may be, a certificate signed by any officer or director of ParentCo or LuxCo, as the case may be.
"OTC B.B." means the over-the-counter Bulletin Board, a quotation system operated by The National Association of Securities Dealers, Inc.
"PARENTCO COMMON SHARE" means a share of common stock in the capital of ParentCo.
"PARENTCO CONSENT" has the meaning ascribed thereto in section 4.2.
"PARENTCO MEETING" has the meaning ascribed thereto in section 4.2.
"PARENTCO SPECIAL VOTING SHARE" means the one share of Special Voting Stock of ParentCo which entitles the holder of record to a number of votes at meetings of holders of ParentCo Common Shares equal to 1,066.44, subject to adjustment in accordance with Article 14 of the Shareholder Agreement, multiplied by the number of LuxCo Exchangeable Preferred Shares outstanding from time to time (other than LuxCo Exchangeable Preferred Shares held by ParentCo and Affiliates of ParentCo), which share is to be issued to, deposited with, and voted by, the Trustee as described herein.
"PARENTCO SUCCESSOR" has the meaning ascribed thereto in section 11.1(a).
"PERSON" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, government body, syndicate or other entity, whether or not having legal status.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Shareholder Agreement.
"RETRACTED SHARES" has the meaning ascribed thereto in section 5.7.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Shareholder Agreement.
"SHAREHOLDER AGREEMENT" means a shareholder agreement dated for reference March 28, 2001 among ParentCo, LuxCo and the holders of the LuxCo Exchangeable Preferred Shares.
"SUPPORT AGREEMENT" means the support agreement dated for reference March 28, 2001 between ParentCo and LuxCo.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the ParentCo Special Voting Share, any other securities, the Exchange Right, the Automatic Exchange Rights and any money or other property which may be held by the Trustee from time to time pursuant to this Agreement.
"TRUSTEE" means MFC Merchant Bank S.A. and, subject to the provisions of Article 10, includes any successor trustee.
"VOTING RIGHTS" means the voting rights attached to the ParentCo Special Voting Share.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into Articles, sections and other portions and the insertion of headings are for convenience of reference only and should not affect the construction or interpretation of this Agreement. Unless otherwise indicated, all references to an "Article" or "section" followed by a number and/or a letter refer to the specified Article or section of this Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and similar expressions refer to this Agreement and not to any particular Article, section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.
1.3 NUMBER, GENDER, ETC.
Words importing the singular number only shall include the plural and vice versa. Words importing any gender shall include all genders.
1.4 DATE FOR ANY ACTION
If any date on which any action is required to be taken under this Agreement is not a business day, such action shall be required to be taken on the next succeeding business day.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 ESTABLISHMENT OF TRUST
The purpose of this Agreement is to create the Trust for the benefit of the Beneficiaries, as herein provided. The Trustee will hold the ParentCo Special Voting Share in order to enable the Trustee to exercise the Voting Rights and will hold the Exchange Right and the Automatic Exchange Rights in order to enable the Trustee to exercise such rights, in each case as trustee for and on behalf of the Beneficiaries as provided in this Agreement.
ARTICLE 3
PARENTCO SPECIAL VOTING SHARE
3.1 ISSUE AND OWNERSHIP OF THE PARENTCO SPECIAL VOTING SHARE
ParentCo will issue to and deposit with the Trustee on the date that ParentCo files a Certificate of Amendment to Certificate of Incorporation to increase the authorized number of ParentCo Common Shares from 30,000,000 to 80,000,000, the ParentCo Special Voting Share to be held of record by the Trustee from and after such date as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries and in accordance with the provisions of this Agreement. ParentCo acknowledges receipt from the Trustee as trustee for and on behalf of the Beneficiaries of good and valuable consideration (and the adequacy thereto for the issuance of the ParentCo Special Voting Share by ParentCo to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the ParentCo Special Voting Share and shall be entitled to exercise all of the rights and powers of an owner with respect to the ParentCo Special Voting Share provided that the Trustee shall:
(a) hold the ParentCo Special Voting Share and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power or authority to sell, transfer, vote or otherwise deal in or with the ParentCo Special Voting Share and the ParentCo Special Voting Share shall not be used or disposed of by the Trustee for any purpose other than the purposes for which this Trust is created pursuant to this Agreement.
3.2 LEGENDED SHARE CERTIFICATES
LuxCo will cause each certificate representing LuxCo Exchangeable Preferred Shares to bear an appropriate legend notifying the Beneficiaries of their right to instruct the Trustee with respect to the exercise of the Voting Rights in respect of the LuxCo Exchangeable Preferred Shares of the Beneficiaries.
3.3 SAFE KEEPING OF CERTIFICATE
The certificate representing the ParentCo Special Voting Share shall at all times be held in safe keeping by the Trustee.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 VOTING RIGHTS
The Trustee, as the holder of record of the ParentCo Special Voting Share, shall be entitled to all of the Voting Rights, including the right to vote in person or by proxy the ParentCo Special Voting Share on any matters, questions, proposals or propositions whatsoever that may properly come before the shareholders of ParentCo at a ParentCo Meeting or in connection with a ParentCo Consent. The Voting Rights shall be and remain vested in and exercised by the Trustee. Subject to section 7.15:
(a) the Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this Article 4 from Beneficiaries entitled to instruct the Trustee as to the voting thereof at the time at which the ParentCo Meeting is held or a ParentCo Consent is sought; and
(b) to the extent that no instructions are received from a Beneficiary with respect to the Voting Rights to which such Beneficiary is entitled, the Trustee shall not exercise or permit the exercise of such Voting Rights.
4.2 NUMBER OF VOTES
With respect to all meetings of shareholders of ParentCo at which holders of ParentCo Common Shares are entitled to vote (each, a "PARENTCO MEETING") and with respect to all written consents sought by ParentCo from its shareholders including the holders of ParentCo Common Shares (each, a "PARENTCO CONSENT"), each Beneficiary shall be entitled to instruct the Trustee to cast and exercise 1,066.44 of the votes comprised in the Voting Rights, subject to adjustment in accordance with Article 14 of the Shareholder Agreement, for each LuxCo Exchangeable Preferred Share owned of record by such Beneficiary on the record date established by ParentCo or by applicable law for such ParentCo Meeting or ParentCo Consent, as the case may be (the "BENEFICIARY VOTES"), IN RESPECT OF EACH matter, question, proposal or proposition to be voted on at such ParentCo Meeting or in connection with such ParentCo Consent.
4.3 MAILINGS TO SHAREHOLDERS
With respect to each ParentCo Meeting and ParentCo Consent, the Trustee will use its reasonable efforts promptly to mail or cause to be mailed (or otherwise communicate in the same manner as ParentCo utilizes in communications to holders of ParentCo Common Shares subject to applicable regulatory requirements and provided such manner of communications is reasonably available to the Trustee) to each of the Beneficiaries named in the List referred to in section 4.6, such mailing or communication to commence on the same day as the mailing or notice (or other communication) with respect thereto is commenced by ParentCo to its shareholders:
(a) a copy of such notice, together with any related materials to be provided to shareholders of ParentCo;
(b) a statement that such Beneficiary is entitled to instruct the Trustee as to the exercise of the Beneficiary Votes with respect to such ParentCo Meeting or ParentCo Consent or, pursuant to section 4.7, to attend such ParentCo Meeting and to exercise personally the Beneficiary Votes thereat;
(c) a statement as to the manner in which such instructions may be given to the Trustee, including an express indication that instructions may be given to the Trustee to give:
(i) a proxy to such Beneficiary or his designee to exercise personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative of the management of ParentCo to exercise such Beneficiary Votes;
(d) a statement that if no such instructions are received from the Beneficiary, the Beneficiary Votes to which such Beneficiary is entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and instruct the Trustee as contemplated herein; and
(f) a statement of the time and date by which such instructions must be received by the Trustee in order to be binding upon it, which in the case of a ParentCo Meeting shall not be earlier than the close of business on the second business day prior to such meeting, and of the method for revoking or amending such instructions.
The materials referred to in this section 4.3 are to be provided to the Trustee by ParentCo and the materials referred to in section 4.3(c), (e) and (f) shall be subject to reasonable comment by the Trustee in a timely manner. ParentCo shall ensure that the materials to be provided to the Trustee are provided in sufficient time to permit the Trustee to comment as aforesaid and to send all materials to each Beneficiary at the same time as such materials are first sent to holders of ParentCo Common Shares. ParentCo agrees not to communicate with holders of ParentCo Common Shares with respect to the materials referred to in this section 4.3 otherwise than by mail unless such method of communication is also reasonably available to the Trustee for communication with the Beneficiaries.
For the purpose of determining Beneficiary Votes to which a Beneficiary is entitled in respect of any ParentCo Meeting or ParentCo Consent, the number of LuxCo Exchangeable Preferred Shares owned of record by the Beneficiary shall be determined at the close of business on the record date established by ParentCo or by applicable law for purposes of determining shareholders entitled to vote at such ParentCo Meeting or consent in respect of such ParentCo Consent. ParentCo will notify the Trustee of any decision of the board of directors of ParentCo with respect to the calling of any ParentCo Meeting or the seeking by ParentCo of any such ParentCo Consent and shall provide all necessary information and materials to the Trustee in each case promptly and in any event in sufficient time to enable the Trustee to perform its obligations contemplated by this section 4.3.
4.4 COPIES OF SHAREHOLDER INFORMATION
ParentCo will deliver to the Trustee copies of all proxy materials (including notices of ParentCo Meetings but excluding proxies to vote ParentCo Common Shares), information statements, reports (including without limitation, all interim and annual financial statements) and other written communications that, in each case, are to be distributed from time to time to holders of ParentCo Common Shares in sufficient quantities and in sufficient time so as to enable the Trustee to send those materials to each Beneficiary at the same time as such materials are first sent to holders of ParentCo Common Shares. The Trustee will mail or otherwise send to each Beneficiary, at the expense of ParentCo, copies of all such materials (and all materials specifically directed to the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by ParentCo) received by the Trustee from ParentCo contemporaneously with the sending of such materials to holders of ParentCo Common Shares. The Trustee will also make available for inspection by any Beneficiary, during the regular business hours of the Trustee, at the Trustee's principal office in Geneva, Switzerland, all reports and other written communications that are:
(a) received by the Trustee as the registered holder of the ParentCo Special Voting Share and made available by ParentCo generally to the holders of ParentCo Common Shares; or
(b) specifically directed to the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by ParentCo.
4.5 OTHER MATERIALS
As soon as reasonably practicable after receipt by ParentCo or shareholders of ParentCo (if such receipt is known by ParentCo) of any material sent or given by or on behalf of a third party to holders of ParentCo Common Shares generally, ParentCo shall use its reasonable efforts to obtain and deliver to the Trustee copies thereof in sufficient quantities so as to enable the Trustee to forward such material (unless the same has been provided directly to Beneficiaries by such third party) to each Beneficiary as soon as possible thereafter. As soon as reasonably practicable after receipt thereof, the Trustee will mail or otherwise send to each Beneficiary, at the expense of ParentCo, copies of all such materials received by the Trustee from ParentCo. The Trustee will also make available for inspection by any Beneficiary, during the regular business hours of the Trustee, at the Trustee's principal office in Geneva, Switzerland, copies of all such materials.
4.6 LIST OF PERSONS ENTITLED TO VOTE
LuxCo shall: (i) prior to each annual, general and special ParentCo Meeting or the seeking of any ParentCo Consent; and (ii) forthwith upon each request made at any time by the Trustee in writing, prepare or cause to be prepared a list (a "LIST") of the names and addresses of the Beneficiaries arranged in alphabetical order and showing the number of LuxCo Exchangeable Preferred Shares held of record by each such Beneficiary, in each case at the close of business on the date specified by the Trustee in such request or, in the case of a List prepared in connection with a ParentCo
Meeting or a ParentCo Consent, at the close of business on the record date established by ParentCo or pursuant to applicable law for determining the holders of ParentCo Common Shares entitled to receive notice of and/or to vote at such ParentCo Meeting or to give consent in connection with such ParentCo Consent. Each such List shall be delivered to the Trustee promptly after receipt by LuxCo of such request or the record date for such meeting or seeking of consent, as the case may be, and in any event within sufficient time as to permit the Trustee to perform its obligations under this Agreement. ParentCo agrees to give LuxCo notice (with a copy to the Trustee) of the calling of any ParentCo Meeting or the seeking of any ParentCo Consent, together with the record dates therefor, sufficiently prior to the date of the calling of such meeting or seeking of such consent so as to enable LuxCo to perform its obligations under this section 4.6.
4.7 ENTITLEMENT TO DIRECT VOTES
Any Beneficiary named in a List prepared in connection with any ParentCo Meeting or ParentCo Consent will be entitled: (i) to instruct the Trustee in the manner described in section 4.3 with respect to the exercise of the Beneficiary Votes to which such Beneficiary is entitled; or (ii) to attend such meeting and personally exercise thereat, as the proxy of the Trustee, the Beneficiary Votes to which such Beneficiary is entitled.
4.8 VOTING BY TRUSTEE AND ATTENDANCE OF TRUSTEE REPRESENTATIVE AT MEETING
(a) In connection with each ParentCo Meeting and ParentCo Consent, the Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Beneficiary pursuant to section 4.3, the Beneficiary Votes as to which such Beneficiary is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that such written instructions are received by the Trustee from the Beneficiary prior to the time and date fixed by the Trustee for receipt of such instruction in the notice given by the Trustee to the Beneficiary pursuant to section 4.3.
(b) The Trustee shall cause a representative who is empowered by it to sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend each ParentCo Meeting. Upon submission by a Beneficiary (or its designee) of identification satisfactory to the Trustee's representative, and at the Beneficiary's request, such representative shall sign and deliver to such Beneficiary (or its designee) a proxy to exercise personally the Beneficiary Votes as to which such Beneficiary is other-wise entitled hereunder to direct the vote, if such Beneficiary either: (i) has not previously given the Trustee instructions pursuant to section 4.3 in respect of such meeting; or (ii) submits to such representative written revocation of any such previous instructions. At such meeting, the Beneficiary exercising such Beneficiary Votes shall have the same rights as the Trustee to speak at the meeting in favor of any matter, question, proposal or proposition, to vote by way of ballot at the meeting in respect of any matter, question, proposal or proposition, and to vote at such meeting by way of a show of hands in respect of any matter, question or proposition.
4.9 DISTRIBUTION OF WRITTEN MATERIALS
Any written materials distributed by the Trustee pursuant to this Agreement shall be sent by mail (or otherwise communicated in the same manner as ParentCo utilizes in communications to holders of ParentCo Common Shares subject to applicable regulatory requirements and provided such manner of communications is reasonably available to the Trustee) to each Beneficiary at its address as shown on the books of LuxCo. ParentCo agrees not to communicate with holders of ParentCo Common Shares with respect to such written materials otherwise than by mail unless such method of communication is also reasonably available to the Trustee for communication with the Beneficiaries. LuxCo shall provide or cause to be provided to the Trustee for purposes of communication, on a timely basis and without charge or other expense:
(a) a current List; and
(b) upon the request of the Trustee, mailing labels to enable the Trustee to carry out its duties under this Agreement.
4.10 TERMINATION OF VOTING RIGHTS
All of the rights of a Beneficiary with respect to the Beneficiary Votes exercisable in respect of the LuxCo Exchangeable Preferred Shares held by such Beneficiary, including the right to instruct the Trustee as to the voting of or to vote personally such Beneficiary Votes, shall be deemed to be surrendered by the Beneficiary to ParentCo and such Beneficiary Votes and the Voting Rights represented thereby shall cease immediately upon the delivery by such holder to the Trustee of the certificates representing such LuxCo Exchangeable Preferred Shares in connection with the exercise by the Beneficiary of the Exchange Right or the occurrence of the automatic exchange of LuxCo Exchangeable Preferred Shares for ParentCo Common Shares, as specified in Article 5 (unless, in either case, ParentCo shall not have delivered the requisite ParentCo Common Shares issuable in exchange therefor to the Trustee for delivery to the Beneficiaries), or upon the redemption of LuxCo Exchangeable Preferred Shares pursuant to Article 7 or 8 of the Shareholder Agreement, or upon the effective date of the liquidation, dissolution or winding-up of LuxCo pursuant to Article 6 of the Shareholder Agreement, or upon the purchase of LuxCo Exchangeable Preferred Shares from the holder thereof by ParentCo pursuant to the exercise by ParentCo of the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT
ParentCo hereby grants to the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries the right (the "EXCHANGE RIGHT"), upon the occurrence and during the continuance of an Insolvency Event, to require ParentCo to purchase from each or any Beneficiary all or any part of the LuxCo Exchangeable Preferred Shares held by the Beneficiary and the Automatic Exchange Rights, all in accordance with the provisions of this Agreement. ParentCo hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Beneficiaries of good and valuable consideration (and the adequacy thereof) for the grant of the Exchange Right and the Automatic Exchange Rights by ParentCo to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Exchange Right and the Automatic Exchange Rights and shall be entitled to exercise all of the rights and powers of an owner with respect to the Exchange Right and the Automatic Exchange Rights, provided that the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power or authority to exercise or otherwise deal in or with the Exchange Right or the Automatic Exchange Rights, and the Trustee shall not exercise any such rights for any purpose other than the purposes for which the Trust is created pursuant to this Agreement.
5.2 LEGENDED SHARE CERTIFICATES
LuxCo will cause each certificate representing LuxCo Exchangeable Preferred Shares to bear an appropriate legend notifying the Beneficiaries of:
(a) their right to instruct the Trustee with respect to the exercise of the Exchange Right in respect of the LuxCo Exchangeable Preferred Shares held by a Beneficiary; and
(b) the Automatic Exchange Rights.
5.3 GENERAL EXERCISE OF EXCHANGE RIGHT
The Exchange Right shall be and remain vested in and exercisable by the Trustee. Subject to section 7.15, the Trustee shall exercise the Exchange Right only on the basis of instructions received pursuant to this Article 5 from Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To the extent that no instructions are received
from a Beneficiary with respect to the Exchange Right, the Trustee shall not exercise or permit the exercise of the Exchange Right.
5.4 PURCHASE PRICE
The purchase price payable by ParentCo for each LuxCo Exchangeable Preferred Share to be purchased by ParentCo under the Exchange Right shall be an amount per share equal to: (i) the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 of the Shareholder Agreement, on the last business day prior to the day of closing of the purchase and sale of such LuxCo Exchangeable Preferred Share under the Exchange Right, which shall be satisfied in full by ParentCo causing to be sent to such holder 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 of the Shareholder Agreement; plus (ii) to the extent not paid by LuxCo on the designated payment date therefor, an additional amount equal to and in satisfaction of the full amount of all declared and unpaid dividends on each such LuxCo Exchangeable Preferred Share held by such holder on any dividend record date which occurred prior to the closing of the purchase and sale. In connection with each exercise of the Exchange Right, ParentCo shall provide to the Trustee an Officer's Certificate setting forth the calculation of the purchase price for each LuxCo Exchangeable Preferred Share. The purchase price for each such LuxCo Exchangeable Preferred Share so purchased may be satisfied only by ParentCo issuing and delivering or causing to be delivered to the Trustee, on behalf of the relevant Beneficiary, 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 of the Shareholder Agreement, and on the applicable payment date a cheque for the balance, if any, of the purchase price without interest (but less any amounts withheld pursuant to section 5.13).
5.5 EXERCISE INSTRUCTIONS
Subject to the terms and conditions herein set forth, a Beneficiary shall be entitled, upon the occurrence and during the continuance of an Insolvency Event, to instruct the Trustee to exercise the Exchange Right with respect to all or any part of the LuxCo Exchangeable Preferred Shares registered in the name of such Beneficiary on the books of LuxCo. To cause the exercise of the Exchange Right by the Trustee, the Beneficiary shall deliver to the Trustee, in person or by certified or registered mail, as its principal office in Geneva, Switzerland, or at such other places as the Trustee may from time to time designate by written notice to the Beneficiaries, the certificates representing the LuxCo Exchangeable Preferred Shares which such Beneficiary desires ParentCo to purchase, duly endorsed in blank for transfer, and accompanied by such other documents and instruments as may be required to effect a transfer of LuxCo Exchangeable Preferred Shares under the applicable corporate legislation in Luxembourg and the bylaws of LuxCo and such additional documents and instruments as the Trustee may reasonably require together with:
(a) a duly completed form of notice of exercise of the Exchange
Right, contained on the reverse of or attached to the LuxCo
Exchangeable Preferred Share certificates, stating: (i) that
the Beneficiary thereby instructs the Trustee to exercise the
Exchange Right so as to require ParentCo to purchase from the
Beneficiary the number of LuxCo Exchangeable Preferred Shares
specified therein; (ii) that such Beneficiary has good title
to and owns all such LuxCo Exchangeable Preferred Shares to be
acquired by ParentCo free and clear of all liens, claims and
encumbrances; (iii) the names in which the certificates
representing ParentCo Common Shares issuable in connection
with the exercise of the Exchange Right are to be issued; and
(iv) the names and addresses of the persons to whom such new
certificates should be delivered; and
(b) payment (or evidence satisfactory to the Trustee, LuxCo and ParentCo of payment) of the taxes (if any) payable as contemplated by section 5.8 of this Agreement.
If only a part of the LuxCo Exchangeable Preferred Shares represented by any certificate or certificates delivered to the Trustee are to be purchased by ParentCo under the Exchange Right, a new certificate for the balance of such LuxCo Exchangeable Preferred Shares shall be issued to the holder at the expense of LuxCo.
5.6 DELIVERY OF PARENTCO COMMON SHARES; EFFECT OF EXERCISE
Promptly after the receipt of the certificates representing the LuxCo Exchangeable Preferred Shares which the Beneficiary desires ParentCo to purchase under the Exchange Right, together with such documents and instruments
of transfer and a duly completed form of notice of exercise of the Exchange Right (and payment of taxes, if any, payable as contemplated by section 5.8 or evidence thereof), duly endorsed for transfer to ParentCo, the Trustee shall notify ParentCo and LuxCo of its receipt of the same, which notice to ParentCo and LuxCo shall constitute exercise of the Exchange Right by the Trustee on behalf of the holder of such LuxCo Exchangeable Preferred Shares, and ParentCo shall promptly thereafter deliver or cause to be delivered to the Trustee, for delivery to the Beneficiary of such LuxCo Exchangeable Preferred Shares (or to such other persons, if any, properly designated by such Beneficiary) the number of ParentCo Common Shares issuable in connection with the exercise of the Exchange Right, and on the applicable payment date cheques for the balance, if any, of the total purchase price therefor without interest (but less any amounts withheld pursuant to section 5.13); provided, however, that no such delivery shall be made unless and until the Beneficiary requesting the same shall have paid (or provided evidence satisfactory to the Trustee, LuxCo and ParentCo of the payment of) the taxes (if any) payable as contemplated by section 5.8 of this Agreement. Immediately upon the giving of notice by the Trustee to ParentCo and LuxCo of the exercise of the Exchange Right as provided in this section 5.6, the closing of the transaction of purchase and sale contemplated by the Exchange Right shall be deemed to have occurred and the holder of such LuxCo Exchangeable Preferred Shares shall be deemed to have transferred to ParentCo all of such holder's right, title and interest in and to such LuxCo Exchangeable Preferred Shares and the related interest in the Trust Estate and shall cease to be a holder of such LuxCo Exchangeable Preferred Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive his proportionate part of the total purchase price therefor, uriless the requisite number of ParentCo Common Shares is not allotted, issued and delivered by ParentCo to the Trustee within five business days of the date of the giving of such notice by the Trustee or the balance of the purchase price, if any, is not paid by ParentCo on the applicable payment date therefor, in which case the rights of the Beneficiary shall remain unaffected until such ParentCo Common Shares are so allotted, issued and delivered, and the balance of the purchase price, if any, has been paid, by ParentCo. Upon delivery by ParentCo to the Trustee of such ParentCo Common Shares, and the balance of the purchase price, if any, the Trustee shall deliver such ParentCo Common Shares to such Beneficiary (or to such other persons, if any, properly designated by such Beneficiary). Concurrently with such Beneficiary ceasing to be a holder of LuxCo Exchangeable Preferred Shares, the Beneficiary shall be considered and deemed for all purposes to be the holder of the ParentCo Common Shares delivered to it pursuant to the Exchange Right.
