SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by rule
14c-5(d)(2))
[ X ] Definitive Information Statement
UNIMANN, INC.
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(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction
applies: Unimann, Inc., $.001 par value common stock
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2) Aggregate number of securities to which transaction applies:
9,750,000 shares
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction: $8,775,000
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5) Total fee paid: $1,755
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[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing:
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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UNIMANN, INC.
11601 East Lusitano Place
Tucson, Arizona 85748
December 6, 2001
The enclosed Information Statement is being furnished to shareholders
of record on October 31, 2001 (our "Record Date"), of Unimann, Inc., a Wyoming
corporation (the "Company"), in connection with the following actions taken by
written consent of holders of a majority of the outstanding shares of our common
stock entitled to vote on the following proposals:
1. Approval of a reverse stock split of the Company's common
stock on a one for four basis;
2. Approval and adoption of a Stock Purchase Agreement whereby
the shareholders of Sino Pharmaceuticals Corporation ("SPC")
will exchange all of SPC's issued and outstanding shares of
$.001 par value common stock for shares of post-reverse split
$.001 par value common stock in Unimann, Inc. (the
"Acquisition"). A copy of the Stock Purchase Agreement is
attached as Appendix A.
3. Amendment of our articles of incorporation to change our name
to Sino Pharmaceuticals Corporation. A copy of our proposed
Amended and Restated Articles of Incorporation is attached as
Appendix B;
4. Amendment of our articles of incorporation to authorize the
issuance of preferred stock at the discretion of our board of
directors. A copy of our proposed Amended and Restated
Articles of Incorporation is attached as Appendix B; and
5. Approval of the adoption of the 2001 Stock Option Plan, a copy
of which is attached as Appendix C.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
Our board of directors has fully reviewed and unanimously approved the
actions in connection with the above-referenced reverse stock split, Stock
Purchase Agreement and the amendments to the articles of incorporation. In
addition, our board of directors unanimously approved the amendments to our
articles of incorporation and the adoption of the 2001 Stock Option Plan.
The holder of 80% of our common stock has executed a written consent in
favor of the above proposals. However, under Wyoming law these proposals may not
be effected until all shareholders have executed the consent or a special
meeting of shareholders has been held. In addition, under federal law these
proposals may not be effected until at least 20 days after this Information
Statement has first been sent to our shareholders.
By Order of the Board of Directors
Daniel L. Hodges
Chairman of the Board
Tucson, Arizona
December 6, 2001
INFORMATION STATEMENT.........................................................2
PROPOSAL NO. 1: REVERSE STOCK SPLIT..........................................2
Summary of Reverse Stock Split.......................................2
Mechanics of the Reverse Stock Split.................................2
Federal Income Tax Consequences of the Reverse Stock Split...........3
PROPOSAL NO. 2: PLAN OF ACQUISITION..........................................4
Summary Term Sheet...................................................4
Reasons for Acquiring SPC............................................4
Votes Required.......................................................4
Income Tax Consequences of the Acquisition...........................5
Dissenter's Rights...................................................6
Government Regulation................................................6
Differences in Rights of Shareholders................................6
Accounting Treatment of the Acquisition..............................6
Unaudited Historical and Pro Forma Condensed Financial Information...6
RISK FACTORS..................................................................8
Risks Relating to SPC's Business.....................................8
Risks Relating to the Acquisition...................................11
THE COMPANIES................................................................13
Unimann, Inc........................................................13
Sino Pharmaceuticals Corporation....................................14
PROPOSAL NO. 3 CHANGE IN OUR CORPORATE NAME..................................21
PROPOSAL NO. 4 AUTHORIZE PREFERRED STOCK.....................................21
GENERAL INFORMATION..........................................................21
Security Ownership of Our Shares By Certain Beneficial Shareholders.21
Executive Compensation of our Directors and Officers................22
Shareholder Proposals...............................................22
Management Following the Acquisition................................22
Executive Compensation.......................................................24
STOCK OPTION GRANTS..........................................................24
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT.......................24
PROPOSAL NO. 5 ADOPTION OF THE 2001 STOCK OPTION PLAN........................25
Summary of the 2001 Stock Option Plan...............................25
1
INFORMATION STATEMENT
This Information Statement has been prepared by our management. "We,"
"our," "Unimann" and the "Company" refer to Unimann, Inc. "SPC" refers to Sino
Pharmaceuticals Corporation. This Information Statement is first being sent to
our stockholders on or about December 6, 2001.
PROPOSAL NO. 1: REVERSE STOCK SPLIT
Summary of Reverse Stock Split
On November 12, 2001, our board of directors by unanimous consent
approved a reverse stock split of our $.001 par value common stock on a one for
four basis. Currently, the Company has 100,000,000 shares of common stock
authorized, of which 1,000,000 shares are issued and outstanding. The Company
has no other classes of stock authorized. When the reverse stock split becomes
effective, each holder of four shares of the Company's $.001 par value common
stock will own one share of $.001 par value common stock. The result of the
reverse stock split will be that the Company will have 100,000,000 shares of
$.001 par value common stock authorized and 250,000 shares of $.001 par value
common stock outstanding, adjusted for fractional shareholdings. With exception
of the adjustments for those stockholders who would receive cash in lieu of
fractional shares, the reverse stock split will not effect any stockholder's
proportionate equity interest in the Company in relation to the other
stockholders or the rights, preference, privileges or priorities of any
stockholder.
All outstanding options, warrants, rights and convertible securities
that include provisions for adjustments in the number of shares covered thereby,
and the exercise or conversion price thereof, automatically would be
appropriately adjusted for the reverse stock split on the date the split becomes
effective.
Dissenting stockholders have no appraisal rights under Wyoming law or
under the Company's articles of incorporation or bylaws in connection with the
reverse stock split.
The board of directors adopted this four for one reverse stock split in
preparation of the proposed acquisition of SPC described in more detail in
Proposal 2 to this Information Statement. The board of directors believed the
reverse stock split would allow the Company to complete the acquisition of SPC
at the right level of shareholder capitalization such that the acquisition would
dilute the current shareholders of the Company to the level anticipated and
negotiated with the SPC's board of directors. The amended articles of
incorporation reflecting the effect of the four for one reverse stock split
appears in Appendix A.
Mechanics of the Reverse Stock Split
When the waiting period for this information statement has passed, an
amendment to the Company's articles of incorporation will be filed with the
Wyoming Secretary of State, and the four for one reverse stock split will thus
be effected unless abandoned by the board of directors. Immediately upon the
filing of the amendment, each four shares of pre-reverse stock split common
stock will, automatically and without any action on the part of the
stockholders, be converted into one share of post-reverse stock split common
stock.
As soon as practicable after the date the reverse stock split becomes
effective, the Company will notify all stockholders of record on the date of
effectiveness where and by what means to surrender their stock certificates in
exchange for certificates representing the post-reverse stock split common
stock.
Holders of fractional shares or fewer than four shares will be paid a
cash settlement equal to the fractional value of one post-reverse stock split
shares of common stock. Because the Company's common stock is not traded on any
exchange, the board of directors has determined the fair market value of each
post-reverse stock split shares of common stock is $.001.
2
Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of the material federal income tax
consequences of the reverse stock split to stockholders of the Company. This
summary is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Department Regulations (the "Regulations")
issued pursuant thereto, and published rulings and court decisions in effect as
of the date hereof, all of which are subject to change. This summary does not
take into account possible changes in such laws or interpretations, including
amendments to the Code, applicable statutes, Regulations and proposed
Regulations or changes in judicial or administrative rulings, some of which may
have retroactive effect. No assurance can be given that any such changes will
not adversely affect the discussion of this summary.
The Company believes that the reverse stock split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code or as a
stock-for-stock exchange under Section 1036(a) of the Code. As a result, no gain
or loss should be recognized by the Company or its stockholders in connection
with the reverse stock split, except with respect to any cash received in lieu
of fractional shares. A stockholder's aggregate tax basis in his or her shares
of post-reverse stock split common stock received from the Company will be the
same as his or her aggregate tax basis in the pre-reverse stock split common
stock exchanged therefor. The holding period of the post-reverse stock split
common stock surrendered in exchange therefor will include the period for which
the shares of pre-reverse stock split common stock were held, provided all such
common stock was held as a capital asset on the date of the exchange. Each
stockholder who receives cash, if any, in lieu of a fractional share of
post-reverse stock split common stock will recognize capital gain or loss equal
to the difference between the amount of cash received and the stockholder's tax
basis allocable to such fractional share.
This summary is provided for general information only and does not
purport to address all aspects of the possible federal income tax consequences
of the reverse stock split and is not intended as tax advice to any person. In
particular, and without limiting the foregoing, this summary does not consider
the federal income tax consequences to stockholders of the Company in light of
their individual investment circumstances or to holders subject to special
treatment under the federal income tax laws (such as life insurance companies,
regulated investment companies and foreign taxpayers). In addition, this summary
does not address any consequence of the reverse stock split under any state,
local or foreign tax laws.
No ruling from the Internal Revenue Service or opinion of counsel has
been or will be obtained regarding the federal income tax consequences to the
stockholders of the Company as a result of the reverse stock split. Accordingly,
each stockholder is encouraged to consult his or her tax advisor regarding the
specific tax consequences of the proposed transaction to such stockholder,
including the application and effect of state, local and foreign income and
other tax laws. It is the responsibility of each stockholder to obtain and rely
on advice from his or her personal tax advisor as to: the effect on his or her
personal tax situation of the reverse stock split (including the application and
effect of state, local and foreign income and other tax laws); the effect of
possible future legislation and Regulations; and the reporting of information
required in connection with the reverse stock split on his or her own tax
returns. It also will be the responsibility of each stockholder to prepare and
file all appropriate tax returns.
3
PROPOSAL NO. 2: PLAN OF ACQUISITION
Summary Term Sheet
The following summary highlights selected information about the
proposed Acquisition and may not contain all of the information that is
important to you. You should carefully read this entire information statement,
including the "Risk Factors," the financial statements and the related notes and
all the attachments for a complete understanding of the Acquisition. In
particular, you should read the Stock Purchase Agreement, which is attached as
Appendix A.
o The proposed transaction involves the acquisition by us of all of the
issued and outstanding capital stock of SPC resulting in SPC becoming
our wholly-owned subsidiary. We are a company with a class of common
stock registered under the Securities Exchange Act of 1934 and have no
operations, except organizational matters. Our principal offices are
located at 11601 E. Lusitano Place, Tucson, Arizona 85748, and our
phone number is (520) 731-9890. SPC is a Nevada corporation and its
principal offices are located at Unit 152-11782 River Road, Richmond,
British Columbia V6X 127, Canada, and its phone number is 604-303-9170.
For more information about the parties, please see "The Companies" on
page 12.
o On the effective date of the Acquisition, which is expected to be in
December of 2001, each shareholder of SPC will receive nine and
three-quarters (9.75) shares of newly issued common stock of Unimann
for each share of SPC's common stock they own. Unimann will issue an
aggregate of 9,750,000 shares of its common stock to the SPC
shareholders as part of the Acquisition.
o We plan to account for this Acquisition utilizing the purchase method.
The parties believe that the proposed Acquisition may qualify for tax
free treatment under Section 368(a)(1)(B) and Section 351(a) of the
Internal Revenue Code of 1986, as amended.
o After the Acquisition, our current shareholders will own 2.5% of us and
the former SPC shareholders will own 97.5% .
o After the Acquisition, we will change our name to Sino Pharmaceuticals
Corporation.
o After the Acquisition, we will have a new board of directors and new
management.
Reasons for Acquiring SPC
In evaluating the proposed Acquisition, our management considered
criteria such as the value of the assets of SPC and the anticipated business
operations of SPC in comparison with our current lack of operations and other
opportunities presented to us. Based on these criteria, our management
determined that the Acquisition was in the best interest of our shareholders.
Votes Required
Wyoming law provides that the actions of a corporation may be approved
upon such terms and conditions as its board of directors may deem expedient and
in the best interests of the corporation when authorized by a vote of the
holders of the majority of the stock in a corporation. Wyoming further permits
the holders of a majority of the stock in a corporation to approve such an
action by written consent without the necessity of holding a meeting. Daniel L.
Hodges, holder of 800,000 shares of our common stock, or 80% of our currently
outstanding shares, has committed to execute a written consent to take all of
the actions set forth in this Information Statement, including ratification of
the Stock Purchase Agreement. Therefore, no further vote of our shareholders is
required.
4
Income Tax Consequences of the Acquisition
The following is a summary of the material United States federal income
tax consequences of the proposed Acquisition. This summary is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
United States Treasury Department Regulations (the "Regulations") issued
pursuant thereto, and published rulings and court decisions in effect as of the
date hereof, all of which are subject to change. This summary does not take into
account possible changes in such laws or interpretations, including amendments
to the Code, applicable statutes, Regulations and proposed Regulations or
changes in judicial or administrative rulings, some of which may have
retroactive effect. No assurance can be given that any such changes will not
adversely affect the discussion of this summary.
Section 1032(a) of the Code provides that no gain or loss shall be
recognized to a corporation on the receipt of money or other property in
exchange for stock of such corporation. Accordingly, assuming that the
Acquisition is executed in accordance with the terms and conditions set forth in
the Stock Purchase Agreement, (a) the Acquisition appears to satisfy the
requirements of a tax deferred "reorganization" within the meaning of Section
368(a)(1)(B) of the Code and a transfer to a controlled corporation within the
meaning of Section 351(a) of the Code, and (b) no gain or loss should be
recognized by the Company upon the issuance of its common stock to the SPC
shareholders in exchange for SPC common stock. Furthermore, the Company's
shareholders will not incur any taxable gain or loss as a result of the
Acquisition.
The Acquisition will, however, significantly limit the Company's
ability to utilize on an annual basis its net operating loss carryforward
("NOL") currently available to the Company. Under Section 382 of the Code,
limitations are imposed on the use of NOLs in the event of a substantial change
in the stock ownership of a corporation. The Acquisition will result in such an
ownership change because, among other reasons, the percentage of voting stock
owned by the existing shareholders of the Company after the Acquisition will be
less than 50% of their ownership prior to the Acquisition. As a result, the
amount of the Company's annual taxable income that could be offset by the
pre-Acquisition NOL will be limited to an amount determined by multiplying the
value of the issued and outstanding shares of the Company's common stock on the
date of the Acquisition by the federal long term tax exempt rate. The value of
the Company's common stock has not yet been ascertained for purposes of
determining the limitation on use of the NOL. To the extent the value of the
Company's common stock is determined to be equal to shareholders' equity, the
use of the NOL will be significantly limited.
This summary is provided for general information only and does not
purport to address all aspects of the possible federal income tax consequences
of the Acquisition and is not intended as tax advice to any person. In
particular, and without limiting the foregoing, this summary does not consider
the federal income tax consequences to stockholders of the Company in light of
their individual investment circumstances or to holders subject to special
treatment under the federal income tax laws (such as life insurance companies,
regulated investment companies and foreign taxpayers). In addition, this summary
does not address any consequence of the Acquisition under any state, local or
foreign tax laws. No ruling from the Internal Revenue Service or opinion of
counsel has been or will be obtained regarding the federal income tax
consequences to the stockholders of the Company as a result of the Acquisition.
Accordingly, each stockholder is encouraged to consult his or her tax advisor
regarding the specific tax consequences of the proposed transaction to such
stockholder, including the application and effect of state, local and foreign
income and other tax laws. It is the responsibility of each stockholder to
obtain and rely on advice from his or her personal tax advisor as to: the effect
on his or her personal tax situation of the Acquisition (including the
application and effect of state, local and foreign income and other tax laws);
the effect of possible future legislation and Regulations; and the reporting of
information required in connection with the Acquisition on his or her own tax
returns. It also will be the responsibility of each stockholder to prepare and
file all appropriate tax returns.
5
Dissenter's Rights
Because this Acquisition is being accomplished under a unanimous
written consent of all of our shareholders no dissenters rights will be created.
Government Regulation
Our acquisition of SPC is not subject to federal or state regulatory
review, except as it relates to the review of this information statement by the
Securities and Exchange Commission.
Differences in Rights of Shareholders
Because our shareholders will retain their shares in this transaction,
there will be no change in the rights of our shareholders as a result of the
Acquisition. However, once we approve Proposal 4, our board of directors will be
able to designate and issue preferred stock without amending our articles and
requiring shareholder approval. If the preferred shares are convertible into
common shares or have voting rights similar to common stock, the issuance of the
preferred shares will dilute the voting power of the common shares.
Accounting Treatment of the Acquisition
We plan to account for this Acquisition under the purchase method.
Unaudited Historical and Pro Forma Condensed Financial Information
On October 10, 2001, we entered into a Stock Purchase Agreement
whereby, subject to shareholder approval, we agreed to acquire all of the issued
and outstanding common stock of SPC in exchange for 9,750,000 shares of our
common stock. We are an inactive publicly registered shell corporation with no
significant assets or operations. After the Acquisition, SPC will become a
wholly owned subsidiary of ours. The transaction is accounted for using the
purchase method of accounting.
The following table presents certain historical per share data for SPC
and for us and certain unaudited pro forma per share data that reflect our
acquisition of SPC using the purchase method of accounting. The unaudited pro
forma condensed financial data have been prepared by our management and the
management of SPC based on the financial statements included elsewhere in this
Information Statement. The pro forma adjustments include certain assumptions and
preliminary estimates as discussed in the accompanying notes and are subject to
change. This pro forma data may not be indicative of the results that actually
would have occurred if the combination had been in effect on the dates indicated
or which may be obtained in the future. The data should be read in conjunction
with our audited financial statements and those of SPC, and the unaudited
condensed financial information of SPC and us, which is included elsewhere in
this Information Statement. The combined pro forma per share data for us and SPC
do not necessarily indicate the operating results that would have been achieved
had the Acquisition actually occurred at the beginning of the periods presented
nor do they indicate future results of operations or financial position. See
"Financial Statements."
6
The Unaudited historical and proforma concensed financial information
is included herein beginning on page F - 1 though F - 22.
(THE REMAINDER OF THIS PAGE INTENTIALLY LEFT BLANK)
7
RISK FACTORS
This Information Statement contains or incorporates by reference
certain forward looking statements with respect to our financial condition,
results of operations and business and, assuming the consummation of the
Acquisition, the proposed Acquisition with SPC. These forward-looking statements
involve certain risks and uncertainties. Factors that may cause actual results
to differ materially from those contemplated by such forward-looking statements
include, among others, the following possibilities.
Risks Relating to SPC's Business
The following risks related to SPC's business and our business once the
Acquisition is consummated, are important for you to consider.
No History of Profitable
Operations
SPC was formed in May 2001 and has a limited operating history. In May
2001 acquired a 70% ownership interest in Quindao Haier Pharmaceutical
Co., Ltd. ("QHP" or "Qindao Haier"), which is its only business. For
the nine months ended September 30, 2001, and year end December 31,
2000, SPC had revenues of approximately $5,920,931 and $7,615,914, and
losses of $176,210 and $110,647, respectively. Due to SPC's need to
develop and market additional products and expand its customer base, it
anticipates that it will have further operating losses for the
immediate future.
