SOPHARMA AD AGM 2010 Materials
Substantiated report
of the Board of Directors of Sopharma AD, Sofia
RE: CONDITIONS and appropriateness of transactions pursuant to Article 114, Para. 1 of the Public Offering of Securities Act (POSA), PROPOSED FOR APPROVAL OF THE MEETING OF THE GENERAL MEETING OF SHAREHOLDERS scheduled for June 23, 2010 D.
This report was prepared and adopted by the Board of Directors of Sopharma AD Sofia meeting held on 03.05.2010, the subject of art. 114a, para. 1 of POSA and art. 46 of Decree № 2 from 17.09.2003 to the Financial Supervision Commission Prospectus for public offering and admission to trading on a regulated securities market and for disclosure by public companies and other issuers of securities.
According to Art. 114a, para. 1 of POSA, this report of the Board of Directors is part of the materials for the agenda of the General Meeting of shareholders scheduled for 23 June 2010
The purpose of this report is to acquaint the Shareholders of Sopharma AD Sofia with the essential conditions and appropriateness of transactions under Art. 114, para. 1 of POSA proposed for approval at the General Meeting of shareholders scheduled for June 23, 2010, to make an informed decision by the shareholders on the relevant agenda items, namely - empower the Board of Directors of Sopharma AD Sofia to perform these transactions.
SCOPE OF THIS REPORT ARE THE FOLLOWING TRANSACTIONS:
I. Contract governing the relationship between Sopharma AD and Unipharm AD associated with the development of medicinal products - transactions falling within the scope of article 114, paragraph 1, item 2 and item 3 of POSA
1. SUBJECT OF TRANSACTION - Available General Meeting of Shareholders of Sopharma AD to approve a contract for:
1.1. Production of medicines between Sopharma AD as principals and Unipharm AD as a contractor for a period of the contract 5 / five / years worth 16 million / sixteen million BGN / year or total value of transaction: 80 million Euro .
1.2. Supply of raw materials and materials for the manufacture of medicinal products between Sopharma AD as Provider and Unipharm PLC as Receiver duration of the contract 5 / five / years worth 12 million / Twelve million / per year or total the transaction: EUR 60 million.
2. Parties to the transaction
PRINCIPAL: Sopharma AD, with registered head office - Sofia 1220, Iliensko road "№ 16 registered in the Commercial Register at the Registry Agency with UIC 831,902,088, represented by Ognian Ivanov Donev , as a member of the Executive Board of Directors of the company.
CONTRACTOR: Unipharm SA, with registered address - city, Sofia 1797, Dr. Mr. Student, hc Bug Street Trajko Stanoev № 3, registered in the Commercial Register at the Registry Agency PIN: 831 537 465, represented by Ognyan Palaveev Kirilov, as a member of the Executive Board of the company.
3. Participation of interested parties in the transaction under Art. 114, para. 5 of POSA
Under the provisions of article 114, paragraph 5 of POSA, interested persons are members of management and supervisory bodies of the public company, his procurator, and who directly or indirectly hold at least 25 percent of the votes in the general meeting of the company or control it when they or related persons:
• a party, its representative or broker of the deal, or at their transactions are conducted or actions, or
• directly or indirectly hold at least 25 percent of the vote in the General Assembly or controlled entity which is a party, its agent or intermediary in the transaction, or for whom transactions are conducted or actions;
• are members of management or supervisory bodies or procurators of the entity under item 2.
The proposed transaction involved the approval interested person within the meaning of art. 114, para. 5 of POSA, namely: Unipharm AD as part of the deal is an interested party as a member of the Board of Directors of Sopharma AD. In connection with this transaction between two companies within the scope of article 114, paragraph 1, 2 and 3 of POSA.
Interested person within the meaning of article 114, paragraph 5 of POSA is Ognian Ivanov Donev - Executive member of the Board of Directors of public company Sopharma AD. Ognian Ivanov Donev owns directly more than 25% of capital - a party to the transaction.