5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION
In the event that a Beneficiary has exercised its right under Article 7 of the Shareholder Agreement to require LuxCo to redeem any or all of the LuxCo Exchangeable Preferred Shares held by the Beneficiary (the "RETRACTED SHARES") and is notified by LuxCo pursuant to section 7.6 of the Shareholder Agreement that LuxCo will not be permitted as a result of solvency requirements of applicable law to redeem all such Retracted Shares, and provided that ParentCo shall not have exercised the Retraction Call Right with respect to the Retracted Shares and that the Beneficiary has not revoked the retraction request delivered by the Beneficiary to LuxCo pursuant to section 7.1 of the Shareholder Agreement and provided further that the Trustee has received written notice of same from LuxCo or ParentCo, the retraction request will constitute and will be deemed to constitute notice from the Beneficiary to the Trustee instructing the Trustee to exercise the Exchange Right with respect to those Retracted Shares that LuxCo is unable to redeem. In any such event, LuxCo hereby agrees with the Trustee and in favour of the Beneficiary promptly to forward or cause to be forwarded to the Trustee all relevant materials delivered by the Beneficiary to LuxCo or to the transfer agent of the LuxCo Exchangeable Preferred Shares (including without limitation, a copy of the retraction request delivered pursuant to section 7.1 of the Shareholder Agreement) in connection with such proposed redemption of the Retracted Shares and the Trustee will thereupon exercise the Exchange Right with respect to the Retracted Shares that LuxCo is not permitted to redeem and will require ParentCo to purchase such shares in accordance with the provisions of this Article 5.
5.8 STAMP OR OTHER TRANSFER TAXES
Upon any sale of LuxCo Exchangeable Preferred Shares to ParentCo pursuant to the Exchange Right or the Automatic Exchange Rights, the share certificate or certificates representing ParentCo Common Shares to be delivered in connection with the payment of the total purchase price therefor shall be issued in the name of the Beneficiary of the LuxCo Exchangeable Preferred Shares so sold or in such names as such Beneficiary may otherwise direct in writing without charge to the holder of the LuxCo Exchangeable Preferred Shares so sold; provided, however, that such Beneficiary: (i) shall pay (and none of ParentCo, LuxCo or the Trustee shall be
required to pay) any documentary, stamp, transfer or other taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Beneficiary; or (ii) shall have evidenced to the satisfaction of the Trustee, ParentCo and LuxCo that such taxes, if any, have been paid.
5.9 NOTICE OF INSOLVENCY EVENT
As soon as practicable following the occurrence of an Insolvency Event or any event that with the giving of notice or the passage of time or both would be an Insolvency Event, LuxCo and ParentCo shall give written notice thereof to the Trustee. As soon as practicable following the receipt of notice from LuxCo and ParentCo of the occurrence of an Insolvency Event, or upon the Trustee becoming aware of an Insolvency Event, the Trustee will mail to each Beneficiary, at the expense of ParentCo (such funds to be received in advance), a notice of such Insolvency Event in the form provided by ParentCo, which notice shall contain a brief statement of the rights of the Beneficiaries with respect to the Exchange Right as provided for in Article 5 of this Agreement.
5.10 QUALIFICATION OF PARENTCO COMMON SHARES
ParentCo covenants that if any ParentCo Common Shares to be issued and delivered pursuant to the Exchange Right or the Automatic Exchange Rights require registration or qualification with or approval of or the filing of any document, including any prospectus or similar document, or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority or pursuant to the rules and regulations of any regulatory authority or the fulfillment of any other legal requirement before such shares may be issued and delivered by ParentCo to the initial holder thereof, ParentCo will in good faith expeditiously take all such actions and do all such things as are necessary or desirable to cause such ParentCo Common Shares to be and remain duly registered, qualified or approved. ParentCo will in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all ParentCo Common Shares to be delivered pursuant to the Exchange Right or the Automatic Exchange Rights to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding ParentCo Common Shares have been listed by ParentCo and remain listed and are quoted or posted for trading at such time.
5.11 PARENTCO COMMON SHARES
ParentCo hereby represents and warrants that, from and after the filing by ParentCo of a Certificate of Amendment to Certificate of Incorporation to increase the authorized number of ParentCo Common Shares from 30,000,000 to 80,000,000, it will irrevocably reserve for issuance such number of ParentCo Common Shares as is equal to the number of LuxCo Exchangeable Preferred Shares outstanding at the date hereof multiplied by 1,066.44, subject to adjustment in accordance with Article 14 of the Shareholder Agreement, and covenants that it will at all times keep available free from pre-emptive and other rights, such number of ParentCo Common Shares (or other shares or securities into which ParentCo Common Shares may be reclassified or changed) as is necessary to enable ParentCo and LuxCo to perform their respective obligations pursuant to this Agreement, the Shareholder Agreement and the Support Agreement.
5.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENTCO
(a) ParentCo will give the Trustee written notice of each of the following events at the time set forth below:
(i) in the event of any determination by the board of directors of ParentCo to institute voluntary liquidation, dissolution or winding-up proceedings with respect to ParentCo or to effect any other distribution of assets of ParentCo among its shareholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; and
(ii) as soon as practicable following the earlier of: (A) receipt by ParentCo of notice of, and (B) ParentCo otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of ParentCo or to effect any other distribution of assets of ParentCo among
its shareholders for the purpose of winding up its affairs, in each case where ParentCo has failed to contest in good faith any such proceeding commenced in respect of ParentCo within 30 days of becoming aware thereof.
(b) As soon as practicable following receipt by the Trustee from ParentCo of notice of any event (a "LIQUIDATION EVENT") contemplated by section 5.12(a)(i) or 5.12(a)(ii) above, the TRUSTEE, AT THE EXPENSE OF PARENTCO, will give notice thereof to the Beneficiaries. Such notice shall be provided to the Trustee by ParentCo and shall include a brief description of the automatic exchange of LuxCo Exchangeable Preferred Shares for ParentCo Common Shares provided for in section 5.12(c).
(c) In order that the Beneficiaries will be able to participate on a pro rata basis with the holders of ParentCo Common Shares in the distribution of assets of ParentCo in connection with a Liquidation Event, on the fifth business day prior to the effective date (the "LIQUIDATION EVENT EFFECTIVE DATE") of a Liquidation Event all of the then outstanding LuxCo Exchangeable Preferred Shares shall be automatically exchanged for ParentCo Common Shares. To effect such automatic exchange, ParentCo shall purchase on the fifth business day prior to the Liquidation Event Effective Date each LuxCo Exchangeable Preferred Share then outstanding and held by Beneficiaries, and each Beneficiary shall sell the LuxCo Exchangeable Preferred Shares held by it at such time, for a purchase price per share equal to: (i) the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 of the Shareholder Agreement, on the fifth business day prior to the Liquidation Event Effective Date, which shall be satisfied in full by ParentCo issuing to the Beneficiary 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 of the Shareholder Agreement: and (ii) to the extent not paid by LuxCo, an additional amount equal to and in satisfaction of the full amount of all declared and unpaid dividends on each such LuxCo Exchangeable Preferred Share held by such holder on any dividend record date which occurred prior to the date of the exchange. ParentCo shall provide the Trustee with an Officer's Certificate in connection with each automatic exchange setting forth the calculation of the purchase price for each LuxCo Exchangeable Preferred Share.
(d) On the fifth business day prior to the Liquidation Event Effective Date, the closing of the transaction of purchase and sale contemplated by the automatic exchange of LuxCo Exchangeable Preferred Shares for ParentCo Common Shares shall be deemed to have occurred, and each Beneficiary shall be deemed to have transferred to ParentCo all of the Beneficiary's right, title and interest in and to such Beneficiary's LuxCo Exchangeable Preferred Shares and the related interest in the Trust Estate, any right of each such Beneficiary to receive declared and unpaid dividends from LuxCo shall be deemed to be satisfied and discharged and each such Beneficiary shall cease to be a holder of such LuxCo Exchangeable Preferred Shares and ParentCo shall issue to the Beneficiary the ParentCo Common Shares issuable upon the automatic exchange of LuxCo Exchangeable Preferred Shares for ParentCo Common Shares and on the applicable payment date shall deliver to the Trustee for delivery to the Beneficiary a cheque for the balance, if any, of the total purchase price for such LuxCo Exchangeable Preferred Shares without interest but less any amounts withheld pursuant to section 5.13. Concurrently with such Beneficiary ceasing to be a holder of LuxCo Exchangeable Preferred Shares, the Beneficiary shall be considered and deemed for all purposes to be the holder of the ParentCo Common Shares issued pursuant to the automatic exchange of LuxCo Exchangeable Preferred Shares for ParentCo Common Shares and the certificates held by the Beneficiary previously representing the LuxCo Exchangeable Preferred Shares exchanged by the Beneficiary with ParentCo pursuant to such automatic exchange shall thereafter be deemed to represent ParentCo Common Shares issued to the Beneficiary by ParentCo pursuant to such automatic exchange. Upon the request of a Beneficiary and the surrender by the Beneficiary of LuxCo Exchangeable Preferred Share certificates deemed to represent ParentCo Common Shares, duly endorsed in blank and accompanied by such instruments of transfer as ParentCo may reasonably require, ParentCo shall deliver or cause to be delivered to the Beneficiary certificates representing ParentCo Common Shares of which the Beneficiary is the holder.
5.13 WITHHOLDING RIGHTS
ParentCo, LuxCo and the Trustee shall be entitled to deduct and withhold from any consideration otherwise payable under this Agreement to any holder of LuxCo Exchangeable Preferred Shares or ParentCo Common Shares such amounts as ParentCo, LuxCo or the Trustee is required to deduct and withhold with respect to such payment under any provision of federal, provincial, state, local or foreign tax law, in each case as amended or succeeded. The Trustee may act on the advice of counsel with respect to such matters. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, ParentCo, LuxCo and the Trustee are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to ParentCo, LuxCo or the Trustee, as the case may be, to enable it to comply with such deduction or withholding requirement and ParentCo, LuxCo or the Trustee shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale. ParentCo represents and warrants that, based upon facts currently known to it, it has no current intention, as at the date of this Agreement, to deduct or withhold from any dividend paid to holders of LuxCo Exchangeable Preferred Shares any amounts.
ARTICLE 6
RESTRICTIONS ON ISSUE OF PARENTCO SPECIAL VOTING STOCK
6.1 ISSUE OF ADDITIONAL SHARES
During the term of this Agreement, ParentCo will not, without the consent of the holders at the relevant time of LuxCo Exchangeable Preferred Shares, given in accordance with section 13.2 of the Shareholder Agreement, issue any shares in the same series as the ParentCo Special Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 POWERS AND DUTIES OF THE TRUSTEE
The rights, powers, duties and authorities of the Trustee under this Agreement, in its capacity as Trustee of the Trust, shall include:
(a) receipt and deposit of the ParentCo Special Voting Share from ParentCo as Trustee for and on behalf of the Beneficiaries in accordance with the provisions of this Agreement;
(b) granting proxies and distributing materials to Beneficiaries as provided in this Agreement;
(c) voting the Beneficiary Votes in accordance with the provisions of this Agreement;
(d) receiving the grant of the Exchange Right and the Automatic Exchange Rights from ParentCo as Trustee for and on behalf of the Beneficiaries in accordance with the provisions of this Agreement;
(e) exercising the Exchange Right and enforcing the benefit of the Automatic Exchange Rights, in each case in accordance with the provisions of this Agreement, and in connection therewith receiving from Beneficiaries LuxCo Exchangeable Preferred Shares and other requisite documents and distributing to such Beneficiaries ParentCo Common Shares and cheques, if any, to which such Beneficiaries are entitled upon the exercise of the Exchange Right or pursuant to the Automatic Exchange Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust Estate as provided in this Agreement;
(h) taking action on its own initiative or at the direction of a Beneficiary or Beneficiaries to enforce the obligations of ParentCo and LuxCo under this Agreement; and
(i) taking such other actions and doing such other things as are specifically provided in this Agreement.
In the exercise of such rights, powers, duties and authorities the Trustee shall have (and is granted) such incidental and additional rights, powers, duties and authority not in conflict with any of the provisions of this Agreement as the Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary, appropriate or desirable to effect the purpose of the Trust. Any exercise of such discretionary rights, powers, duties and authorities by the Trustee shall be final, conclusive and binding upon all persons.
The Trustee in exercising its rights, powers, duties and authorities hereunder shall act honestly and in good faith and with a view to the best interests of the Beneficiaries and shall exercise the care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall be specifically required to do so under the terms hereof, nor shall the Trustee be required to take any notice of, or to do, or to take any act, action or proceeding as a result of any default or breach of any provision hereunder, unless and until notified in writing of such default or breach, which notices shall distinctly specify the default or breach desired to be brought to the attention of the Trustee, and in the absence of such notice the Trustee may for all purposes of this Agreement conclusively assume that no default or breach has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein.
7.2 NO CONFLICT OF INTEREST
The Trustee represents to ParentCo and LuxCo that at the date of execution and delivery of this Agreement there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder and the role of the Trustee in any other capacity. The Trustee shall, within 90 days after it becomes aware that such material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Article 10. If, notwithstanding the foregoing provisions of this section 7.2, the Trustee has such a material conflict of interest, the validity and enforceability of this Agreement shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest. If the Trustee contravenes the foregoing provisions of this section 7.2, any interested party may apply to an applicable court for an order that the Trustee be replaced as Trustee hereunder.
7.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC.
ParentCo and LuxCo irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective registrars and transfer agents, and with any such subsequent registrar or transfer agent, of the LuxCo Exchangeable Preferred Shares and ParentCo Common Shares; and
(b) requisition, from time to time: (i) from any such registrar or transfer agent any information readily available from the records maintained by it which the Trustee may reasonably require for the discharge of its duties and responsibilities under this Agreement; and (ii) from the transfer agent of ParentCo Common Shares, and any subsequent transfer agent of such shares, the share certificates issuable upon the exercise from time to time of the Exchange Right and pursuant to the Automatic Exchange Rights.
ParentCo and LuxCo irrevocably authorize their respective registrars and transfer agents to comply with all such requests. ParentCo covenants that it will supply its transfer agent with duly executed share certificates for the purpose of completing the exercise from time to time of the Exchange Right and the Automatic Exchange Rights.
7.4 BOOKS AND RECORDS
The Trustee shall keep available for inspection by ParentCo and LuxCo at the Trustee's principal office in Geneva, Switzerland correct and complete books and records of account relating to the Trust created by this Agreement, including without limitation, all relevant data relating to mailings and instructions to and from Beneficiaries and all transactions pursuant to the Exchange Right and the Automatic Exchange Rights. On or before April 30, 2001, and on or before January 31 in every year thereafter, so long as the ParentCo Special Voting Share is on deposit with the Trustee, the Trustee shall transmit to ParentCo and LuxCo a brief report, dated as of the preceding December 31st, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
(b) the number of exercises of the Exchange Right, if any, and the aggregate number of LuxCo Exchangeable Preferred Shares received by the Trustee on behalf of Beneficiaries in consideration of the issuance by ParentCo of ParentCo Common Shares in connection with the Exchange Right, during the previous calendar year; and
(c) any action taken by the Trustee in the performance of its duties under this Agreement which it had not previously reported and which, in the Trustee's opinion, materially affects the Trust Estate.
7.5 INCOME TAX RETURNS AND REPORTS
The Trustee shall, to the extent necessary, prepare and file on behalf of the Trust appropriate income tax returns and any other returns or reports as may be required by applicable law or pursuant to the rules and regulations of any securities exchange or other trading system through which the LuxCo Exchangeable Preferred Shares are traded. In connection therewith, the Trustee may obtain the advice and assistance of such experts or advisors as the Trustee considers necessary or advisable (who may be experts or advisors to ParentCo or LuxCo). If requested by the Trustee, ParentCo or LuxCo shall retain qualified experts or advisors for the purpose of providing such tax advice or assistance.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE
The Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this Agreement at the request, order or direction of any Beneficiary upon such Beneficiary furnishing to the Trustee reasonable funding, security or indemnity against the costs, expenses and liabilities which may be incurred by the Trustee therein or thereby, provided that no Beneficiary shall be obligated to furnish to the Trustee any such security or indemnity in connection with the exercise by the Trustee of any of its rights, duties, powers and authorities with respect to the ParentCo Special Voting Share pursuant to Article 4, subject to section 7.15, and with respect to the Exchange Right pursuant to Article 5, subject to section 7.15, and with respect to the Automatic Exchange Rights pursuant to Article 5.
None of the provisions contained in this Agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the exercise of any of its rights, powers, duties, or authorities unless funded, given security and indemnified as aforesaid.
7.7 ACTION OF BENEFICIARIES
No Beneficiary shall have the right to institute any action, suit or proceeding or to exercise any other remedy authorized by this Agreement for the purpose of enforcing any of its rights or for the execution of any trust or power hereunder unless the Beneficiary has requested the Trustee to take or institute such action, suit or proceeding and famished the Trustee with the funding, security or indemnity referred to in section 7.6 and the Trustee shall have failed to act within a reasonable time thereafter. In such case, but not otherwise, the Beneficiary shall be entitled to
take proceedings in any court of competent jurisdiction such as the Trustee might have taken; it being understood and intended that no one or more Beneficiaries shall have any right in any manner whatsoever to affect, disturb or prejudice the rights hereby created by any such action, or to enforce any right hereunder or the Voting Rights, the Exchange Rights or the Automatic Exchange Rights except subject to the conditions and in the manner herein provided, and that all powers and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and maintained by the Trustee, except only as herein provided, and in any event for the equal benefit of all Beneficiaries.
7.8 RELIANCE UPON DECLARATIONS
The Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon statutory declarations, certificates, opinions or reports famished pursuant to the provisions hereof or required by the Trustee to be famished to it in the exercise of its rights, powers, duties and authorities hereunder if such statutory declarations, certificates, opinions or reports comply with the provisions of section 7.9, if applicable, and with any other applicable provisions of this Agreement.
7.9 EVIDENCE AND AUTHORITY TO TRUSTEE
ParentCo and/or LuxCo shall furnish to the Trustee evidence of compliance with the conditions provided for in this Agreement relating to any action or step required or permitted to be taken by ParentCo and/or LuxCo or the Trustee under this Agreement or as a result of any obligation imposed under this Agreement, including, without limitation, in respect of the Voting Rights or the Exchange Right or the Automatic Exchange Rights and the taking of any other action to be taken by the Trustee at the request of or on the application of ParentCo and/or LuxCo promptly if and when:
(a) such evidence is required by any other section of this Agreement to be famished to the Trustee in accordance with the terms of this section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and authorities under this Agreement gives ParentCo and/or LuxCo written notice requiring it to famish such evidence in relation to any particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of ParentCo and/or LuxCo or a statutory declaration or a certificate made by persons entitled to sign an Officer's Certificate stating that any such condition has been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting Rights or the Exchange Right or the Automatic Exchange Rights or the taking of any other action to be taken by the Trustee at the request or on the application of ParentCo and/or LuxCo, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, attorney, auditor, accountant, appraiser, value, engineer or other expert or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of ParentCo and/or LuxCo it shall be in the form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or report famished to the Trustee as evidence of compliance with a condition provided for in this Agreement shall include a statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation upon which he based the statutory declaration, certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation as he believes is necessary to enable him to make the statements or give the opinions contained or expressed therein.
7.10 EXPERTS, ADVISERS AND AGENTS
The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice of or information obtained from any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert, whether retained by the Trustee or by ParentCo and/or LuxCo or otherwise, and may retain or employ such assistants as may be necessary to the proper discharge of its powers and duties and determination of its rights hereunder and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably require for the proper determination and discharge of its powers and duties hereunder, and may pay reasonable remuneration for all services performed for it (and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Trust.
7.11 INVESTMENT OF MONEYS HELD BY TRUSTEE
Unless otherwise provided in this Agreement, any moneys held by or on behalf of the Trustee which under the terms of this Agreement may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee may be invested and reinvested in the name or under the control of the Trustee, in trust for LuxCo, in securities in which, under applicable laws, trustees are authorized to 'invest trust moneys, provided that such securities are stated to mature within one year after their purchase by the Trustee, and the Trustee shall so invest such moneys on the written direction of LuxCo. Pending the investment of any moneys as hereinbefore provided, such moneys may be deposited in the name of the Trustee in any commercial bank in Switzerland or Luxembourg or, with the consent of LuxCo, in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under applicable laws at the rate of interest then current on similar deposits.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this Agreement or otherwise in respect of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON REQUEST
Except as in this Agreement otherwise specifically provided, the Trustee shall not be bound to act in accordance with any direction or request of ParentCo and/or LuxCo or of the directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Trustee, and the Trustee shall be empowered to act upon any such copy purporting to be authenticated and believed by the Trustee to be genuine.
7.14 AUTHORITY TO CARRY ON BUSINESS
The Trustee represents to ParentCo and LuxCo that at the date of execution and delivery by it of this Agreement it is authorized to carry on the business of a trust company but if, notwithstanding the provisions of this section 7.14, it ceases to be so authorized to carry on business, the validity and enforceability of this Agreement and the Voting Rights, the Exchange Right and the Automatic Exchange Rights shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company, either become so authorized or resign in the manner and with the effect specified in Article 10.
7.15 CONFLICTING CLAIMS
If conflicting claims or demands are made or asserted with respect to any interest of any Beneficiary in any LuxCo Exchangeable Preferred Shares, including any disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Beneficiary in any LuxCo Exchangeable Preferred Shares, resulting in conflicting claims or demands being made in connection with such interest, then the Trustee shall be entitled, at its sole discretion, to refuse to recognize or to comply with any such claims or demands. In so refusing, the Trustee may elect not to exercise any Voting Rights, Exchange Rights or Automatic Exchange Rights subject to such conflicting claims or demands and, in so doing, the Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Trustee shall be entitled to continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been adjudicated by a final judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Trustee shall have been famished with an executed copy of such agreement certified to be in full force and effect.
If the Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to famish such surety bond or other security satisfactory to the Trustee as it shall deem appropriate to fully indemnify it as between all conflicting claims or demands.
7.16 ACCEPTANCE OF TRUST
The Trustee hereby accepts the Trust created and provided for by and in this Agreement and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Beneficiaries, subject to all the terms and conditions herein set forth.
7.17 NOTICE TO TRUSTEE
The Trustee shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall have been required so to do under the terms hereof, nor shall the Trustee be required to take any action in connection with any prohibition against LuxCo redeeming any Retracted Shares as set out in section 5.7 or of any Insolvency Event as set out in section 5.9 or Liquidation Event as set out in section 5.12 (collectively, a "Notice Event"), unless and until notified in writing of such Notice Event. Such notice shall distinctly specify the Notice Event desired to be brought to the attention of the Trustee, and in the absence of any such notice the Trustee may for all purposes of this Agreement conclusively assume that no such Notice Event has occurred. Any such notice shall in no way limit any discretion herein given to the Trustee to determine whether or not the Trustee shall take action with respect to any Notice Event.
7.18 MERGER OR CONSOLIDATION OF TRUSTEE
Any entity into or with which the Trustee may be merged or consolidated or amalgamated, or any entity resulting therefrom, or any entity succeeding to the trust business of the Trustee shall be the successor to the Trustee under this Agreement without any further act on its part or any of the parties hereto, provided that such entity would be eligible for appointment as a successor trustee under the provisions of this Agreement.