Need for Additional Capital to
Complete QHP Acquisition
SPC executed promissory notes in the total principal amount of $9.0
million to acquire QHP. Such notes were due in November 2001, but
provided for an extension to May 31, 2002 with the payment of certain
penalties, including increased interest. SPC must raise additional
capital in order to pay the notes in full before such date or it will
forfeit its ownership interest in QHP. In such case, neither SPC nor we
will have any significant assets and our current shareholders will have
suffered significant dilution of their ownership interest in us. A
principal reason for SPC and its shareholders entering into the
Acquisition transaction with us is that they believe it will assist SPC
in raising such capital. After the completion of the Acquisition, SPC's
directors, officers and principal shareholders, who will then control
us, intend to make a private placement of our equity securities to
raise the required capital. There can be no assurance that the
Acquisition will assist in raising such capital through the sale of our
securities or that we will be ale to raise the capital needed or raise
it on terms and conditions acceptable to us. If we are successful in
raising the capital, there can be no assurance that our shareholders
will not suffer significant dilution of their ownership of us.
Need for Additional Capital For
Operations
SPC estimates that an additional $1,000,000 over the next 12 months
will be necessary in order to finance its business, assuming that it
receives a $4.4 million equity contribution from the QHP's. Because SPC
currently does not have sufficient revenues to support its activities,
it will be required to raise additional capital to fund its operations
and finance its product research and development. Before its
acquisition QHP, relied primarily on capital contributions and loans
from the Haier Group, Inc. ("Haier"), its former parent, to meet its
operations and capital requirements. Any equity financing that we make
8
to fund SPC's activities after the Acquisition could result in dilution
to our then-exiting stockholders. Debt financing will result in
interest expense, and if it is convertible into equity, such financing
could also dilute then-existing stockholders. If we were unable to
obtain financing in the amounts and on terms deemed acceptable, our
business and future success may be adversely affected.
Option to Purchase Haier's
Interest in QHP
Haier and its affiliate owns the remaining 30% of Quindao Haier. SPC
has an oral understanding that SPC may purchase this interest; however,
the price and terms are subject further negotiations. There can be no
assurance that SPC will be able to acquire this minority interest or
can acquire it on terms and conditions acceptable to it after the
Acquisition. In such case, Haier and its affiliate will remain a
minority owner of QHP.
Risks of Doing Business
in China
The potential risks of political, social or economic instability in the
People's Republic of China could adversely affect our ability to carry
on or expand our business in China.
Virtually all of SPC's business is conducted in China. Consequently,
after the Acquisition, an investment in our common stock may be
adversely affected by the political, social and economic environment in
China. Under its current leadership, China had been pursuing economic
reform policies, including the encouragement of private economic
activity and greater economic decentralization. There can be no
assurance, however, that the Chinese government will continue to pursue
such policies, that such policies will be successful if pursued, or
that such policies will not be significantly altered from time to time.
SPC's business and prospects are dependent upon agreements and
regulatory approval with various entities controlled by Chinese
governmental instrumentalities. SPC's operations and prospects would be
materially and adversely affected by the failure of such governmental
entities to grant necessary approvals or honor existing contracts, and,
if breached, it might be difficult to enforce these contracts in China.
In addition, the legal system of China relating to foreign investments
is both new and continually evolving, and currently there can be no
certainty as to the application of its laws and regulations in
particular instances.
9
SPC's business plan assumes that if it can broaden its array of
pharmaceutical and nutraceutical products and increase its market
penetration in China, it will achieve profitable operating results. In
order to achieve the demand for its products, it must educate the
Chinese medical community and consumers about the uses of its products
and export market opportunities must be studied. No assurance can be
given that SPC will develop a sufficient array of products or that the
products will gain broad enough acceptance in the Chinese market place
to achieve profitable operations. Further, SPC may be limited in its
ability to sell its products outside of China due to competitive,
regulatory and other barriers and patent rights held by its competitors
in some other countries.
Patent Protection
Six of SPC's products are protected by patents in China. There can be
no assurance its current or future production of its patented
pharmaceutical products will not be the subject of a patent
infringement action in the future asserted by patent holders or that
our competitors will take political steps to prevent SPC from producing
them in China. Further, none of SPC's neutraceutical products are
protected by patents. A key to SPC's future success is its ability to
produce its pharmaceutical and nutraceuticals at lower costs than its
competitors. Although SPC currently utilizes its modern manufacturing
facility to produce its products at low costs, it will be competing
against other low cost producers, including Kunming Pharmaceutical
Company and Shanghai Pharmaceutical Company. There can be no assurance
that SPC will be able to produce its pharmaceuticals and nutraceuticals
at lower costs than its competitors.
No Employment Agreements
We have no employment agreements with any of our employees, including
our key employees. Employment agreements are not generally used in
China and historically there has not been much movement of employees
between employers. SPC will rely on this cultural tradition and will
not seek employment agreements with its key employees. The loss of
these key employees would adversely impact its performance.
The market in which SPC
operates is intensely competitive
and actions by its competitors
could harm its business
SPC must compete with other pharmaceutical companies, many of whom are
larger, better capitalized, better connected with and more experienced.
Barriers to entry in the pharmaceutical and nutraceutical industry are
moderate and increased competition could occur. As SPC seeks to market
its product, it will face a greater number of competitors, many of who
will be in well-established markets it seeks to penetrate. Accordingly,
SPC may not be able to successfully compete against them or any future
competitors. Moreover, competitors may be able to respond more quickly
to take advantage of new or changing opportunities, technologies and
customer preferences and requirements. They also may be able to
undertake more extensive promotional activities and offer more
attractive rates and other terms to borrowers, gaining a competitive
advantage over SPC.
10
SPC may have difficulty
managing future expansion
SPC's future success will be highly dependent upon its ability to
successfully manage its operations. If SPC's products are successful,
SPC will need to expand very quickly to meet demand. SPC's ability to
manage and support its growth effectively will be substantially
dependent on its ability to implement adequate financial and management
controls, reporting systems, and other procedures and hire sufficient
additional financial, accounting, administrative, and management
personnel. There can be no assurance that SPC will be able to identify,
attract, and retain experienced personnel.
SPC's future operating results will depend, in part, on the ability of
its management and other key employees to implement a system for
operations, financial control, and information management, and to
recruit, train, and manage its employee base.
There can be no assurance that SPC will be able to achieve or manage
any such growth successfully or to implement and maintain adequate
financial and management controls and procedures, and any inability to
do so would have a material adverse effect on our business, results of
operations and financial condition.
Risks Relating to the Acquisition
The consideration to be paid to
SPC was determined by us and
the shareholders of SPC after
negotiation and may not reflect
any recognized criteria of value
The consideration offered to SPC in the Acquisition may not reflect the
actual value of our stock and bears no relationship to the assets, book
value, earnings, net worth, or any other recognized criteria of value.
Consequently, the consideration offered to SPC was determined
arbitrarily and solely by SPC and us. In establishing the offering
price, our management considered such matters as SPC's operating
results, assets, business, financial resources and the general
condition of the securities markets. The exchange ratio of the
Acquisition should not, however, be considered an indication of actual
value of SPC or us. Neither we nor SPC obtained a fairness opinion in
connection with the Acquisition.
Certain anti-takeover features
of our articles of incorporation
and bylaws and Wyoming law
may have the effect of
discouraging potential
Acquisition proposals
Upon consummation of the Acquisition, certain provisions of our
Articles of Incorporation and Bylaws, along with certain provisions of
Wyoming statutory law, could discourage potential Acquisition proposals
and could delay or prevent a change in control. Such provisions could
diminish the opportunities for a shareholder to participate in tender
offers, including tender offers at a price above the then current
market value of our common stock. Such provisions also may inhibit
fluctuations in the market price of our common stock that could result
from takeover attempts.
There is no market for your
shares and you may not be able
to sell them
There has been no trading market for our common stock. There is no
assurance that a trading market will ever exist. The Securities and
Exchange Commission is hostile to reverse shell Acquisitions like this
one. The Securities and Exchange Commission may not allow this
Acquisition to occur or may only do so after great difficulty.
Although we intend to ultimately file a registration statement under
the Securities Act of 1933, as amended, there is no assurance the
registration statement will be declared effective by the Securities and
Exchange Commission.
11
If our registration statement is declared effective, we intend to apply
for listing of our common stock on the OTC Bulletin Board. We do not
meet the qualifications for NASDAQ or the other national exchanges.
Although we will be applying to list our common stock on the OTC
Bulletin Board, there can be no assurance that our application will be
granted and there can be no assurance that an active market will
develop for our common stock. Although our director, officer and
principal shareholder, Daniel L. Hodges, intends to assist us in
obtaining a market maker (a requirement for listing) after the
Acquisition and effectiveness of the registration statement, there can
be no assurance any broker will be interested in trading our stock.
Therefore, it may be difficult to sell your shares if you should desire
or need to sell. You may have no more liquidity in your stock even if
we are successful in getting our stock transaction registered and
getting listed on the OTC Bulletin Board.
o Once we have issued shares of our common stock in the
Acquisition, we do not know how our common stock will trade.
Even if we are successful in being listed on the OTC Bulleting
Board, market price of our common stock may fluctuate
significantly due to a number of factors, some of which may be
beyond our control, including:
o the potential absence of securities analysts covering us and
distributing research and recommendations about us;
o the liquidity of our common stock will be low because only
2.5% of our shares will be in the hands of non-affiliates of
the company and such shares are not eligible for sale under
exemptions from registration under the Securities Act of 1933;
o changes in earnings estimates by securities analysts or our
ability to meet those estimates;
o the operating results and stock price performance of other
comparable companies;
o low trading volume because so much of our stock is closely
held;
o overall stock market fluctuations; and
o economic conditions generally and in the alternative fuels
industry in particular. Any of these factors could have a
significant and adverse impact on the market price of our
common stock. In addition, the stock market in general has
experienced extreme volatility and rapid decline that has
often been unrelated or disproportionate to the operating
performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our
common stock, regardless of our actual operating performance.
12
THE COMPANIES
Unimann, Inc.
Since its inception in 1997, Unimann, Inc., a Wyoming corporation, has
not engaged in any operations other than organizational matters. We were formed
specifically to be a "blank check" or "clean public shell" corporation for the
purpose of either merging with or acquiring an operating company with operating
history assets. We are currently an inactive publicly registered shell
corporation with no significant assets or operations. We have not been involved
in any litigation nor have we had any prior regulatory problems or business
failures. We are not traded on any public market and we have never paid
dividends. As of October 31, 2001 (our "Record Date") we had 25 shareholders of
record.
Our executive offices are located at 11601 E. Lusitano Place, Tucson,
Arizona 85748. Our telephone number is (520) 731-9890. Our President, Secretary
and sole director is Daniel L. Hodges.
As the sole director, Mr. Hodges has commenced implementation of our
principal business purpose, which is to seek Acquisition or Acquisition
candidates. We have sought to acquire assets or shares of an entity actively
engaged in business and which generates revenues, in exchange for our
securities. We have not and will not, if the Acquisition is not consummated,
limit our search to any particular field or industry.
Mr. Hodges has a controlling interest in numerous shell companies which
seek or have effected Acquisitions or Acquisitions similar to that which we
seek. Mr. Hodges owns 800,000 pre-reverse stock split shares (80 percent) of our
outstanding common stock. In the past, Mr. Hodges has typically sold his
controlling shares in the shell companies for cash. The other shareholders of
the shell companies received shares in the applicable new company as a result of
the Acquisition or Acquisition.
Competition. We are not a significant participant in the market for
Acquisitions with, or financing of, development stage enterprises. There are
many established management and financial consulting companies and venture
capital firms which have significantly greater financial and personnel
resources, technical expertise and experience than we have in this field. In
view of our limited financial resources and management availability, we continue
to be at a significant competitive disadvantage.
Property. We have no operations and therefore neither rent nor own any
property. We operate at 11601 E. Lusitano Place, Tucson, Arizona 85748, the
offices of Daniel L. Hodges. We pay no rent on this space.
Employees. We have no full-time or part-time employees. Mr. Hodges, our
sole officer and director, has agreed to allocate a nominal portion of his time
to our activities without compensation.
Legal Proceedings. We are not subject to any pending litigation, legal
proceedings or claims.
Market Information. There are no public markets for our common stock.
None of our securities are traded on any public market.
Dividends. We have not paid dividends on our common stock and do not
anticipate doing so in the foreseeable future.
13
Our Management's Discussion and Analysis of Financial Condition and
Results of Operation
We are an inactive publicly registered shell corporation with no
significant assets or operations. There are no trends that will result in or are
likely to result in our liquidity increasing or decreasing. We have no material
commitments for capital expenditures as of the end of the latest fiscal period.
We do not anticipate performing research and development for any products during
the next twelve months. We have no full or part time employees and do not
anticipate hiring any employees during the next twelve months. We are a public
shell corporation created as a vehicle to acquire or merge with another
corporation who seeks the perceived advantages of a publicly held corporation.
We have, and likely will continue to have, insufficient capital to engage in any
operations other than acquiring or merging with another company.
Trading Market and Dividends. Our stock is not traded on any public
market or exchange.
Holders of common stock are entitled to receive dividends out of assets
legally available for this purpose at the times and in the amounts as the Board
of Directors may from time to time determine. Holders of common stock will share
equally on a per share basis in any dividend declared by the Board of Directors.
We have not paid any dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future.
Sino Pharmaceuticals Corporation
General
Sino Pharmaceuticals Corporation ("SPC" or "Sino") was formed in Nevada
in May 2001 and acquired a 70% ownership interest in Qingdao Haier
Pharmaceutical Co., Ltd. ("Qingdao Haier" or "QHP") in that month. Qingdao Haier
was formed on November 24, 1994 as a wholly owned subsidiary of The Haier Group,
one of the largest business conglomerates in China with revenues exceeding U.S.
$5 billion in 2000. QHP is the sole business of SPC and, therefore, unless the
context otherwise indicates, references in this Information Statement to SPC
refer to the business of QHP.
Qingdao Haier manufactures both therapeutic pharmaceuticals and Chinese
nutraceuticals, which essentially are herbal supplements. QHP manufactures and
distributes ten products in China and recently obtained regulatory approval from
the Chinese State Drug Authority ("SDA") for four new products. In addition, it
has three new products targeting osteoporosis that are currently in its late
stage development pipeline where it is seeking regulatory approval from the SDA.
QHP's pharmaceutical products are designed to treat and prevent osteoporosis,
chronic gastritis, diabetes and cancer. Its four nutraceutical products are
designed to boost immunity and treat and prevent premenstrual syndrome, liver
disease, insomnia, immunity and anti-aging. Its three new products in the
regulatory pipeline are designed to treat and prevent osteoporosis on a
pharmaceutical and nutraceutical level.
14
SPC's strategy is to reposition QHP to take advantage of what it
perceives to be three long-term growth areas:
o pharmaceuticals;
o nutraceuticals; and
o given sufficient capital, biotechnology.
According to the SDA, Quingdao Haier has the second largest
pharmaceutical distribution system in China, the largest being that of China
North Pharmaceutical Corporation ("China North"), which is owned by the Chinese
government. More than 95% of the pharmaceutical industry is state owned and
managed and SPC believes is characterized by inefficiency, low productivity,
mismanagement and low innovation. SPC believes that this provides an opportunity
for future growth as it repositions the business of Qingdao Haier.
The following is a summary of pharmaceuticals and nutraceuticals that
QHP is selling, plans to sell or are awaiting seeking approval from the SDA to
begin selling.
Pharmaceutical Products
- ---------------------------- -------------------------- -------------------------- --------------------------------
Product Category Indication Status
- ---------------------------- -------------------------- -------------------------- --------------------------------
Gainuozhen Pharmaceutical Osteoporosis Launched
(alfacalcidol)
- ---------------------------- -------------------------- -------------------------- --------------------------------
Danguixiang Pharmaceutical Chronic Gastritis Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Sangzhi Pharmaceutical Diabetes Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Borui Pharmaceutical Anti Cancer Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Haitong Pharmaceutical Cholesterol lowering Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Tianruite Pharmaceutical Analgesic/Anti-pyuretic Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Nutraceutical Products
- ---------------------------- -------------------------- -------------------------- --------------------------------
Product Category Indication Status
- ---------------------------- -------------------------- -------------------------- --------------------------------
Caili Nutraceutical Immunity Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Caili No. 2 Nutraceutical PMS/menopause Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Hailite Nutraceutical Liver Disease Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Shenankong Nutraceutical Diabetes Launched
- ---------------------------- -------------------------- -------------------------- --------------------------------
Baoankang Nutraceutical Immunity Approved by SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
Cailisol Nutraceutical Anti-aging Approved by SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
Caili No. 4 Nutraceutical Anti-aging Approved by SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
F.O.S. Solution Nutraceutical Constipation Approved by SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
Products in the Pipeline
- ---------------------------- -------------------------- -------------------------- --------------------------------
Product Category Indication Status
- ---------------------------- -------------------------- -------------------------- --------------------------------
Gainuoquang Pharmaceutical Osteoporosis Seeking approval of SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
Calsup Nutraceutical Osteoporosis Seeking approval of SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
1, 25 (OH) 2AD3 Pharmaceutical Osteoporosis Seeking approval of SDA
- ---------------------------- -------------------------- -------------------------- --------------------------------
15
Development of Pharmaceutical and Nutraceutical Products
Qingdao Haier has developed all its pharmaceutical and nutraceutical
products internally. It has expensed its research and development costs, which
are cumulatively estimated at US $12.0 million during the period from 1994 to
2001. Chinese GAAP does not take these costs into account as capitalized
development assets.
Production Facilities
According to the SDA, QHP owns and operates one of the most modern
pharmaceutical factories in China. It is a good manufacturing practices ("GMP")
factory certified by the SDA. Its facilities are comprehensibly certified and
licensed to manufacture the full range of pharmaceuticals, including tablets,
hard capsules, soft gel capsules, granules and oral solutions. All of the
products are manufactured at QHP's facility and are fully licensed for sale
throughout China and for export overseas. However, in order to export SPC's
products into other countries, SPC's products would have to be registered in
such countries, which SPC has not done. Its production capabilities include an
extraction workshop that can:
o perform extractions of water or ethanol, and can produce 21.6
million bottles of oral solutions of various sizes per year,
and produce soft gel capsules at the rate of 42 million per
year;
o produce solid preparations, including 10.8 million packets of
granules per year of various sizes, and produce 130 million
capsules per year; and
o produce 250 million capsules or tablets per year.
QHP's factory is running at approximately 15% capacity and it can
produce all of its pharmaceuticals and nutraceuticals now approved by the SDA or
in the pipeline for review by the SDA.
Distribution
SPC believes that Qingdao Haier has one of the largest and most
developed pharmaceutical sales and distributions networks in China, comprising
4,120 retail outlets and 105 hospitals. SPC believes that this network is second
only to China's largest pharmaceutical company, the state-owned North China
Pharmaceutical Corporation ("NCPC"). Of the retail outlets, which include
private and state owned pharmacy chains, supermarket chains, independent private
and state-owned pharmacies, hospital retail pharmacies, over 3,300 are run
without QHP sales personnel or employees. In addition to the retail sales force
and distribution network, QHP also has a sales force of 200 that calls
approximately 105 hospitals throughout China. Its hospital customers purchase
the pharmaceuticals under China's centrally planned national medical insurance
system. Its largest group of hospital customers are in Qingdao, Wuhan and
Sijiazhuang provinces. Its largest concentration of retail outlets are in
Suzhou, Sichuan, Beijing, Qingdao and Wuxi provinces.