Under article 114, paragraph 3 of POSA interested persons can not exercise their right out loud at the General Meeting, scheduled for June 23, 2010
4. TERMS OF THE TRANSACTION AND period for concluding
Board of Directors proposes the following key provisions of the Treaty concerning the manufacture of medicinal products where Sopharma AD is contracting and Unipharm AD implementation:
Duration of contract 5 / five / years;
Transaction value - 16,000,000 / sixteen million BGN / year or a total value of the transaction: 80,000,000 / eighty million / Euro.
Medicinal products will be made on orders from the Principal. Contracts will be for three-month periods and will include at least the following: type, quantity, assortment, turnaround and construction unit cost for each of the products ordered.
Payment under the contract will be effected as follows: After acceptance by the Principal of the work done in any order against the invoice issued by the Contractor.
Manufactured products should meet the quality requirements in accordance with their registration documents. Control over the quality of manufactured under contract medicinal products will be effected by the developer, who is responsible for, under his own authorization of the medicinal product.
The contractor will use in the manufacture of medicinal products ordered raw materials supplied by the Contractor under the same contract as:
Board of Directors proposes the following key provisions of the Treaty concerning the supply of raw materials, where SOPHARMA AD Provider and Unipharm Receiver AD.
The value of supplies provided to up to 12 million / Twelve million / per year or a total value of transaction: 60 million Euro for the duration of the contract 5 / five / years.
The recipient Unipharm AD will be required to pay the requested and received quantities and types of raw materials in the period referred to in the invoice issued by the Contractor for each delivery.
It is envisaged that deliveries be made based on periodic requests from the Unipharm AD, periods can not be shorter than one month and more than three months. Each application will contain at least the following information: the type and quantities of necessary raw materials and delivery terms.
The supplier will be able within a certain period, but not less than seven days to assess their capacity to implement the application in assortment and to meet deadlines and whether I accept it.
Payment will be made on delivery of the goods accepted for execution against orders issued by the lender invoice.
Control over the quality of supplies and materials will be provided on both sides of the following principle: The supplier will require the item to be supplied by priduzhena quality certificate and the recipient will be required to exercise control of incoming product quality of each delivery. Quality Division will be decided by an independent laboratory designated by both parties.
The contract for the manufacture of medicines and supplies necessary for such raw materials between Sopharma AD and Unipharm AD to be concluded within one month of the adoption of a decision from the General Assembly of Shareholders of Sopharma AD scheduled for June 23, 2010 under the parameters set out in this report to the Board of Directors.
General Meeting of Shareholders of Sopharma AD should empower the Board of Directors of the Company to conclude the transaction and make all factual and legal actions necessary for its implementation in accordance with the decision of the General Assembly of shareholders of the Company Charter and accordance with the applicable legislation.
5. TRANSACTION BENEFIT
The deal is for the benefit of both parties.
6. Assessment of the conditions under Art. 114, para. 1 item 2 and item 3 of POSA - these conditions are assessed when under and pursuant to the transaction incurs obligations to a public company or entity to related parties totaling more than the value of art. 114, para 1, item 1, letter "a" of herein, and where obligations are to interested persons or for the benefit of stakeholders - over the value of item 1, letter "b" in that provision, and when strength and performance of the contract receivables arising from the public company to a person or related parties in excess of the value of art. 114, para 1, item 1, letter "a" of herein, and where debtors of the company stakeholders - over 10 percent of the value of item 1, letter "b" in that provision.
In compliance with the proposed transaction to Sopharma AD will affect monetary payment obligation of manufactured under contract medicinal products totaling 80 million euro to the person concerned Unipharm AD, so here is the relevant provision of Art. 114 (1), item 1 b. "B" in connection with the second hypothesis of section 2 of the same provision of POSA.
399 785 000 / 422 477 000 / 80000000 / 7 996 000
In compliance with the obligation to supply raw materials resulting from the same transaction, Sopharma AD will affect the value of taking delivery, totaling 60 million euro from the person concerned Unipharm AD, so in this case is relevant provisions of Art. 114 (1), item 1 b. "B" in connection with the second hypothesis of Section 3 of the same provision of POSA.