ARTICLE 8
COMPENSATION
8.1 FEES AND EXPENSES OF THE TRUSTEE
ParentCo and LuxCo jointly and severally agree to pay the Trustee reasonable compensation for all of the services rendered by it under this Agreement and will reimburse the Trustee for all reasonable expenses (including, but not limited to, taxes other than taxes based on the net income of the Trustee, fees paid to legal counsel and other experts and advisors and travel expenses) and disbursements, including the cost and expense of any suit or litigation of any
character and any proceedings before any governmental agency reasonably incurred by the Trustee in connection with its duties under this Agreement; provided that ParentCo and LuxCo shall have no obligation to reimburse the Trustee for any expenses or disbursements paid, incurred or suffered by the Trustee in any suit or litigation in which the Trustee is determined to have acted in bad faith or with negligence, recklessness or willful misconduct. Invoices for services rendered by the Trustee shall be provided to ParentCo on behalf of ParentCo and LuxCo at the addresses set forth in section 14.3 of this Agreement. Any amount owing and unpaid after 30 days from the invoice date will bear interest at a rate per annum, from the expiration of such 30 day period, equal to the then current rate charged by the Trustee and shall be payable on demand. The obligations of ParentCo and LuxCo under this section 8.1 shall survive the resignation or removal of the Trustee.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE
ParentCo and LuxCo jointly and severally agree to indemnify and hold harmless the Trustee and each of its directors, officers, employees and agents appointed and acting in accordance with this Agreement (collectively, the "INDEMNIFIED PARTIES") against all claims, losses, damages, reasonable costs, penalties, fines and reasonable expenses (including reasonable expenses of the Trustee's legal counsel) which, without fraud, negligence, recklessness, willful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason or as a result of the Trustee's acceptance or administration of the Trust, its compliance with its duties set forth in this Agreement, or any written or oral instruction delivered to the Trustee by ParentCo or LuxCo pursuant hereto.
In no case shall ParentCo or LuxCo be liable under this indemnity for any claim against any of the Indemnified Parties unless ParentCo and LuxCo shall be notified by the Trustee of the written assertion of a claim or of any action commenced against the Indemnified Parties, promptly after any of the Indemnified Parties shall have received any such written assertion of a claim or shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Subject to (ii) below, ParentCo and LuxCo shall be entitled to participate at their own expense in the defense and, if ParentCo and LuxCo so elect at any time after receipt of such notice, either of them may assume the defense of any suit brought to enforce any such claim. Ile Trustee shall have the right to employ separate counsel in any such suit and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Trustee unless: (i) the employment of such counsel has been authorized by ParentCo or LuxCo; or (ii) the named parties to any such suit include both the Trustee and ParentCo or LuxCo and the Trustee shall have been advised by counsel acceptable to ParentCo or LuxCo that there may be one or more legal defenses available to the Trustee that are different from or in addition to those available to ParentCo or LuxCo and that, in the judgment of such counsel, would present a conflict of interest were a joint representation to be undertaken (in which case ParentCo and LuxCo shall not have the right to assume the defense of such suit on behalf of the Trustee but shall be liable to pay the reasonable fees and expenses of counsel for the Trustee). This indemnity shall survive the termination of this Agreement and the resignation or removal of the Trustee.
9.2 LIMITATION OF LIABILITY
The Trustee shall not be held liable for any loss which may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this Agreement, except to the extent that such loss is attributable to the fraud, negligence, recklessness, willful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION
The Trustee, or any trustee hereafter appointed, may at any time resign by giving written notice of such resignation to ParentCo and LuxCo specifying the date on which it desires to resign, provided that such notice shall not be given
less than thirty (30)days before such desired resignation date unless ParentCo and LuxCo otherwise agree and provided further that such resignation shall not take effect until the date of the appointment of a successor trustee and the acceptance of such appointment by the successor trustee. Upon receiving such notice of resignation, ParentCo and LuxCo shall promptly appoint a successor trustee by written instrument in duplicate, one copy of which shall be delivered to the resigning trustee and one copy to the successor trustee. Failing the appointment and acceptance of a successor trustee, a successor trustee may be appointed by order of a court of competent jurisdiction upon application of one or more of the parties to this Agreement, at the expense of ParentCo and LuxCo. If the retiring trustee is the party initiating an application for the appointment of a successor trustee by order of a court of competent jurisdiction, ParentCo and LuxCo shall be jointly and severally liable to reimburse the retiring trustee for its legal costs and expenses in connection with same.
10.2 REMOVAL
The Trustee, or any trustee hereafter appointed, may (provided a successor trustee is appointed) be removed at any time on not less than 30 days' prior notice by written instrument executed by ParentCo, and LuxCo, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee.
10.3 SUCCESSOR TRUSTEE
Any successor trustee appointed as provided under this Agreement shall execute, acknowledge and deliver to ParentCo and LuxCo and to its predecessor trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with the like effect as if originally named as trustee in this Agreement. However, on the written request of ParentCo and LuxCo or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of this Agreement, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon the request of any such successor trustee, ParentCo, LuxCo and such predecessor trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE
Upon acceptance of appointment by a successor trustee as provided herein, ParentCo and LuxCo shall cause to be mailed notice of the succession of such trustee hereunder to each Beneficiary specified in a List. If ParentCo or LuxCo, shall fail to cause such notice to be mailed within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of ParentCo and LuxCo.
ARTICLE 11
PARENTCO SUCCESSORS
11.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.
ParentCo shall not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom unless, but may do so if
(a) such other person or continuing corporation (herein called the "PARENTCO SUCCESSOR"), by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, a trust agreement supplemental hereto and such other instruments (if any) as are satisfactory to the Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee are reasonably necessary or advisable to evidence the assumption by the ParentCo Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such ParentCo Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of ParentCo under this Agreement; and
(b) such transaction shall, to the satisfaction of the Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee, be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the Trustee or of the Beneficiaries hereunder.
11.2 VESTING OF POWERS IN SUCCESSOR
Whenever the conditions of section 11.1 have been duly observed and performed, the Trustee, ParentCo Successor and LuxCo shall, if required by section 11.1, execute and deliver the supplemental trust agreement provided for in Article 12 and thereupon ParentCo Successor shall possess and from time to time may exercise each and every right and power of ParentCo under this Agreement in the name of ParentCo or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the board of directors of ParentCo or any officers of ParentCo may be done and performed with like force and effect by the directors or officers of such ParentCo Successor.
11.3 WHOLLY-OWNED SUBSIDIARIES
Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned direct or indirect subsidiary of ParentCo with or into ParentCo or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of ParentCo provided that all of the assets of such subsidiary are transferred to ParentCo or another wholly-owned direct or indirect subsidiary of ParentCo and any such transactions are expressly permitted by this Article 11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1 AMENDMENTS, MODIFICATIONS, ETC.
This Agreement may not be amended or modified except by an agreement in writing executed by ParentCo, LuxCo and the Trustee and approved by the Beneficiaries in accordance with section 13.2 of the Shareholder Agreement.
12.2 MINISTERIAL AMENDMENTS
Notwithstanding the provisions of section 12.1, the parties to this Agreement may in writing, at any time and from time to time, without the approval of the Beneficiaries, amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all parties hereto for the protection of the Beneficiaries hereunder provided that the board of directors of each of LuxCo and ParentCo shall be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the Beneficiaries;
(b) making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the board of directors of each of ParentCo and LuxCo and in the opinion of the Trustee, having in mind the best interests of the Beneficiaries it may be expedient to make, provided that such boards of directors and the Trustee, acting on the advice of counsel, shall be of the opinion that such amendments and modifications will not be prejudicial to the interests of the Beneficiaries; or
(c) making such changes or corrections which, on the advice of counsel to ParentCo, LuxCo and the Trustee, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the Trustee, acting on the advice of counsel, and the board of directors of each of ParentCo and LuxCo shall be of the opinion that such changes or corrections will not be prejudicial to the rights and interests of the Beneficiaries.
12.3 MEETING TO CONSIDER AMENDMENTS
LuxCo, at the request of ParentCo, shall call a meeting or meetings of the Beneficiaries for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the bylaws of LuxCo, the Shareholder Agreement and all applicable laws.
12.4 CHANGES IN CAPITAL OF PARENTCO AND LUXCO
At all times after the occurrence of any event contemplated pursuant to section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which either ParentCo Common Shares or the LuxCo Exchangeable Preferred Shares or both are in any way changed, this Agreement shall forthwith be amended and modified as necessary in order that it shall apply with fall force and effect, mutatis mutandis, to all new securities into which ParentCo Common Shares or the LuxCo Exchangeable Preferred Shares or both are so changed and the parties hereto shall execute and deliver a supplemental trust agreement giving effect to and evidencing such necessary amendments and modifications.
12.5 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS
No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto. From time to time LuxCo (when authorized by a resolution of its board of directors), ParentCo, (when authorized by a resolution of its board of directors) and the Trustee may, subject to the provisions of these presents, and they shall, when so directed by these presents, execute and deliver by their proper officers, trust agreements or other instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes:
(a) evidencing the succession of ParentCo Successors and the covenants of and obligations assumed by each such ParentCo Successor in accordance with the provisions of Article II and the successors of any successor trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the provisions of this Agreement or the Voting Rights, the Exchange Right or the Automatic Exchange Rights which, in the opinion of the Trustee, will not be prejudicial to the interests of the Beneficiaries or are, in the opinion of counsel to the Trustee, necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to ParentCo, LuxCo, the Trustee or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this Agreement, including without limitation, to make or evidence any amendment or modification to this Agreement as contemplated hereby, provided that, in the opinion of the Trustee, the rights of the Trustee and Beneficiaries will not be prejudiced thereby.
ARTICLE 13
TERM
13.1 TERM
The Trust created by this Agreement shall commence on the date ParentCo files a Certificate of Amendment to Certificate of Incorporation to increase the authorized number of ParentCo Common Shares from 30,000,000 to 80,000,000 and continue until the earliest to occur of the following events:
(a) no outstanding LuxCo Exchangeable Preferred Shares are held by a Beneficiary; and
(b) each of ParentCo and LuxCo elects in writing to terminate the Trust and such termination is approved by the Beneficiaries in accordance with section 13.2 of the Shareholder Agreement.
13.2 SURVIVAL OF AGREEMENT
This Agreement shall survive any termination of the Trust and shall continue until there are no LuxCo Exchangeable Preferred Shares outstanding held by a Beneficiary; provided, however, that the provisions of Articles 8 and 9 shall survive any such termination of this Agreement.
ARTICLE 14
GENERAL
14.1 SEVERABILITY
If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and the agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.
14.2 ENUREMENT
This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns and to the benefit of the Beneficiaries.
14.3 NOTICES TO PARTIES
All notices and other communications between the parties hereunder shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for such party as shall be specified in like notice):
(a) if to LuxCo, at:
6543 Luxembourg S.A.
3, Rue de la Chapelle
L-2419 Luxembourg
Attention: Secretary
Telecopier No.: (352) 45 45 5 1
(b) if to ParentCo, at:
ICHOR Corporation
17 Dame Street
Dublin 2, Ireland
Attention: Secretary
Telecopier No.: (3531) 670-8938
(c) if to the Trustee, at:
MFC Merchant Bank S.A.
6, Cours de Rive
P.O. Box 3540
1211 Geneva 3
Switzerland
Attention: President
Telecopier No.: (41 22) 818-2929
Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of receipt thereof unless such day is not a business day in which case it shall be deemed to have been given and received upon the immediately following business day.
14.4 NOTICE TO BENEFICIARIES
Any and all notices to be given and any documents to be sent to any Beneficiaries may be given or sent to the address of such Beneficiary shown on the register of holders of LuxCo Exchangeable Preferred Shares in any manner permitted by the by-laws of LuxCo from time to time in force in respect of notices to shareholders and shall be deemed to be received (if given or sent in such manner) at the time specified in such by-laws, the provisions of which by-laws shall apply mutatis mutandis to notices or documents as aforesaid sent to such Beneficiaries.
14.5 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
14.6 JURISDICTION
This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware in the United States.
14.7 ATTORNMENT
Each of the Trustee, ParentCo and LuxCo agrees that any action or proceeding arising out of or relating to this Agreement may be instituted in the courts of the State of Delaware in the United States, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgment of the said courts and not to seek, and hereby waivers, any review of the merits of any such judgment by the courts of any other jurisdiction.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as of the date first above written.
ICHOR CORPORATION 6543 LUXEMBOURG S.A.
By: /s/ Eric Turcotte By: /s/ Charles Duro
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Name: Eric Turcotte Name: Charles Duro
Title: Title: Director
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MFC MERCHANT BANK S.A.
By: /s/ Illegible
---------------------------
Name:
Title:
By: /s/ Fremner Jacques
---------------------------
Name: Fremner Jacques
Title: Vice President
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Exhibit 10.4
CONSULTING AGREEMENT
This Agreement is made as of August 31, 2001, to be effective September 1, 2001 between MYMETICS CORPORATION, a Delaware Corporation (the "COMPANY"), and MICHAEL ALLIO, an individual resident of Rhode Island (the "CONSULTANT").
PREAMBLE
The Company requires certain international management and marketing assistance and advice, and the Consultant has valuable experience and contacts and wishes to assist the Company in this regard. Therefore, the parties, intending to be legally bound, agree as follows.
AGREEMENT
1. ENGAGEMENT. The Company hereby engages the Consultant to render the following services, and other services reasonably requested by the Company, through February 28, 2002:
(1) Assist the Company in establishing the scope of the business of the Company and establishing and operating management team for the Company's operations in France and the United States;
(2) Coordinating marketing matters with the Company's public relations firm;
(3) Preparing a business plan for the Company;
(4) Proposing appropriate advisors and consultants to assist the Company in its business operations;
(5) Address issues relating to the Company's patents and patent applications;
(6) Explore strategic joint venture opportunities for the Company world-wide;
(7) Manage the issuance of a secondary $20,000,000 equity offering with respect to the Company's equity securities, including the preparation of investor presentations; and
(8) Developing a viable market identity for the Company and its products and services in the United States.
The Consultant hereby accepts such engagement and covenants that he will devote his best efforts and skill to the performance of these services and such additional services as may be mutually agreed upon by the Company and the Consultant. The Company and the Consultant agree that the engagement shall comprise approximately 7.5 days of full time work per month.
2. FEES & EXPENSES.
(a) RETAINER FEE AND EXPENSES. The Company agrees to pay the Consultant for his services $12,000 per month, payable in arrears on or before the 5th day of the month following the month during which the services were rendered. The Company is obligated to pay the Consultant only for such time that the Consultant is available to and works for the Company. The Company shall reimburse the Consultant for his ordinary, necessary, and reasonable business expenses incurred on Company business upon presentation of properly documented expense reports to the Company's Chief Operating Officer. It is agreed that the Consultant shall be entitled to air-travel in business class.
(b) STOCK OPTIONS. In addition to the compensation set forth in (a) above, the Consultant shall be granted stock options to purchase up to 50,000 shares of the Company's common stock, $0.01 par value,
pursuant to the Company's 2001 Stock Option Plan (the "INITIAL STOCK OPTION"). The exercise price for the Initial Stock Option will be $2.50 per share of commons stock, which represents the average of the bid and ask price of such shares as of September 1, 2001. In addition, the Company agrees to grant the Consultant stock options for an additional 100,000 shares of the Company's common stock, $0.01 par value, pursuant to the Company's 2001 Stock Option Plan upon the successful completion of the listing of the Company's common stock on the Nasdaq Stock Exchange (the "LISTING STOCK OPTION" and, together with the Initial Stock Option, the "STOCK OPTIONS"). The exercise price for the Listing Stock Option will be the average of the bid and ask price of such shares on the first day the Company's shares of stock are listed on the Nasdaq Stock Exchange. The Consultant agrees to execute a Stock Option Agreement in substantially the form of EXHIBIT A, attached hereto an incorporated by reference herein, upon the grant of each of the Stock Options. Each of the Stock Options will vest upon being granted.
3. TERM.
(a) This Agreement shall commence as of its effective date and shall continue until February 28, 2002 unless earlier terminated as hereinafter provided. Thereafter, the Agreement shall continue indefinitely unless terminated by either party at any time and for any reason upon 15 days' prior written notice given to the other party. Notwithstanding any other provisions of this Agreement, this Agreement shall terminate automatically without notice at any time upon the occurrence of any of the following events:
(i) The Consultant's death or Total and Permanent Disability (as defined below);
(ii) A material breach of this Agreement by the Consultant;
(iii) The Consultant's engaging in conduct materially injurious to the Company or to himself, including but not limited to acts of dishonesty or fraud, commission of a felony or a crime of moral turpitude, or substance abuse; or
(iv) The Consultant's continuing and unreasonable refusal to substantially perform his duties for the Company as specifically directed by the Company.
(b) TOTAL AND PERMANENT DISABILITY. "TOTAL AND PERMANENT DISABILITY" shall mean a mental or physical condition of the Consultant which, in the reasonable opinion of the Company's Board of Directors, renders the Consultant unable or incompetent, with or without reasonable accommodation, to perform the essential functions of his job or devote his best efforts (measured against prior performance) to the Company, or any of its successors, for more than 60 days.
4. CONFIDENTIAL INFORMATION. The Consultant agrees that he will not reveal (or permit to be revealed) to a third party or use for his own benefit, either during or after the term of this Agreement, without the prior written consent of the Company, any confidential information pertaining to the business of the Company, its shareholders, subsidiaries or other affiliates (collectively, "AFFILIATES") including but not limited to information about customers, suppliers, employees, financial condition, operations, procedures, know-how, production, distribution, experiments, patents, or other trade secrets obtained while working with the Company or its Affiliates except for information clearly established to be in the public record.
5. ARBITRATION. Any disagreement or claim (other than a claim for injunctive relief for violation of Sections 4 or 5 hereof) arising out of or relating to this Agreement, or the breach thereof, or its termination shall be submitted to arbitration pursuant to the provisions of the Uniform Arbitration Act, 42 Pa. C.S.A. ss.7301 ET SEQ. in Pittsburgh, Pennsylvania in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. The disputants shall promptly endeavor by mutual agreement to designate one person to serve as the Impartial Arbitrator within 30 days after written request for arbitration by any party hereto. If the disputants cannot agree on a single arbitrator, then each of the disputants shall promptly designate one person to serve as an arbitrator, and the arbitrators so designated shall within 10 days select another person (or two persons where necessary to ensure that the total number of arbitrators is an odd number) as Impartial Chairman of the Board of Arbitration (and where necessary, Impartial Vice Chairman) by
agreement, or if they are unable to agree, then the Impartial Arbitrator shall be selected through the facilities of the Pittsburgh Regional Office of the American Arbitration Association and in accordance with the rules thereof. The Award of the Impartial Arbitrator or the Board of Arbitration (as the case may be) shall be final and binding upon the disputants, subject only to such rights of appeal as are provided by the said Act. The costs of the arbitration proceeding, including the fees of the Impartial Arbitrator or the Board of Arbitration (as the case may be) shall be borne equally by the disputants.
6. INDEPENDENT CONTRACTOR. The Consultant, in entering into this Agreement and carrying out his obligations hereunder, is an independent contractor, is not and shall not be deemed to be an agent or Consultant of the Company, and shall have no power to bind the Company to any contract or warranty or in any respect whatever, whether by written or oral statements, by any course of conduct, or in any other manner, without the express written consent of the Company, which consent may not be general but must specifically refer to each particular instance as to which the Company consents to be so bound. The Consultant shall indemnify the Company against and hold it harmless from all damages, costs, and expenses (including attorneys' fees) which the Company may suffer or incur should it be held bound by any writing, speech, action or inaction of the Consultant other than those consented to by the Company.
9. MISCELLANEOUS. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. This Agreement embodies the entire Agreement between the parties hereto and supersedes any and all prior or contemporaneous, oral or written understandings, negotiations, or communications on behalf of such parties. This Agreement may be executed in several counterparts, each of which shall be deemed original, but all of which together shall constitute one and the same instrument. The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or violation hereof. This Agreement is executed in and shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. This Agreement shall be changed, waived, discharged, or terminated only by written agreement of both parties hereto. This Agreement shall inure to the benefit of the Company, its successors and assigns.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO CONSULTING AGREEMENT]
ATTEST: MYMETICS CORPORATION
By: /s/ Dr. Peter P. Mccann
--------------------------------- -----------------------
Name: Peter P. McCann
Title: President and CEO
WITNESS:
/s/ Michael Allio
--------------------------------- -----------------
Michael Allio, Grantee
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EXHIBIT A
FORM OF
STOCK OPTION AGREEMENT
This Agreement is made as of _____________, 2001, between MYMETICS CORPORATION, a Delaware corporation (the "COMPANY"), and _________________ (the "GRANTEE").
1. GRANT OF OPTION. The Company hereby grants to the Grantee the right and option (the "OPTION") to purchase _________ full shares of authorized but unissued or repurchased shares of Common Stock of the Company (the "OPTION SHARES") according to the vesting schedule and the other terms and conditions of this Agreement.
2. SUBJECT TO TERMS OF PLAN. This grant is being made to the Grantee pursuant to ______________________________________ Plan (the "PLAN") and is subject to all terms and conditions contained in the Plan. Unless expressly stated herein, if there is any inconsistency between this Agreement and the Plan, the terms and conditions of the Plan will control. All capitalized terms not defined herein shall have the meanings assigned to such terms in the Plan.
3. PRICE. The option price of the Option Shares will be _________ ($___) per share.
4. DATE OF GRANT. The Option is granted as of September 1, 2001 (the "DATE OF GRANT").
5. STATUS OF OPTION. The Option is not intended to qualify as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "CODE").
6. VESTING OF OPTION. Subject to Section 11 hereof, the Option will vest immediately upon being granted.
7. TERM OF OPTION. Except as provided in Section 10, the portion of the Option which has vested according to the terms set forth in Section 6 above may be exercised in full, or in part, at any time after vesting and prior to _______, 2011.
8. HOW EXERCISABLE. The Grantee may exercise the Option only by giving written notice to the Company, which notice must specify the number of vested Option Shares to be purchased and must be accompanied by payment in full as provided in Section ____ of the Plan. Until full payment of the option price is received by the Company, the Grantee will have no right to receive the Option Shares.
The Company may require that the Grantee furnish to the Company, prior to the issuance of any Option Shares, an agreement (in such form as the Company may specify) that all shares purchased by him/her under the Option will be acquired for investment only and not for purposes of distribution or resale.
9. TRANSFER. The Option is not transferable by the Grantee other than by will, by the laws of descent and distribution or pursuant to a "qualified domestic relations order" as defined by the Code or Title 1 of the Employee Retirement Income Security Act or the rules thereunder. Except as set forth in the preceding sentence, during the lifetime of the Grantee the Option is exercisable only by the Grantee; provided, however, that the Grantee may in a manner specified by the Board and to the extent provided in the Plan (a) designate in writing a beneficiary to exercise the Option after [HIS/HER] death and (b) transfer the option to a revocable, inter vivos trust as to which the Grantee is both the settlor and trustee.
10. Termination of Option.
(a) FOR CAUSE. If the Grantee's service to the Company is terminated (a "TERMINATION") for Cause, any unexercised portion of the Option shall thereupon terminate.
(b) ON ACCOUNT OF DEATH OR DISABILITY. If the Grantee's Termination is
on account of [HIS/HER] death or permanent disability, then any unexercised
portion of the Option which has vested according to the terms set forth in
Section 6 above as of the date of such Termination, may be exercised, in whole
or in part, at any time within one year after such Termination by the Grantee,
or after the Grantee's death, by (A) [his/her] personal representative or by the
person to whom the option is transferred by will or the applicable laws of
descent and distribution, (B) the Grantee's beneficiary designated in accordance
with Section 9 above, or (C) the then-acting trustee of the trust described in
Section 9 above.
(c) IN ALL OTHER CASES. Except as provided in subsections (a) and (b) above or as otherwise provided in the Plan, any unexercised portion of the Option which has vested according to the terms set forth in section 6 above may be exercised at any time within ninety (90) days following the date of Termination.
11. CHANGE OF CONTROL. Notwithstanding any provision set forth in the Plan, upon a Change of Control (as defined in the Plan), any and all unvested Option Shares shall automatically vest in their entirety and shall be immediately exercisable by the Grantee.
12. NO EMPLOYMENT RIGHTS. Neither the establishment of the Plan nor the granting of the Option shall be construed to (a) give the Grantee the right (i) to remain employed or retained by the Company or (ii) to any benefits not specifically provided by the Plan or (b) in any manner modify the right of the Company to modify, amend, or terminate any of its employee benefit plans.
13. RESTRICTIONS OF TRANSFERABILITY. In connection with the exercise of all or any portion of the Option, the Grantee shall comply with all Federal and State securities laws and regulations.