Suppliers
The main supplier of pharmaceutical raw materials and ingredients to
QHP is Qingdao No. 3 Pharmaceutical Plant, based in Qingdao China. QHP purchases
herbs for its nutraceuticals from local collective farms in Shandong Province.
16
Customers
QHP's customers are located throughout all of the provinces of China.
It markets to these customers through its retail sales and distribution network
in hospitals and pharmacies. QHP uses a team of detail personnel to educate
doctors and pharmacists on the benefits of its products. It also does direct
consumer marketing through newspaper advertisements and in-store point of sale
materials and on-site promotions.
Employees
SPC employs approximately 219 full-time staff, including 34 in
production, 32 in technical and research and development, 10 in administration,
140 in sales and marketing and 13 in shipping and warehousing. It also employs
approximately 1,000 part-time sales and distribution employees in China.
Competition
SPC believes that the Chinese pharmaceutical industry is a highly
regulated, inefficient, low productivity manufacturing industry characterized by
little innovation. The industry principally produces traditional Chinese
medicines and second and third generation western prescription and
over-the-counter (OTC) pharmaceuticals that are predominantly generic (or off
patent) and, to a lesser extent, patented medicines. The industry displays a
lack of current, or fourth generation pharmaceuticals production, both patented
and generic, such as those being manufactured and marketed by the multinational
pharmaceutical companies in North America, Europe and even India.
The industry is principally the result of years of state ownership and
high subsidization. The state-owned and operated entities are centrally planned
and directed organizations under the socialist system. This has resulted in
regionalization of both production and sales, complacency through assured
regional market share in a large, captive and protected market, and the lack of
research and development innovation as a result of centrally planned and
directed production dictates.
In recent years, as a consequence of China's continuing evolution to a
more capitalist oriented market economy, its pharmaceutical industry has
undergone some positive measure of reform, leading to deregulation,
consolidation, closure of facilities, privatization and decreasing subsidization
of the industry that has resulted in marginal increases in efficiency,
productivity and innovation.
While China has many pharmaceutical factories, most of these factories
are small-to-medium sized, regional, state-owned enterprises. According to the
SDA, there are only twelve large, state-owned pharmaceutical enterprises that
have a national exposure and distribution system similar to QHP. Most of these
are dedicated to the production of second and third generation, generic
pharmaceuticals and traditional Chinese medicines. There are relatively few
neutraceutical producers in China and most neutraceuticals are imported. QHP
believes that few of these have the ubiquitous, established brand recognition
and consumer confidence that the "Haier" brand does. China also has sixteen
foreign-owned and Sino-foreign joint venture pharmaceutical enterprises that
market third and fourth generation pharmaceuticals.
For a country with the size and population base of China, the existence
of very few large, national, state owned pharmaceutical factories, coupled with
sixteen multinational pharmaceutical factories, does not lend itself to a highly
competitive industry and market environment in the patented pharmaceutical and
nutraceutical area. Further, QHP believes that the ongoing and continued closure
of aging, non-complying and debt ridden, regional, state owned pharmaceutical
enterprises and the merging and consolidation of existing state owned
pharmaceutical enterprises, coupled with the recently imposed restriction on
issuance of new pharmaceutical production licenses, should further lessen the
competitive environment.
17
Regulation and Taxation
All Sino-foreign joint ventures are governed by the "Law of the
People's Republic of China on Chinese-Foreign Equity Joint Ventures," which
contain provisions on protecting the legal rights of foreign investors.
Enterprises of this category have the characteristics that all the parties
participating in the joint venture offer investment in it, jointly operate it,
share the risks of it in accordance with their proportions of investment and are
jointly held responsible for the profits and losses of it. The corporate form of
the Sino-foreign joint-ventures is the limited liability company with the board
of directors being the supreme body of power.
The establishment of Sino-foreign pharmaceutical joint-venture
enterprises requires special approval and license by the SDA, which restricts
the number of licenses granted to Sino-foreign pharmaceutical joint-venture
enterprises. In fact, under the most recent SDA guidelines, no further licenses
shall be issued for new pharmaceutical factories in China.
According to Chinese law, all pharmaceutical enterprises are governed,
according to the Drug Administration Law of the People's Republic of China,
under the sole auspices of the SDA.
All pharmaceutical enterprises are approved and registered by the SDA
and all pharmaceutical enterprises are issued a "License of Pharmaceutical
Enterprise" and a "Certificate of Inspection" to legally operate in China. Under
the China Foreign Joint Venture Law, the joint venture, QHP, has a two-year tax
holiday commencing from the date that the company first declares a net profit.
Thereafter, QHP will have a favorable tax rate of 28%.
Intellectual Property
SPC holds patents on six of its pharmaceutical products issued by the
Chinese government. The products are Gainuozhen, Sangyhi, Borui, Caili, Caili
No. 2 and Caili No. 4. The patent protection on these in China extends from 2001
to 2015.
Legal Proceedings
Qingdao Haier is not subject to any pending litigation, legal
proceedings or claims.
Acquisition of Qingdao Haier Pharmaceutical Co., Ltd.
On May 30, 2001, SPC entered into a Share Ownership Purchase & Transfer
Agreement (the "Agreement") of QHP with Haier and Brave Lion (HK) Co., Ltd.
("Brave Lion"). QHP was wholly owned by Haier and Brave Lion, with Haier having
a 75% ownership interest and Brave Lion having a 25% ownership interest. Brave
Lion is owned by an affiliate of Haier. Under the Agreement SPC purchased 70% of
the shares of common stock of QHP from Haier and Brave Lion for $9.0 million.
SPC issued two promissory notes in payment of the purchase price, one in the
amount of $8,260,700 to Haier and one in the amount of $739,300 to Brave Lion.
These notes were dated May 30, 2001, and are due November 30, 2001. SPC will not
made a payment on either of the notes by such date, but the notes permit an
extension of payment to May 31, 2002 with an increase in interest and payment of
certain penalties.
18
A precondition to SPC's obligations under the Agreement was that QHP
have $7,650,000 in paid in capital on May 30, 2001. In addition, Haier committed
to make an additional investment of $4,440,000 on or before July 29,2001 or the
payment of the notes issued by QHP, whichever is later. Haier will pay this
amount concurrently with SPC's payment of its note to Haier. This payment will
alter the relative percentage ownership in QHP, such that, upon the investment
by Haier of $4,440,000, the final ownership of QHP will be as follows:
Haier 20%
Brave Lion 10%
SPC 70%
The Chinese Government approved the transfer of the 70% ownership
interest in QHP on July 10, 2001, so that SPC is now the record owner of the QHP
shares. However, if SPC does not pay the notes by May 31, 2002 it will forfeit
its ownership interest in QHP. The Agreement calls for a Board of Directors of
Qingdao with six members. Under the Agreement, four of the directors will be
elected by the Company, one by Haier, and one by Brave Lion. The Chairman of the
Board of Directors shall be appointed by SPC, while the Vice-Chairman shall be
jointly elected by Haier and Brave Lion. SPC also has the right to appoint the
general manager and financial manager of QHP. SPC has an oral understanding with
Haier and Brave Lion that it may purchase the remaining 30% of QHP in the future
on terms acceptable to the parties. SPC can make no assurance that it will in
fact be able to make such purchase. Further, for various reasons, some of which
a re political in nature, SPC may not want to make such purchase.
Doing Business In China
QHP's business is being conducted in the People's Republic of China
("PRC" or "China") and will be subject to the political, social and economic
environment in China. China is controlled by the Communist Party of China. Under
its current leadership, China has been pursuing economic reform policies,
including the encouragement of private economic activity and greater economic
decentralization. However, the Chinese central government has exercised and
continues to exercise substantial control over virtually every sector of the
Chinese economy. Accordingly, the Chinese government actions in the future,
including any decision not to continue to support current economic reform
programs and to return to a more centrally planned economy, or regional or local
variations in the implementation of economic reform policies, could have a
significant effect on economic conditions in China or particular regions
thereof. Economic development may be further limited by the imposition of
austerity measures intended to reduce inflation, the inadequate development or
maintenance of infrastructure or the unavailability of adequate power and water
supplies, transportation, raw materials and parts, or a deterioration of the
general political, economic or social environment in the PRC, any of which would
have a material adverse effect on QHP's business, financial condition and
results of operations. Moreover, economic reforms and growth in China have been
more successful in certain provinces than others, and the continuation or
increase of such disparities could affect the political or social stability of
China.
If QHP was required to move its manufacturing operations outside of
China, its potential profitability, competitiveness and market position could be
materially jeopardized, and there could be no assurance that QHP could continue
its operations. QHP's business and prospects are dependent upon agreements with
various entities controlled by Chinese governmental instrumentalities. The
failure of such entities to honor these contracts, or the inability to enforce
these contracts in China could adversely affect its business operations. There
can be no assurance that assets and business operations in China will not be
nationalized, which could result in the total loss of its investment in China.
19
The legal system of China relating to foreign investments is relatively
new and continues to evolve, thus creating uncertainty as to the application of
its laws and regulations in particular instances. Definitive regulations and
policies with respect to such matters as the permissible percentage of foreign
investment and permissible rates of equity returns have not yet been published.
Furthermore, statements regarding these evolving policies have been conflicting.
These policies are in many cases subject to interpretation, the discretion of
officials and continue to be modified, perhaps on a case-by-case basis. As a
legal system in China develops with respect to these new types of enterprises,
foreign investors may be adversely affected by new laws, changes to existing
laws, or interpretations of the laws, and the preemption of provincial or local
laws by national laws. In circumstances where adequate laws exist, it may not be
possible to obtain timely and equitable enforcement of them.
Legal Proceedings. SPC is not subject to any pending litigation, legal
proceedings or claims.
SPC's Management Discussion and Analysis of Financial Condition and Results of
Operation
The following discussion should be read in conjunction with SPC's
financial statements and notes thereto appearing elsewhere in this information
statement. The following discussion contains forward-looking statements,
including, but not limited to, statements concerning our plans, anticipated
expenditures, the need for additional capital and other events and circumstances
described in terms of our expectations and intentions. You are urged to review
the information set forth under the captions for factors that may cause actual
events or results to differ materially from those discussed below.
Overview. SPC was formed in May 2001 in order to acquire a 70%
ownership interest in QHP for the price of $9.0 million. SPC had no business
prior to its purchase of QHP. It issued two promissory notes in the aggregate
principal amount of $9.0 million to purchase QHP. The notes were due and payable
November 1, 2001, but provided for an extension to May 31, 2002 upon the payment
of additional interest and certain other penalties.
QHP was formed on November 24, 1994 by The Haier Group, one of the
largest companies in China, to engage in the pharmaceutical business.
Results and Plan of Operation. On a pro forma basis, for the year ended
December 31, 2000 SPC had revenues of $7,614,914 and a loss of $110,647 and for
the nine months ended September 30, 2001 it had revenues of $5,920,931 and a
loss of $176,210. All of these revenues were derived from QHP. Since its
formation in 1994, QHP has received capital contributions from its parent, The
Haier Group, to implement its business plan. Because QHP was a wholly-owned
subsidiary and it was in the development stage for much of this period, it has
historically not operated on a profitable basis.
SPC believes that with the addition of its management team and the
implementation of a new business plan, it can grow the pharmaceutical and
nutraceutical business. SPC plans, with sufficient capital, to increase QHP's
revenue base, increase the promotion of its products with a larger sales force
and greater marketing efforts and emphasize new product development. With an
increase in revenues and margins through higher production and more efficient
utilization of its manufacturing facilities and personnel, SPC believes QHP and
it can achieve profitable operations.
Liquidity and Capital Resources. SPC will require approximately $10.0
million in debt or equity capital to complete its acquisition of QHP by retiring
the $9.0 million principal amount notes it issued to purchase QHP and to provide
working capital to implement its business plan. Upon payment of the notes, Haier
is obligated to contribute $4.4 million in working capital. SPC believes that
this amount plus its own $1.0 million working capital infusion will be
sufficient to execute its business plan for the next 24 months.
SPC has no firm commitments to raise such capital, but it has
undertaken discussions with various investment bankers and other financing
sources, which it intends to pursue after completion of the Acquisition
transaction. SPC can offer no assurance that it will be able to raise the
required capital or raise it on terms and conditions acceptable to it.
Description of SPC's Capital Stock
SPC has 100,000,000 shares of common stock authorized at a par value of
$.001 per share. As of October 31, 2001, there were 1,000,000 shares issued and
outstanding. There are no agreements to issue any additional stock. There are no
voting trusts between SPC and its shareholders relative to the outstanding
common stock.
20
PROPOSAL NO. 3 CHANGE IN OUR CORPORATE NAME
Following the Acquisition, our board of directors and the majority
shareholder has decided that it is in our best interest to change our name to
reflect our Acquisition with SPC in order to capture the goodwill associated
with that name. Therefore, following the closing of the Acquisition we will
amend our articles of incorporation to change our name to Sino Pharmaceuticals
Corporation. The form of amendment is attached hereto as Appendix A.
PROPOSAL NO. 4 AUTHORIZE PREFERRED STOCK
Our majority shareholder has approved an amendment to our articles of
incorporation that would allow for the issuance of preferred stock. At the
present time, our articles of incorporation do not allow for the issuance of
preferred stock. The board of directors has reviewed this matter and has decided
that it is in our best interest to amend our articles of incorporation to
provide for 10,000,000 shares of post-reverse stock split "blank check"
preferred stock.
Blank check preferred stock is preferred stock that is generally
authorized for issuance without any determination of rights and preferences
attached to it. The final decision as to the rights and preferences of preferred
stock that is issued rests in the hands of the board of directors without any
further shareholder approval requirement. In other words, the board of directors
can issue preferred stock in one or more classes with varying rights and
preferences from time to time without asking your permission.
As mentioned above, the board of directors reviewed this matter and
determined that not having the ability to issue preferred stock was a detriment
to our ability to achieve our business strategy. In addition, in the context of
the Acquisition, the lack of authorized preferred stock would hinder our ability
to raise additional capital, assuming the Acquisition is consummated, for the
ongoing business operations of SPC.
The form of the proposed amendment that is attached as Appendix B.
GENERAL INFORMATION
Security Ownership of Our Shares By Certain Beneficial Shareholders
As of October 31, 2001, Daniel L. Hodges was: (i) the only person known
by us to be the beneficial owner of more than 5% of the outstanding shares of
common stock, and (ii) is our sole director and executive officer. Mr. Hodges
has sole voting and investment power as to the shares shown below.
Name and Address of Beneficial Amount Percent
Owner
--------------------------------- ---------------- ----------------
--------------------------------- ---------------- ----------------
Daniel L. Hodges 800,000(1) 80%
President and Director
11601 E. Lusitano Place
Tucson, AZ 85748
(1) Shares shown on a pre-reverse stock split basis.
After the four for one reverse stock split and the Acquisition, our
shareholders will own 250,000 shares or 2.5% of the Company.
21
Executive Compensation of our Directors and Officers
Mr. Hodges, the sole officer and director, has not received any
compensation for his services as an officer or director, at any time.
Shareholder Proposals
If the Acquisition is not consummated, we may hold an annual meeting of
shareholders during 2002. In the event such a meeting is held, any shareholder
notice of a proposal intended to be presented at such meeting must be received
at our principal offices no later than the close of business of the sixtieth day
prior to the meeting, unless the public announcement is first made by us fewer
than seventy days prior to the date of such annual meeting, then the notice must
be received by the close of business on the tenth day following the day on which
the public announcement of the date of such annual meeting is made.
A shareholders' notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the shareholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the shareholder, (iv) any material interest of
the shareholder in such business and (v) any other information that is required
to be provided by the shareholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, in his capacity as a proponent of a shareholder
proposal. Notwithstanding the foregoing, in order to include information with
respect to a shareholder proposal in the proxy statement and form of proxy for a
shareholders' meeting, shareholders must provide notice as required by the
regulations promulgated under the 1934 Act.
Management Following the Acquisition
The following table sets forth the names, positions and ages of our
directors and executive officers following the Acquisition. All directors are
elected at each annual meeting and serve for one year and until their successors
are elected and qualify. Officers are elected by the Board of Directors and
their terms of office are at the discretion of the Board.
Name of Director/Officer Age Position(s) With Company
------------------------ --- ------------------------
Mahmoud S. Aziz 44 Chairman of the Board, President and
Secretary
Jianfang Jin 48 Vice President, Treasurer and Director
Ms. Yunhua Jin 72 Director
Zahir Popat 48 Director
Manjit Mundie 38 Director
Mahmoud S. Aziz
Mr. Aziz has served as Chairman of the Board, President and Secretary
of SPC since its inception in 2001. Since 1983, Mr. Aziz has been the
Chairman and CEO of The Fazio Group of companies, which are involved in
manufacturing, international trade, shipping and transportation,
biotechnology, and pharmaceuticals, warehousing and distribution, real
estate construction and development, ship-building, banking and
financial investments. Mr. Aziz is the principal shareholder of the
Fazio Group. He has a biochemistry degree from Simon Fraser University,
Canada.
22
Jianfang Jin
Mr. Jin has been our Vice President and Treasurer since our inception
in 2001. Since May 1997, Mr. Jin has served as the President of the
American Evans Group Corporation, a holding corporation with various
interests in China. Since June 1997, he has served as General Manager
and a consultant of Beijing Evans Information and Consulting Co., Ltd.,
a China-based management, investment and marketing consulting company.
From July 1994 to January 1997, he served as CEO of Fanlen Software
System (Beijing) Co., Ltd., a software design and development company.
Mr. Jin has a bachelors degree in economics from Nankai University in
China, a masters degree in accounting from the University of
Indianapolis and a masters degree in agricultural economics from Purdue
University.
Jin Yunhua
Since 1998 Ms. Yunhua has been the State Outstanding Senior Expert of
China, which is a senior scientific advisor to the Chinese government.
Also since 1998 she has been a senior advisor to the Director General
of the SDA. From 1986 to 1998 she was the Executive Vice Chairman of
the Committee on Technology for the State Pharmaceutical Administration
of China. Ms. Yunhua served as the Expert Advisor to the United Nations
Industrial Development Organization for the Chinese Government in the
area of preventative medicines from 1983 to 1987. Ms. Yunhua received
her Bachelor of Science degree in Pharmacy from Shanghai Medical
College, and her Masters of Science and Ph.D. in pharmaceutical
chemistry from Purdue University. She is the mother of Jianfang Jin.
Zahir Popat
Mr. Popat has been the President and CEO of La Roche Remedies, Inc.
since 1999. From 1986 through 1998, Mr. Popat represented Apotax, Inc.,
a privately-owned Canadian generic manufacturer in its Middle East
operations. Mr. Popat earned a Bachelors degree in Science and Pharmacy
from the University of British Columbia.
Manjit Mundie
Since 1992, Mr. Mundie has been an independent consultant working
various capacities with public and private companies. From 1986 to
1992, Mr. Mundie served as an account executive at Yorkton Securities
and Canaccord Capital (previously known as LOM Western), two of the
largest independent stock brokerage firms in Canada. He has dealt with
companies in natural resources, manufacturing, health care,
nutraceuticals and technology related industries. Mr. Mundie received
his degree in financial management from the British Columbia Institute
of Technology.