Value of the assets in the audited balance sheet as at 31.12.2009 in BGN / Value of the assets in the unaudited balance sheet as at 30.03.2010 in BGN / Value of the receivables in BGN / Limit according to art. 114, para 1, item 1, b”b” of the LOPS in BGN399 785 000 / 422 477 000 / 60 000 000 / 799 600
From the above tables shows that the total value of the proposed transaction exceeds the limits of art. 114, para. 1, item 1, letter "b" in relation to items 2 and 3 of the same provision of POSA, which is necessary because the Board of Directors is expressly empowered to conclude it by the General Meeting of shareholders of the company.
7. Appropriateness of the proposed transaction
Unipharm JSC provides Sopharma AD services in the production of the product list of Sopharma AD. For its part, Sopharma AD has contracts for the supply of raw materials and export network to ensure the profitability of production and distribution of finished goods.
Production and storage facilities available Unipharm AD, are licensed for the activities required under current legislation in the country. Due to technological specifics of certain products from the portfolio of Sopharma AD is possible under excessive load capacity of the company, these products can be assigned to Unipharm AD.
This and the fact that Unipharm AD is part of a group of related economic SOPHARMA, determines the appropriateness of the proposed transaction. The contract relates to the ordinary business of Sopharma AD.
II. CONCLUSION OF A MONETARY LOAN CONTRACT BETWEEN MONETARY LOAN Sopharma AD AS lender and Unipharm AD as borrowers in rate of up to 5 million / five million BGN / YEARLY
1. SUBJECT OF TRANSACTION
Provision of a loan by Sopharma AD as a lender of Unipharm SA as borrower up to 5 million / five million BGN / year for 5 / five / years against any obligation of the loan amount provided to be returned within no longer than 1 / A year after the grant due to its consideration by the borrower in the form of an annual interest rate in line with the market rate at the time of granting the loan. The total cost of services under this contract funds for the duration of the contract is estimated at 25 million / twenty five million / Euro.
"Market interest is interest that would have been paid under the same conditions granted or obtained credit under any form of transaction between individuals who are not related. The market rate is determined by market conditions, taking into account all the quantitative and qualitative characteristics of the transaction - shape, size and currency of award, date of their submission, type, size and liquidity of the collateral, credit risk and other risks associated with transaction profile of the borrower / lessee and all other conditions and circumstances affecting the amount of interest.
2. Parties to the transaction
Lender: Sopharma AD, with registered address - city Sofia, highway Iliensko "№, UIC 831902088, represented by Ognyan Donev, as a member of the Executive Board of Directors of the company.
Borrower: Unipharm SA, with registered address - city, Sofia 1797, Dr. Mr. Student, hc Bug Street Trajko Stanoev № 3, registered in the Commercial Register at the Registry Agency PIN: 831 537 465, represented by Ognyan Palaveev Kirilov, as a member of the Executive Board of the company.
3. Participation of interested parties in the described above transaction within the meaning of Art. 114, para. 5 of POSA
Interested persons are members of management and supervisory bodies of the public company, his procurator, and who directly or indirectly hold at least 25 percent of the votes in the General Assembly of the company or control it when they or related persons:
• a party, its representative or broker of the deal, or at their transactions are conducted or actions, or
• directly or indirectly hold at least 25 percent of the vote in the General Assembly or controlled entity which is a party, its agent or intermediary in the transaction, or for whom transactions are conducted or actions;
• are members of management or supervisory bodies or procurators of the entity under item 2.
The proposed transaction involved the approval interested person within the meaning of art. 114, para. 5 of POSA, namely: Unipharm AD as part of the deal is an interested party as a member of the Board of Directors of Sopharma AD. In connection with this transaction between two companies within the scope of article 114, paragraph 1, 2 and 3 of POSA.
Interested person within the meaning of article 114, paragraph 5 of POSA is Ognian Ivanov Donev - Executive member of the Board of Directors of public company Sopharma AD. Ognian Ivanov Donev owns directly more than 25% of capital - a party to the transaction.
Under article 114, paragraph 3 of POSA interested persons can not exercise their right out loud at the General Meeting, scheduled for June 23, 2010
4. TERMS AND CONDITIONS
Amount of loan money - up to 5 million / five million BGN / year with a total of up to 25 million / twenty five million / EUR for the duration of the contract 5 / five / years.
Lender - Sopharma AD
Borrower - Unipharm AD