14. NOTICE OF DISPOSITION OF SHARES. Option shares acquired upon exercise of the Option by a person then subject to the provisions of Section 16 of the Securities Exchange Act or 1934, as amended, may not be sold or otherwise transferred prior to (i) the expiration of six months after the Date of Grant of such option or (ii) the death of the optionee, whichever may first occur.
15. RECEIPT OF PLAN. The Grantee acknowledges [HIS/HER] receipt of the Plan and agrees to accept the Option subject to all terms and conditions contained herein and therein. The Grantee agrees to accept as binding all decisions or interpretations of the Board upon any questions arising under the Plan.
16. ENTIRE AGREEMENT. This Agreement, along with the Plan, contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior written and oral agreements, and all contemporaneous oral agreements, relating to such matters
17. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of Delaware, except that the construction and interpretation of the Agreement as it relates to the service relationship between the Company and the Grantee shall be governed by the laws of the Commonwealth of Pennsylvania, in either case without regard to the conflict of law provisions of the laws of Delaware or Pennsylvania.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
IN WITNESS WHEREOF, the parties have signed this Agreement or caused the Agreement to be executed on the day and year first above written.
MYMETICS CORPORATION
Exhibit 10.5
MYMETICS CORPORATION
50-52 Avenue Du Chanoine
Cartellier 69230
Saint-Genis Laval, France
July 19, 2001
Mr. Robert Demers
3537 Aylmer
Montreal [Quebec] Canada H2X 2B9
Dear Mr. Demers:
I am pleased to advise you that as of the date hereof, the Administrator appointed by the Board of Directors of Mymetics Corporation (f/k/a Ichor Corporation) (the "CORPORATION"), which administers the Mymetics Corporation 2001 Stock Option Plan (the "PLAN"), has granted you an option to purchase 10,000 shares of Common Stock (the "COMMON STOCK") of the Corporation at a price of $3.15 per share (the "OPTION").
The terms applicable to the Option are set forth below and in the Plan, a copy of which accompanies this Agreement.
1. TERM AND VESTING.
The Option shall expire at the close of the business on January 19, 2012. The Option granted hereby shall be fully vested as of the date of this Stock Option Agreement
2. OTHER OPTION TERMS.
The Option has been granted pursuant to the Plan, and the terms and conditions of the Plan are incorporated by reference in this Agreement as though set forth herein in their entirety.
The Option is a "Non-Statutory Stock Option" as defined in the Plan.
If your relationship with the Corporation (or a Subsidiary) terminates for a reason other than death, voluntary termination with the written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall terminate immediately. If your relationship with the Corporation terminates because of death, voluntary termination with written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall be exercisable to the extent permitted by Section 7 of the Plan; PROVIDED, HOWEVER, that if you engage in the operation or management of a business (whether as owner, partner, officer, director,
Mr. Robert Demers
3537 Aylmer
Montreal [Quebec] Canada H2X 2B9
July 19, 2001
employee or otherwise) which is in competition with the Corporation (or a Subsidiary), the Administrator in its sole discretion may immediately terminate the Option.
Subject to the foregoing and the provisions of the Plan, the Option may be exercised at your election, in whole or in part, at any time prior to its expiration. The Option may be exercised by (a) delivery of written notice to the Corporation setting forth your election to exercise and the number of shares of Common Stock to be purchased and (b) payment of the purchase price for the shares to be purchased. The notice must be dated and signed by the person exercising the Option. If the Option is exercised by someone other than you, the notice must be accompanied by proof, satisfactory to the Administrator, of the right of such person(s) to exercise the Option under the Plan.
The date of exercise of the Option is the date on which the notice of exercise, proof of right to exercise (if required) and payment of the exercise price are received by the Corporation at its principal executive office, to the attention of the Corporation's Secretary. As of the date of exercise, you will be considered by the Corporation for all purposes to be the owner of the shares of Common Stock purchased, subject to the terms set forth in this Agreement.
3. SECURITIES LAW MATTERS.
Neither this Option nor the shares of Common Stock issuable upon
exercise of the Option (the "SHARES") have been registered under the Securities
Act of 1933 (the "1933 ACT") or any other securities laws (together with the
1933 Act, the "ACTS"). Therefore, in order to ensure compliance with the Acts,
notwithstanding anything else in the Option to the contrary, you (and any
successive holder) agree by accepting the Option as follows: This Option and the
Shares may not be sold, transferred, pledged or hypothecated in the absence of
(i) an effective registration statement under the Acts applicable to the Option
or the Shares or (ii) the availability of an exemption from the registration
requirements of the Acts and, at the reasonable request of the Corporation, an
opinion of counsel reasonably satisfactory to the Corporation that registration
is not required under the Acts.
The Corporation is under no obligation to register the Option or the Shares, or take any other action in connection with the offer or sale of the Shares.
Prior to the issuance or delivery of any Shares pursuant to the exercise of the Option in whole or in part, you may be required to represent and warrant (i) that the Shares to be acquired upon exercise of the Option are being acquired for investment for your own account and not with a view to resale or other distribution thereof and (ii) that you will not sell or otherwise transfer any such Shares unless the Shares are registered under the Acts or an exemption from registration is available. The certificate or certificates representing any Shares issued or delivered upon exercise of the Option shall bear a legend to this effect (and a legend evidencing any other restrictions on transfer set forth in the Plan) and other legends required by any applicable securities laws.
4. OTHER TRANSFER RESTRICTIONS.
The Option may not be transferred except as permitted under the Plan.
5. TAX AND WITHHOLDING MATTERS.
Under current federal income tax laws, upon exercise of the Option you may recognize compensation income equal to the amount (if any) by which the fair market value (on the date of exercise) of the Shares acquired upon such exercise exceeds the purchase price paid for such Shares. You will be notified by the Corporation of the amount of any state and local income taxes and employment taxes required to be withheld by the Corporation on any compensation income resulting from the exercise of the Option, and the Corporation in its sole discretion may require you to provide the funds necessary to satisfy such withholding obligation or may provide such funds on your
Mr. Robert Demers
3537 Aylmer
Montreal [Quebec] Canada H2X 2B9
July 19, 2001
behalf, subject to your obligation, which you hereby assume, to reimburse the Corporation for the amount (or portion of the amount) so withheld.
6. MISCELLANEOUS.
When accepted by you, this Agreement shall constitute an agreement which shall be binding upon the successors and assigns of the Corporation and your heirs and legal representatives.
This Agreement does not confer any right on you to continue as a director of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation's shareholders to remove you as a director of the Corporation.
It is suggested that you obtain competent advice as to the tax consequences of the exercise of the Option prior to the time you exercise any part of the Option.
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Any dispute or disagreement which shall arise under or in any way relate to the interpretation or construction of the Plan or this Agreement shall be resolved by the Board, and its decision shall be final, binding and conclusive for all purposes.
This Agreement is the Stock Option Agreement referred to in Section 7(F) of the Plan and has been prepared in duplicate. Please execute both copies of this Agreement in the space provided and return one copy to Mymetics Corporation, 50-52 Avenue Du Chanoine, Cartellier 69230, Saint-Genis Laval, France, Attn: Corporate Secretary.
Very truly yours,
MYMETICS CORPORATION
By: /s/ John M. Musacchio ------------------------- Title: |
Receipt Acknowledged and
Option Accepted:
/s/ Robert Demers ----------------- Signature of Optionee Print Name: Robert Demers DATE: July 19, 2001 |
Exhibit 10.6
MYMETICS CORPORATION
50-52 Avenue Du Chanoine
Cartellier 69230
Saint-Genis Laval, France
July 19, 2001
Mr. Michael K. Allio
34 Pratt Street
Providence, RI 02906
Dear Mr. Allio:
I am pleased to advise you that as of the date hereof, the Administrator appointed by the Board of Directors of Mymetics Corporation (f/k/a Ichor Corporation) (the "CORPORATION"), which administers the Mymetics Corporation 2001 Stock Option Plan (the "PLAN"), has granted you an option to purchase 10,000 shares of Common Stock (the "COMMON STOCK") of the Corporation at a price of $3.15 per share (the "OPTION").
The terms applicable to the Option are set forth below and in the Plan, a copy of which accompanies this Agreement.
1. TERM AND VESTING.
The Option shall expire at the close of the business on January 19, 2012. The Option granted hereby shall be fully vested as of the date of this Stock Option Agreement
2. OTHER OPTION TERMS.
The Option has been granted pursuant to the Plan, and the terms and conditions of the Plan are incorporated by reference in this Agreement as though set forth herein in their entirety.
The Option is a "Non-Statutory Stock Option" as defined in the Plan.
If your relationship with the Corporation (or a Subsidiary) terminates for a reason other than death, voluntary termination with the written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall terminate immediately. If your relationship with the Corporation terminates because of death, voluntary termination with written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall be exercisable to the extent permitted by Section 7 of the Plan; PROVIDED, HOWEVER, that if you engage in the operation or management of a business (whether as owner, partner, officer, director,
Mr. Michael K. Allio
34 Pratt Street
Providence, RI 02906
July 19, 2001
employee or otherwise) which is in competition with the Corporation (or a Subsidiary), the Administrator in its sole discretion may immediately terminate the Option.
Subject to the foregoing and the provisions of the Plan, the Option may be exercised at your election, in whole or in part, at any time prior to its expiration. The Option may be exercised by (a) delivery of written notice to the Corporation setting forth your election to exercise and the number of shares of Common Stock to be purchased and (b) payment of the purchase price for the shares to be purchased. The notice must be dated and signed by the person exercising the Option. If the Option is exercised by someone other than you, the notice must be accompanied by proof, satisfactory to the Administrator, of the right of such person(s) to exercise the Option under the Plan.
The date of exercise of the Option is the date on which the notice of exercise, proof of right to exercise (if required) and payment of the exercise price are received by the Corporation at its principal executive office, to the attention of the Corporation's Secretary. As of the date of exercise, you will be considered by the Corporation for all purposes to be the owner of the shares of Common Stock purchased, subject to the terms set forth in this Agreement.
3. SECURITIES LAW MATTERS.
Neither this Option nor the shares of Common Stock issuable upon
exercise of the Option (the "SHARES") have been registered under the Securities
Act of 1933 (the "1933 ACT") or any other securities laws (together with the
1933 Act, the "ACTS"). Therefore, in order to ensure compliance with the Acts,
notwithstanding anything else in the Option to the contrary, you (and any
successive holder) agree by accepting the Option as follows: This Option and the
Shares may not be sold, transferred, pledged or hypothecated in the absence of
(i) an effective registration statement under the Acts applicable to the Option
or the Shares or (ii) the availability of an exemption from the registration
requirements of the Acts and, at the reasonable request of the Corporation, an
opinion of counsel reasonably satisfactory to the Corporation that registration
is not required under the Acts.
The Corporation is under no obligation to register the Option or the Shares, or take any other action in connection with the offer or sale of the Shares.
Prior to the issuance or delivery of any Shares pursuant to the exercise of the Option in whole or in part, you may be required to represent and warrant (i) that the Shares to be acquired upon exercise of the Option are being acquired for investment for your own account and not with a view to resale or other distribution thereof and (ii) that you will not sell or otherwise transfer any such Shares unless the Shares are registered under the Acts or an exemption from registration is available. The certificate or certificates representing any Shares issued or delivered upon exercise of the Option shall bear a legend to this effect (and a legend evidencing any other restrictions on transfer set forth in the Plan) and other legends required by any applicable securities laws.
4. OTHER TRANSFER RESTRICTIONS.
The Option may not be transferred except as permitted under the Plan.
5. TAX AND WITHHOLDING MATTERS.
Under current federal income tax laws, upon exercise of the Option you may recognize compensation income equal to the amount (if any) by which the fair market value (on the date of exercise) of the Shares acquired upon such exercise exceeds the purchase price paid for such Shares. You will be notified by the Corporation of the amount of any state and local income taxes and employment taxes required to be withheld by the Corporation on any compensation income resulting from the exercise of the Option, and the Corporation in its sole discretion may require you to provide the funds necessary to satisfy such withholding obligation or may provide such funds on your
Mr. Michael K. Allio
34 Pratt Street
Providence, RI 02906
July 19, 2001
behalf, subject to your obligation, which you hereby assume, to reimburse the Corporation for the amount (or portion of the amount) so withheld.
6. MISCELLANEOUS.
When accepted by you, this Agreement shall constitute an agreement which shall be binding upon the successors and assigns of the Corporation and your heirs and legal representatives.
This Agreement does not confer any right on you to continue as a director of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation's shareholders to remove you as a director of the Corporation.
It is suggested that you obtain competent advice as to the tax consequences of the exercise of the Option prior to the time you exercise any part of the Option.
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Any dispute or disagreement which shall arise under or in any way relate to the interpretation or construction of the Plan or this Agreement shall be resolved by the Board, and its decision shall be final, binding and conclusive for all purposes.
This Agreement is the Stock Option Agreement referred to in Section 7(F) of the Plan and has been prepared in duplicate. Please execute both copies of this Agreement in the space provided and return one copy to Mymetics Corporation, 50-52 Avenue Du Chanoine, Cartellier 69230, Saint-Genis Laval, France, Attn: Corporate Secretary.
Very truly yours,
MYMETICS CORPORATION
By: /s/ John M. Musacchio
---------------------
Title:
|
Receipt Acknowledged and
Option Accepted:
/s/ Michael K. Allio -------------------- Signature of Optionee Print Name: Michael K. Allio DATE: July 19, 2001 |
Exhibit 10.7
MYMETICS CORPORATION
50-52 Avenue Du Chanoine
Cartellier 69230
Saint-Genis Laval, France
July 19, 2001
Mr. John M. Musacchio
507 Lakewood Drive
Monroeville, PA 15146
Dear Mr. Musacchio:
I am pleased to advise you that as of the date hereof, the Administrator appointed by the Board of Directors of Mymetics Corporation (f/k/a Ichor Corporation) (the "CORPORATION"), which administers the Mymetics Corporation 2001 Stock Option Plan (the "PLAN"), has granted you an option to purchase 10,000 shares of Common Stock (the "COMMON STOCK") of the Corporation at a price of $3.15 per share (the "OPTION").
The terms applicable to the Option are set forth below and in the Plan, a copy of which accompanies this Agreement.
1. TERM AND VESTING.
The Option shall expire at the close of the business on January 19, 2012. The Option granted hereby shall be fully vested as of the date of this Stock Option Agreement
2. OTHER OPTION TERMS.
The Option has been granted pursuant to the Plan, and the terms and conditions of the Plan are incorporated by reference in this Agreement as though set forth herein in their entirety.
The Option is a "Non-Statutory Stock Option" as defined in the Plan.
If your relationship with the Corporation (or a Subsidiary) terminates for a reason other than death, voluntary termination with the written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall terminate immediately. If your relationship with the Corporation terminates because of death, voluntary termination with written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall be exercisable to the extent permitted by Section 7 of the Plan; PROVIDED, HOWEVER, that if you engage in the operation or management of a business (whether as owner, partner, officer, director,
Mr. John M. Musacchio
507 Lakewood Drive
Monroeville, PA 15146
July 19, 2001
employee or otherwise) which is in competition with the Corporation (or a Subsidiary), the Administrator in its sole discretion may immediately terminate the Option.
Subject to the foregoing and the provisions of the Plan, the Option may be exercised at your election, in whole or in part, at any time prior to its expiration. The Option may be exercised by (a) delivery of written notice to the Corporation setting forth your election to exercise and the number of shares of Common Stock to be purchased and (b) payment of the purchase price for the shares to be purchased. The notice must be dated and signed by the person exercising the Option. If the Option is exercised by someone other than you, the notice must be accompanied by proof, satisfactory to the Administrator, of the right of such person(s) to exercise the Option under the Plan.
The date of exercise of the Option is the date on which the notice of exercise, proof of right to exercise (if required) and payment of the exercise price are received by the Corporation at its principal executive office, to the attention of the Corporation's Secretary. As of the date of exercise, you will be considered by the Corporation for all purposes to be the owner of the shares of Common Stock purchased, subject to the terms set forth in this Agreement.
3. SECURITIES LAW MATTERS.
Neither this Option nor the shares of Common Stock issuable upon
exercise of the Option (the "SHARES") have been registered under the Securities
Act of 1933 (the "1933 ACT") or any other securities laws (together with the
1933 Act, the "ACTS"). Therefore, in order to ensure compliance with the Acts,
notwithstanding anything else in the Option to the contrary, you (and any
successive holder) agree by accepting the Option as follows: This Option and the
Shares may not be sold, transferred, pledged or hypothecated in the absence of
(i) an effective registration statement under the Acts applicable to the Option
or the Shares or (ii) the availability of an exemption from the registration
requirements of the Acts and, at the reasonable request of the Corporation, an
opinion of counsel reasonably satisfactory to the Corporation that registration
is not required under the Acts.
The Corporation is under no obligation to register the Option or the Shares, or take any other action in connection with the offer or sale of the Shares.
Prior to the issuance or delivery of any Shares pursuant to the exercise of the Option in whole or in part, you may be required to represent and warrant (i) that the Shares to be acquired upon exercise of the Option are being acquired for investment for your own account and not with a view to resale or other distribution thereof and (ii) that you will not sell or otherwise transfer any such Shares unless the Shares are registered under the Acts or an exemption from registration is available. The certificate or certificates representing any Shares issued or delivered upon exercise of the Option shall bear a legend to this effect (and a legend evidencing any other restrictions on transfer set forth in the Plan) and other legends required by any applicable securities laws.
4. OTHER TRANSFER RESTRICTIONS.
The Option may not be transferred except as permitted under the Plan.
5. TAX AND WITHHOLDING MATTERS.
Under current federal income tax laws, upon exercise of the Option you may recognize compensation income equal to the amount (if any) by which the fair market value (on the date of exercise) of the Shares acquired upon such exercise exceeds the purchase price paid for such Shares. You will be notified by the Corporation of the amount of any state and local income taxes and employment taxes required to be withheld by the Corporation on any compensation income resulting from the exercise of the Option, and the Corporation in its sole discretion may require you to provide the funds necessary to satisfy such withholding obligation or may provide such funds on your
Mr. John M. Musacchio
507 Lakewood Drive
Monroeville, PA 15146
July 19, 2001
behalf, subject to your obligation, which you hereby assume, to reimburse the Corporation for the amount (or portion of the amount) so withheld.
6. MISCELLANEOUS.
When accepted by you, this Agreement shall constitute an agreement which shall be binding upon the successors and assigns of the Corporation and your heirs and legal representatives.
This Agreement does not confer any right on you to continue as a director of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation's shareholders to remove you as a director of the Corporation.
It is suggested that you obtain competent advice as to the tax consequences of the exercise of the Option prior to the time you exercise any part of the Option.
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Any dispute or disagreement which shall arise under or in any way relate to the interpretation or construction of the Plan or this Agreement shall be resolved by the Board, and its decision shall be final, binding and conclusive for all purposes.
This Agreement is the Stock Option Agreement referred to in Section 7(F) of the Plan and has been prepared in duplicate. Please execute both copies of this Agreement in the space provided and return one copy to Mymetics Corporation, 50-52 Avenue Du Chanoine, Cartellier 69230, Saint-Genis Laval, France, Attn: Corporate Secretary.
Very truly yours,
MYMETICS CORPORATION
By: /s/ Pierre-Francois Serres --------------------------- Title: Chief Executive Officer |
Receipt Acknowledged and
Option Accepted:
/s/ John M. Musacchio --------------------- Signature of Optionee Print Name: John M. Musacchio DATE: July 19, 2001 |
Exhibit 10.8
MYMETICS CORPORATION
50-52 Avenue Du Chanoine
Cartellier 69230
Saint-Genis Laval, France
July 19, 2001
Mr. Patrice Pactol
130 Route des Bouleau
69126 Brindas
France
Dear Mr. Pactol:
I am pleased to advise you that as of the date hereof, the Administrator appointed by the Board of Directors of Mymetics Corporation (f/k/a Ichor Corporation) (the "CORPORATION"), which administers the Mymetics Corporation 2001 Stock Option Plan (the "PLAN"), has granted you an option to purchase 10,000 shares of Common Stock (the "COMMON STOCK") of the Corporation at a price of $3.15 per share (the "OPTION").
The terms applicable to the Option are set forth below and in the Plan, a copy of which accompanies this Agreement.
1. TERM AND VESTING.
The Option shall expire at the close of the business on January 19, 2012. The Option granted hereby shall be fully vested as of the date of this Stock Option Agreement
2. OTHER OPTION TERMS.
The Option has been granted pursuant to the Plan, and the terms and conditions of the Plan are incorporated by reference in this Agreement as though set forth herein in their entirety.
The Option is a "Non-Statutory Stock Option" as defined in the Plan.
If your relationship with the Corporation (or a Subsidiary) terminates for a reason other than death, voluntary termination with the written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall terminate immediately. If your relationship with the Corporation terminates because of death, voluntary termination with written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall be exercisable to the extent permitted by Section 7 of the Plan; PROVIDED, HOWEVER, that if you engage in the operation or management of a business (whether as owner, partner, officer, director,
Mr. Patrice Pactol
130 Route des Bouleau
69126 Brindas
France
July 19, 2001
employee or otherwise) which is in competition with the Corporation (or a Subsidiary), the Administrator in its sole discretion may immediately terminate the Option.
Subject to the foregoing and the provisions of the Plan, the Option may be exercised at your election, in whole or in part, at any time prior to its expiration. The Option may be exercised by (a) delivery of written notice to the Corporation setting forth your election to exercise and the number of shares of Common Stock to be purchased and (b) payment of the purchase price for the shares to be purchased. The notice must be dated and signed by the person exercising the Option. If the Option is exercised by someone other than you, the notice must be accompanied by proof, satisfactory to the Administrator, of the right of such person(s) to exercise the Option under the Plan.
The date of exercise of the Option is the date on which the notice of exercise, proof of right to exercise (if required) and payment of the exercise price are received by the Corporation at its principal executive office, to the attention of the Corporation's Secretary. As of the date of exercise, you will be considered by the Corporation for all purposes to be the owner of the shares of Common Stock purchased, subject to the terms set forth in this Agreement.
3. SECURITIES LAW MATTERS.
Neither this Option nor the shares of Common Stock issuable upon
exercise of the Option (the "SHARES") have been registered under the Securities
Act of 1933 (the "1933 ACT") or any other securities laws (together with the
1933 Act, the "ACTS"). Therefore, in order to ensure compliance with the Acts,
notwithstanding anything else in the Option to the contrary, you (and any
successive holder) agree by accepting the Option as follows: This Option and the
Shares may not be sold, transferred, pledged or hypothecated in the absence of
(i) an effective registration statement under the Acts applicable to the Option
or the Shares or (ii) the availability of an exemption from the registration
requirements of the Acts and, at the reasonable request of the Corporation, an
opinion of counsel reasonably satisfactory to the Corporation that registration
is not required under the Acts.
The Corporation is under no obligation to register the Option or the Shares, or take any other action in connection with the offer or sale of the Shares.
Prior to the issuance or delivery of any Shares pursuant to the exercise of the Option in whole or in part, you may be required to represent and warrant (i) that the Shares to be acquired upon exercise of the Option are being acquired for investment for your own account and not with a view to resale or other distribution thereof and (ii) that you will not sell or otherwise transfer any such Shares unless the Shares are registered under the Acts or an exemption from registration is available. The certificate or certificates representing any Shares issued or delivered upon exercise of the Option shall bear a legend to this effect (and a legend evidencing any other restrictions on transfer set forth in the Plan) and other legends required by any applicable securities laws.
4. OTHER TRANSFER RESTRICTIONS.
The Option may not be transferred except as permitted under the Plan.
5. TAX AND WITHHOLDING MATTERS.
Under current federal income tax laws, upon exercise of the Option you may recognize compensation income equal to the amount (if any) by which the fair market value (on the date of exercise) of the Shares acquired upon such exercise exceeds the purchase price paid for such Shares. You will be notified by the Corporation of the amount of any state and local income taxes and employment taxes required to be withheld by the Corporation on any compensation income resulting from the exercise of the Option, and the Corporation in its sole discretion may require you to provide the funds necessary to satisfy such withholding obligation or may provide such funds on your
Mr. Patrice Pactol
130 Route des Bouleau
69126 Brindas
France
July 19, 2001
behalf, subject to your obligation, which you hereby assume, to reimburse the Corporation for the amount (or portion of the amount) so withheld.