23
Executive Compensation
For the year ended December 31, 2000, and for the nine months ended
September 30, 2001, neither Mr. Aziz, our Chairman of the Board, President and
Secretary, nor Mr. Jin, our Treasurer, received any compensation or stock
options from SPC.
STOCK OPTION GRANTS
The Company has not granted any stock options since its inception.
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
The following table sets forth, as of October 31, 2001, the number and
percentage of outstanding shares of Common Stock beneficially owned by (a) each
person known by us to beneficially own more than 5% of such stock, (b) each
director of the Company, (c) each of the Named Officers, and (d) all our
directors and executive officers as a group. The address of each stockholder
listed below is c/o Sino Pharmaceuticals, Inc., Unit 152 - 11782 River Road,
Richmond, British Columbia, V6X 1Z7 Canada.
Shares Shares
Beneficially Beneficially
Owned Before Percent of Common Owned After Percent of
Name and Address of Beneficial Owner Acquisition Stock Acquisition Common Stock
- ------------------------------------- ----------- ----------------- ----------- ------------
Mahmoud S. Aziz(1) 623,639 70.8 6,080,480 60.8
Jianfang Jin(1) 153,565 15.4 1,497,258 15.0
Jin Yunhua(1) -0- - -
Zahir Popat(1) 61,539 6.2 600,005 6.0
Manjit Mundie(1) 10,257 2.7 100,005 1.0
Shabnam Aziz(1) 100,000 10.0 975,000 9.8
Ruth Jean Janay(1) 51,000 5.1 497,250 5.0
All officers and directors as a group 798,000 79.8 7,780,498 77.8
(5 persons)
(1) The addresses of all of these shareholders is Unit 152-11782 River Road,
Richmond, British Columbia V6X 127, Canada.
Our Principal Shareholder.
As of October 31, 2001, Daniel L. Hodges holds 800,000 pre-reverse
stock split shares of our common stock which represents 80% of our issued and
outstanding capital stock. He is also our sole director and executive officer.
Twenty-five shareholders hold the remaining 200,000 pre-reverse stock split
shares of our common stock. None of our 25 shareholders owns in excess of 1% of
our shares.
24
PROPOSAL NO. 5 ADOPTION OF THE 2001 STOCK OPTION PLAN
Summary of the 2001 Stock Option Plan
Our board of directors adopted the 2001 Stock Option Plan on October
31, 2001. The Plan authorizes us to issue 1,000,000 pre-reverse stock split
shares of common stock for issuance upon exercise of options. The Plan
authorizes us to grant to our key employees (i) incentive stock options to
purchase shares of common stock and (ii) non-qualified stock options to purchase
shares of common stock.
Objectives
The objective of the Plan is to provide incentives to our key employees
and directors to achieve financial results aimed at increasing
shareholder value and attracting talented individuals to the Company.
Persons eligible to be granted incentive stock options under the Plan
will be those employees whose performance, in the judgment of the
compensation committee of our board of directors, can have significant
effect on our success.
Oversight
The compensation committee of our board of directors will administer
the Plan by making recommendations to the board or determinations
regarding the persons to whom options should be granted and the amount,
terms, conditions and restrictions of the awards. It also has the
authority to interpret the provisions of the Plan and to establish and
amend rules for its administration subject to the Plan's limitations.
The compensation committee is comprised of non-employee directors as
required by Rule 16b-3 of the Securities and Exchange Act of 1934, as
amended.
Types of grants
The Plan allows for the grant of both incentive stock options and
incentive stock options. The Plan does not specify what portion of the
awards may be in the form of incentive stock options or non-statutory
options. Incentive stock options awarded our to employees are qualified
stock options under the Internal Revenue Code.
Statutory conditions on stock options
Incentive stock options granted under the Plan must have an exercise
price at least equal to 100% of the fair market value of the common
stock as of the date of grant. Incentive stock options granted to any
person who owns, immediately after the grant, stock possessing more
than 10% of the combined voting power of all classes of our stock, or
of any parent or subsidiary corporation, must have an exercise price at
least equal to 110% of the fair market value of the common stock on the
date of grant.
- - Exercise price
Non-statutory stock options may have exercise prices as determined by
the compensation committee of our board of directors.
- - Dollar limit
The aggregate fair market value, determined as of the time an incentive
stock option is granted, of the common stock with respect to which
incentive stock options are exercisable by an employee for the first
time during any calendar year cannot exceed $100,000. However, there is
no aggregate dollar limitation on the amount of non-statutory stock
options that may be exercisable for the first time during any calendar
year.
25
- - Expiration date
Any option granted under the Plan will expire at the time fixed by the
compensation committee, which cannot be more than ten years after the
date it is granted or, in the case of any person who owns more than 10%
of the combined voting power of all classes of our stock or of any
subsidiary corporation, not more than five years after the date of
grant.
- - Exerciseability
The compensation committee may also specify when all or part of an
option becomes exercisable, but in the absence of such specification,
the option will ordinarily be exercisable in whole or part at any time
during its term. However, the compensation committee may accelerate the
exerciseability of any option at its discretion.
- - Assignability
Options granted under the Plan are not assignable. Incentive stock
options may be exercised only while the optionee is employed by us or
within twelve months after termination by reason of death or
disabilities or within three months after termination for any other
reason.
Payment upon exercise of options
Payment of the exercise price for any option may be in cash, by
withheld shares which, upon exercise, have a fair market value at the
time the option is exercised equal to the option price (plus applicable
withholding tax) or in the form of shares of our common stock.
Tax consequences of options
An employee or director will not recognize income on the awarding of
incentive stock options and nonstatutory options under the Plan.
An optionee will recognize ordinary income as the result of the
exercise of a nonstatutory stock option in the amount of the excess of
the fair market value of the stock on the day of exercise over the
option exercise price.
An employee will not recognize income on the exercise of an incentive
stock option, unless the option exercise price is paid with stock
acquired on the exercise of an incentive stock option and the following
holding period for such stock has not been satisfied. The employee will
recognize long-term capital gain or loss on a sale of the shares
acquired on exercise, provided the shares acquired are not sold or
otherwise disposed of before the earlier of: (i) two years from the
date of award of the option or (ii) one year from the date of exercise.
If the shares are not held for the required period of time, the
employee will recognize ordinary income to the extent the fair market
value of the stock at the time the option is exercised exceeds the
option price, but limited to the gain recognized on sale. The balance
of any such gain will be a short-term capital gain. Exercise of an
option with previously owned stock is not a taxable disposition of such
stock. An employee generally must include in alternative minimum
taxable income the amount by which the price he paid for an incentive
stock option is exceeded by the option's fair market value at the time
his rights to the stock are freely transferable or are not subject to a
substantial risk of forfeiture.
INDEPENDENT AUDITOR'S REPORT
Unimann, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Unimann, Inc. (a
development stage company) as of September 30, 2001 and 2000, and the related
statements of operations and cash flows for the two years ended September 30,
2001, and the statement of stockholders' equity for the period from September
12, 1997 (inception) to September 30, 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 of America., 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 financial statements referred to above present
fairly, in all material respects, the financial position of Unimann, Inc. (a
development stage company) as of September 30, 2001 and 2000, and the results of
its operations and its cash flows for the two years ended September 30, 2001 in
conformity with generally accepted accounting principles.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
November 16, 2001
F - 1
UNIMANN, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30,
-------------------------------
2001 2000
-------------- ---------------
Assets: $ - $ -
============== ===============
Liabilities - Accounts Payable $ 17,664 $ 511
-------------- ---------------
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 1,000,000 shares at September 30,
2001 and 2000 1,000 1,000
Paid-In Capital 5,072 2,824
Retained Deficit (1,075) (1,075)
Deficit Accumulated During the
Development Stage (22,661) (3,260)
-------------- ---------------
Total Stockholders' Equity (17,664) (511)
-------------- ---------------
Total Liabilities and
Stockholders' Equity $ - $ -
============== ===============
The accompanying notes are an integral part of these financial
statements.
F - 2
UNIMANN, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
since
October 20,
1999
inception
For the year ended of
September 30, development
------------------------------
2001 2000 stage
-------------- -------------- ---------------
Revenues: $ - $ - $ -
Expenses: 19,401 3,260 22,661
-------------- -------------- ---------------
Net Loss $ (19,401) $ (3,260) $ (22,661)
-------------- -------------- ---------------
Basic & Diluted loss per share $ - $ -
============== ==============
The accompanying notes are an integral part of these financial
statements.
F - 3
UNIMANN, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM SEPTEMBER 12, 1997 (INCEPTION) TO SEPTEMBER 30, 2001
Deficit
Accumulated
Since
October 20,
1999
Inception of
Common Stock Paid-In Retained Development
Shares Par Value Capital Deficit Stage
------------ ----------- --------- ----------- -------------
Balance at September 12, 1997
(inception) - $ - $ - $ - $ -
Net Loss - - - (1,025) -
------------ ----------- --------- ----------- -------------
Balance at September 30, 1997 - - - (1,025) -
November 4, 1997 Issuance of
Stock for Services and payment
of Accounts Payable 1,000,000 1,000 - - -
Net Loss - - - (25) -
------------ ----------- --------- ----------- -------------
Balance at September 30, 1998 1,000,000 1,000 - (1,050) -
Capital contributed by shareholder - - 75 - -
Net Loss - - - (25) -
------------ ----------- --------- ----------- -------------
Balance at September 30, 1999 1,000,000 1,000 75 (1,075) -
Capital contributed by shareholder - - 2,749 - -
Net Loss - - - -
------------ ----------- --------- ----------- -------------
Balance at September 30, 2000 1,000,000 1,000 2,824 (1,075) (3,260)
Capital contributed by shareholder - - 2,248 - -
Net Loss - - - - (19,401)
------------ ----------- --------- ----------- -------------
Balance at September 30, 2001 1,000,000 $ 1,000 $ 5,072 $ (1,075) $ (22,661)
============ =========== ========= =========== =============
The accompanying notes are an integral part of these financial
statements.
F - 4
UNIMANN, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Since
October 20,
1999
Inception
For the years ended of
September 30, Development
---------------------
2001 2000 Stage
---------- ---------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (19,401)$ (3,260)$ (22,661)
Increase (Decrease) in Accounts Payable 17,153 511 17,664
---------- ---------- --------------
Net Cash Used in operating activities (2,248) (2,749) (4,997)
---------- ---------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash provided by
investing activities - - -
---------- ---------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital contributed by shareholder 2,248 2,749 4,997
---------- ---------- --------------
Net Cash Provided by
Financing Activities 2,248 2,749 4,997
---------- ---------- --------------
Net (Decrease) Increase in
Cash and Cash Equivalents - - -
Cash and Cash Equivalents
at Beginning of Period - - -
---------- ---------- --------------
Cash and Cash Equivalents
at End of Period $ - $ - $ -
========== ========== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ 50 $ 25 $ 75
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
F - 5
UNIMANN, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Unimann, Inc. is presented to
assist in understanding the Company's financial statements. The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Wyoming on
September 12, 1997. The Company ceased all operating activities during the
period from September 12, 1997 to October 20, 1999 and was considered dormant.
Since October 20, 1999, the Company is in the development stage, and has not
commenced planned principal operations.
Nature of Business
The Company has no products or services as of September 30, 2001. The
Company was organized as a vehicle to seek merger or acquisition candidates. The
Company intends to acquire interests in various business opportunities, which in
the opinion of management will provide a profit to the Company.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required 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.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
F - 6
UNIMANN, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the year ended September 30, 2001
Basic Loss per Share
Loss to common shareholders $ (19,401) 1,000,000 $ (0.02)
=============== =============== ==============
For the year ended September 30, 2000
Basic Loss per Share
Loss to common shareholders $ (3,260) 1,000,000 $ -
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for September 30, 2001 and 2000 and are thus not considered.
NOTE 2 - INCOME TAXES
As of September 30, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $23,000 that may
be offset against future taxable income through 2021. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
F - 7
UNIMANN, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
(Continued)
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage.
NOTE 4 - COMMITMENTS
As of September 30, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 5 - STOCK SPLIT
On October 20, 1999 the Board of Directors authorized 1,000 to 1 stock
split, changed the authorized number of shares to 100,000,000 shares and the par
value to $.001 for the Company's common stock. As a result of the split, 999,000
shares were issued. All references in the accompanying financial statements to
the number of common shares and per-share amounts for 1999 and 1998 have been
restated to reflect the stock split.
F - 8
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Sino Pharmaceuticals Corporation
We have audited the accompanying consolidated balance sheet of Sino
Pharmaceuticals Corporation as of May 25, 2001, and the related consolidated
statements of operations and cash flows for the period ended May 25, 2001, and
the statement of stockholders' equity for the period from May 25, 2001
(inception) to May 25, 2001. These consolidated 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 of America. 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 Sino
Pharmaceuticals Corporation as of May 25, 2001, and the results of its
operations and its cash flows for the period ended May 25, 2001 in conformity
with generally accepted accounting principles.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
July 3, 2001
F - 9
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, May 25,
2001 2001
-------------- ---------------
Assets:
Investment in Haier Pharmaceuticals Co., Ltd. $ 8,989,809 $ -
============== ===============
Liabilities - Notes Payable $ 9,000,000 $ -
-------------- ---------------
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
-0- Shares Issued at May 25, 2001 1,000 1,000
Paid-In Capital 60,444 9,000
Retained Deficit (71,635) (10,000)
-------------- ---------------
Total Stockholders' Equity (10,191) -
-------------- ---------------
Total Liabilities and
Stockholders' Equity $ 8,989,809 $ -
============== ===============
The accompanying notes are an integral part of these financial
statements.
F - 10
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the For the
period ended period ended
September 30, May 25,
2001 2001
-------------- --------------
Revenues $ 1,842,068 $ -
Cost of revenues 366,748 -
-------------- --------------
Gross margin 1,475,320 -
Expenses:
Sales and marketing 1,092,418 -
General and administrative 389,991 10,000
Interest, net 64,546 -
-------------- --------------
Net Loss $ (71,635) $ (10,000)
============== ==============
Basic & Diluted loss per share $ (0.07) $ (0.01)
============== ==============
The accompanying notes are an integral part of these financial
statements.
F - 11
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 25, 2001 (INCEPTION) TO SEPTEMBER 30, 2001
(UNAUDITED)
Common Stock Paid-In Retained
Shares Par Value Capital Deficit
------------ ---------------------- -------------
Balance at May 25, 2001 (inception) 1,000,000 $ 1,000$ 9,000 $ -
Capital contributed by shareholder 51,444
Net Loss - - - (71,635)
------------ ---------------------- -------------
Balance at September 30, 2001
(unaudited) 1,000,000 $1,000$ 60,444 $ (71,635)
============ ====================== =============
The accompanying notes are an integral part of these financial
statements.
F - 12
SINO PHARMACEUTICALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the For the
period period
ended ended
September 30, May 25,
2001 2001
-------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (71,635) $ (10,000)
Loss from investment in joint venture 10,191 -
-------------- --------------
Net Cash Used in operating activities (61,444) (10,000)
-------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in Haier Pharmaceuticals., Ltd. (9,000,000) -
-------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of notes payable 9,000,000 -
Issuance of Common Stock 10,000 10,000
Capital contributed by shareholder 51,444 -
-------------- --------------
Net Cash Provided by
Financing Activities 9,061,444 10,000
-------------- --------------
Net (Decrease) Increase in
Cash and Cash Equivalents - -
Cash and Cash Equivalents
at Beginning of Period - -
-------------- --------------
Cash and Cash Equivalents
at End of Period $ - $ -
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
Franchise and income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
F - 13
SINO PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Sino Pharmaceuticals Corporation
is presented to assist in understanding the Company's financial statements.
Haier Pharmaceutical Co., Ltd. ("Haier")(a subsidiary of the Company) is
required to maintain its statutory accounts in accordance with the Accounting
Regulation of the People's Republic of China ("PRC") for Enterprises with
Foreign Investment. Such regulations differ in certain respects from Generally
Accepted Accounting Principles ("GAAP"). Consequently, certain adjustments were
made to the statutory accounts of Haier to conform to GAAP. The financial
statements of the Company were prepared in conformity with GAAP as if those
standards had been consistently applied throughout the year.
Interim Reporting
The unaudited financial statements as of September 30, 2001 and for the
period May 25, 2001 (inception) to September 30, 2001 reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
the period ending September 30, 2001. Operating results for interim periods are
not necessarily indicative of the results which can be expected for full years.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
May 25, 2001.
The Company's principal executive office is in Richmond, B.C. Canada
with offices in Quindao, China and Kirkland, USA.
Nature of Business
The principal activities of the Company are the production and sale of
medicine.
Consolidation
The accompanying consolidated financial statements include the accounts
of Sino Pharmaceuticals Corporation. and its 50% or more owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated. Joint
venture operations are accounted for under the equity method of accounting.
On May 30, 2001 the Company acquired a 70% interest in Haier
Pharmaceutical Co., Ltd. Haier is a sino-foreign equity joint venture enterprise
registered in the PRC. Haier was established
F - 14
SINO PHARMACEUTICALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
on October 14, 1994, upon the issue of its business license, with an operating
period of fifteen years. The operating period, which will expire on November 23,
2009, can be extended upon mutual agreement of the joint venture partners.
Translation of Foreign Currency
All balance sheet accounts of foreign operations are translated into
U.S. dollars at the year- end rate of exchange and statement of operations items
are translated at the weighted average exchange rates for the year. The
resulting translation adjustments are made directly to a separate component of
the stockholders' equity. Certain foreign activities are considered to be an
extension of the U.S. operations, and the gain or loss resulting from
re-measuring these transactions into U.S. dollars is included in income. Gains
or losses from other foreign currency transactions, such as those resulting from
the settlement of foreign receivables or payables, are included in the
statements of operations.
Haier maintains its books and accounting records in RMB. Transactions in
other currencies are converted into RMB at the exchange rates prevailing at the
dates of the transactions. Monetary assets and liabilities denominated in other
currencies at the balance sheet date are converted into RMB at the exchange
rates prevailing at that date. Exchange differences other than those capitalized
are included in the statement of operations.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required 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.
F - 15
SINO PHARMACEUTICALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
(Unaudited)
For the period ended September 30, 2001
---------------------------------------
Basic Loss per Share
Loss to common shareholders $ (71,635) 1,000,000 $ (0.07)
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for September 30, 2001 and are thus not considered.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
Revenue Recognition
Revenue is generated on the sale of medicines and is recognized when
significant risks and rewards of ownership of goods have been transferred.
Warranty
The Company offers a 1-2 year warranty on its products and accrues the
estimated warranty costs when sales are recorded.
NOTE 2 - COMMITMENTS
As of September 30, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
F - 16
SINO PHARMACEUTICALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MAY 25, 2001 AND SEPTEMBER 30, 2001
(Continued)
NOTE 3 - INCOME TAXES
As of September 30, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $61,000 that may
be offset against future taxable income through 2021. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
The Company's foreign operations are subject to value added tax ("VAT"),
which is charged on the selling price at a general rate of 17%. An input credit
is available whereby input VAT previously paid on purchases of semi-finished
products or raw materials can bve used to offset the output VAT on sales to
determine the net VAT payable.