6. MISCELLANEOUS.
When accepted by you, this Agreement shall constitute an agreement which shall be binding upon the successors and assigns of the Corporation and your heirs and legal representatives.
This Agreement does not confer any right on you to continue as a director of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation's shareholders to remove you as a director of the Corporation.
It is suggested that you obtain competent advice as to the tax consequences of the exercise of the Option prior to the time you exercise any part of the Option.
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Any dispute or disagreement which shall arise under or in any way relate to the interpretation or construction of the Plan or this Agreement shall be resolved by the Board, and its decision shall be final, binding and conclusive for all purposes.
This Agreement is the Stock Option Agreement referred to in Section 7(F) of the Plan and has been prepared in duplicate. Please execute both copies of this Agreement in the space provided and return one copy to Mymetics Corporation, 50-52 Avenue Du Chanoine, Cartellier 69230, Saint-Genis Laval, France, Attn: Corporate Secretary.
Very truly yours,
MYMETICS CORPORATION
By: /s/ John M. Musacchio
---------------------
Title:
|
Receipt Acknowledged and
Option Accepted:
/s/ Patrice Pactol ------------------ Signature of Optionee Print Name: Patrice Pactol DATE: July 19, 2001 |
Exhibit 10.9
MYMETICS CORPORATION
50-52 Avenue Du Chanoine
Cartellier 69230
Saint-Genis Laval, France
July 19, 2001
Pierre-Francois Serres
50-52 Avenue Chanoine
Cartellier 69230
Saint-Genis-Laval, France
Dear Dr. Serres:
I am pleased to advise you that as of the date hereof, the Administrator appointed by the Board of Directors of Mymetics Corporation (f/k/a Ichor Corporation) (the "CORPORATION"), which administers the Mymetics Corporation 2001 Stock Option Plan (the "PLAN"), has granted you an option to purchase 10,000 shares of Common Stock (the "COMMON STOCK") of the Corporation at a price of $3.15 per share (the "OPTION").
The terms applicable to the Option are set forth below and in the Plan, a copy of which accompanies this Agreement.
1. TERM AND VESTING.
The Option shall expire at the close of the business on January 19, 2012. The Option granted hereby shall be fully vested as of the date of this Stock Option Agreement
2. OTHER OPTION TERMS.
The Option has been granted pursuant to the Plan, and the terms and conditions of the Plan are incorporated by reference in this Agreement as though set forth herein in their entirety.
The Option is a "Non-Statutory Stock Option" as defined in the Plan.
If your relationship with the Corporation (or a Subsidiary) terminates for a reason other than death, voluntary termination with the written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall terminate immediately. If your relationship with the Corporation terminates because of death, voluntary termination with written consent of the Corporation (or a Subsidiary) or involuntary termination without cause, the Option shall be exercisable to the extent permitted by Section 7 of the Plan; PROVIDED, HOWEVER, that if you engage in the operation or management of a business (whether as owner, partner, officer, director,
Pierre-Francois Serres
50-52 Avenue Chanoine
Cartellier 69230
Saint-Genis-Laval, France
July 19, 2001
employee or otherwise) which is in competition with the Corporation (or a Subsidiary), the Administrator in its sole discretion may immediately terminate the Option.
Subject to the foregoing and the provisions of the Plan, the Option may be exercised at your election, in whole or in part, at any time prior to its expiration. The Option may be exercised by (a) delivery of written notice to the Corporation setting forth your election to exercise and the number of shares of Common Stock to be purchased and (b) payment of the purchase price for the shares to be purchased. The notice must be dated and signed by the person exercising the Option. If the Option is exercised by someone other than you, the notice must be accompanied by proof, satisfactory to the Administrator, of the right of such person(s) to exercise the Option under the Plan.
The date of exercise of the Option is the date on which the notice of exercise, proof of right to exercise (if required) and payment of the exercise price are received by the Corporation at its principal executive office, to the attention of the Corporation's Secretary. As of the date of exercise, you will be considered by the Corporation for all purposes to be the owner of the shares of Common Stock purchased, subject to the terms set forth in this Agreement.
3. SECURITIES LAW MATTERS.
Neither this Option nor the shares of Common Stock issuable upon
exercise of the Option (the "SHARES") have been registered under the Securities
Act of 1933 (the "1933 ACT") or any other securities laws (together with the
1933 Act, the "ACTS"). Therefore, in order to ensure compliance with the Acts,
notwithstanding anything else in the Option to the contrary, you (and any
successive holder) agree by accepting the Option as follows: This Option and the
Shares may not be sold, transferred, pledged or hypothecated in the absence of
(i) an effective registration statement under the Acts applicable to the Option
or the Shares or (ii) the availability of an exemption from the registration
requirements of the Acts and, at the reasonable request of the Corporation, an
opinion of counsel reasonably satisfactory to the Corporation that registration
is not required under the Acts.
The Corporation is under no obligation to register the Option or the Shares, or take any other action in connection with the offer or sale of the Shares.
Prior to the issuance or delivery of any Shares pursuant to the exercise of the Option in whole or in part, you may be required to represent and warrant (i) that the Shares to be acquired upon exercise of the Option are being acquired for investment for your own account and not with a view to resale or other distribution thereof and (ii) that you will not sell or otherwise transfer any such Shares unless the Shares are registered under the Acts or an exemption from registration is available. The certificate or certificates representing any Shares issued or delivered upon exercise of the Option shall bear a legend to this effect (and a legend evidencing any other restrictions on transfer set forth in the Plan) and other legends required by any applicable securities laws.
4. OTHER TRANSFER RESTRICTIONS.
The Option may not be transferred except as permitted under the Plan.
5. TAX AND WITHHOLDING MATTERS.
Under current federal income tax laws, upon exercise of the Option you may recognize compensation income equal to the amount (if any) by which the fair market value (on the date of exercise) of the Shares acquired upon such exercise exceeds the purchase price paid for such Shares. You will be notified by the Corporation of the amount of any state and local income taxes and employment taxes required to be withheld by the Corporation on any compensation income resulting from the exercise of the Option, and the Corporation in its sole discretion may require you to provide the funds necessary to satisfy such withholding obligation or may provide such funds on your
Pierre-Francois Serres
50-52 Avenue Chanoine
Cartellier 69230
Saint-Genis-Laval, France
July 19, 2001
behalf, subject to your obligation, which you hereby assume, to reimburse the Corporation for the amount (or portion of the amount) so withheld.
6. MISCELLANEOUS.
When accepted by you, this Agreement shall constitute an agreement which shall be binding upon the successors and assigns of the Corporation and your heirs and legal representatives.
This Agreement does not confer any right on you to continue as a director of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation's shareholders to remove you as a director of the Corporation.
It is suggested that you obtain competent advice as to the tax consequences of the exercise of the Option prior to the time you exercise any part of the Option.
This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Any dispute or disagreement which shall arise under or in any way relate to the interpretation or construction of the Plan or this Agreement shall be resolved by the Board, and its decision shall be final, binding and conclusive for all purposes.
This Agreement is the Stock Option Agreement referred to in Section 7(F) of the Plan and has been prepared in duplicate. Please execute both copies of this Agreement in the space provided and return one copy to Mymetics Corporation, 50-52 Avenue Du Chanoine, Cartellier 69230, Saint-Genis Laval, France, Attn: Corporate Secretary.
Very truly yours,
MYMETICS CORPORATION
By: /s/ John M. Musacchio ---------------------- Title: |
Receipt Acknowledged and
Option Accepted:
/s/ Pierre-Francois Serres -------------------------- Signature of Optionee Print Name: Pierre-Francois Serres DATE: July 19, 2001 |
Exhibit 10.13
SHAREHOLDER AGREEMENT
This Agreement dated for reference the 28th day of March, 2001.
AMONG:
The undersigned HOLDERS OF LUXCO EXCHANGEABLE PREFERRED SHARES, more particularly described on the signature pages hereto
(collectively, the "LUXCO SHAREHOLDERS")
AND:
ICHOR CORPORATION, a corporation organized under the laws of the State of Delaware in the United States, with an address at 17 Dame Street, Dublin 2, Ireland
("PARENTCO")
AND:
6543 LUXEMBOURG S.A., a corporation organized under the laws of Luxembourg, with an address at L-2419, Luxembourg, 3, rue de la Chapelle
("LUXCO")
WHEREAS:
A. Each LuxCo Shareholder owns the LuxCo Exchangeable Preferred Shares as set forth beside his name on the signature pages hereto;
B. ParentCo owns all but not less than all of the issued and outstanding LuxCo Common Shares; and
C. The parties hereto wish to establish their respective rights and obligations with respect to the LuxCo Common Shares, the LuxCo Exchangeable Preferred Shares and LuxCo, as set forth in this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, including the recitals, and any amendments hereto, unless the context otherwise requires, the following words and phrases shall have the following meanings, respectively:
1.1 "AFFILIATE" of any Person means any other Person directly or indirectly controlling, controlled by, or under common control of, that Person. For the purposes of this definition "control" (including, with correlative meanings, the terms "controlled by" and "under common control of), as applied to any Person, means the possession by another Person, directly or indirectly, of the power to direct or cause the direction of the management and policies of that first mentioned Person, whether through the ownership of voting securities, by contract or otherwise;
1.2 "BUSINESS DAY" means any day on which commercial banks are generally open for business in Luxembourg and in the State of Delaware in the United States, other than a Saturday, a Sunday or a day observed as a holiday in Luxembourg or in the State of Delaware in the United States under the laws of Luxembourg and the State of Delaware in the United States, respectively,
1.3 "CURRENT MARKET PRICE" means, in respect of a ParentCo Common Share on any date, the Luxembourg Franc Equivalent of the average of the closing bid and asked prices of ParentCo Common Shares during a period of 20 consecutive quotation days ending not mom than three quotation days before such date on the OTC B.B., or, if the ParentCo Common Shares are not then quoted on the OTC B.B., on such other stock exchange or automated quotation system on which the ParentCo Common Shares are listed or quoted, as the case may be, as may be selected by the board of directors of LuxCo for such purpose; provided, however, that if in the opinion of the board of directors of LuxCo the public distribution or trading activity of ParentCo Common Shares during such period does not create a market which reflects the fair market value of ParentCo Common Share, then the Current Market Price of a ParentCo Common Share shall be determined by the board of directors of LuxCo, in good faith and in its sole discretion, and provided further that any such selection, opinion or determination by the board of directors of LuxCo shall be conclusive and binding;
1.4 "DIVIDEND AMOUNT" has the meaning ascribed thereto in section 7.3 hereof;
1.5 "EXEMPT LUXCO EXCHANGEABLE PREFERRED SHARE VOTING EVENT" means any matter in respect of which holders of LuxCo Exchangeable Preferred Shares are entitled to vote as shareholders of LuxCo in order to approve or disapprove, as applicable, any change to, or in the rights of the holders of the LuxCo Exchangeable Preferred Shares, where the approval or disapproval, as applicable, of such change would be required to maintain the equivalence of the LuxCo Exchangeable Preferred Shares and the ParentCo Common Shares;
1.6 "GOVERNMENTAL ENTITY" means any: (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign; (ii) any subdivision, agent, commission, board, or authority of any of the foregoing; or (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;
1.7 "LIQUIDATION AMOUNT" has the meaning ascribed thereto in section 6.1 hereof;
1.8 "LIQUIDATION CALL PURCHASE PRICE" has the meaning ascribed thereto in section 9.1 hereof;
1.9 "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in section 9.1 hereof;
1.10 "LIQUIDATION DATE" has the meaning ascribed thereto in section 6.1 hereof; 1.11 "LUXCO COMMON SHARES" means the ordinary shares of class A in the |
capital of LuxCo;
1.12 "LUXCO EXCHANGEABLE PREFERRED SHARE VOTING EVENT" means any matter in respect of which holders of LuxCo Exchangeable Preferred Shares are entitled to vote as shareholders of LuxCo, other than an Exempt LuxCo Exchangeable Preferred Share Voting Event, and, for greater certainty, excluding any matter in respect of which holders of LuxCo Exchangeable Preferred Shares are entitled to vote (or instruct the Trustee to vote) in their capacity as Beneficiaries under (and as that term is defined in) the Voting and Exchange Trust Agreement;
1.13 "LUXCO EXCHANGEABLE PREFERRED SHARES" means the exchangeable preferential non voting shares in the capital of LuxCo, having the rights, privileges, restrictions and conditions set forth herein;
1.14 "LUXEMBOURG FRANC EQUIVALENT" means in respect of an amount expressed in a currency other than Luxembourg Francs (the "FOREIGN CURRENCY AMOUNT") at any date the product obtained by multiplying
(a) the Foreign Currency Amount by,
(b) the noon spot exchange rate on such date for such foreign currency expressed in Luxembourg Francs as reported by the U.S. Federal Reserve Bank or, in the event such spot exchange rate is not available, such spot exchange rate on such date for such foreign currency expressed in Luxembourg Francs as may be deemed by the board of directors of LuxCo to be appropriate for such purpose;
1.15 "OTC B.B." means the over-the-counter Bulletin Board, a quotation system operated by The National Association of Securities Dealers, Inc.;
1.16 "PARENTCO CALL NOTICE" has the meaning ascribed thereto in section 7.3 hereof; 1.17 "PARENTCO COMMON SHARES" mean the shares of common stock in the capital |
of ParentCo;
1.18 "PARENTCO CONTROL TRANSACTION" means any merger, amalgamation, tender offer, material sale of shares or rights or interests therein or thereto or similar transactions involving ParentCo, or any proposal to do so; and
1.19 "PARENTCO DIVIDEND DECLARATION DATE" means the date on which the board of directors of ParentCo declares any dividend on the ParentCo Common Shares;
1.20 "PERSON" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, government Entity, syndicate or other entity, whether or not having legal status;
1.21 "PURCHASE PRICE" has the meaning ascribed thereto in section 7.3 hereof; 1.22 "REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in |
section 10.1(a) hereof;
1.23 "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in section 10.1(a) hereof;
1.24 "REDEMPTION DATE" means the date, if any, established by the board of directors of LuxCo for the redemption by LuxCo of all but not less than all of the outstanding LuxCo Exchangeable Preferred Shares pursuant to Article 8 hereof, which date shall be no earlier than December 31, 2011, unless:
(a) there are fewer than 769 LuxCo Exchangeable Preferred Shares outstanding (other than LuxCo Exchangeable Preferred Shares held by ParentCo and its Affiliates, and as such number of shares may be adjusted to give effect to any subdivision or consolidation of, or stock dividend on, the LuxCo Exchangeable Preferred Shares, any issue or distribution of rights to acquire LuxCo Exchangeable Preferred Shares or securities exchangeable for or convertible into LuxCo Exchangeable Preferred Shares, any issue or distribution of other securities or rights or evidences of indebtedness or assets, or any other capital reorganization or other transaction affecting the LuxCo Exchangeable Preferred Shares), in which case the board of directors of LuxCo may accelerate such redemption date to such date prior to December 31, 2011 as they may determine, upon at least 60 days' prior written notice to the registered holders of the LuxCo Exchangeable Preferred Shares and the Trustee;
(b) a ParentCo Control Transaction occurs, in which case, provided that the board of directors of LuxCo determines, in good faith and in its sole discretion, that it is not reasonably practicable to substantially replicate the terms and conditions of the LuxCo Exchangeable Preferred Shares in connection with such ParentCo Control Transaction and that the redemption of all but not less than all of the outstanding LuxCo Exchangeable Preferred Shares is necessary to enable the completion of such ParentCo Control Transaction in accordance with its terms, the board of directors of LuxCo may accelerate such redemption date to such date prior to December 31, 2011 as they may determine, upon such number of days' prior written notice to the registered holders of the LuxCo Exchangeable Preferred Shares and the Trustee as the board of directors of LuxCo may determine to be reasonably practicable in such circumstances;
(c) a LuxCo Exchangeable Preferred Share Voting Event is proposed, in which case, provided that the board of directors of LuxCo has determined, in good faith and in its sole discretion, that it is not reasonably practicable to accomplish the business purpose intended by the LuxCo Exchangeable Preferred Share Voting Event, which business purpose must be bonafide and not for the primary purpose of causing the occurrence of a Redemption Date, in any other commercially reasonable
manner that does not result in a LuxCo Exchangeable Preferred
Share Voting Event, the redemption date shall be the Business
Day prior to the record date for any meeting or vote of the
holders of the LuxCo Exchangeable Preferred Shares to consider
the LuxCo Exchangeable Preferred Share Voting Event and the
board of directors of LuxCo shall give such number of days'
prior written notice of such redemption to the registered
holders of the LuxCo Exchangeable Preferred Shares and the
Trustee as the board of directors of LuxCo may determine to be
reasonably practicable in such circumstances; or
(d) an Exempt LuxCo Exchangeable Preferred Share Voting Event is
proposed and the holders of the LuxCo Exchangeable Preferred
Shares fail to take the necessary action at a meeting or other
vote of holders of LuxCo Exchangeable Preferred Shares, to
approve or disapprove, as applicable, the Exempt LuxCo
Exchangeable Preferred Share Voting Event, in which case the
redemption date shall be the Business Day following the day on
which the holders of the LuxCo Exchangeable Preferred Shares
failed to take such action and the board of directors of LuxCo
shall give such number of days prior written notice of such
redemption to the registered holders of the LuxCo Exchangeable
Preferred Shares as the board of directors of LuxCo may
determine to be reasonably practicable in such circumstances,
provided, however, that the accidental failure or omission to
give any notice of redemption under clauses (a), (b), (c) or
(d) above to less than 10% of such holders of LuxCo
Exchangeable Preferred Shares shall not affect the validity of
any such redemption;
1.25 "REDEMPTION PRICE" has the meaning ascribed thereto in section 8.1
hereof;
1.26 "RETRACTED SHARES" has the meaning ascribed thereto in section 7.1 (a)
hereof;
1.27 "RETRACTION CALL RIGHT" has the meaning ascribed thereto in section
7.1(c) hereof;
1.28 "RETRACTION DATE" has the meaning ascribed thereto in section 7.l(b)
hereof,
1.29 "RETRACTION PRICE" has the meaning ascribed thereto in section 7.1
hereof,
1.30 "RETRACTION REQUEST" has the meaning ascribed thereto in section 7.1
hereof,
1.31 "SUPPORT AGREEMENT" means the support agreement dated for reference
|
March 28, 2001 between ParentCo and LuxCo, as amended, supplemented or restated from time to time;
1.32 "TRANSFER AGENT" means MFC Merchant Bank S.A. or such other Person as may from time to time be appointed by LuxCo as the registrar and transfer agent for the LuxCo Exchangeable Preferred Shares;
1.33 "TRUSTEE" means the trustee under the Voting and Exchange Trust Agreement, and any successor trustee appointed thereunder, and
1.34 "VOTING AND EXCHANGE TRUST AGREEMENT" means the voting and exchange trust agreement dated for reference March 28, 2001 among ParentCo, LuxCo and the Trustee, as amended, supplemented or restated from time to time.
2. REPRESENTATIONS AND WARRANTIES
2.1 The LuxCo Shareholders severally represent and warrant to the other parties hereto that the statements contained in this section 2.1 are correct and complete as of the date of this Agreement and hereby acknowledge and confirm that the other parties hereto are relying upon such representations and warranties in connection with the transactions contemplated herein:
(a) Each LuxCo Shareholder has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder;
(b) This Agreement has been duly executed and delivered by and on behalf of each LuxCo Shareholder and constitutes legal, valid and binding obligations of each LuxCo Shareholder enforceable against such LuxCo Shareholder in accordance with its terms;
(c) Each LuxCo Shareholder owns the LuxCo Exchangeable Preferred Shares as set forth beside his name on the signature pages hereto as the sole legal and beneficial owner of record with good, full and marketable title thereto, free and clear of any mortgages, liens, charges, restrictions, security interests, adverse claims, pledges, encumbrances or demands whatsoever, and such LuxCo Exchangeable Preferred Shares are issued and outstanding as fully paid and non-assessable; and
(d) No person, firm or corporation has any agreement or option, or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement or option for the purchase, acquisition, transfer or contribution from any LuxCo Shareholder of any of its LuxCo Exchangeable Preferred Shares or any interest therein or right thereto owned by such LuxCo Shareholder, other than pursuant hereto.
2.2 ParentCo represents and warrants to the other parties hereto that the statements contained in this section 2.2 are correct and complete as of the date of this Agreement and hereby acknowledges and confirms that the other parties hereto are relying upon such representations and warranties in connection with the transactions contemplated herein:
(a) ParentCo has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization. ParentCo is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. ParentCo has full corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it;
(b) ParentCo has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered by and on behalf of ParentCo and constitutes legal, valid and binding obligations of ParentCo enforceable against ParentCo in accordance with its terms;
(c) ParentCo owns all but not less than all of the issued and outstanding LuxCo Common Shares are owned by ParentCo as the sole legal and beneficial owner of record with good and marketable title thereto, free and clear of any mortgages, liens, charges, restrictions, security interests, adverse claims, pledges, encumbrances or demands whatsoever; and
(d) No person, firm or corporation has any agreement or option, or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement or option for the purchase, acquisition, transfer or contribution from ParentCo of any LuxCo Common Shares or any interest therein or right thereto owned by ParentCo, other than pursuant hereto.
2.3 LuxCo represents and warrants to the other parties hereto that the statements contained in this section 2.3 are correct and complete as of the date of this Agreement and hereby acknowledges and confirms that the other parties hereto are relying upon such representations and warranties in connection with the transactions contemplated herein:
(a) LuxCo has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization. LuxCo is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. LuxCo has full corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it; and
(b) LuxCo has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered by and
on behalf of LuxCo and constitutes legal, valid and binding obligations of LuxCo enforceable against LuxCo in accordance with its terms.
3. RANKING OF LUXCO EXCHANGEABLE PREFERRED SHARES
3.1 The LuxCo Exchangeable preferred Shares shall be entitled to a preference over the LuxCo Common Shares and any other shares ranking junior to the LuxCo Exchangeable Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of LuxCo, whether voluntary or involuntary, or any other distribution of the assets of LuxCo, among its shareholders for the purpose of winding up its affairs.
4. DIVIDENDS
4.1 A holder of a LuxCo Exchangeable Preferred Share shall be entitled to receive and the shareholders of LuxCo shall by resolution, subject to applicable law, on each ParentCo Dividend Declaration Date, declare a dividend on each LuxCo Exchangeable Preferred Share:
(a) in the case of a cash dividend declared on the ParentCo Common Shares, in an amount in cash for each LuxCo Exchangeable Preferred Share in U.S. dollars, or the Luxembourg Franc Equivalent thereof on the ParentCo Dividend Declaration Date, in each case, corresponding to the cash dividend declared on each ParentCo Common Share multiplied by 1,066.44, subject to adjustment in accordance with Article 14 hereof;
(b) in the case of a stock dividend declared on the ParentCo Common Shares to be paid in ParentCo Common Shares, in such number of LuxCo Exchangeable Preferred Shares for each LuxCo Exchangeable Preferred Share as is equal to the number of ParentCo Common Shares to be paid on each ParentCo Common Share; or
(c) in the case of a dividend declared on the ParentCo Common Shares in property other than cash or ParentCo Common Shares, in such type and amount of property for each LuxCo Exchangeable Preferred Share as is the same as or economically equivalent to (to be determined by the board of directors of LuxCo as contemplated by section 4.5 hereof) the type and amount of property declared as a dividend on each ParentCo Common Share multiplied by 1,066.44, subject to adjustment in accordance with Article 14 hereof,
which amounts in (a), (b) and (c) above shall expressly include any dividend to be paid by LuxCo to the holders of LuxCo Exchangeable Preferred Shares pursuant to the constating documents of LuxCo.
Such dividends shall be paid out of money, assets or property of LuxCo properly applicable to the payment of dividends, or out of authorized but unissued shares of LuxCo, as applicable.
4.2 Cheques of LuxCo payable at par at any branch of the bankers of LuxCo shall be issued in respect of any cash dividends contemplated by section 4.1(a) hereof and the sending of such a cheque to each holder of a LuxCo Exchangeable Preferred Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation. Certificates registered in the name of the registered holder of LuxCo Exchangeable Preferred Shares shall be issued or transferred in respect of any stock dividends contemplated by section 4.1(b) hereof and the sending of such a certificate to each holder of a LuxCo Exchangeable Preferred Share shall satisfy the stock dividend represented thereby. Such other type and amount of property in respect of any dividends contemplated by section 4.1(c) hereof shall be issued, distributed or transferred by LuxCo in such manner as it shall determine and the issuance, distribution or transfer thereof by LuxCo to each holder of a LuxCo Exchangeable Preferred Share shall satisfy the dividend represented thereby. No holder of a LuxCo Exchangeable Preferred Share shall be entitled to recover by action or other legal process against LuxCo any dividend that is represented by a cheque that has not been duly presented to LuxCo's bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was payable.
4.3 The record date for the determination of the holders of LuxCo Exchangeable Preferred Shares entitled to receive payment of, and the payment date for, any dividend declared on the LuxCo Exchangeable Preferred Shares under section 4.1 hereof shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the ParentCo Common Shares.
4.4 If on any payment date for any dividends declared on the LuxCo Exchangeable Preferred Shares under section 4.1 hereof the dividends are not paid in full on all of the LuxCo Exchangeable Preferred Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates on which LuxCo shall have sufficient moneys, assets or property properly applicable to the payment of such dividends as determined by the holders of LuxCo Common Shares by resolution.
4.5 The board of directors of LuxCo shall determine, in good faith and in its sole discretion, economic equivalence for the purposes of section 4.1 hereof and each such determination shall be conclusive and binding on LuxCo and its shareholders. In making each such determination, the following factors shall, without excluding other factors determined by the board of directors of LuxCo to be relevant, be considered by the board of directors of LuxCo:
(a) in the case of any stock dividend or other distribution payable in ParentCo Common Shares, the number of such shares issued in proportion to the number of ParentCo Common Shares previously outstanding;
(b) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price of a ParentCo Common Share;
(c) in the case of the issuance or distribution of any other form of property (including without limitation any shares or securities of ParentCo of any class other than ParentCo Common Shares, any rights, options or warrants other than those referred to in section 4.5(b) above, any evidences of indebtedness of ParentCo or any assets of ParentCo), the relationship between the fair market value (as determined by the board of directors of LuxCo in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding ParentCo Common Share and the Current Market Price of a ParentCo Common Share; and
(d) in all such cases, the general taxation consequences of the relevant event to holders of LuxCo Exchangeable Preferred Shares to the extent that such consequences may differ from the taxation consequences to holders of ParentCo, Common Shares as a result of differences between taxation laws of Luxembourg (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of LuxCo Exchangeable Preferred Shares).
5. CERTAIN RESTRICTIONS
5.1 So long as any of the LuxCo Exchangeable Preferred Shares are outstanding, LuxCo shall not at any time without, but may at any time with, the approval of the holders of the LuxCo Exchangeable Preferred Shares given as specified in section 13.2 hereof:
(a) pay any dividends on the LuxCo Common Shares or any other shares ranking junior to the LuxCo Exchangeable Preferred Shares, other than stock dividends payable in LuxCo Common Shares or any such other shares ranking junior to the LuxCo Exchangeable Preferred Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect of LuxCo Common Shares or any other shares ranking junior to the LuxCo Exchangeable Preferred Shares;
(c) redeem or purchase any other shares of LuxCo ranking equally with the LuxCo Exchangeable Preferred Shares with respect to the payment of dividends or on any liquidation distribution; or
(d) issue any LuxCo Exchangeable Preferred Shares or any other shares of LuxCo ranking equally with, or superior to, the LuxCo Exchangeable Preferred Shares other than by way of stock dividends to the holders of such LuxCo Exchangeable Preferred Shares.
The restrictions in sections 5.1(a), (b), (c) and (d) above shall not apply if all dividends on the outstanding LuxCo Exchangeable Preferred Shares corresponding to dividends declared and paid to date on the ParentCo Common Shares shall have been declared and paid on the LuxCo Exchangeable Preferred Shares.
6. DISTRIBUTION ON LIQUIDATION
6.1 In the event of the liquidation, dissolution or winding-up of LuxCo or any other distribution of the assets of LuxCo among its shareholders for the purpose of winding up its affairs, a holder of LuxCo Exchangeable Preferred Shares shall be entitled, subject to applicable law, to receive from the assets of LuxCo in respect of each LuxCo Exchangeable Preferred Share held by such holder on the effective date (the "LIQUIDATION DATE") of such liquidation, dissolution or winding-up, before any distribution of any part of the assets of LuxCo among the holders of the LuxCo Common Shares or any other shares ranking junior to the LuxCo Exchangeable Preferred Shares, an amount per share (the "LIQUIDATION AMOUNT") equal to the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by LuxCo causing to be delivered to such holder 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, plus an amount equal to all declared and unpaid dividends on each such LuxCo Exchangeable Preferred Share held by such holder on any dividend record date which occurred prior to the Liquidation Date.
6.2 On or promptly after the Liquidation Date, and subject to the exercise by ParentCo of the Liquidation Call Right, LuxCo shall cause to be delivered to the holders of the LuxCo Exchangeable Preferred Shares the Liquidation Amount for each such LuxCo Exchangeable Preferred Share upon presentation and surrender of the certificates representing such LuxCo Exchangeable Preferred Shares, together with such other documents and instruments as may be required to effect a transfer of LuxCo Exchangeable Preferred Shares under the applicable corporate legislation in Luxembourg and the Articles of LuxCo and such additional documents and instruments as the Transfer Agent and LuxCo may reasonably require, at the registered office of LuxCo or at any office of the Transfer Agent as may be specified by LuxCo by notice to the holders of the LuxCo Exchangeable Preferred Shares. Payment of the total Liquidation Amount for such LuxCo Exchangeable Preferred Shares shall be made by delivery to each holder, at the address of the holder recorded in the securities register of LuxCo for the LuxCo Exchangeable Preferred Shares or by holding for pick-up by the holder at the registered office of LuxCo or at any office of the Transfer Agent as may be specified by LuxCo by notice to the holders of LuxCo, Exchangeable Preferred Shares, on behalf of LuxCo, of certificates representing ParentCo Common Shares (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance) and a cheque of LuxCo payable at par at any branch of the bankers of LuxCo in respect of the remaining portion, if any, of the total Liquidation Amount (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom). On and after the Liquidation Date, the holders of the LuxCo Exchangeable Preferred Shares shall cease to be holders of such LuxCo Exchangeable Preferred Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Liquidation Amount, unless payment of the total Liquidation Amount for such LuxCo Exchangeable Preferred Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Liquidation Amount has been paid in the manner hereinbefore provided. LuxCo shall have the right at any time after the Liquidation Date to deposit or cause to be deposited the total Liquidation Amount in respect of the LuxCo Exchangeable Preferred Shares represented by certificates that have not at the Liquidation Date been surrendered by the holders thereof in a custodial account with any commercial bank in Luxembourg. Upon such deposit being made, the rights of the holders of LuxCo Exchangeable Preferred Shares after such deposit shall be limited to receiving their proportionate part of the total Liquidation Amount (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom) for such LuxCo Exchangeable Preferred Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of the total
liquidation Amount, the holders of the LuxCo Exchangeable Preferred Shares shall thereafter be considered and deemed for all purposes to be holders of the ParentCo Common Shares delivered to them or the custodian on their behalf.
6.3 After LuxCo has satisfied its obligations to pay the holders of the LuxCo Exchangeable Preferred Shares the Liquidation Amount per LuxCo Exchangeable Preferred Share pursuant to section 6.1 hereof such holders shall not be entitled to share in any further distribution of the assets of LuxCo.
7. RETRACTION OF LUXCO EXCHANGEABLE PREFERRED SHARES BY HOLDER
7.1 A holder of LuxCo Exchangeable Preferred Shares shall be entitled at any time, subject to the exercise by ParentCo of the Retraction Call Right and otherwise upon compliance with the provisions of this Article 7, to require LuxCo to redeem any or all of the LuxCo Exchangeable Preferred Shares registered in the name of such holder for an amount per share equal to the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, on the last Business Day prior to the Retraction Date (the "RETRACTION PRICE"), which shall be satisfied in full by LuxCo causing to be delivered to such holder 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, for each LuxCo Exchangeable Preferred Share presented and surrendered by the holder, together with, on the payment date therefor, the full amount of all declared and unpaid dividends on any such LuxCo Exchangeable Preferred Share held by such holder on any dividend record date which occurred prior to the Retraction Date, subject to the restriction that prior to the filing by ParentCo of a Certificate of Amendment to Certificate of Incorporation to increase the authorized number of ParentCo Common Shares from 30,000,000 to 80,000,000, LuxCo shall only be required to redeem a maximum of in aggregate 1,400 LuxCo Exchangeable Preferred Shares pursuant to this section 7.1 (and that it prior to such filing, the holders of LuxCo Exchangeable Preferred Shares require LuxCo to redeem more than in aggregate 1,400 LuxCo Exchangeable Preferred Shares, such LuxCo Exchangeable Preferred Shares will be redeemed on a pro rata basis). To effect such redemption, the holder shall present and surrender at the registered office of LuxCo or at any office of the Transfer Agent as may be specified by LuxCo by notice to the holders of LuxCo Exchangeable Preferred Shares the certificate or certificates representing the LuxCo Exchangeable Preferred Shares which the holder desires to have LuxCo redeem, together with such other documents and instruments as may be required to effect a transfer of LuxCo Exchangeable Preferred Shares under applicable corporate legislation in Luxembourg and the Articles of LuxCo and such additional documents and instruments as the Transfer Agent and LuxCo may reasonably require, and together with a duly executed statement (the "RETRACTION REQUEST") in the form of Schedule "A" hereto or in such other form as may be acceptable to LuxCo:
(a) specifying that the holder desires to have all or any number specified therein of the LuxCo Exchangeable Preferred Shares represented by such certificate or certificates (the "RETRACTED SHARES") redeemed by LuxCo;
(b) stating the Business Day on which the holder desires to have LuxCo redeem the Retracted Shares (the "RETRACTION DATE"), provided that the Retraction Date shall be not less than 10 Business Days nor more than 15 Business Days after the date on which the Retraction Request is received by LuxCo and further provided that in the event that no such Business Day is specified by the holder in the Retraction Request, the Retraction Date shall be deemed to be the 15th Business Day after the date on which the Retraction Request is received by LuxCo; and
(c) acknowledging the overriding right (the "RETRACTION CALL RIGHT") of ParentCo to purchase but not less than all the Retracted Shares directly from the holder and that the Retraction Request shall be deemed to be a revocable offer by the holder to sell the Retracted Shares to ParentCo in accordance with the Retraction Call Right on the terms and conditions set out in section 7.3 below.
7.2 Subject to the exercise by ParentCo of the Retraction Call Right, upon receipt by LuxCo or the Transfer Agent in the manner specified in section 7.1 above of a certificate or certificates representing the number of LuxCo Exchangeable Preferred Shares which the holder desires to have LuxCo redeem, together with a Retraction Request, and provided that the Retraction Request is not revoked by the holder in the manner specified in section 7.7 below, LuxCo shall redeem the Retracted Shares effective at the dose of business on the Retraction Date and shall cause to be delivered to such holder the total Retraction Price with respect to such shares, provided that all declared and
unpaid dividends for which the record date has occurred prior to the Retraction Date shall be paid on the payment date for such dividends. If only a part of the LuxCo Exchangeable Preferred Shares represented by any certificate is redeemed (or purchased by ParentCo pursuant to the Retraction Call Right), a new certificate for the balance of such LuxCo Exchangeable Preferred Shares shall be issued to the holder at the expense of LuxCo.
7.3 Upon receipt by LuxCo of a Retraction Request, LuxCo shall immediately notify ParentCo thereof. In order to exercise the Retraction Call Right, ParentCo must notify LuxCo of its determination to do so (the "PARENTCO CALL NOTICE") within five business days of notification to ParentCo by LuxCo of the receipt by LuxCo of the Retraction Request. If ParentCo does not so notify LuxCo within such five business day period, LuxCo will notify the holder as soon as possible thereafter that ParentCo will not exercise the Retraction Call Right If ParentCo delivers the ParentCo Call Notice within such five business day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in section 7.7 below, the Retraction Request shall thereupon be considered only to be an offer by the holder to sell the Retracted Shares to ParentCo in accordance with the Retraction Call Right. In such event, LuxCo shall not redeem the Retracted Shares and ParentCo shall purchase from such holder and such holder shall sell to ParentCo on the Retraction Date the Retracted Shares for a purchase price (the "PURCHASE PRICE") per share equal to the Retraction Price per share, plus, on the designated payment date therefor, to the extent not paid by LuxCo on the designated payment date therefor, an additional amount equivalent to the fall amount of all declared and unpaid dividends on those Retracted Shares held by such holder on any dividend record date which occurred prior to the Retraction Date (the "DIVIDEND AMOUNT"). For the purposes of completing a purchase pursuant to the Retraction Call Right, ParentCo shall deposit with the Transfer Agent, on or before the Retraction Date, certificates representing ParentCo Common Shares and a cheque or cheques of ParentCo payable at par at any branch of the bankers of ParentCo representing the aggregate Dividend Amount, less any amounts withheld on account of tax required to be deducted and withheld therefrom. Provided that ParentCo has complied with the immediately preceding sentence, the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by LuxCo of such Retracted Shares shall take place on the Retraction Date. In the event that ParentCo does not deliver a ParentCo, Call Notice within such five business day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in section 7.7 below, LuxCo shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in this Article 7.
7.4 LuxCo or ParentCo, as the case may be, shall deliver or cause the Transfer Agent to deliver to the relevant holder, at the address of the holder recorded in the securities register of LuxCo for the LuxCo Exchangeable Preferred Shares or at the address specified in the holder's Retraction Request or by holding for pick-up by the holder at the registered office of LuxCo or at any office of the Transfer Agent as may be specified by LuxCo by notice to the holders of LuxCo Exchangeable Preferred Shares, certificates representing the ParentCo Common Shares (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance) registered in the name of the holder or in such other name as the holder may request, and, if applicable and on or before the payment date therefor, a cheque payable at par at any branch of the bankers of LuxCo or ParentCo, as applicable, representing the aggregate Dividend Amount, in payment of the total Retraction Price or the total Purchase Price, as the case may be, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom and such delivery of such certificates and cheques on behalf of LuxCo or by ParentCo, as the case may be, or by the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the total Retraction Price or total Purchase Price, as the case may be, to the extent that the same is represented by such share certificates and cheques (plus any tax deducted and withheld therefrom and remitted to the proper tax authority).
7.5 On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall cease to be a holder of such Retracted Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof other than the right to receive his proportionate part of the total Retraction Price or total Purchase Price, as the case may be, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the total Retraction Price or the total Purchase Price, as the case may be, shall not be made as provided in section 7.4 above, in which case the rights of such holder shall remain unaffected until the total Retraction Price or the total Purchase Price, as the case may be, has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of the total Retraction Price or the total Purchase Price, as the case may be, has been made in accordance with
the foregoing provisions, the holder of the Retracted Shares so redeemed by LuxCo or purchased by ParentCo shall thereafter be considered and deemed for all purposes to be a holder of the ParentCo Common Shares delivered to it.
7.6 Notwithstanding any other provision of this Article 7, LuxCo shall not be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law. If LuxCo believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and provided that ParentCo shall not have exercised the Retraction Call Right with respect to the Retracted Shares, LuxCo shall only be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the holder and the Trustee at least two Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by LuxCo. In any case in which the redemption by LuxCo of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law, LuxCo shall redeem Retracted Shares in accordance with section 7.2 above on a pro rata basis and shall issue to each holder of Retracted Shares a new certificate, at the expense of LuxCo, representing the Retracted Shares not redeemed by LuxCo pursuant to section 7.2 above. Provided that the Retraction Request is not revoked by the holder in the manner specified in section 7.7 below, the bolder of any such Retracted Shares not redeemed by LuxCo pursuant to section 7.2 above as a result of solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to require ParentCo, to purchase such Retracted Shares from such holder on the Retraction Date or as soon as practicable thereafter on payment by ParentCo to such holder of the Purchase Price for each such Retracted Share, all as more specifically provided in the Voting and Exchange Trust Agreement.
7.7 A holder of Retracted Shares may, by notice in writing given by the holder to LuxCo before the close of business on the Business Day immediately preceding the Retraction Date, withdraw its Retraction Request, in which event such Retraction Request shall be null mid void, and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to ParentCo shall be deemed to have been revoked.
8. REDEMPTION OF LUXCO EXCHANGEABLE PREFERRED SHARES BY LUXCO
8.1 Subject to applicable law, and provided ParentCo has not exercised the Redemption Call Right, LuxCo shall on the Redemption Date redeem all but not less than all of the then outstanding LuxCo Exchangeable Preferred Shares for an amount per share equal to the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, on the last Business Day prior to the Redemption Date (the "REDEMPTION PRICE"), which shall be satisfied in full by LuxCo causing to be delivered to each holder of LuxCo Exchangeable Preferred Shares 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof for each LuxCo Exchangeable Preferred Share held by such holder, together with the full amount of all declared and unpaid dividends on each such LuxCo Exchangeable Preferred Share held by such holder on any dividend record date which occurred prior to the Redemption Date.
8.2 In any case of a redemption of LuxCo Exchangeable Preferred Shares under this Article 8, LuxCo shall, at least 60 days before the Redemption Date (other than a Redemption Date established in connection with a ParentCo Control Transaction, a LuxCo Exchangeable Preferred Share Voting Event or an Exempt LuxCo Exchangeable Preferred Share Voting Event), send or cause to be sent to each holder of LuxCo Exchangeable Preferred Shares a notice in writing of the redemption by LuxCo or the purchase by ParentCo under the Redemption Call Right, as the case may be, of the LuxCo Exchangeable Preferred Shares held by such holder. In the case of a Redemption Date established in connection with a ParentCo Control Transaction, a LuxCo Exchangeable Preferred Share Voting Event and an Exempt LuxCo Exchangeable Preferred Share Voting Event, the written notice of redemption by LuxCo or the purchase by ParentCo under the Redemption Call Right will be sent on or before the Redemption Date, on as many days prior written notice as may be determined by the board of directors of LuxCo to be reasonably practicable in the circumstances. In any such case, such notice shall set out the formula for determining the Redemption Price or the Redemption Call Purchase Price, as the case may be, the Redemption Date and, if applicable, particulars of the Redemption Call Right.
8.3 On or after the Redemption Date, and subject to the exercise by ParentCo of the Redemption Call Right, LuxCo shall cause to be delivered to the holders of the LuxCo Exchangeable Preferred Shares to be redeemed the
Redemption Price for each such LuxCo Exchangeable Preferred Share, together with the full amount of all declared and unpaid dividends on each such LuxCo Exchangeable Preferred Share held by such holder on any dividend record date which occurred prior to the Redemption Date, upon presentation and surrender at the registered office of LuxCo or at any office of the Transfer Agent as may be specified by LuxCo in such notice of the certificates representing such LuxCo Exchangeable Preferred Shares, together with such other documents and instruments as may be required to effect a transfer of LuxCo Exchangeable Preferred Shares under applicable corporate legislation in Luxembourg and the Articles of LuxCo and such additional documents and instruments as the Transfer Agent and LuxCo may reasonably require. Payment of the total Redemption Price for such LuxCo Exchangeable Preferred Shares, together with payment of such dividends, shall be made by delivery to each holder, at the address of the holder recorded in the securities register of LuxCo or by holding for pick-up by the holder at the registered office of LuxCo or at any office of the Transfer Agent as may be specified by LuxCo in such notice, on behalf of LuxCo of certificates representing ParentCo Common Shares (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance) and, if applicable, a cheque of LuxCo payable at par at any branch of the bankers of LuxCo in payment of any such dividends, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom. On and after the Redemption Date, the holders of the LuxCo Exchangeable Preferred Shares called for redemption shall cease to be holders of such LuxCo Exchangeable Preferred Shares and shall not be entitled to exercise any of the rights of holders in respect thereof other than the right to receive their proportionate part of the total Redemption Price and any such dividends, unless payment of the total Redemption Price and any such dividends for such LuxCo Exchangeable Preferred Shares shall not be made upon presentation and surrender of certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Redemption Price and any such dividends have been paid in the mariner hereinbefore provided. LuxCo shall have the right at any time after the sending of notice of its intention to redeem the LuxCo Exchangeable Preferred Shares as aforesaid to deposit or cause to be deposited the total Redemption Price for and the full amount of such dividends on (except as otherwise provided in this section 8.3) the LuxCo Exchangeable Preferred Shares so called for redemption, or of such of the said LuxCo Exchangeable Preferred Shares represented by certificates that have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption, in a custodial account with any commercial bank in Luxembourg named in such notice, less any amounts withheld on account of tax required to be deducted and withheld therefrom. Upon the later of such deposit being made and the Redemption Date, the LuxCo Exchangeable Preferred Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the holders thereof after such deposit or Redemption Date, as the case may be, shall be limited to receiving their proportionate part of the total Redemption Price and such dividends for such LuxCo Exchangeable Preferred Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of the total Redemption Price and the full amount of such dividends, the holders of the LuxCo Exchangeable Preferred Shares shall thereafter be considered and deemed for all purposes to be holders of the ParentCo Common Shares delivered to them or the custodian on their behalf
9. PARENTCO LIQUIDATION CALL RIGHT
9.1 ParentCo shall have the overriding right (the "LIQUIDATION CALL RIGHT"), in the event of and notwithstanding the proposed liquidation, dissolution or winding-up of LuxCo pursuant to Article 6 hereof to purchase from all but not less than all of the holders of LuxCo Exchangeable Preferred Shares (other than LuxCo Exchangeable Preferred Shares held by ParentCo and its Affiliates) on the Liquidation Date all but not less than all of the Exchangeable Shares held by each such holder on payment by ParentCo of an amount per share (the "LIQUIDATION CALL PURCHASE PRICE") equal to the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by ParentCo, causing to be delivered to such holder 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, plus any Dividend Amount. In the event of the exercise of the Liquidation Call Right by ParentCo, each holder shall be obligated to sell all the LuxCo Exchangeable Preferred Shares held by the holder to ParentCo on the Liquidation Date on payment by ParentCo to the holder of the Liquidation Call Purchase Price for each such share, and LuxCo shall have no obligation to pay any Liquidation Amount to the holders of such shares so purchased by ParentCo.
9.2 To exercise the Liquidation Call Right, ParentCo must notify LuxCo's transfer agent (the "TRANSFER AGENT"), as agent for the holders of LuxCo Exchangeable Preferred Shares, and LuxCo of ParentCo's intention to exercise such right at least 45 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or
winding-up of LuxCo and at least five Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding-up of LuxCo. The Transfer Agent will notify the holders of LuxCo Exchangeable Preferred Shares as to whether or not ParentCo has exercised the Liquidation Call Right forthwith after the expiry of the period during which the same may be exercised by ParentCo. If ParentCo exercises the Liquidation Call Right, then on the Liquidation Date ParentCo will purchase and the holders will sell all of the LuxCo Exchangeable Preferred Shares then outstanding for a price per share equal to the Liquidation Call Purchase Price.