NOTE 4 - ACQUISITION
On May 30, 2001, the Company entered into a Share Ownership Purchase and
Transfer Agreement with Haier Pharmaceutical Co. Ltd. ("Haier") whereby the
Company acquired 70% of the share ownership of Haier by issuing promissory notes
in the amount of $9,000,000. The $9,000,000 is due and payable on May 31, 2002.
F - 17
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On May 30, 2001, Sino Pharmaceuticals Corporation ("SPC") and Qingdao
Haier Pharmaceutical Co., Ltd. ("Haier") executed the Share Ownership Purchase
and Transfer Agreement that provides for the Purchase by SPC of 70% of the share
ownership of Haier. See "The Purchase." The following unaudited pro forma
condensed combined financial statements are based on the September 30, 2001
historical financial statements of SPC and the September 30, 2001 and December
31, 2000 historical financial statements of Haier contained elsewhere herein,
giving effect to the transaction under the purchase method of accounting, with
SPC treated as the acquiring entity for financial reporting purposes.
During October 2001 Sino Pharmaceuticals Corporation and Unimann, Inc.
(a development stage company) ("Unimann") executed the Stock Purchase Agreement
that provides for the Acquisition of SPC by Unimann. See "The Plan of
Acquisition". The following unaudited pro forma condensed combined financial
statements are based on the September 30, 2001 and 2000 historical financial
statements of SPC and Unimann contained elsewhere herein, giving effect to the
transaction under the purchase method of accounting, with SPC treated as the
acquiring entity for financial reporting purposes.
The unaudited pro forma condensed combined balance sheet presenting the
financial position of the Surviving Corporation assumes the purchase occurred as
of September 30, 2001 and 2000. The unaudited pro forma condensed combined
statement of operations presents the results of operations of the Surviving
Corporation, assuming the acquisition was completed on January 1, 2001 and 2000.
The unaudited pro forma condensed combined financial statements have
been prepared by management of SPC, Haier, and Unimann based on the financial
statements included elsewhere herein. The pro forma adjustments include certain
assumptions and preliminary estimates as discussed in the accompanying notes and
are subject to change. These pro forma statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. These pro forma
financial statements should be read in conjunction with the accompanying notes
and the historical financial information of SPC, Haier, and Unimann (including
the notes thereto) included in this Form. See "FINANCIAL STATEMENTS."
F - 18
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
Haier Sino Pro Forma
Pharmaceutical Pharmaceutical Unimann Pro Forma Combined
Company Corp. Inc. Adjustments Balance
---------------- ---------------- --------------- -------------- --------------
ASSETS
Current Assets $ 7,163,531 $ - $ - $ (7,163,531)A$ -
Fixed Assets (net) 4,411,412 - - (4,411,412)A -
Investment in Joint Venture - - - 9,000,000 B 9,000,000
Intangible and Other Assets (net) 2,151,718 - - (2,151,718)A -
---------------- ---------------- --------------- -------------- --------------
Total Assets $ 13,726,661 $ $ - $ - (4,726,661) $ 9,000,000
================ ================ =============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 7,175,377 $ $ - 17,664 (7,175,377)A$ 17,664
Short-term Notes Payable - - - 9,000,000 C 9,000,000
---------------- ---------------- --------------- -------------- --------------
Total Liabilities 7,175,377 - 17,664 9,000,000 9,017,664
---------------- ---------------- --------------- -------------- --------------
Stockholders' Equity:
Common Stock - 1,000 1,000 (750)D
8,750 E 10,000
Additional Paid in Capital 7,560,000 60,444 5,072 (7,560,000)A
(8,000)E 57,516
Capital Translation Adjustment 19,584 - - (19,584)A -
Accumulated Deficit (1,028,300) (61,444) (1,075) 1,028,300 A (62,519)
Deficit Accumulated During the
Development Stage - - (22,661) - (22,661)
---------------- ---------------- --------------- -------------- --------------
Total Stockholders' Equity (Deficit) 6,551,284 - (17,664) (6,551,284) (17,664)
---------------- ---------------- --------------- -------------- --------------
Total Liabilities and Stockholders' Equity $ 13,726,661 $ $ - $ - 2,448,716 $ 9,000,000
================ ================ =============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined financial
statements.
F - 19
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
Haier Sino Pro Forma
Pharmaceutical Pharmaceutical Unimann Pro Forma Combined
Company Corp. Inc. Adjustments Balance
---------------- ---------------- --------------- -------------- --------------
Revenues:
Sales $ 5,920,931 $ - $ - (1,776,279)A$ 4,144,652
Cost of Sales 1,178,833 - - (353,650)A 825,183
---------------- ---------------- --------------- -------------- --------------
Gross Margin 4,742,098 - - (1,422,629) 3,319,469
Operating Expenses:
Sales and Marketing 3,511,344 - - (1,053,403)A 2,457,941
General & Administrative 1,138,050 61,444 19,401 (341,415)A 877,480
Other Expenses 207,470 - - (62,241)A 145,229
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) from Operations $ (114,766)$ (61,444)$ (19,401) $ 34,430 $ (161,181)
================ ================ =============== ============== ==============
Weighted average shares outstanding 1,000,000 1,000,000 8,000,000 10,000,000
Loss per share $ (0.07) $ (0.02) $ (0.02)
================ =============== ==============
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F - 20
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
Haier Sino Pro Forma
Pharmaceutical Pharmaceutical Unimann Pro Forma Combined
Company Corp. Inc. Adjustments Balance
---------------- ---------------- --------------- -------------- --------------
Revenues:
Sales $ 7,614,914 $ - $ - $ (2,284,474)A$ 5,330,440
Cost of Sales 1,767,989 - - (530,397)A 1,237,592
---------------- ---------------- --------------- -------------- --------------
Gross Profit 5,846,925 - - (1,754,077) 4,092,848
Operating Expenses:
General & Administrative 5,755,576 1,000 3,260 (1,726,673)A 4,033,163
Other Expenses 87,977 - - (26,393)A 61,584
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) from Operations 3,372 (1,000) (3,260) (1,011) (1,899)
Other Income (Expense):
Interest Expense (324,660) - - 97,398 A (227,262)
Other, net 261,381 - - (78,414)A 182,967
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) before Taxes (59,907) (1,000) (3,260) 17,973 (46,194)
Provision for Income Tax (49,740) - - 14,922 A (34,818)
---------------- ---------------- --------------- -------------- --------------
Net Income (Loss) $ (109,647)$ (1,000)$ (3,260) $ 32,895 $ (81,012)
================ ================ =============== ============== ==============
Weighted average shares outstanding 1,000,000 1,000,000 8,000,000 10,000,000
Loss per share $ - $ - $ (0.01)
================ =============== ==============
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F - 21
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
(1) General
In the May 30, 2001 Share Ownership Purchase and Transfer Agreement, Haier
transfered to SPC 70% of the share ownership in exchange for a promissory note
of $9,000,000. This promissory note is due for payment on May 31, 2002. The
purchase has been recorded as an investment in a joint venture using the equity
method of accounting.
In the proposed transaction Unimann will acquire all of the issued and
outstanding capital stock of SPC resulting in SPC becoming a wholly-owned
subsidiary of Unimann. Concurrently with the acquisition the name of the Company
will be changed to Sino Pharmaceuticals Corporation. On the effective date of
the Acquisition, which is expected to be in December of 2001 each shareholder of
SPC will receive 9.75 shares of newly issued common stock of Unimann for each
share of SPC's common stock they own. Unimann will issue an aggregate of
9,750,000 shares of its common stock to the SPC shareholders as part of the
Acquisition.
(2) Fiscal Year
Unimann has a fiscal year end of September while SPC operates on a calendar year
end. The proforma financials of Unimann have been adjusted to reflect a calendar
year.
(3) Pro Forma Adjustments
The adjustments to the accompanying unaudited pro forma condensed
combined balance sheets are described below:
(A) Remove assets and liabilities of Haier joint venture.
(B) Record investment in Haier using equity method of accounting for the
joint venture.
(C) Record promissory note from SPC for purchase of 70% of Haier.
(D) Record pre merger 1 for 4 reverse split.
(E) Record issuance of 9,750,000 shares for acquisition of SPC and
elimination of intercompany investment.
The adjustments to the accompanying unaudited pro forma condensed
combined statements of operations are described below:
(A) Reduce income and expenses by 30% (minority interest).
F - 22
Appendix A
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into this 10th day of
October, 2001, by and among UNIMANN, INC., a corporation incorporated under the
laws of the State of Wyoming (the "Purchaser"), SINO PHARMACEUTICALS, INC., a
corporation incorporated under the laws of the State of Nevada (the "Company"),
and the persons listed on Exhibit A who are all of the Shareholders of the
Company (the "Selling Shareholders").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to acquire from the Selling Shareholders
all of the issued and outstanding capital stock of the Company on the terms and
conditions set forth in this Agreement; and
WHEREAS, the Company and the Selling Shareholders deem it advisable and
for their benefit to sell their shares of capital stock of the Company to the
Purchaser, believing that it will contribute materially to the growth and
profitability of the Company; and
NOW, THEREFORE, in consideration of the premises and the agreements and
covenants contained herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1.
Definitions
For all purposes of this Agreement:
1.1 "Purchaser Shares" means the shares of common stock, par value $.001 per
share, of the Purchaser.
1.2 "Fiscal Year" means the period from January 1 through December 31 for each
year referenced.
The parties contemplate that (i) after the Closing the Purchaser will
own one hundred percent (100%) of the Company, and (ii) the Company, as a new
member of the Purchaser's consolidated group, will have its financial results
included in the Purchaser's financial results and have its federal income tax
returns consolidated with the federal income tax returns of the Purchaser
covering the appropriate periods as a result of its joining the Purchaser's
consolidated group. The parties agree that accountants of the Company may be
requested to perform such review as may be necessary to have financial results
sufficient to prepare a consolidated federal income tax return for the Company
for any years required by the Internal Revenue Code. The Purchaser shall have
the right to have such tax return reviewed by a representative of an accounting
firm designated by the Purchaser. However, the Company shall retain all
responsibility and authority with respect to such tax return.
At the appropriate times, the Purchaser may require the auditors of the
Company to prepare (i) audited financial statements for the Company for the 1999
and 2000 Fiscal Years and (ii) such financial statements regarding the Company
as the Purchaser reasonably requests for use in preparing its consolidated
federal income tax returns.
1.3 "Company Financial Statements" means the (i) unaudited financial statements
of the Company for its fiscal years ended December 31, 1999 and 2000, (ii) the
unaudited financial statements of the Company for the nine month period ended
September 30, 2001 and (iii) the audited financial statements of the Company
which will be prepared for the fiscal years ended December 31, 1999, and 2000.
The Company will prepare the items in (i) and (ii) above, include them in
Schedule 1.3 and deliver them prior to the Closing. The Company will prepare the
items in (iii) above, include them in Schedule 1.3 and deliver them within 90
days of the Closing.
1.4 "Company Shares" means the shares of the common stock of the Company, $.001
par value per share, which have been issued and which are held by the Selling
Shareholders.
1.5 "Purchaser Financial Statements" means the audited consolidated financial
statements of the Purchaser for the 1999 and 2000 Fiscal Years. The Purchaser
has previously delivered such financial statements to the Selling Shareholders,
which are included in Schedule 1.5, and will prepare its unaudited financial
statements for the nine months ended September 30, 2001, include them in
Schedule 1.5 and deliver them to the Selling Shareholders prior to the Closing.
1.6 "Confidential Information" means information related to pricing,
commissions, methods, processes, customers, clients, suppliers, financial data,
lists, trade secrets, client lists and information, contacts, computer programs,
software or procedures, discoveries, improvements, inventions, ideas, lists,
apparatus, statistics, programs, research, development, or related information
of the Purchaser or the Company and the Selling Shareholders.
ARTICLE 2.
Purchase and Sale
2.1 Purchase and Sale. Upon the terms and subject to the conditions contained
herein, the Selling Shareholders, agree to sell and transfer the Company shares
to the Purchaser, and the Purchaser agrees to purchase and pay for the Company
Shares by issuing restricted Purchaser Shares to the Selling Shareholders in
accordance with Schedule 2.1. Such purchase and sale shall take place at a
closing (the "Closing") to be held at the offices of the Purchaser, 11601 East
Lusitano Place, Tucson, Arizona 85748 on the date established pursuant to
Section 11.1, "Closing Date" (the "Closing Date").
ARTICLE 3.
Representations and Warranties of the Purchaser
Except as disclosed on the Disclosure Schedules noted in this Article 3
to be delivered by the Purchaser to the Selling Shareholders on or before
December 31, 2001 and subsequently disclosed in any Supplemental Disclosure
Schedules to be delivered by the Purchaser to the Selling Shareholders on or
before the Closing Date, or thereafter in the case of certain Purchaser
Financial Statements, the Purchaser represents and warrants to the Selling
Shareholders as of the date hereof and as of the Closing Date as follows:
3.1 Authority and Validity. This Agreement is valid and binding upon the
Purchaser and neither the execution nor the delivery of this Agreement by the
Purchaser, nor the performance by it of any of the covenants or obligations to
be performed by the Purchaser hereunder, after the conditions precedent to its
obligations set forth in Article 9, "Conditions Precedent to Obligations of the
Purchaser," have been satisfied, will result in any violation of any order,
decree or judgment of any court or other governmental body, or statute or law
applicable to the Purchaser, or in any breach of any terms or provisions of the
Purchaser's Articles of Incorporation or Bylaws, or constitute a default under
any indenture, mortgage, deed of trust or other contract to which the Purchaser
is a party or by which it is bound, or cause the creation of a lien or
encumbrance on any properties owned by it or leased to it.
3.2 Government Approvals. No consent, approval or authorization of, or
notification to or registration with, any governmental authority is required in
connection with the execution, delivery and performance of this Agreement by the
Purchaser.
3.3 Organization.
3.3.1 The Purchaser is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Wyoming and has full corporate
power and authority to carry on its business as now being conducted and to
execute, deliver and perform its obligations under this Agreement.
3.3.2 The Purchaser is a public company whose shares of capital stock are not
actively traded. The Purchaser is a reporting company under the Securities
Exchange Act of 1934, as amended ("Exchange Act").
3.4 Financial Statements. The consolidated financial statements of the Purchaser
for the Fiscal Years 1998, 1999 and 2000, with accompanying notes, made
available by the Purchaser to the Selling Shareholders and the Company, fairly
present the financial position of the Purchaser at said date and the results of
its operations and changes in its financial position for the years ended on such
dates, in conformity with accounting principles as generally accepted and
consistently applied.
3.5 Absence of Change. There has been no material adverse change in the business
or properties or in the consolidated condition, financial or otherwise, of the
Purchaser since December 31, 2000.
3.6 Securities Laws. The Purchaser is purchasing the Company Shares for its own
account and for investment and not with a view to, or for sale in connection
with, any distribution of the Company Shares.
3.7 Private Placement Memorandum. Set forth as Schedule 3.7 is a Private
Placement Memorandum ("Purchaser Memorandum") of the Purchaser. The information
with respect to the Purchaser is contained in the Memorandum and does not
contain any untrue statement of material fact or omit to state a material fact
necessary in order to make the statements made in the Memorandum and the
Schedules thereto not misleading.
3.8 No Subsidiaries. The Purchaser does not own five percent (5%) or more of the
voting securities of any corporation (or would own such securities in such
amount upon the closing of any existing purchase obligations for securities).
3.9 Financial Statements. The Purchaser Financial Statements which have been
provided to the Selling Shareholders (i) have been prepared from the books and
records of the Purchaser and (ii) fairly and accurately presents the financial
condition of the Purchaser as of the date thereof and, except as disclosed
therein, were prepared in accordance with generally accepted accounting
principles, and (iii) contain and reflect all necessary adjustments for a fair
and accurate presentation of the financial condition as of such date. Except as
and to the extent reflected or reserved against in such Purchaser Financial
Statements, otherwise expressly disclosed therein or as disclosed in Schedule
3.11, the Purchaser has no liabilities or obligations, contingent or otherwise,
of a nature required to be reflected in the Purchaser Financial Statements, in
accordance with generally accepted accounting principles.
3.10 Absence of Certain Changes. Except as set forth in Schedule 3.10 or as
otherwise provided herein, the Company has not since December 31, 2000:
3.10.1 Suffered any material change adversely affecting its assets, liabilities,
financial condition or business;
3.10.2 Made a material change in the compensation payable or to become payable
to any of its employees or agents, or in any bonus payments or arrangements made
to or with any of its employees or agents;
3.10.3 Paid or declared any dividends or distributed any of its assets of any
kind whatsoever to any of its shareholders;
3.10.4 Issued any stock, or granted any stock options or warrants to purchase
stock;
3.10.5 Sold or transferred any of its assets or canceled any indebtedness or
claims owing to it except in the ordinary course of business, consistent with
its past practices;
3.10.6 Sold, assigned or transferred any formulas, inventions, patents, patent
applications, trademarks, trade names, copyrights, licenses, computer programs
or software, know-how or other intangible assets;
3.10.7 Amended or terminated any contract, agreement or license to which it is a
party otherwise than in the ordinary course of business or as may be necessary
or appropriate for the consummation of the transactions described in this
Agreement;
3.10.8 Borrowed any money or incurred, directly or indirectly (as a guarantor or
otherwise), any indebtedness except in the ordinary course of business,
consistent with its past practices;
3.10.9 Discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities shown on the
Purchaser Financial Statements or current liabilities incurred since such date
in the ordinary course of business, consistent with its past practices;
3.10.10 Mortgaged, pledged or subjected to lien, charge or other encumbrance any
of its assets; or
3.10.11 Entered into or committed to any transaction other than transactions in
the ordinary course of business, consistent with past practices.
3.11 Contracts and Other Documents. Attached hereto as Schedule 3.11 is a
complete schedule listing all documents to which the Purchaser is a party or
under which it has any liability in excess of $5,000 per annum. All such
contracts, documents and agreements listed on Schedule 3.11 are valid and
enforceable and accurate and complete copies of such contracts, documents and
agreements (or, with the consent of the Selling Shareholders forms thereof) as
have been requested by the Selling Shareholders have been provided to the
Selling Shareholders. Except as disclosed on Schedule 3.11 hereof, the Purchaser
is not or will not be, merely with the passage of time, in default under any
such contract, including those listed on Schedule 3.11. Except as specified on
Schedule 3.11, there is no requirement for any contract or agreement to which
the Purchaser is a party to be novated or to have the consent of the other
contracting party in order for the contract or agreement to be valid, effective
and enforceable by the Purchaser after the Closing as it was immediately prior
thereto.
3.12 Title to Properties and Assets. Except as set forth in Schedule 3.12, the
Purchaser does not presently own or lease any real property. The Purchaser has
good title to all tangible personal property reflected on its books and records
as owned by it, free and clear of all liens and encumbrances, except (i) liens
for current taxes, and (ii) other liens or encumbrances that do not materially
impair the use of the property subject thereto. Such tangible personal property
is in satisfactory condition and suitable for the purpose for which it is being
used, subject in each case to consumption in the ordinary course, ordinary wear
and tear and ordinary repair, maintenance and periodic replacement.
3.13 Absence of Undisclosed Liabilities. Except as set forth in Schedule 3.13,
the Purchaser is not subject to any liabilities, including contingent
liabilities, liabilities for unperformed obligations, and liabilities for
unasserted claims.