9.3 For the purposes of completing the purchase of the LuxCo Exchangeable Preferred Shares pursuant to the Liquidation Call Right, ParentCo shall deposit with the Transfer Agent, on or before the Liquidation Date, certificates representing the aggregate number of ParentCo Common Shares deliverable by ParentCo and a cheque or cheques of ParentCo payable at par at any branch of the bankers of ParentCo representing the aggregate Dividend Amount if any, in payment of the total Liquidation Call Purchase Price, less any amounts withheld on account of tax required to be deducted and withheld therefrom. Provided that ParentCo has complied with the immediately preceding sentence, on and after the Liquidation Date the rights of each holder of LuxCo Exchangeable Preferred Shares will be limited to receiving such holder's proportionate part of the total Liquidation Call Purchase Price payable by ParentCo upon presentation and surrender by the holder of certificates representing the LuxCo Exchangeable Preferred Shares held by such holder and the holder shall on and after the Liquidation Date be considered and deemed for all purposes to be the holder of the ParentCo Common Shares to which it is entitled. Upon surrender to the Transfer Agent of a certificate or certificates representing LuxCo Exchangeable Preferred Shares, together with such other documents and instruments as may be required to effect a transfer of LuxCo Exchangeable Preferred Shares under the governing corporate statute and the by-laws of LuxCo and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of ParentCo shall deliver to such holder, certificates representing the ParentCo, Common Shares to which the holder is entitled and a cheque or cheques of ParentCo payable at par at any branch of the bankers of ParentCo in payment of the remaining portion, if any, of the total Liquidation Call Purchase Price, less any amounts withheld on account of tax required to be deducted and withheld therefrom. If ParentCo does not exercise the Liquidation Call Right in the manner described above, on the Liquidation Date the holders of the LuxCo Exchangeable Preferred Shares will be entitled to receive in exchange therefor the Liquidation Amount otherwise payable by LuxCo in connection with the liquidation, dissolution or winding-up of LuxCo pursuant to Article 6 hereof.
10. PARENTCO REDEMPTION CALL RIGHT
10.1 In addition to ParentCo's rights contained herein, including, without limitation, the Retraction Call Right, ParentCo shall have the following rights in respect of the LuxCo Exchangeable Preferred Shares:
(a) ParentCo shall have the overriding right (the "REDEMPTION CALL RIGHT"), notwithstanding the proposed redemption of the LuxCo Exchangeable Preferred Shares by LuxCo pursuant to Article 8 hereof, to purchase from all but not less than all of the holders of LuxCo Exchangeable Preferred Shares (other than any LuxCo Exchangeable Preferred Shares held by ParentCo and its Affiliates) on the Redemption Date all but not less than all of the LuxCo Exchangeable Preferred Shares held by each such holder on payment by ParentCo to each holder of an amount per LuxCo Exchangeable Preferred Share (the "REDEMPTION CALL PURCHASE PRICE") equal to the Current Market Price of 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, on the last Business Day prior to the Redemption Date, which shall be satisfied in full by ParentCo causing to be delivered to such holder 1,066.44 ParentCo Common Shares, subject to adjustment in accordance with Article 14 hereof, plus any Dividend Amount. In the event of the exercise of the Redemption Call Right by ParentCo, each holder shall be obligated to sell all the LuxCo Exchangeable Preferred Shares held by the holder to ParentCo on the Redemption Date on payment by ParentCo to the holder of the Redemption Call Purchase Price for each such share, and LuxCo shall have no obligation to redeem, or to pay any Dividend Amount in respect of, such shares so purchased by ParentCo.
(b) To exercise the Redemption Call Right, ParentCo must notify the Transfer Agent, as agent for the holders of LuxCo Exchangeable Preferred Shares, and LuxCo of ParentCo's intention to exercise
such right at least 60 days before the Redemption Date, except in the case of a redemption occurring as a result of a ParentCo Control Transaction, a LuxCo Exchangeable Preferred Share Voting Event or an Exempt LuxCo Exchangeable Preferred Share Voting Event, in which case ParentCo shall so notify the Transfer Agent and LuxCo on or before the Redemption Date. The Transfer Agent will notify the holders of the LuxCo Exchangeable Preferred Shares as to whether or not ParentCo has exercised the Redemption Call Right forthwith after the expiry of the period during which the same may be exercised by ParentCo. If ParentCo exercises the Redemption Call Right, on the Redemption Date ParentCo will purchase and the holders will sell all of the LuxCo Exchangeable Preferred Shares then outstanding for a price per share equal to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the LuxCo Exchangeable Preferred Shares pursuant to the Redemption Call Right, ParentCo shall deposit with the Transfer Agent, on or before the Redemption Date, certificates representing the aggregate number of ParentCo Common Shares deliverable by ParentCo and a cheque or cheques of ParentCo payable at par at any branch of the bankers of ParentCo representing the aggregate Dividend Amount, if any, in payment of the total redemption Call Purchase Price, less any amounts withheld on account of tax required to be deducted and withheld therefrom. Provided that ParentCo has complied with the immediately preceding sentence, on and after the Redemption Date, the rights of each holder of LuxCo Exchangeable Preferred Shares will be limited to receiving such holder's proportionate part of the total Redemption Call Purchase Price payable by ParentCo upon presentation and surrender by the holder of certificates representing the LuxCo Exchangeable Preferred Shares held by such holder and the holder shall on and after the Redemption Date be considered and deemed for all purposes to be the holder of the ParentCo Common Shares to which it is entitled. Upon surrender to the Transfer Agent of a certificate or certificates representing LuxCo Exchangeable Preferred Shares, together with such other documents and instruments as may be required to effect a transfer of LuxCo Exchangeable Preferred Shares under the governing corporate statute and the by-laws of LuxCo and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of ParentCo shall deliver to such holder, certificates representing the ParentCo Common Shares to which the holder is entitled and a cheque or cheques of ParentCo payable at par at any branch of the bankers of ParentCo in payment of the remaining portion, if any, of the total Redemption Call Purchase Price, less any amounts withheld on account of tax required to be deducted and withheld therefrom. If ParentCo does not exercise the Redemption Call Right in the manner described above, on the Redemption Date the holders of the LuxCo Exchangeable Preferred Shares will be entitled to receive in exchange therefor the redemption price otherwise payable by LuxCo in connection with the redemption of the LuxCo Exchangeable Preferred Shares pursuant to Article 8 hereof.
11. PURCHASE FOR CANCELLATION
11.1 Subject to applicable law and notwithstanding section 11.2 below, LuxCo may at any time and from time to time purchase for cancellation all or any part of the LuxCo Exchangeable Preferred Shares by private agreement with any holder of LuxCo Exchangeable Preferred Shares for consideration consisting of LuxCo Common Shares.
11.2 Subject to applicable law and the Articles of LuxCo, LuxCo may at any time and from time to time purchase for cancellation all or any part of the outstanding LuxCo Exchangeable Preferred Shares at any price by tender to all the holders of record of LuxCo Exchangeable Preferred Shares then outstanding or through the facilities of any stock exchange or quotation system on which the LuxCo Exchangeable Preferred Shares are listed or quoted at any price per share together with an amount equal to all declared and unpaid dividends thereon for which the record date has occurred prior to the date of purchase. If in response to an invitation for tenders under the provisions of this section 11.2, more LuxCo Exchangeable Preferred Shares are tendered at a price or prices acceptable to LuxCo than LuxCo is prepared to purchase, the LuxCo Exchangeable Preferred Shares to be purchased by LuxCo shall be purchased as nearly as may be pro rata according to the number of shares tendered by each holder who submits a tender to LuxCo, provided that when shares are tendered at different prices, the pro rating shall be effected (disregarding fractions) only with respect to the shares tendered at the price at which more shares were tendered than
LuxCo is prepared to purchase after LuxCo has purchased all the shares tendered at lower prices. If part only of the LuxCo Exchangeable Preferred Shares represented by any certificate shall be purchased, a new certificate for the balance of such shares shall be issued at the expense of LuxCo.
12. VOTING RIGHTS
12.1 Except as required by applicable law and by Article 13 hereof the holders of the LuxCo Exchangeable Preferred Shares shall not be entitled as such to vote at any meeting of the shareholders of LuxCo.
13. AMENDMENT AND APPROVAL
13.1 The rights, privileges, restrictions and conditions attaching to the LuxCo Exchangeable Preferred Shares may be added to, changed or removed in accordance with applicable law subject to a minimum requirement that the approval of the holders of the LuxCo Exchangeable Preferred Shares be given as hereinafter specified.
13.2 Any approval given by the holders of the LuxCo Exchangeable Preferred Shares to add to, change or remove any right, privilege, restriction or condition attaching to the LuxCo Exchangeable Preferred Shares or any other matter requiring the approval or consent of the holders of the LuxCo Exchangeable Preferred Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law subject to a minimum requirement that such approval be evidenced by resolution passed by not less than 75% of the votes cast on such resolution at a meeting of holders of LuxCo Exchangeable Preferred Shares (other than any LuxCo Exchangeable Preferred Shares held by ParentCo and its Affiliates) duly called and held; provided that if at any such meeting the requisite quorum is not present or represented by proxy within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than five days thereafter and to such time and place as may be designated by the Chairman of such meeting. At such adjourned meeting the holders of LuxCo Exchangeable Preferred Shares (other than any LuxCo Exchangeable Preferred Shares held by ParentCo and its Affiliates) present or represented by proxy thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than 75% of the votes cast on such resolution at such meeting shall constitute the approval or consent of the holders of the LuxCo Exchangeable Preferred Shares.
14. RECIPROCAL CHANGES, ETC. IN RESPECT OF PARENTCO COMMON SHARES
14.1 Each holder of a LuxCo Exchangeable Preferred Share acknowledges that the Support Agreement provides, in part, that ParentCo will not without the prior approval of LuxCo and the prior approval of the holders of the LuxCo Exchangeable Preferred Shares given in accordance with section 13.2 hereof:
(a) issue or distribute ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares) to the holders of all or substantially all of the then outstanding ParentCo Common Shares by way of stock dividend or other distribution, other than an issue of ParentCo, Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares) to holders of ParentCo Common Shares who exercise an option to receive dividends in ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares) in lieu of receiving cash dividends;
(b) issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding ParentCo Common Shares entitling them to subscribe for or to purchase ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares); or
(c) issue or distribute to the holders of all or substantially all of the then outstanding ParentCo Common Shares;
(d) shares or securities of ParentCo of any class other than ParentCo Common Shares (other than shares convertible into or exchangeable for or carrying rights to acquire ParentCo Common Shares);
(i) rights, options or warrants other than those referred to in section 14.1 (b) above;
(ii) evidences of indebtedness of ParentCo; or
(iii) assets of ParentCo,
unless the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the LuxCo Exchangeable Preferred Shares.
14.2 Each holder of a LuxCo Exchangeable Preferred Share acknowledges that the Support Agreement further provides, in part, that ParentCo will not without the prior approval of LuxCo and the prior approval of the holders of the LuxCo Exchangeable Preferred Shares given in accordance with section 13.2 hereof:
(a) subdivide, redivide or change the then outstanding ParentCo Common Shares into a greater number of ParentCo Common Shares;
(b) reduce, combine, consolidate or change the then outstanding ParentCo Common Shares into a lesser number of ParentCo Common Shares; or
(c) reclassify or otherwise change the ParentCo Common Shares or effect an amalgamation, merger, reorganization or other transaction affecting the ParentCo Common Shares,
unless the same or an economically equivalent change shall simultaneously be made to, or in, the rights of the holders of the LuxCo Exchangeable Preferred Shares. The Support Agreement further provides, in part, that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the LuxCo Exchangeable Preferred Shares Oven in accordance with section 13.2 hereof
15. ACTIONS BY LUXCO UNDER SUPPORT AGREEMENT
15.1 LuxCo will take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to ensure performance and compliance by ParentCo and LuxCo with all provisions of the Support Agreement applicable to ParentCo and LuxCo, respectively, in accordance with the terms thereof including without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of LuxCo all rights and benefits in favor of LuxCo under or pursuant to such agreement.
15.2 LuxCo shall not propose, agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement without the approval of the holders of the LuxCo Exchangeable Preferred Shams given in accordance with section 13.2 hereof other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of
(a) adding to the covenants of the other parties to such agreement for the protection of LuxCo or the holders of the LuxCo Exchangeable Preferred Shares thereunder,
(b) making such provisions or modifications not inconsistent with such agreement as may be necessary or desirable with respect to matters or questions arising thereunder which, in the good faith opinion of the board of directors of LuxCo, it may be expedient to make, provided that the board of directors of LuxCo shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the LuxCo Exchangeable Preferred Shares; or
(c) making such changes in or corrections to such agreement which, on the advice of counsel to LuxCo, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the board of directors of LuxCo shall be of the good faith opinion, after consultation with counsel, that such changes or corrections will not be prejudicial to the interests of the holders of the LuxCo Exchangeable Preferred Shares.
16. LEGEND; CALL RIGHTS
16.1 The certificates evidencing the LuxCo Exchangeable Preferred Shares shall contain or have affixed thereto a legend in form and on terms approved by the board of directors of LuxCo, with respect to the Support Agreement, the provisions relating to the Liquidation Call Right and the Redemption Call Right, and the Voting and Exchange Trust Agreement (including the provisions with respect to the voting rights, exchange right and automatic exchange thereunder).
16.2 Each holder of a LuxCo Exchangeable Preferred Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favor of ParentCo, and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of LuxCo or the retraction or redemption of LuxCo Exchangeable Preferred Shares, as the case may be, and to be bound thereby in favor of ParentCo as herein provided.
17. NOTICES
17.1 Any notice, request or other communication to be given to LuxCo by a holder of LuxCo Exchangeable Preferred Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or by delivery to the registered office of LuxCo and addressed to the attention of the President of LuxCo. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by LuxCo.
17.2 Any presentation and surrender by a holder of LuxCo Exchangeable Preferred Shares to LuxCo, or the Transfer Agent of certificates representing LuxCo Exchangeable Preferred Shares in connection with the liquidation, dissolution or winding-up of LuxCo or the retraction or redemption of LuxCo Exchangeable Preferred Shares shall be made by registered mail (postage prepaid) or by delivery to the registered office of LuxCo or to such office of the Transfer Agent as may be specified by LuxCo, in each case, addressed to the attention of the President of LuxCo. Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by LuxCo or the Transfer Agent, as the case may be. Any such presentation and surrender of certificates made by registered mail shall be at the sole risk of the holder mailing the same.
17.3 Any notice, request or other communication to be given to a holder of LuxCo Exchangeable Preferred Shares by or on behalf of LuxCo shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder recorded in the securities register of LuxCo or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the third Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holders of LuxCo Exchangeable Preferred Shares shall not invalidate or otherwise alter or affect any action or proceeding to be taken by LuxCo pursuant thereto.
18. DISCLAIMER OF PARTNERSHIP
18.1 No partnership is created by this Agreement. Nothing contained in this Agreement shall or shall be deemed to constitute the parties hereto as partners nor as agent of the other nor any other relationship whereby any party hereto could be held liable for any act or omission of the other, save as specifically provided by this Agreement. None of the parties hereto shall have any authority to act for the other or to incur any obligation on behalf of the other with respect to the subject matter of this Agreement, save as specifically provided by this Agreement. Each
party hereto covenants to indemnify the other parties and hold them harmless from all claims, losses, costs, charges, fees, expenses, damages, obligations and responsibilities incurred by such parties by reason of any action or omission of The other party outside the scope of the authority specifically provided by this Agreement.
19. SECTIONS AND HEADINGS
19.1 The division of this Agreement into sections and the insertion of headings are for convenience of reference only and shall not affect the interpretation of this Agreement. Unless otherwise indicated, any reference in this Agreement to an Article, a section or a Schedule refers to the specified Article or section of or Schedule to this Agreement.
20. NUMBER, GENDER AND PERSONS
20.1 In this Agreement, words importing the singular number only shall include the plural and vice versa, words importing gender shall include all genders and words importing persons shall include individuals, corporations, partnerships, associations, trusts, unincorporated organizations, governmental bodies and other legal or business entities.
21. SUCCESSORS AND ASSIGNS
21.1 All the terms and provisions of this agreement shall be binding upon and entire to the benefit of and be enforceable by the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns.
22. SURVIVAL
22.1 It is understood and agreed that all warranties, representations, covenants, indemnities and agreements of the parties herein contained or contained in any certificates or documents submitted pursuant to or in connection with the transactions contemplated herein shall survive the completion of the transactions contemplated herein and the termination of this Agreement.
23. FURTHER ASSURANCES
23.1 The parties hereto shall sign such further and other documents, cause such meetings to be held, resolutions passed and bylaws enacted, exercise their vote and influence, do and perform and cause to be done and performed such further and other acts and things as may be necessary or desirable in order to give full effect to this Agreement and every part thereof.
24. AMENDMENTS
24.1 This Agreement may be amended or modified by an agreement in writing executed by the parties hereto. Except as aforesaid, no amendment, waiver or modification of this Agreement shall be effective.
25. SEVERABILITY
25.1 Should a provision of this Agreement be or become invalid, the validity of the remaining provisions of this Agreement shall not be affected. The parties hereto undertake to replace any such invalid provision without delay with a valid provision which as nearly as possible duplicates the economic intent of the invalid provision.
26. INDEPENDENT LEGAL ADVICE
26.1 Each of the parties hereby represents and warrants to the other parties and acknowledges and agrees that it had the opportunity to seek, was not prevented nor discouraged by another party from seeking and did obtain independent legal advice prior to the execution and delivery of this Agreement.
27. ENGLISH VERSION
27.1 The parties hereby represent, warrant, acknowledge and agree that: (i) they have agreed that this Agreement be drawn up in the English language; and (ii) the English version of this Agreement shall govern for all purposes.
28. GOVERNING LAW
28.1 This Agreement shall be construed and enforced in accordance with, and the rights and obligations of the parties shall be governed by, the laws of the State of Delaware in the United States.
29. JURISDICTION
29.1 Each of the parties irrevocably attorns to the exclusive jurisdiction of the courts in the State of Delaware in the United States.
30. COUNTERPARTS
30.1 This Agreement may be executed in any number of counterparts, each of which when delivered, either in original or facsimile form, shall be deemed to be an original and all of which together shall constitute one and the same document.
IN WITNESS WHEREOF the parties have executed this Agreement as follows:
ICHOR CORPORATION
Per: /s/ M. Eric Turcotte
-----------------------------------------------------
Authorized Signatory
|
6543 LUXEMBOURG S.A.
Per: /s/ (Illegible)
-----------------------------------------------------
Authorized Signatory
|
THE FOLLOWING LUXCO SHAREHOLDERS:
SIGNED, SEALED and DELIVERED by PIERRE- )
FRANCOIS SERRES in the presence of: )
)
/s/ Kowalski Delphine ) /s/ Pierre-Francois Serres
----------------------------------------------------- ) -----------------------------------------------
Signature ) PIERRE-FRANCOIS SERRES
KOWALKI DELPHINE ) 69230 Saint Genis Laval France
----------------------------------------------------- ) -----------------------------------------------
Name ) Address
1029 Grand Rue, 01700 Miribel ) 10,436
----------------------------------------------------- ) -----------------------------------------------
Address ) Number of LuxCo Exchangeable Preferred Shares
Secretary ) Held
----------------------------------------------------- )
Occupation )
|
SIGNED, SEALED and DELIVERED by )
BERTRAND FAVREAU )
in the presence of: )
)
/s/ Pierre-Francois Serres ) /s/ Bertrand Favreau
----------------------------------------------------- ) -----------------------------------------------
Signature ) BERTRAND FAVREAU
PIERRE-FRANCOIS SERRES ) 12 Rue Saint Nicholas
----------------------------------------------------- ) -----------------------------------------------
Name ) Address
69230 Saint Genis Laval, France ) 2,004
----------------------------------------------------- ) -----------------------------------------------
Address ) Number of LuxCo Exchangeable Preferred Shares
Manager ) Held
----------------------------------------------------- )
Occupation
SIGNED, SEALED and DELIVERED by PATRICE )
PACTOL )
in the presence of: )
)
/s/ Pierre-Francois Serres ) /s/ Patrice Pactol
----------------------------------------------------- ) -----------------------------------------------
Signature ) PATRICE PACTOL
PIERRE-FRANCOIS SERRES ) 130 Route du bouleau, Brindao France
----------------------------------------------------- ) -----------------------------------------------
Name ) Addres
69230 Saint Genis Laval, France ) 2,004
----------------------------------------------------- ) -----------------------------------------------
Address ) Number of LuxCo Exchangeable Preferred Shares
Manager ) Held
----------------------------------------------------- )
Occupation
SIGNED, SEALED and DELIVERED by DORIA )
TROIANI )
in the presence of: )
)
/s/ Anne Marie Danon ) /s/ Doria Troiani
----------------------------------------------------- ) -----------------------------------------------
Signature ) DORIA TROIANI
ANNE MARIE DANON ) Chateau de la Creuzette, Saove France
----------------------------------------------------- ) -----------------------------------------------
Name ) Address
62 Chemin de la Bouviere ) 408
----------------------------------------------------- ) -----------------------------------------------
Address ) Number of LuxCo Exchangeable Preferred Shares
Secretary ) Held
----------------------------------------------------- )
Occupation
|
SIGNED, SEALED and DELIVERED by YVES BUSCH )
in the presence of: )
)
/s/ Patricia Busch ) /s/ Yves Busch
----------------------------------------------------- ) -----------------------------------------------
Signature ) YVES BUSCH
PATRICIA BUSCH ) 19 Rue de Gananteze, Jringy France
----------------------------------------------------- ) -----------------------------------------------
Name ) Address
19 Rue de Gananteze, Jrigny France ) 400
----------------------------------------------------- ) -----------------------------------------------
Address ) Number of LuxCo Exchangeable Preferred Shares
(N/A) ) Held
----------------------------------------------------- )
Occupation )
SIGNED, SEALED and DELIVERED by BERNADETTE DAOUT )
in the presence of: )
)
/s/ Phillippe Jaussely ) /s/ Bernadette Daout
----------------------------------------------------- ) -----------------------------------------------
Signature ) BERNADETTE DAOUT
PHILLIPPE JAUSSELY ) 2 Rue de Boro Voisom, Plowewheim
----------------------------------------------------- ) -----------------------------------------------
Name ) Address
12 Rue de Bengers, Vendenheim ) 120
----------------------------------------------------- ) -----------------------------------------------
Address ) Number of LuxCo Exchangeable Preferred Shares
Hotel Manager ) Held
----------------------------------------------------- )
Occupation )
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SCHEDULE "A"
[TO BE PRINTED ON LUXCO EXCHANGEABLE PREFERRED SHARE CERTIFICATES]
To 6543 Luxembourg S.A. ("LUXCO") and ICHOR Corporation ("PARENTCO")
This notice is given pursuant to Article 7 of the shareholder agreement (the "SHAREHOLDER AGREEMENT") dated March 28, 2001 among ParentCo, LuxCo and certain holders of exchangeable preferred shares of LuxCo and all capitalized words and expressions used in this notice that are defined in the Shareholder Agreement have the meanings ascribed to such words and expressions in the Shareholder Agreement.
The undersigned hereby notifies LuxCo that, subject to the Retraction Call Right referred to below, the undersigned desires to have LuxCo redeem in accordance with Article 7 of the Shareholder Agreement:
[ ] all share(s) represented by this certificate; or
[ ] _____ share(s) only.
The undersigned hereby notifies LuxCo that the Retraction Date shall be ______.
NOTE: The Retraction Date must be a Business Day and must not be less than ten Business Days nor more than 15 Business Days after the date upon which this notice is received by LuxCo. If no such Business Day is specified above, the Retraction Date shall be deemed to be the 15th Business Day after the date on which this notice is received by LuxCo.
The undersigned acknowledges the overriding Retraction Call Right of ParentCo to purchase a but not less than all the Retracted Shares from the undersigned and that this notice is and shall be deemed to be a revocable offer by the undersigned to sell the Retractable Shares to ParentCo in accordance with the Retraction Call Right on the Retraction Date for the Purchase Price and on the other terms and conditions set out in section 7.3 of the Shareholder Agreement. This Retraction Request, and this offer to sell the Retracted Shares to ParentCo, may be revoked and withdrawn by the undersigned only by notice in writing given to LuxCo at any time before the close of business on the Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions of applicable law, LuxCo is unable to redeem all Retracted Shares, the undersigned will be deemed to have exercised the Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to require ParentCo to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to LuxCo that the undersigned:
[ ] is
(select one)
[ ] is not
a non-resident of Luxembourg for purposes of the Luxembourg tax laws. THE UNDERSIGNED ACKNOWLEDGES THAT IN THE ABSENCE OF AN INDICATION THAT THE UNDERSIGNED IS NOT A NON-RESIDENT OF LUXEMBOURG, WITHHOLDING ON ACCOUNT OF LUXEMBOURG TAX MAY BE MADE FROM AMOUNTS PAYABLE TO THE UNDERSIGNED ON THE REDEMPTION OR PURCHASE OF THE RETRACTED SHARES.
The undersigned hereby represents and warrants to LuxCo and ParentCo that the undersigned has good title to, and owns, the share(s) represented by this certificate to be acquired by LuxCo or ParentCo free and clear of all liens, claims and encumbrances.
[ ] Please check box if the securities and any cheque(s) resulting from the retraction or phase of the Retracted Shares are to be held for pick-up by the shareholder from the Transfer Agent, failing which the securities and any cheque(s) will be mailed to the last address of the shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate, together with such additional documents as the Transfer Agent may require, must be deposited with the Transfer Agent. The securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares will be issued and registered in, and made payable to, respectively, the name of the shareholder as it appears on the register of LuxCo and the securities and any cheque(s) resulting from such retraction or purchase will be delivered to such shareholder as indicated above, unless the form appearing immediately below is duly completed.
NOTE: If this Retraction Request is for less than all of the shares represented by this certificate, a certificate representing the remaining share(s) of LuxCo represented by this certificate will be issued and registered in the name of the shareholder as it appears on the register of LuxCo, unless the share transfer power on the share certificate is duly completed in respect of such share(s).
Exhibit 10.14
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT dated for reference the 28th day of March, 2001.
BETWEEN:
ICHOR CORPORATION, a corporation organized under the laws of the State of Delaware in the United States
(hereinafter referred to as "PARENTCO")
AND:
6543 LUXEMMOURG S.A., a corporation organized under the laws of Luxembourg
(hereinafter referred to as "LUXCO")
WHEREAS in connection with a share exchange agreement (the "SHARE EXCHANGE AGREEMENT") dated for reference December 13, 2000 between ParentCo and certain shareholders of Hippocampe SA., ParentCo agreed to execute and deliver and cause LuxCo to execute and deliver a support agreement substantially in the form of this Agreement which contemplates that ParentCo will cause LuxCo to issue LuxCo Exchangeable Preferred Shares to certain holders of securities of Hippocampe SA. contemplated by the Share Exchange Agreement;
NOW THEREFORE in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
Each term denoted herein by initial capital letters and not otherwise defined herein shall have the meaning ascribed thereto in a shareholder agreement (the "SHAREHOLDER AGREEMENT") dated for reference March 28, 2001 among ParentCo, LuxCo and certain holders of LuxCo Exchangeable Preferred Shares, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS
The division of this agreement into Articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement Unless otherwise indicated, all references to an "Article" or "section" followed by a number and/or a letter refer to the specified Article or section of this Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and similar expressions refer to this Agreement and not to any particular Article, section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.
1.3 NUMBER, GENDER
Words importing the singular number only shall include the plural and vice versa. Words importing any gender shall include all genders.
1.4 DATE FOR ANY ACTION
If any date on which any action is required to be taken under this agreement is not a business day, such action shall be required to be taken on the next succeeding business day.
ARTICLE 2
COVENANTS OF PARENTCO AND LUXCO
2.1 COVENANTS REGARDING LUXCO EXCHANGEABLE PREFERRED SHARES
So long as any LuxCo Exchangeable Preferred Shares not owned by ParentCo or its Affiliates are outstanding, ParentCo will:
(a) not declare or pay any dividend on the ParentCo Common Shares unless:
(i) LuxCo shall simultaneously declare or pay, as the case may be, an
equivalent dividend (as provided for in the Shareholder Agreement) on
the LuxCo Exchangeable Preferred Shares; and (ii) LuxCo shall have
sufficient money or other assets or authorized but unissued securities
available to enable the due declaration and the due and punctual
payment, in accordance with applicable law, of any such dividend on the
LuxCo Exchangeable Preferred Shares;
(b) advise LuxCo sufficiently in advance of the declaration by ParentCo of any dividend on ParentCo Common Shares and take all such other actions as are reasonably necessary, in cooperation with LuxCo, to ensure that the respective declaration date, record date and payment date for a dividend on the LuxCo Exchangeable Preferred Shares shall be the same as the declaration date, record date and payment date for the corresponding dividend on the ParentCo Common Shares;
(c) ensure that the record date for any dividend declared on ParentCo Common Shares is not less than ten business days after the declaration date of such dividend; and
(d) take all such actions and do all such things as are reasonably necessary or desirable to enable and permit LuxCo, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Amount, the Retraction Price or the Redemption Price in respect of each issued and outstanding LuxCo Exchangeable Preferred Share (other than LuxCo Exchangeable Preferred Shares owned by ParentCo or its Affiliates) upon the liquidation, dissolution or winding-up of LuxCo, the delivery of a Retraction Request by a holder of LuxCo Exchangeable Preferred Shares or a redemption of LuxCo Exchangeable Preferred Shares by LuxCo, as the case may be, including without limitation all such actions and all such things as are necessary or desirable to enable and permit LuxCo to cause to be delivered ParentCo Common Shares to the holders of LuxCo Exchangeable Preferred Shares in accordance with the provisions of Article 6, 7, or 8, as the case may be, of the Shareholder Agreement.
2.2 SEGREGATION OF FUNDS
ParentCo will cause LuxCo to deposit a sufficient amount of funds in a separate account of LuxCo and segregate a sufficient amount of such other assets and property as is necessary to enable LuxCo to pay dividends when due and to pay or otherwise satisfy its respective obligations under Article 6, 7 or 8 of the Shareholder Agreement as applicable.
2.3 RESERVATION OF PARENTCO COMMON SHARES
ParentCo hereby represents, warrants and covenants in favor of LuxCo that, from and after the filing by ParentCo of a Certificate of Amendment to Certificate of Incorporation to increase the authorized number of ParentCo Common Shares from 30,000,000 to 80,000,000, ParentCo will reserve for issuance and will, at all times while any LuxCo Exchangeable Preferred Shares (other than LuxCo Exchangeable Preferred Shares held by ParentCo or its Affiliates) are outstanding, keep available, free from pre-emptive and other rights, out of its authorized and unissued capital stock such number of ParentCo Common Shares (or other shares or securities into which ParentCo Common Shares may be reclassified or changed as contemplated by section 2.7 hereof): (i) as is equal to the sum of. (A) 1,066.44 multiplied by the number of LuxCo Exchangeable Preferred Shares issued and outstanding from time to time,
subject to adjustment in accordance with section 2.7 hereof, and (B) 1,066.44 multiplied by the number of LuxCo Exchangeable Preferred Shares issuable upon the exercise of all rights to acquire LuxCo Exchangeable Preferred Shares outstanding from time to time, subject to adjustment in accordance with section 2.7 hereof; and (ii) as are now and may hereafter be required to enable and permit ParentCo to meet its obligations under the Voting and Exchange Trust Agreement and under any other security or commitment pursuant to which ParentCo may now or hereafter be required to issue ParentCo Common Shares and to enable and permit LuxCo to meet its respective obligations under the provisions attaching to the LuxCo Exchangeable Preferred Shares and under the Shareholder Agreement.
2.4 NOTIFICATION OF CERTAIN EVENTS
In order to assist ParentCo to comply with its obligations hereunder and to permit ParentCo to exercise the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, LuxCo will notify ParentCo of each of the following events at the time set forth below:
(a) in the event of any determination by the board of directors of LuxCo to institute voluntary liquidation, dissolution or winding-up proceedings with respect to LuxCo or to effect any other distribution of the assets of LuxCo among its shareholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution;
(b) promptly, upon the earlier of receipt by LuxCo of notice of and LuxCo otherwise becoming aware of any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of LuxCo or to effect any other distribution of the assets of LuxCo among its shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by LuxCo of a Retraction Request;
(d) on the same date on which notice of redemption is given to holders of LuxCo Exchangeable Preferred Shares, upon the determination of a Redemption Date in accordance with the Shareholder Agreement; and
(e) as soon as practicable upon the issuance by LuxCo of any LuxCo Exchangeable Preferred Shares or rights to acquire LuxCo Exchangeable Preferred Shares (other than the issuance of LuxCo Exchangeable Preferred Shares and rights to acquire LuxCo Exchangeable Preferred Shares in exchange for outstanding common shares of Hippocampe S.A. pursuant to the Share Exchange Agreement).
2.5 DELIVERY OF COMMON SHARES TO LUXCO
In furtherance of its obligations under sections 2.1(d) hereof, upon notice from LuxCo of any event that requires LuxCo to cause to be delivered ParentCo Common Shares to any holder of LuxCo Exchangeable Preferred Shares, ParentCo, shall forthwith issue and deliver or cause to be delivered to LuxCo the requisite number of ParentCo Common Shares to be received by, and issued to or to the order of, the former holder of the surrendered LuxCo Exchangeable Preferred Shares, as LuxCo shall direct. All such ParentCo Common Shares shall be duly authorized and validly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance. In consideration of the issuance and delivery of each such ParentCo Common Share, LuxCo shall issue to ParentCo, or as ParentCo may direct, LuxCo Common Shares having equivalent value.
2.6 QUALIFICATION OF PARENTCO COMMON SHARES
If any ParentCo Common Shares (or other shares or securities into which ParentCo Common Shares may be reclassified or changed as contemplated by section 2.7 hereof) to be issued and delivered hereunder require registration or qualification with or approval of or the filing of any document including any prospectus or similar document or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any securities or other law or regulation or pursuant to the rules and regulations of any securities or other regulatory authority or the fulfillment of any other legal requirement before such shares (or such other shares or securities) may be issued by ParentCo and delivered by ParentCo at the direction of LuxCo to the holder of surrendered LuxCo Exchangeable Preferred Shares, ParentCo, will in good faith
expeditiously take all such actions and do all such things as are necessary or desirable to cause such ParentCo Common Shares (or such other shares or securities) to be and remain duly registered, qualified or approved under applicable laws. ParentCo will in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all ParentCo Common Shares (or such other shares or securities) to be delivered hereunder to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding ParentCo Common Shares (or such other shares or securities) have been listed by ParentCo and remain listed and are quoted or posted for trading at such time.
2.7 ECONOMIC EQUIVALENCE
So long as any LuxCo Exchangeable Preferred Shares not owned by ParentCo, or its Affiliates are outstanding:
(a) ParentCo will not without prior approval of LuxCo and the prior approval of the holders of the LuxCo Exchangeable Preferred Shares given in accordance with section 13.2 of the Shareholder Agreement:
(i) issue or distribute ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares) to the holders of all or substantially all of the then outstanding ParentCo Common Shares by way of stock dividend or other distribution, other than an issue of ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares) to holders of ParentCo Common Shares who exercise an option to receive dividends in ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares) in lieu of receiving cash dividends; or
(ii) issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding ParentCo Common Shares entitling them to subscribe for or to purchase ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares); or
(iii) issue or distribute to the holders of all or substantially all of the then outstanding ParentCo Common Shares: (A) shares or securities of ParentCo of any class other than ParentCo Common Shares (other than shares convertible into or exchangeable for or carrying rights to acquire ParentCo Common Shares); (B) rights, options or warrants other than those referred to in section 2.7(a)(ii) above; (C) evidences of indebtedness of ParentCo; or (D) assets of ParentCo,
unless the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the LuxCo Exchangeable Preferred Shares; provided that, for greater certainty, the above restrictions shall not apply to any securities issued or distributed by ParentCo in order to give effect to and to consummate the transactions contemplated by, and in accordance with, the Share Exchange Agreement,
(b) ParentCo will not without the prior approval of LuxCo and the prior approval of the holders of the LuxCo Exchangeable Preferred Shares given in accordance with section 13.2 of the Shareholder Agreement:
(i) subdivide, redivide or change the then outstanding ParentCo Common Shares into a greater number of ParentCo Common Shares; or
(ii) reduce, combine, consolidate or change the then outstanding ParentCo Common Shares into a lesser number of ParentCo Common Shares; or
(iii) reclassify or otherwise change ParentCo Common Shares or effect an amalgamation, merger, reorganization or other transaction affecting ParentCo Common Shares,
unless the same or an economically equivalent change shall simultaneously be made to, or in the rights of the holders of, the LuxCo Exchangeable Preferred Shares.
(c) ParentCo will ensure that the record date for any event referred to in section 2.7(a) or 2.7(b) above, or (if no record date is applicable for such event) the effective date for any such event, is not less than five business days after the date on which such event is declared or announced by ParentCo (with contemporaneous notification thereof by ParentCo to LuxCo);
(d) The board of directors of LuxCo shall determine, in good faith and in its sole discretion, economic equivalence for the purposes of any event referred to in section 2.7(a) or 2.7(b) above and each such determination shall be conclusive and binding on ParentCo. in making each such determination, the following factors shall, without excluding other factors determined by the board of directors of LuxCo to be relevant, be considered by the board of directors of LuxCo:
(i) in the case of any stock dividend or other distribution payable in ParentCo Common Shares, the number of such shares issued in proportion to the number of ParentCo Common Shares previously outstanding;
(ii) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase ParentCo Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire ParentCo Common Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price of a ParentCo Common Share;
(iii) in the case of the issuance or distribution of any other form of property (including without limitation any shares or securities of ParentCo, of any class other than ParentCo Common Shares, any rights, options or warrants other than those referred to in section 2.7(d)(ii) above, any evidences of indebtedness of ParentCo or any assets of ParentCo), the relationship between the fair market value (as determined by the board of directors of LuxCo in the mariner above contemplated) of such property to be issued or distributed with respect to each outstanding ParentCo Common Share and the Current Market Price of a ParentCo Common Share;
(iv) in the case of any subdivision, redivision or change of the then outstanding ParentCo Common Shares into a greater number of ParentCo Common Shares or the reduction, combination, consolidation or change of the then outstanding ParentCo Common Shares into a lesser number of ParentCo Common Shares or any amalgamation, merger, reorganization or other transaction affecting ParentCo Common Shares, the effect thereof upon the then outstanding ParentCo Common Shares; and
(v) in all such cases, the general taxation consequences of the relevant event to holders of LuxCo Exchangeable Preferred Shares to the extent that such consequences may differ from the taxation consequences to holders of ParentCo Common Shares as a result of differences between taxation laws of Luxembourg and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of LuxCo Exchangeable Preferred Shares).
(e) LuxCo agrees that, to the extent required, upon due notice from ParentCo, LuxCo will use its best efforts to take or cause to be taken such steps as may be necessary for the purposes of ensuring that appropriate dividends are paid or other distributions are made by LuxCo, or subdivisions, redivisions or changes are made to the LuxCo Exchangeable Preferred Shares, in order to implement the required economic equivalent with respect to the ParentCo Common Shares and the LuxCo Exchangeable Preferred Shares as provided for in this Section 2.7.
2.8 TENDER OFFERS
In the event that a tender offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to ParentCo Common Shares (an "OFFER") is proposed by ParentCo or is proposed to ParentCo or its shareholders and is recommended by the board of directors of ParentCo, or is otherwise effected or to be effected with the consent or approval of the board of directors of ParentCo, and the LuxCo Exchangeable Preferred Shares are not redeemed by LuxCo or purchased by ParentCo pursuant to the Redemption Call Right, ParentCo will use its reasonable efforts
expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit holders of LuxCo Exchangeable Preferred Shares to participate in such Offer to the same extent and on an economically equivalent basis as the holders of ParentCo Common Shares, without discrimination. Without limiting the generality of the foregoing, ParentCo will use its reasonable efforts expeditiously and in good faith to ensure that holders of LuxCo Exchangeable Preferred Shares may participate in each such Offer without being required to retract LuxCo Exchangeable Preferred Shares as against LuxCo (or, if so required, to ensure that any such retraction, shall be effective only upon, and shall be conditional upon, the closing of such Offer and only to the extent necessary to tender or deposit to the Offer). Nothing herein shall affect the rights of LuxCo to redeem (or ParentCo to purchase pursuant to the Redemption Call Right) LuxCo Exchangeable Preferred Shares, as applicable, in the event of a ParentCo Control Transaction.
2.9 OWNERSHIP OF OUTSTANDING SHARES
Without the prior approval of LuxCo and the prior approval of the holders of the LuxCo Exchangeable Preferred Shares given in accordance with section 13.2 of the Shareholder Agreement, ParentCo covenants and agrees in favor of LuxCo that, as long as any outstanding LuxCo Exchangeable Preferred Shares are owned by any Person other than ParentCo or any of its Affiliates, ParentCo with be and remain the direct or indirect beneficial owner of all issued and outstanding voting shares in the capital of LuxCo.
2.10 PARENTCO AND AFFILIATES NOT TO VOTE LUXCO EXCHANGEABLE PREFERRED SHARES
ParentCo covenants and agrees that it will appoint and cause to be appointed proxy holders with respect to all LuxCo Exchangeable Preferred Shares held by it and its Affiliates for the sole purpose of attending each meeting of holders of LuxCo Exchangeable Preferred Shares in order to be counted as part of the quorum for each such meeting. ParentCo further covenants and agrees that it will not, and will cause its Affiliates not to, exercise any voting rights which may be exercisable by holders of LuxCo Exchangeable Preferred Shares from time to time pursuant to the Shareholder Agreement or pursuant to the provisions of any applicable corporate legislation in Delaware or Luxembourg, as applicable, with respect to any LuxCo Exchangeable Preferred Shares held by it or by its Affiliates in respect of any matter considered at any meeting of holders of LuxCo Exchangeable Preferred Shares.
ARTICLE 3
PARENTCO SUCCESSORS
3.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.
ParentCo shall not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other Person or, in the case of a merger, of the continuing corporation resulting therefrom unless, but may do so if:
(a) such other Person or continuing corporation (the "PARENTCO SUCCESSOR") by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement supplemental hereto and such other instruments (if any) as are reasonably necessary or advisable to evidence the assumption by the ParentCo Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such ParentCo Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of ParentCo under this Agreement; and
(b) such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the other parties hereunder.
3.2 VESTING OF POWERS IN SUCCESSOR
Whenever the conditions of section 3.1 have been duly observed and performed, the parties, if required by section 3.1, shall execute and deliver the supplemental agreement provided for in section 3.1(a) and thereupon the ParentCo
Successor shall possess and from time to time may exercise each and every right and power of ParentCo under this Agreement in the name of ParentCo or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the board of directors of ParentCo or any officers of ParentCo may be done and performed with like force and effect by the directors or officers of such ParentCo Successor.
3.3 WHOLLY-OWNED SUBSIDIARIES
Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned direct or indirect subsidiary of ParentCo with or into ParentCo or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of ParentCo provided that all of the assets of such subsidiary are transferred to ParentCo or another wholly-owned direct or indirect subsidiary of ParentCo and any such transactions are expressly permitted by this Article 3.
ARTICLE 4
GENERAL
4.1 TERM
This Agreement shall come into force and be effective as of the date hereof and shall terminate and be of no further force and effect at such time as no LuxCo Exchangeable Preferred Shares (or securities or rights convertible into or exchangeable for or carrying rights to acquire LuxCo Exchangeable Preferred Shares) are held by any Person other than ParentCo and any of its Affiliates.
4.2 CHANGES IN CAPITAL OF PARENTCO AND LUXCO
At all times after the occurrence of any event contemplated pursuant to sections 2.7 and 2.8 hereof or otherwise, as a result of which either ParentCo Common Shares or the LuxCo Exchangeable Preferred Shares or both are in any way changed, this agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which ParentCo Common Shares or the LuxCo Exchangeable Preferred Shares or both are so changed and the parties hereto shall execute and deliver an agreement in writing giving effect to and evidencing such necessary amendments and modifications.
4.3 SEVERABILITY
If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and this Agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.
4.4 AMENDMENTS, MODIFICATIONS
This Agreement may not be amended or modified except by an agreement in writing executed by LuxCo and ParentCo and approved by the holders of the LuxCo Exchangeable Preferred Shares in accordance with section 13.2 of the Shareholder Agreement.
4.5 MINISTERIAL AMENDMENTS
Notwithstanding the provisions of section 4.4, the parties to this Agreement may in writing at any time and from time to time, without the approval of the holders of the LuxCo Exchangeable Preferred Shares, amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all parties provided that the board of directors of each of LuxCo and ParentCo shall be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the holders of the LuxCo Exchangeable Preferred Shares;
(b) making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the board of directors of
each of LuxCo and ParentCo, it may be expedient to make, provided that each such board of directors shall be of the good faith opinion that such amendments or modifications will not be prejudicial to the rights or interests of the holders of the LuxCo Exchangeable Preferred Shares; or
(c) making such changes or corrections which, on the advice of counsel to LuxCo and ParentCo, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the boards of directors of each of LuxCo and ParentCo shall be of the good faith opinion that such changes or corrections will not be prejudicial to the rights or interests of the holders of the LuxCo Exchangeable Preferred Shares.
4.6 MEETING TO CONSIDER AMENDMENTS
LuxCo, at the request of ParentCo, shall call a meeting or meetings of the holders of the LuxCo Exchangeable Preferred Shares for the purpose of considering any proposed amendment or modification requiring approval pursuant to section 4.4 hereof. Any such meeting or meetings shall be called and held in accordance with the bylaws of LuxCo, the Shareholder Agreement and all applicable laws.
4.7 AMENDMENTS ONLY IN WRITING
No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto.
4.9 ENUREMENT
This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and assigns.
4.9 NOTICES TO PARTIES
All notices and other communications between the parties to this Agreement shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for any such party as shall be specified in like notice):
(a) if to LuxCo:
6543 Luxembourg S.A. 3,
Rue de la Chapelle
L-2419 Luxembourg
Attention: Secretary
Telecopier No.: (352) 45 45 51
(b) if to ParentCo:
ICHOR Corporation
17 Dame Street Dublin 2, Ireland
Attention: Secretary
Telecopier No.: (3531)670 8938
Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of confirmed receipt thereof unless such day is not a business day in which case it shall be deemed to have been given and received upon the immediately following business day.
4.10 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.
4.11 JURISDICTION
This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware in the United States.
4.12 ATTORNMENT
Each of the parties hereto agrees that any action or proceeding arising out of or relating to this Agreement may be instituted in the courts of the State of Delaware in the United States, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgment of the said courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
ICHOR CORPORATION
By: /s/M. Eric Turcotte
_________________________________
Name: Mr. Eric Turcotte
Title: CFO
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6543 LUXEMBOURG S.A.
By: /s/ Charles Duro
_________________________________
Name: Charles Duro
Title: Director
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Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
For the Years Ended December 31, 2001, 2000, and 1999
(In Thousands of Euros, Except for Per Share Amounts)
BASIC EPS
---------
2001 2000 1999
------------------------ ------------------------ ------------------------
Net loss per financial statements (euro dollar) (15,701) (euro dollar) (1,314) (euro dollar) (99)
======================== ======================== ========================
Weighted average shares outstanding 42,459,784 33,311,361 33,311,361
Basic earnings (loss) per share (euro dollar) (.37) (euro dollar) (.04) (euro dollar) (.00)
======================== ======================== ========================
DILUTED EPS
-----------
2001 2000 1999
------------------------ ------------------------ ------------------------
Net loss per financial statements (euro dollar) (15,701) (euro dollar) (1,314) (euro dollar) (99)
======================== ======================== ========================
Weighted average shares outstanding 43,671,784 33,391,361 33,456,361
Diluted earnings (loss) per share* (euro dollar) (.36) (euro dollar) (.04) (euro dollar) (.00)
======================== ======================== ========================
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* - Anti-dilutive
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this registration statement (No. 333-______) on Form S-1 of Mymetics Corporation of our report dated March 8, 2002, relating to the consolidated balance sheets of Mymetics Corporation as of December 31, 2001 and 2000, and the related consolidated statements of operations and comprehensive loss, changes in shareholders' equity, and cash flows for the years ended December 31, 2001, 2000, and 1999, and for the period from May 2, 1990 (inception) to December 31, 2001. We also consent to the reference to our firm under the caption "Experts".
/s/ Peterson Sullivan P.L.L.C. Seattle, Washington May 21, 2002 |