3.14 Absence of Pension Liability.
3.14.1 The Purchaser has no liability of any nature to any person or entity for
pension or retirement obligations, vested or unvested, to or for the benefit of
any of its existing or former employees.
3.14.2 The consummation of the transactions contemplated by this Agreement will
not entitle any employee of the Purchaser to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, including the Schedules, or accelerate the time of payment or
increase the amount of compensation due to any such employee.
3.14.3 Except as set forth on Schedule 3.14, the Purchaser presently has no
employee benefit plans and has no announced plan or legally binding commitment
to create any employee benefit plans.
3.15 Absence of Liens. There are no outstanding mechanics', materialmens',
laborers' or other liens or encumbrances filed or enforceable against any
property owned by or in the possession of the Purchaser, or, to the best
knowledge of the Purchaser, threatened to be filed against any property owned by
the Purchaser or in its possession, which properly may be filed against such
property or which are the subject of any lawsuit against the Purchaser.
3.16 Tax Returns. The Purchaser (and any predecessor corporation or partnership
as to which either of them is the transferee or successor) has timely filed, or
has timely secured an extension and will (within the permitted extension) file,
all tax returns, including federal, state, local and foreign tax returns, tax
reports and forms, as to which the due date for filing is prior to the Closing
Date; has reported all reportable income on such returns; has adopted and
followed in the preparation of such returns methods of accounting accepted by
law, and has not changed any methods of accounting without compliance with
procedures required by law; has not deducted any expenses or charges or claimed
any credits which are not allowable; and has paid, or accrued and reserved for,
all taxes, penalties and interest shown to be due or required to be paid
pursuant to the returns as filed, or as adjusted pursuant to amendment or
correction. The Purchaser has no knowledge of any claim for taxes, penalties or
interest thereon in addition to those for which such taxes, penalties or
interest have been paid or accrued.
3.17 Filings. The Purchaser has made all filings and reports required (i) under
all local, state and federal laws with respect to its business of any
predecessor entity or partnership and (ii) as required by the Securities and
Exchange Commission ("SEC").
3.18 Litigation. There are no lawsuits, arbitration actions or other proceedings
(equitable, legal, administrative or otherwise) pending or (to the best of the
Purchaser's knowledge) threatened, or any customer complaints which have not
been resolved or settled, and there are no investigations pending or threatened,
against the Purchaser (or involving the industry in which they are members)
which relate to and could have a material adverse effect on the properties,
businesses or assets of the Purchaser or which could adversely affect the
validity or enforceability of this Agreement or the obligation or ability of the
Purchaser to perform its obligations under this Agreement or to carry out the
transactions contemplated by this Agreement.
3.19 Compliance With Laws. The Purchaser has conducted, and is continuing to
conduct, its business in material compliance with, and is in material compliance
with, all applicable statutes, orders, rules and regulations promulgated by
governmental authorities relating in any material respect to its operations,
conduct of business or use of properties, including, without limitation, any
applicable statute, order, rule or regulation relating to (i) wages, hours,
hiring, nondiscrimination, retirement, benefits, pensions, working conditions,
and worker safety and health; (ii) air, water, toxic substances, noise, or
solid, gaseous or liquid waste generation, handling, storage, disposal or
transportation; (iii) zoning and building codes; (iv) the production, storage,
processing, advertising, sale, distribution, transportation, disposal, use and
warranty of products; or (v) trade and antitrust regulations. The execution,
delivery and performance of this Agreement by the Purchaser and the consummation
by the Purchaser of the transactions contemplated by this Agreement will not,
separately or jointly, violate, contravene or constitute a default under any
applicable statutes, orders, rules and regulations promulgated by governmental
authorities or cause a lien on any property used, owned or leased by the
Purchaser to be created thereunder. There are no proposed changes in any
applicable statutes, orders, rules and regulations promulgated by governmental
authorities that would cause any representation or warranty contained in this
Section to be untrue.
3.20 Certain Activities. The Purchaser has not, directly or indirectly, engaged
in or been a party to any of the following activities:
3.20.1 Bribes, kickbacks or gratuities to any person or entity, including
domestic or foreign government officials or any other payments to any such
persons or entity, whether legal or not legal, to obtain or retain business or
to receive favorable treatment of any nature with regard to business (excluding
commissions or gratuities paid or given in full compliance with applicable law
and constituting ordinary and necessary expenses incurred in carrying on its
business in the ordinary course);
3.20.2 Contributions (including gifts), whether legal or not legal, made to any
domestic or foreign political party, political candidate or holder of political
office;
3.20.3 Holding of or participation in bank accounts, funds or pools of funds
created or maintained in the U.S. or any foreign country, without being
reflected on the corporate books of account, or as to which receipts or
disbursements therefrom have not been reflected on such books, the purpose of
which is to obtain or retain business or to receive favorable treatment with
regard to business;
3.20.4 Receiving or disbursing monies, the actual nature of which has been
improperly disguised or intentionally misrecorded on or improperly omitted from
the corporate books of account;
3.20.5 Paying fees to domestic or foreign consultants or commercial agents which
exceed the reasonable value of the ordinary and customary consulting and agency
services purported to have been rendered;
3.20.6 Paying or reimbursing (including gifts) personnel of the Purchaser for
the purpose of enabling them to expend time or to make contributions or payments
of the kind or for the purposes referred to in Paragraphs 3.20.1 through 3.20.5
above;
3.20.7 Participating in any manner in any activity which is illegal under the
international boycott provisions of the Export Administration Act, as amended,
or the international boycott provisions of the Internal Revenue Code, or
guidelines or regulations thereunder; and
3.20.8 Making or permitting unlawful charges, mischarges or defective or
fraudulent pricing under any contract or subcontract under a contract with any
department, agency or subdivision thereof, of the United States government,
state or municipal government or foreign government.
3.21 Insurance Coverage. All policies of fire, liability or other forms of
insurance which the Purchaser has obtained are set forth on Schedule 3.21. All
of the insurance represented by such policies is in full force and effect.
3.22 Articles of Incorporation and By-Laws. The Purchaser has delivered to the
Selling Shareholders true, accurate and complete copies of the Articles of
Incorporation and By-Laws of the Purchaser, together with all amendments to each
of the same as of the date of this Agreement.
3.23 Corporate Minutes. The minute books of the Purchaser made available for
inspection by the Selling Shareholders prior to the Closing are the correct and
only such minute books and contain complete and accurate records of any and all
proceedings and actions at all meetings (including written consents executed in
lieu of meetings) of its shareholder and Board of Directors and committees
thereof, through the Closing Date. The stock records of the Purchaser made
available for inspection by the Selling Shareholders prior to the Closing are
the correct and only such stock records and each accurately reflect all issues
and transfers of record of the capital stock of the Purchaser.
3.24 Default on Indebtedness. The Purchaser is not in default in any respect
under any evidence of indebtedness for borrowed money.
3.25 Consents. The Purchaser does not require any authorizations, consents,
approvals and waivers or other actions in order to make any license, lease,
contract or agreement listed under Schedule 3.13 valid and fully enforceable by
the Purchaser and effective after the issuance of the Purchaser Shares to the
Selling Shareholders as such license, lease, contract or agreement was
immediately prior thereto.
3.26 Indebtedness to Purchaser. No employee, officer or director of the
Purchaser or any third party is indebted to the Purchaser.
3.27 Completeness of Representations and Schedules. The Schedules hereto, where
applicable to the Purchaser, completely and correctly present in all material
respects the information required by this Agreement. This Agreement, the
certificates to be delivered by the Purchaser at the Closing, the Schedules and
the provisions of this Article 3, and the documents and written information
pertaining to the Purchaser furnished to the Selling Shareholders or their
agents by or on behalf of the Purchaser, do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make this
Agreement, or such certificates, schedules, documents or written information not
misleading.
ARTICLE 4.
Representations and Warranties of Selling Shareholders
Except as disclosed on the Disclosure Schedules noted in this Article 4
and Article 5, "Representations and Warranties of the Company," to be delivered
by the Selling Shareholders and the Company to the Purchaser on or before
December 31, 2001 and subsequently disclosed in any Supplemental Disclosure
Schedules to be delivered by the Selling Shareholders and the Company to the
Purchaser on the Closing Date, or thereafter in the case of certain Company
Financial Statements, the Selling Shareholders hereby represent and warrant to
the Purchaser as of the date hereof and as of the Closing Date as follows:
4.1 Authority and Validity.
4.1.1 This Agreement is valid and binding upon the Selling Shareholders and
neither the execution nor delivery of this Agreement by the Selling Shareholders
nor the performance by the Selling Shareholders of any of their respective
covenants or obligations hereunder will constitute a default under any contract,
agreement or obligation to which the Selling Shareholders are a party or by
which the Selling Shareholders or any of their respective properties is bound.
This Agreement is enforceable severally against the Selling Shareholders in
accordance with its terms.
4.1.2 The execution, delivery and performance of this Agreement by the Company
have been duly authorized by its Board of Directors. This Agreement is valid and
binding upon the Company, and is enforceable against the Company in accordance
with its terms. The execution, delivery and performance of this Agreement by the
Company will not result in the violation or breach of any term or provision of
charter instruments applicable to the Company or constitute a default under any
indenture, mortgage, deed of trust or other contract or agreement to which the
Company is a party or by which it or any of its properties is bound or cause the
creation of a lien or encumbrance on any properties owned by or leased to or by
it.
4.2 Governmental Approvals. No consent, approval or authorization of, or
notification to or registration with, any governmental authority, either
federal, state or local, is required in connection with the execution, delivery
and performance of this Agreement by the Selling Shareholders or the Company.
4.3 Title. Each of the Selling Shareholders has full right and title to the
number of the Company Shares set forth opposite his or her name in Schedule 4.3;
such Company Shares constitute all the Company Shares which are owned, directly
or indirectly by the Selling Shareholders; and at the time of transfer thereof
to the Purchaser, all of the Company Shares to be transferred by the Selling
Shareholders will be free of all liens, claims or encumbrances of any kind, and
will be fully transferable to the Purchaser.
4.4 Organization and Good Standing. The Company is a corporation duly organized
and existing in good standing under the laws of the State of California. The
Company has full corporate power and authority to carry on its business as now
conducted and to own or lease and operate the properties and assets now owned or
leased and operated by it. The Company is duly qualified to transact business in
all states and jurisdictions in which the business or ownership of its property
makes it necessary so to qualify (other than jurisdictions in which the nature
of the property owned or business conducted, when considered in relation to the
absence of serious penalties, renders qualification as a foreign corporation
unnecessary as a practical matter).
4.5 Capitalization. The authorized capital stock of the Company consists solely
of 100,000,000 shares of Common Stock, of which 1,000,000 Company Shares are
issued and outstanding, as correctly disclosed on Schedule 4.5. The Company
Shares are validly issued, are fully paid and nonassessable, and subject to no
restrictions on transfer. The Company Shares constitute the only outstanding
shares of the capital stock of the Company of any nature whatsoever, voting and
non-voting. All shares of capital stock of the Company are required to be
certificated, and the Company has executed and delivered no certificates for
shares in excess of the number of issued shares of the Company set forth above.
There are, and at Closing will be, no outstanding options, warrants or other
rights for the purchase of, or any securities convertible into, capital stock of
the Company, whether issued, unissued or held in its treasury.
4.6 No Subsidiaries. The Company does not own five percent (5%) or more of the
securities having voting power of any corporation (or would own such securities
in such amount upon the closing of any existing purchase obligations for
securities).
4.7 Financial Statements. The Company Financial Statements which have been
provided to the Purchaser (i) have been prepared from the books and records of
the Company and (ii) fairly and accurately presents the financial condition of
the Company as of the date thereof and, except as disclosed therein, were
prepared in accordance with generally accepted accounting principles, and (iii)
contain and reflect all necessary adjustments for a fair and accurate
presentation of the financial condition as of such date. Except as and to the
extent reflected or reserved against in such Company Financial Statements, or
otherwise expressly disclosed therein, the Company has no liabilities or
obligations, contingent or otherwise, of a nature required to be reflected in
the Company Financial Statements, in accordance with generally accepted
accounting principles.
4.8 Absence of Certain Changes. Except as set forth in Schedule 4.10 or
otherwise provided herein, the Company has not since December 31, 2001:
4.8.1 Suffered any material change adversely affecting its assets, liabilities,
financial condition or business;
4.8.2 Made a material change in the compensation payable or to become payable to
any of its employees or agents, or in any bonus payments or arrangements made to
or with any of its employees or agents;
4.8.3 Paid or declared any dividends or distributed any of its assets of any
kind whatsoever to any of its shareholders;
4.8.4 Issued any stock, or granted any stock options or warrants to purchase
stock;
4.8.5 Sold or transferred any of its assets or canceled any indebtedness or
claims owing to it except in the ordinary course of business, consistent with
its past practices;
4.8.6 Sold, assigned or transferred any formulas, inventions, patents, patent
applications, trademarks, trade names, copyrights, licenses, computer programs
or software, know-how or other intangible assets;
4.8.7 Amended or terminated any contract, agreement or license to which it is a
party otherwise than in the ordinary course of business or as may be necessary
or appropriate for the consummation of the transactions described in this
Agreement;
4.8.8 Borrowed any money or incurred, directly or indirectly (as a guarantor or
otherwise), any indebtedness except in the ordinary course of business,
consistent with its past practices;
4.8.9 Discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities shown on the
Company Financial Statements or current liabilities incurred since such date in
the ordinary course of business, consistent with its past practices;
4.8.10 Mortgaged, pledged or subjected to lien, charge or other encumbrance any
of its assets; or
4.8.11 Entered into or committed to any transaction other than transactions in
the ordinary course of business, consistent with past practices.
4.9 Contracts and Other Documents. Attached hereto as Schedule 4.11 is a
complete schedule listing of all documents to which the Company is a party or
under which it has any liability. All such contracts, documents and agreements
listed on Schedule 4.11 are valid and enforceable and accurate and complete
copies of such contracts, documents and agreements (or, with the consent of the
Purchaser, forms thereof) as have been requested by the Purchaser have been
provided to the Purchaser. Except as disclosed on Schedule 4.11 hereof, the
Company is not or will not be, merely with the passage of time, in default under
any such contract, including those listed on Schedule 4.11. Except as specified
on Schedule 4.11, there is no requirement for any contract or agreement to which
the Company is a party to be novated or to have the consent of the other
contracting party in order for the contract or agreement to be valid, effective
and enforceable by the Company after the Closing as it was immediately prior
thereto.
4.10 Title to Properties and Assets. Except as set forth in Schedule 4.12, the
Company does not presently own or lease any real property. The Company has good
title to all tangible personal property reflected on its books and records as
owned by it, free and clear of all liens and encumbrances, except (i) liens for
current taxes, and (ii) other liens or encumbrances that do not materially
impair the use of the property subject thereto. Such tangible personal property
is in satisfactory condition and suitable for the purpose for which it is being
used, subject in each case to consumption in the ordinary course, ordinary wear
and tear and ordinary repair, maintenance and periodic replacement.
4.11 Absence of Undisclosed Liabilities. The Company is not subject to any
liabilities, including contingent liabilities, liabilities for unperformed
obligations, and liabilities for unasserted claims, other than liabilities and
obligations incurred in the ordinary course of business, none of which is
materially adverse.
4.12 Absence of Pension Liability.
4.12.1 The Company has no liability of any nature to any person or entity for
pension or retirement obligations, vested or unvested, to or for the benefit of
any of its existing or former employees.
4.12.2 The consummation of the transactions contemplated by this Agreement will
not entitle any employee of the Company to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, including the Schedules, or accelerate the time of payment or
increase the amount of compensation due to any such employee.
4.12.3 Except as set forth on Schedule 4.14, the Company presently has no
employee benefit plans and has no announced plan or legally binding commitment
to create any employee benefit plans.
4.13 Absence of Liens. There are no outstanding mechanics', materialmens',
laborers' or other liens or encumbrances filed or enforceable against any
property owned by or in the possession of the Company, or, to the best knowledge
of the Selling Shareholders, threatened to be filed against any property owned
by the Company or in its possession, which properly may be filed against such
property or which are the subject of any lawsuit against the Company.
4.14 Tax Returns. The Company (and any predecessor corporation or partnership as
to which either of them is the transferee or successor) has timely filed, or has
timely secured an extension and will (within the permitted extension) file, all
tax returns, including federal, state, local and foreign tax returns, tax
reports and forms, as to which the due date for filing is prior to the Closing
Date; has reported all reportable income on such returns; has adopted and
followed in the preparation of such returns methods of accounting accepted by
law, and has not changed any methods of accounting without compliance with
procedures required by law; has not deducted any expenses or charges or claimed
any credits which are not allowable; and has paid, or accrued and reserved for,
all taxes, penalties and interest shown to be due or required to be paid
pursuant to the returns as filed, or as adjusted pursuant to amendment or
correction. The Selling Shareholders have no knowledge of any claim for taxes,
penalties or interest thereon in addition to those for which such taxes,
penalties or interest have been paid or accrued.
4.15 Litigation. Except as set forth on Schedule 4.15, there are no lawsuits,
arbitration actions or other proceedings (equitable, legal, administrative or
otherwise) pending or (to the best of the Selling Shareholders' knowledge)
threatened, or any customer complaints which have not been resolved or settled,
and there are no investigations pending or threatened, against the Selling
Shareholders or the Company (or involving the industry in which they are
members) which relate to and could have a material adverse effect on the
properties, businesses or assets of the Company or which could adversely affect
the validity or enforceability of this Agreement or the obligation or ability of
the Selling Shareholders or the Company to perform their respective obligations
under this Agreement or to carry out the transactions contemplated by this
Agreement.
4.16 Compliance With Laws. The Company has conducted, and is continuing to
conduct, its business in material compliance with, and is in material compliance
with, all applicable statutes, orders, rules and regulations promulgated by
governmental authorities relating in any material respect to its operations,
conduct of business or use of properties, including, without limitation, any
applicable statute, order, rule or regulation relating to (i) wages, hours,
hiring, nondiscrimination, retirement, benefits, pensions, working conditions,
and worker safety and health; (ii) air, water, toxic substances, noise, or
solid, gaseous or liquid waste generation, handling, storage, disposal or
transportation; (iii) zoning and building codes; (iv) the production, storage,
processing, advertising, sale, distribution, transportation, disposal, use and
warranty of products; or (v) trade and antitrust regulations. The execution,
delivery and performance of this Agreement by the Selling Shareholders and the
Company and the consummation by the Selling Shareholders and the Company of the
transactions contemplated by this Agreement will not, separately or jointly,
violate, contravene or constitute a default under any applicable statutes,
orders, rules and regulations promulgated by governmental authorities or cause a
lien on any property used, owned or leased by the Company to be created
thereunder. There are no proposed changes in any applicable statutes, orders,
rules and regulations promulgated by governmental authorities that would cause
any representation or warranty contained in this Section to be untrue.
4.17 Certain Activities. The Company has not, directly or indirectly, engaged in
or been a party to any of the following activities:
4.17.1 Bribes, kickbacks or gratuities to any person or entity, including
domestic or foreign government officials or any other payments to any such
persons or entity, whether legal or not legal, to obtain or retain business or
to receive favorable treatment of any nature with regard to business (excluding
commissions or gratuities paid or given in full compliance with applicable law
and constituting ordinary and necessary expenses incurred in carrying on its
business in the ordinary course).
4.17.2 Contributions (including gifts), whether legal or not legal, made to any
domestic or foreign political party, political candidate or holder of political
office;
4.17.3 Holding of or participation in bank accounts, funds or pools of funds
created or maintained in the U.S. or any foreign country, without being
reflected on the corporate books of account, or as to which receipts or
disbursements therefrom have not been reflected on such books, the purpose of
which is to obtain or retain business or to receive favorable treatment with
regard to business;
4.17.4 Receiving or disbursing monies, the actual nature of which has been
improperly disguised or intentionally misrecorded on or improperly omitted from
the corporate books of account;
4.17.5 Paying fees to domestic or foreign consultants or commercial agents which
exceed the reasonable value of the ordinary and customary consulting and agency
services purported to have been rendered;
4.17.6 Paying or reimbursing (including gifts) personnel of the Company for the
purpose of enabling them to expend time or to make contributions or payments of
the kind or for the purposes referred to in Paragraphs 4.17.1 through 4.17.5
above;
4.17.7 Participating in any manner in any activity which is illegal under the
international boycott provisions of the Export Administration Act, as amended,
or the international boycott provisions of the Internal Revenue Code, or
guidelines or regulations thereunder; and
4.17.8 Making or permitting unlawful charges, mischarges or defective or
fraudulent pricing under any contract or subcontract under a contract with any
department, agency or subdivision thereof, of the United States government,
state or municipal government or foreign government.
4.18 Insurance Coverage. All policies of fire, liability or other forms of
insurance which the Company has obtained and are set forth on Schedule 4.18. All
of the insurance represented by such policies is in full force and effect.
4.19 Articles of Incorporation and By-Laws. The Company has delivered to the
Purchaser true, accurate and complete copies of the Articles of Incorporation
and By-Laws of the Company, together with all amendments to each of the same as
of the date of this Agreement.
4.20 Corporate Minutes. The minute books of the Company delivered to the
Purchaser at the Closing are the correct and only such minute books and do and
will contain complete and accurate records of any and all proceedings and
actions at all meetings (including written consents executed in lieu of
meetings) of its shareholder and Board of Directors and committees thereof,
through the Closing Date. The stock records of the Company delivered to the
Purchaser at the Closing are the correct and only such stock records and each
accurately reflect all issues and transfers of record of the capital stock of
the Company.
4.21 Default on Indebtedness. Except as set forth in Schedule 4.21, the Company
is not in default in any respect under any evidence of indebtedness for borrowed
money.
4.22 Consents. The Company does not require any authorizations, consents,
approvals and waivers or other actions in order to make any license, lease,
contract or agreement listed under Schedule 4.22 valid and fully enforceable by
the Selling Shareholders and the Company and effective after the issuance of the
Company Shares to the Purchaser as such license, lease, contract or agreement
was immediately prior thereto.
4.23 Satisfaction of Indebtedness. Schedule 4.23 sets forth the indebtedness of
the Selling Shareholders, any employee of the Selling Shareholders, any employee
of the Company, or any other party, to the Company.
4.24 Completeness of Representations and Schedules. The Schedules hereto, where
applicable to the Selling Shareholders and the Company, completely and correctly
present in all material respects the information required by this Agreement.
This Agreement, the certificates to be delivered by the Selling Shareholders at
the Closing, the Schedules and the provisions of this Article 4, and the
documents and written information pertaining to the Company furnished to the
Purchaser or its agents by or on behalf of the Selling Shareholders or the
Company, do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make this Agreement, or such certificates,
schedules, documents or written information not misleading.
ARTICLE 5.
Representations and Warranties of the Company
5.1 Representations and Warranties of the Company. Independent of the
representations and warranties of the Selling Shareholders in Article 4,
"Representations and Warranties of Selling Shareholders," the Company represents
and warrants to the Purchaser all of the matters regarding the Company set forth
in Sections 4.1, 4.2 and 4.4 through 4.27, and matters regarding the Company
specifically represented and warranted in those Sections to the knowledge of the
Selling Shareholders are represented and warranted in this Section to the
knowledge of the Company.
ARTICLE 6.
Pre-Closing Covenants of the Selling Shareholders and the Company
The Selling Shareholders and the Company independently covenant and
agree, pending the Closing of the transactions contemplated by this Agreement,
to comply with and perform, and hereby independently represent and warrant that
as of the Closing they will have complied with and performed, the following
covenants and undertakings.
6.1 No Distributions to Shareholder. The Company will not pay or declare any
dividend on, or make any other distribution of, any of its assets of any kind
whatsoever to the Selling Shareholders, or redeem, purchase or otherwise acquire
any of its capital stock.
6.2 Issuance of Capital Stock. The Company will not issue any stock, or grant
any stock options or warrants to purchase stock, or issue any securities
convertible into its capital stock, for consideration or otherwise, except as
provided for in this Agreement.
6.3 Articles of Incorporation and By-Laws. The Company will not amend or alter
in any way its Articles of Incorporation or By-Laws, except to change the name
of the Company, without the prior written consent of the Purchaser.
6.4 Operations of the Company. Except as contemplated by this Agreement, the
Company will conduct its business and operations only in the ordinary course.
Without limiting the generality of the foregoing, and except as contemplated by
this Agreement, prior to the Closing Date, without the prior written consent of
the Purchaser, the Company will not take any action which would result in a
breach of any representation or warranty contained in Article 4,
"Representations and Warranties of Selling Shareholders," and Article 5,
"Representations and Warranties of the Company," as if such representations and
warranties were by their terms applicable to such period.
6.5 Termination of Interest in the Company Shares. The Selling Shareholders
shall take such actions as are necessary to ensure that as of the Closing Date
they have full right and title to, and rights to convey, all the issued and
outstanding shares of the capital stock of the Company and there shall be no
outstanding options on, rights to or claims regarding the capital stock of the
Company.
ARTICLE 7.
Post-Closing Covenants By the Selling Shareholders
7.1 Resale of Purchaser Shares. The Selling Shareholders hereby agree that:
7.1.1 The Selling Shareholders will not, without the prior written consent of
Purchaser, sell or otherwise transfer any Purchaser Shares for a period of one
(1) year after the date of receipt of such shares.
7.1.2 For a period of one (1) year after the receipt of the Purchaser Shares,
the Selling Shareholders will not offer or sell any of said Purchaser Shares
except with the prior written consent of Purchaser, pursuant to an available
exemption under the Securities Act of 1933, as amended (the "Securities Act").
If the Purchaser shall have registered with the SEC and become subject to the
reporting requirements of the Exchange Act, then Purchaser's consent for any
such offer and sale shall not be unreasonably withheld. After expiration of said
two-year period, any sale of the Purchaser Shares must be pursuant to an
available exemption from the Securities Act and shall also be subject to the
Purchaser's consent, which consent shall not be unreasonably withheld. The
Selling Shareholders agree to retain a copy of any letter referenced above for a
reasonable period and to furnish a copy thereof to Purchaser within ten (10)
days after completion of any sale. As used herein, "U.S.A." and "U.S. Person"
shall have the same meanings as in the certificate legend set forth in Section
8.1.
ARTICLE 8.
Securities Laws
8.1 Certificates Evidencing Purchaser Shares. The Purchaser Shares delivered to
the Selling Shareholders pursuant to Section 2.2, "Total Consideration," shall
be in registered form and bear the following legend:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933 AND, EXCEPT PURSUANT
TO AN EXEMPTION THEREFROM, MAY NOT BE OFFERED OR SOLD,
DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA,
INCLUDING THE STATES AND POSSESSIONS AND OTHER AREAS SUBJECT
TO ITS JURISDICTION (THE "U.S.A."), OR TO CITIZENS OR
RESIDENTS OF THE U.S.A., CORPORATIONS, PARTNERSHIPS OR OTHER
ENTITIES CREATED OR ORGANIZED IN OR UNDER THE LAWS OF THE
U.S.A. OR ESTATES OR TRUSTS THE INCOME OF WHICH IS SUBJECT TO
UNITED STATES FEDERAL INCOME TAXATION REGARDLESS OF ITS SOURCE
("U.S. PERSONS"). SPECIFIC RESTRICTIONS ON REOFFERS AND
RESALES OF THE SHARES ARE SET FORTH IN SECTION 7.1 OF THE
STOCK PURCHASE AGREEMENT UNDER WHICH THESE SHARES WERE ISSUED,
TO WHICH THE OWNER OF SUCH SHARES, BY ACCEPTANCE HEREOF,
ASSENTS. COPIES OF THE FORM OF SECTION 7.1 OF SUCH STOCK
PURCHASE AGREEMENT CAN BE OBTAINED FROM THE SECRETARY OF THE
CORPORATION UPON REQUEST."
8.2 Representation and Warranty By the Selling Shareholders. The Selling
Shareholders, represent and warrant to Purchaser that:
8.2.1 The Selling Shareholders have been furnished information concerning the
Purchaser in the Memorandum, including Purchaser's Financial Statements for the
Fiscal Years 1999 and 2000 and, as of the Closing, the unaudited Purchaser
Financial Statements for the 2001 Fiscal Year, has had an opportunity to discuss
Purchaser's business and affairs with its executives in order to secure such
further information about Purchaser as it desired to receive and has not looked
to the Purchaser, or any agents or employees of Purchaser, to provide it with
any information except for such documents as have been specifically requested
and delivered prior to the date of this Agreement;
8.2.2 The Selling Shareholders have knowledge and experience in financial and
business matters such that they are capable of evaluating the merits and risks
of the prospective investment in the Purchaser Shares to be received hereunder;
8.2.3 The Selling Shareholders are and will be accepting the Purchaser Shares
for their respective own accounts for investment and not with a view to, or for
sale in connection with, any distribution of the Purchaser Shares; and
8.2.4 The Selling Shareholders acknowledge that they are aware that the
Purchaser Shares have not been registered under the Securities Act, that
Purchaser has not agreed to register the Purchaser Shares under the Securities
Act, that the Purchaser Shares may not be offered or sold within the U.S.A. or
to U.S. Persons (as defined in the legend contained in Section 8.1) unless an
exemption from such registration is available, and that, accordingly, it must
bear the economic risk of the investment in the Purchaser Shares for an
indefinite period of time.
ARTICLE 9.
Conditions Precedent to Obligations of the Purchaser
The obligations of the Purchaser under this Agreement shall be subject
to the satisfaction, on or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived by the Purchaser:
9.1 Representations and Warranties Accurate. All representations and warranties
of the Selling Shareholders and the Company contained in this Agreement shall
have been true in all material respects when made, and also at and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date. The Selling Shareholders shall furnish the Purchaser with a
certificate, dated the Closing Date and signed on behalf of the Company by a
duly authorized officer thereof, and by the Selling Shareholders, stating the
above in such form as the Purchaser may reasonably request. Acceptance of the
Purchaser Shares by the Selling Shareholders shall constitute an affirmation by
it of the truth, as of the Closing Date, of the representations and warranties
made by it in this Agreement. Any Supplemental Disclosure Schedules prepared by
the Selling Shareholders and delivered to the Purchaser after December 20, 2001
shall be subject to review and acceptance by the Purchaser as of the Closing
Date, in its sole discretion.
9.2 Performance by the Selling Shareholders and the Company.
9.2.1 The Selling Shareholders and the Company shall have performed and complied
in all material respects with all agreements, covenants and conditions required
by this Agreement to be performed and complied with by them, and the Selling
Shareholders shall deliver a certificate to that effect, dated the Closing Date
and signed in the manner set forth in Section 9.1, "Representations and
Warranties Accurate."
9.2.2 The Selling Shareholders shall deliver to the Purchaser evidence that it
has full right and title to, and rights to convey, the Company Shares and that
there are no outstanding options on, rights to or claims regarding the capital
stock of the Company.
9.3 Legal Prohibition. On the Closing Date, there shall exist no injunction or
final judgment, law or regulation prohibiting the consummation of the
transactions contemplated by this Agreement.
9.4 Tender of All Outstanding the Company Shares. The Selling Shareholders
shall, pursuant to this Agreement, tender the Company Shares to the Purchaser at
the Closing in transferrable form acceptable to the Purchaser in accordance with
Article 2, "Purchase and Sale."
9.5 Financial Conditions. The review of the Company Financial Statements shall
not have revealed any matter which, in the reasonable business judgment of the
Purchaser, makes the transactions contemplated by this Agreement on the terms
herein set forth inadvisable for the Purchaser.
ARTICLE 10.
Conditions Precedent to Obligations of the Selling Shareholders and the Company
The obligations of the Selling Shareholders and the Company under this
Agreement shall be subject to the satisfaction, on or prior to the Closing Date,
of all of the following conditions, any one or more of which may be waived by
the Selling Shareholders and the Company:
10.1 Representations and Warranties Accurate. All representations and warranties
of the Purchaser contained in this Agreement shall have been true in all
material respects when made, and also at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date. The
Purchaser shall deliver to the Selling Shareholders a certificate, dated as of
the Closing Date and signed by an officer of the Purchaser, stating the above in
such form as the Selling Shareholders may reasonably request. Acceptance of the
Company Shares by the Purchaser shall constitute an affirmation by it of the
truth, as of the Closing Date, of the representations and warranties made by it
in this Agreement. Any Supplemental Disclosure Schedules prepared by the
Purchaser and delivered to the Selling Shareholders after December 20, 2001
shall be subject to review and acceptance by the Selling Shareholders as of the
Closing Date, in its sole discretion.
10.2 Performance by the Purchaser. The Purchaser shall have performed and
complied in all material respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by it prior to or
on the Closing Date, and there shall be delivered to the Selling Shareholders a
certificate to that effect, dated the Closing Date and signed in the manner set
forth in Section 10.1, "Representations and Warranties Accurate."
10.3 Legal Prohibition. On the Closing Date, there shall exist no injunction or
final judgment, law or regulation prohibiting the consummation of the
transactions contemplated by this Agreement.
10.4 Issuance of the Purchaser Shares. The Purchaser shall, pursuant to this
Agreement, issue the Purchaser Shares to the Selling Shareholders at the Closing
in accordance with Article 2, "Purchase and Sale."
10.5 Financial Conditions. The review of the Purchaser Financial Statements
shall not have revealed any matter which, in the reasonable business judgment of
the Selling Shareholders, makes the transactions contemplated by this Agreement
on the terms herein set forth inadvisable for the Selling Shareholders.
ARTICLE 11.
Closing
11.1 Closing Date. The Closing Date shall be December 31, 2001, or such later
date as the Purchaser and Selling Shareholders may mutually select, but in no
event later than January 5, 2002. No extension thereof beyond January 5, 2002
shall be made unless mutually agreed between the parties to this Agreement. Such
agreement to extend the Closing Date shall be deemed sufficient if executed by
the Purchaser, the Selling Shareholders and the Company.
11.2 Deliveries by the Purchaser on the Closing Date. The Purchaser shall
deliver to the Selling Shareholders at Closing:
11.2.1 The certificates contemplated by Sections 10.1, "Representations and
Warranties Accurate," and 10.2, "Performance by the Purchaser"; and
11.2.2 The share certificates representing the Purchaser Shares.
11.3 Deliveries by the Selling Shareholders on the Closing Date. The Selling
Shareholders shall deliver to the Purchaser at Closing:
11.3.1 The certificates contemplated by Sections 9.1, "Representations and
Warranties Accurate," and 9.2, "Performance by the Selling Shareholders and the
Company";
11.3.2 The original minute book, stock record book, seal of the Company and all
books and records of the Company; and
11.3.3 The share certificates representing all of the Company Shares held by the
Selling Shareholders, with attached stock powers duly executed by the Selling
Shareholders.
ARTICLE 12.
Termination
12.1 Termination Events. This Agreement may be terminated and abandoned, by
notice given by the Purchaser, or by the Selling Shareholders and the Company,
as the case may be, in the manner hereinafter provided:
12.1.1 By the Purchaser, if without fault of the Purchaser all of the conditions
set forth in Article 9, "Conditions Precedent to Obligations of the Purchaser,"
shall not have been satisfied (or are incapable of being satisfied) on or before
the Closing Date and have not been waived by the Purchaser on or before such
date;
12.1.2 By the Selling Shareholders and the Company, if without their fault all
of the conditions set forth in Article 10, "Conditions Precedent to Obligations
of the Selling Shareholders and the Company," shall not have been satisfied (or
are incapable of being satisfied) on or before the Closing Date and have not
been waived by the Selling Shareholders and the Company on or before such Date;
and
12.1.3 By the mutual consent and agreement of the Purchaser, the Selling
Shareholders and the Company;
12.1.4 By either the Purchaser or by the Selling Shareholders and the Company if
after completion of their respective due diligence of each other either the
Purchaser or the Selling Shareholders and the Company for any reason are not
satisfied with the results of their respective due diligence investigations of
the other party and give notice to the other party to such effect. The parties
shall complete their respective due diligence investigations on or before
December 28, 2000, and if the Selling Shareholders and the Company or the
Purchaser fail to give such notice on or before the foregoing date, they shall
be deemed to be satisfied with their respective due diligence examinations for
purposes of this Paragraph 12.1.4.
12.2 Relationships with Third Parties. In consideration of the undertaking by
the parties of the substantial legal, accounting and other expenses incident to
their entering into this Agreement and proceeding toward the Closing, the
parties agree that until the Closing Date or upon earlier termination of this
Agreement, they will not enter into or pursue any arrangements or negotiations
with any other party relative to the sale or merger of the Company into any
other party or any sale of assets for control relative to any extraordinary
transaction involving the Company without the consent of the Purchaser.
12.3 Effect of Termination. If this Agreement is terminated pursuant to Section
12.1, "Termination Events," this Agreement shall forthwith become void, and
there shall be no liability or continuing obligations on the part of the parties
hereunder.
ARTICLE 13.
Indemnification
13.1 Survival of Representations, Warranties and Certain Covenants. The
representations and warranties made by the parties in this Agreement and in the
certificates delivered at the Closing, and all of the covenants of the parties
in this Agreement, shall survive the execution and delivery of this Agreement
and the Closing Date and (except for those contained in Sections 3.6, 4.3, 4.5,
4.15, 7.1 and 7.2 and any substantially identical representations, warranties
and covenants effectively made in Article 5 or in any certificate delivered at
the Closing) shall expire on the second anniversary of the Closing Date. Any
claim for indemnification (other than a claim based upon Sections 3.6, 4.3, 4.5
or 7.2, which can be asserted at any time, or based upon Section 4.15, which can
be asserted within the limit provided therein, or based on Section 7.1, which
can be asserted prior to the second anniversary of the Closing Date) shall be
effective only if notice of such claim is given by the party claiming
indemnification or other relief to the party against whom such indemnification
or other relief is claimed before said expiration date.
13.2 Indemnification by the Purchaser.
13.2.1 The Purchaser agrees to indemnify and hold the Selling Shareholders
harmless, from and after the Closing Date, against and in respect of all matters
in connection with any losses, liabilities or damages (including reasonable
attorneys' fees) incurred by the Selling Shareholders that result from any
misrepresentation or breach of the warranties by the Purchaser in Article 3,
"Representations and Warranties of the Purchaser," or any breach or
nonfulfillment of any agreement or covenant on the part of the Purchaser
contained in this Agreement, and all suits, actions, proceedings, demands,
judgments, costs and expenses incident to the foregoing matters, including
reasonable attorneys' fees.
13.2.2 In no event shall the Purchaser's liability under Paragraph 13.2.1 above
to the Selling Shareholders (other than for costs and reasonable attorneys' fees
incurred by such Selling Shareholders to which he may be entitled pursuant to
Section 13.5, "Arbitration," or Section 15.2.3) exceed the total value of the
Company Shares which have been (and will, pursuant to the formula of Article 2
hereof, be required to be) delivered to the Purchaser, which value shall be set
forth in Schedule 13.2.
13.2.3 Notwithstanding the provisions of Paragraph 13.2.1 above, the Selling
Shareholders shall be entitled to seek indemnification from the Purchaser
pursuant to Paragraph 13.2.1 of this Section 13.2 only to the extent that the
aggregate of the losses, liabilities, costs and damages (including reasonable
attorneys' fees) incurred by the Selling Shareholders which it would be entitled
to claim under such Paragraph 13.2.1 exceeds $25,000.
13.3 Indemnification by the Selling Shareholders.
13.3.1 The Selling Shareholders agree to indemnify and hold the Purchaser
harmless, from and after the Closing Date, against and in respect of all matters
in connection with any losses, liabilities, costs or damages (including
reasonable attorneys' fees) incurred by the Purchaser resulting from (i) any
breach of its representations and warranties in Section 4.3, "Title," or (ii)
any breach or nonfulfillment of his covenants in Article 7, "Post-Closing
Covenants By the Selling Shareholders."
13.3.2 The Selling Shareholders agree to indemnify and hold the Purchaser
harmless, from and after the Closing Date, against and in respect of all matters
in connection with any losses, liabilities or damages (including reasonable
attorneys' fees) incurred by the Purchaser resulting from any misrepresentation
or breach of its warranties in Article 4, "Representations and Warranties of
Selling Shareholders," Article 5, "Representations and Warranties of the
Company," or Article 8, "Securities Laws," (other than Section 4.3), or any
breach or nonfulfillment of any agreement or covenant on the part of the Selling
Shareholders contained in this Agreement (other than those in Article 7,
"Post-Closing Covenants By the Selling Shareholders") and all suits, actions,
proceedings, demands, judgments, costs and expenses incident to the foregoing
matters, including reasonable attorneys' fees. In addition, in the event that
any matter covered by indemnification is clearly also covered by insurance held
by the Company, the Purchaser shall cause the relevant company to make
reasonable efforts to recover on such insurance in mitigation of its
indemnification claim.
13.3.3 Notwithstanding the provisions of Paragraph 13.3.2 above, the Purchaser
shall be entitled to seek indemnification from the Selling Shareholders pursuant
to Paragraph 13.3.2 of this Section 13.3 only to the extent that the aggregate
of the losses, liabilities, costs and damages (including reasonable attorneys'
fees) incurred by the Purchaser which it would be entitled to claim under such
Paragraph 13.3.2 exceeds $25,000.
13.4 Indemnification by the Company. The Company agrees to indemnify and hold
the Purchaser harmless, from and after the Closing Date, against and in respect
of all matters in connection with any losses, liabilities or damages (including
reasonable attorneys' fees) incurred by the Purchaser resulting from any
misrepresentation or breach of its warranties in Article 5, and all suits,
actions, proceedings, demands, judgments, costs and expenses incident to the
foregoing matters, including reasonable attorneys' fees; provided, however, that
the Purchaser shall not be entitled to make a claim against the Company (i) to
the extent that such claim could not be asserted against the Selling
Shareholders because excluded from indemnification under the provisions in
Paragraph 13.3.2 or (ii) if resolved against the Purchaser pursuant to the
procedures provided in Section 13.5, "Arbitration." Subject to the foregoing,
the liability of the Company hereunder is separate and independent of any
liability of the Selling Shareholders. Nothing herein shall require the
Purchaser to assert its indemnification rights against the Company prior to
asserting its indemnification rights against the Selling Shareholders, and
either or both rights may be pursued by the Purchaser independently, in such
priority as the Purchaser may in its discretion decide, or jointly. No agreement
between the Purchaser and the Company shall be binding upon or have any
evidentiary value in any dispute between the Purchaser and the Selling
Shareholders.
13.5 Arbitration. If the Purchaser believes that a matter has occurred that
entitles it to indemnification under Section 13.3, "Indemnification by the
Selling Shareholders," or Section 13.4, "Indemnification by the Company," or the
Selling Shareholders believe that a matter has occurred that entitles him to
indemnification under Section 13.2, "Indemnification by the Purchaser," it (the
"Indemnified Party") shall give notice to the party or parties against whom
indemnification is sought (each, an "Indemnifying Party") describing such matter
in reasonable detail. The Indemnifying Party shall be entitled to give such
notice prior to the establishment of the amount of its losses, liabilities,
costs or damages, and to supplement its claim from time to time thereafter by
further notices as they are established. The Indemnifying Party shall respond to
such claim for indemnification within 30 days after receipt of the claim stating
its acceptance or objection to the indemnification claim, and explaining its
position in respect thereto in reasonable detail. If such Indemnifying Party
does not timely so respond, it will be deemed to have accepted the Indemnified
Party's indemnification claim as specified in the notice given by the
Indemnified Party. If the Indemnifying Party gives a timely objection notice,
then the parties will negotiate in good faith to attempt to resolve the dispute,
and upon the expiration of an additional 30-day period from the objection notice
or such longer period as to which the Indemnified and Indemnifying Parties may
agree, any such dispute shall be submitted to arbitration in California to a
member of the American Arbitration Association mutually appointed by the
Indemnified and Indemnifying Parties (or, in the event the Indemnified and
Indemnifying Parties cannot agree on a single such member, to a panel of three
members of such Association selected in accordance with the rules of such
Association), who shall promptly arbitrate such dispute in accordance with the
rules of such Association and report to the parties upon such disputed items,
and such report shall be final, binding and conclusive on the parties. Judgment
upon the award by the arbitrator(S) may be entered in any court having
jurisdiction. The prevailing party in any such arbitration shall be entitled to
recover from, and have paid by, the other party hereto all fees and
disbursements of such arbitrator or arbitrators. For this purpose, a party shall
be deemed to be the prevailing party only if such party would be deemed to be a
prevailing party under Section 15.2.3.
13.6 No Finders. The Purchaser represents and warrants to the Selling
Shareholders, and the Selling Shareholders represent and warrant to the
Purchaser, respectively, that they have not become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement. The Purchaser agrees to indemnify
and hold the Selling Shareholders harmless from any breach of the Purchaser's
representation in the previous sentence, and the Selling Shareholders agree to
indemnify and hold the Purchaser harmless from any breach of their
representation in the previous sentence.
13.7 Third Person Claim Procedures. If a third person asserts a claim against a
party to this Agreement, and it is intended to seek indemnification against
another party or parties (the "Indemnifying Party") under the provisions of this
Article 13 in connection with the matter involved in such claim, the party
intending to seek such indemnification (the "Indemnified Party") shall promptly
(but in no event later than ten (10) days prior to the time at which an answer
or other responsive pleading or notice with respect to the claim is required)
notify the Indemnifying Party of such claim. The Indemnifying Party shall have
the right at its election to take over the defense or settlement of such claim
by giving prompt notice to the Indemnified Party that it will do so, such
election to be made and notice given in any event at least 24 hours prior to the
time at which an answer or other responsive pleading or notice with respect
thereto is required. If the Indemnifying Party makes such election, it may
conduct the defense of such claim through counsel of its choosing (subject to
the Indemnified Party's approval, not to be unreasonably withheld), will be
responsible for the expenses of such defense, and shall be bound by the results
of its defense or settlement of the claim to the extent it produces damage or
loss to the Indemnified Party. The Indemnifying Party shall not settle such
claims without prior notice to and consultation with the Indemnified Party, and
no such settlement involving any injunction or material and adverse effect on
the Indemnified Party may be agreed to without its consent. So long as the
Indemnifying Party is diligently contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any such claim. If the Indemnifying
Party does not make such election, or having made such election does not proceed
diligently to defend such claim prior to the time at which an answer or other
responsive pleading or notice with respect thereto is required, or does not
continue diligently to contest such claim, then the Indemnified Party may take
over defense and proceed to handle such claim in its exclusive discretion, and
the Indemnifying Party shall be bound by any defense or settlement that the
Indemnified Party may make in good faith with respect to such claim. The parties
agree to cooperate in defending such third party claims, and the defending party
shall have access to records, information and personnel in control of the other
part which are pertinent to the defense thereof.
13.8 Limitation of Remedies.
13.8.1 Except as provided in Paragraph 13.8.2 of this Section 13.8, no party to
this Agreement shall be liable to any other party or parties or have any
remedies against any other party or parties under this Agreement other than as
provided in this Article 13. The parties understand that this requires that all
disputed claims shall be submitted to arbitration in accordance with Section
13.5, "Arbitration."
13.8.2 Notwithstanding the provisions of Paragraph 13.8.1 of this Section 13.8,
the Purchaser shall, in addition to rights to indemnification provided in this
Article 13, be entitled to such equitable remedies for any breach of Article 7
of this Agreement as are available under applicable law. Such remedies shall not
be subject to arbitration, except that if the Purchaser elects to submit any
dispute over a claim for equitable relief to arbitration in accordance with
Arizona law such dispute shall be submitted for and decided by arbitration. In
such event, arbitrators shall be chosen in the manner set forth in Section 13.5,
"Arbitration."
ARTICLE 14.
Post-Closing Covenants by the Purchaser
With respect to its post-Closing operation of the Company, the
Purchaser covenants to and agrees with the Selling Shareholders as follows:
14.1 Election of Directors of the Purchaser. The Purchaser shall use its best
efforts to cause the directors of the Purchaser to nominate and vote for the
election of Mahmaud S. Aziz, Jianfang Jin, Yunhua Jin, Zahir Papat and Manjit
Mundie as directors of the Purchaser and not to vote for the removal of, and to
vote for the reappointment through the 2002 Fiscal Year of such individuals as
directors.
14.2 Election of Directors of the Company. The Purchaser shall use its best
efforts to cause the directors of the Company to nominate and vote for the
election of Mahmaud S. Aziz, Jianfang Jin, Yunhua Jin, Zahi Papat and Manjit
Mundie, subject to the approval of the Board of Directors of the Purchaser, as
directors of the Company and not to vote for the removal of, and to vote for the
reappointment through the 2002 Fiscal Year of such individuals as directors.
14.3 Fringe Benefits. The Purchaser shall provide to the employees of the
Company such medical and life insurance and other benefits as the Purchaser
provides to its executive officers and the employees shall be eligible to share
on such basis as other executive officers of the Purchaser, in any additional
bonuses, options, restricted stock award programs or employee stock ownership
plans which the Purchaser has established for its executive officers, subject to
the determination of the Board of Directors of the Purchaser.
14.4 Issuance of Purchaser Shares. The Purchaser shall promptly issue any
additional Purchaser Shares to the Selling Shareholders or shareholders of the
Purchaser after the Closing Date in accordance with Section 2.2, "Total
Consideration."
ARTICLE 15.
Miscellaneous
15.1 Access and Information.
15.1.1 The Company and the Purchaser shall provide to each other and their
respective counsel, accountants and other representatives reasonable access upon
reasonable notice during normal business hours during the period between the
date hereof and the Closing Date, to all of the properties, books, records,
contracts and commitments of each other, and shall furnish, or, authorize their
respective counsel and accountants to furnish, to the Purchaser or the Company,
as the case may be, and their respective representatives all such information as
the parties may reasonably request of each other. The Purchaser hereby has the
permission of the Company to contact and carry on discussions with the
customers, prospective customers, suppliers, employees and all persons and
entities under contract with the Company upon reasonable notice. Both the
Purchaser and the Company and Selling Shareholders will cooperate with all
reasonable requests by the other party for information and shall use their best
efforts to secure the cooperation of third parties who may be reasonably
requested to furnish such information to each other.
15.1.2 The Purchaser and the Company and the Selling Shareholders shall keep all
Confidential Information derived from the other party relating to their
respective businesses confidential pending the Closing of the transaction
contemplated by this Agreement. The Purchaser and Selling Shareholders shall,
and the Purchaser and Selling Shareholders shall cause their respective
officers, directors, agents and representatives to, keep all Confidential
Information derived from the other party relating to the business of the
Purchaser and the Company confidential pending the Closing.
15.1.3 If this Agreement should be terminated pursuant to Article 12, the
Purchaser and the Selling Shareholders shall return all such Confidential
Information which they have received and agree not to disclose or use such
information in any manner, except to the extent required to so disclose the same
by law and except for information already publicly available.
15.2 Expenses.
15.2.1 The Purchaser shall be solely responsible for paying its own expenses and
costs incident to the preparation of this Agreement and to the consummation of
the transactions contemplated by this Agreement, and shall have no obligation
for paying such expenses or costs of the other parties.
15.2.2 The Company shall be solely responsible for paying its own expenses and
costs, and those of the Selling Shareholders, incident to the preparation of
this Agreement and to the consummation of the transactions contemplated by this
Agreement. The Selling Shareholders shall have no obligation to reimburse the
expenses or costs of the Purchaser.
15.2.3 Notwithstanding any of the other provisions hereof, in the event of
arbitration and/or litigation with respect to the interpretation or enforcement
of this Agreement or any provisions hereof, the prevailing party in any such
matter shall be entitled to recover from the other party his or its reasonable
costs and expense, including reasonable attorneys' fees, incurred in such
arbitration and/or litigation. For purposes of this Paragraph 15.2.3, a party
shall be deemed to be the prevailing party only if such party (A)(i) receives an
award or judgment in such arbitration and/or litigation for 50% or more of the
disputed amount involved in such matter, or (ii) is ordered to pay the other
party less than 50% of the disputed amount involved in such matter or (B)(i)
succeeds in having imposed a material equitable remedy on the other party (such
as an injunction or order compelling specific performance), or (ii) succeeds in
defeating the other party's request for such an equitable remedy.
15.3 Assignment. The rights and obligations of any party under this Agreement
may not be assigned or transferred without the prior written consent of the
Purchaser or the Selling Shareholders, as the case may be. Any assignment in
violation of this paragraph shall be void.
15.4 Construction. This Agreement shall be construed and enforced in accordance
with the laws of the State of Arizona.
15.5 Captions. Captions and headings used herein are for convenience only and
shall not be used in construing or interpreting this Agreement.
15.6 Gender and Number. Whenever the context of this Agreement so requires, the
masculine gender includes the feminine or neuter, the neuter includes the
masculine or feminine, and the singular number includes the plural.
15.7 Severability. Each provision hereof is severable from this Agreement, and
if one or more provisions hereof are declared invalid, the remaining provisions
shall nevertheless remain in full force and effect. If Section 7.1, "Resale of
Purchaser Shares," is declared excessively broad, as to time, area or otherwise,
it shall be construed as limited to the broadest time, area or other scope
permitted by applicable law.
15.8 No Third-Party Beneficiaries. Each of the provisions of this Agreement is
for the sole and exclusive benefit of the parties thereto, respectively, as
their interests appear, and shall not be deemed for the benefit of any other
person.
15.9 Amendment. This Agreement may be amended only by the mutual written
agreement of the Purchaser, the Selling Shareholders and the Company. Any such
written amendment executed as set forth in the preceding sentence shall be
binding upon all parties hereto. The failure of any party to enforce at any time
any of the provisions of this Agreement shall in no way be deemed a waiver of
any such provision, nor in any way affect the validity of this Agreement or any
part thereof.
15.10 Successors and Assigns. Subject to Section 15.3, "Assignment," this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns and heirs of the parties hereto.
15.11 Counterparts. This Agreement may be executed in two or more counterparts,
and by the different parties hereto on separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
15.12 Entire Agreement. This Agreement and its Schedules constitute the entire
contract among the parties hereto with respect to the subject matter thereof,
superseding all prior communications and discussions, and no party hereto shall
be bound by any communication on the subject matter hereof unless such is in
writing signed by any necessary party thereto and bears a date subsequent to the
date hereof. The exhibits and schedules shall be construed with and deemed as an
integral part of this Agreement to the same extent as if the same had been set
forth verbatim herein. Information set forth in any exhibit, schedule or
provision of this Agreement shall be deemed to be set forth in every other
exhibit, schedule or provision of this Agreement and therefore shall be deemed
to be disclosed for all purposes of this Agreement.
15.13 Public Announcements. No party shall issue any press release or public
announcement in connection with this Agreement or the transactions contemplated
hereby without prior notice to and written consent of the other party.
15.14 Further Assurances. Each of the parties hereto shall use commercially
practicable efforts to fulfill all of the conditions set forth in this Agreement
over which it has control or influence (including obtaining any consents
necessary for the performance of such party's obligations hereunder) and to
consummate the transactions contemplated hereby, and shall execute and deliver
such further instruments and provide such documents as are necessary to effect
this Agreement.
15.15 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be validly given if delivered
personally, or if delivered by courier, or if delivered by telex or telecopier
with receipt confirmed, or if sent by certified or registered air mail return
receipt requested, addressed, if to the Purchaser to:
Unimann, Inc.
11601 East Lusitano Place
Tucson, Arizona 85748
or to such other person or at such other place as the Purchaser shall furnish to
the Selling Shareholders in writing; if to the Selling Shareholders or the
Company to them at:
Sino Pharmaceuticals, Inc.
Unit 152 - 11782 River Road
Richmond, British Columbia
V6X127, Canada
or to such other person or at such other place as the Selling Shareholders shall
furnish the Purchaser in writing. Notice given by telex shall be deemed
delivered when received as evidenced by their answer back. Notice given by
telecopier shall be deemed delivered when receipt thereof is confirmed by
subsequent telephone call. Notice given by certified or registered air mail as
set out above shall be deemed delivered at the earlier of (i) actual receipt as
evidenced by the return receipts, or (ii) five (5) business days after the date
the same is postmarked (if postmarked in the United States and addressed to a
recipient in the United States) or seven (7) business days after the date the
same is postmarked (if postmarked outside the United States or addressed to a
recipient outside the United States).
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
SELLING SHAREHOLDERS:
/s/ Mahmoud S. Aziz
MAHMOUD S. AZIZ
/s/ Jianfang Jin
JIANFANG JIN
/s/ Zahir Popat
ZAHIR POPAT
/s/Manjit Mundie
MANJIT MUNDIE
/s/ Shabnam Aziz
SHABNAM AZIZ
/s/ Ruth Jean Janay
RUTH JEAN JANAY
COMPANY:
SINO PHARMACEUTICALS, INC., a Nevada corporation
By
---------------------------------------------------
Mahmoud S. Aziz
Its President
PURCHASER:
UNIMANN INC., a Wyoming corporation
By
---------------------------------------------------
Daniel L. Hodges
Its President
EXHIBIT "A"
SELLING SHAREHOLDERS
Mahmoud S. Aziz
Jianfang Jin
Zahir Popat
Manjit Mundie
Ruth Jean Janay
SCHEDULE 2.1
Name of Shareholder Company Shares Purchaser Shares
- ------------------- -------------- ----------------
Mahmoud S. Aziz 623,639 6,080,480
Jianfang Jin 153,565 1,497,260
Zahir Popat 61,539 600,005
Manjit Mundie 10,257 100,005
Shabnam Aziz 100,000 975,000
Ruth Jean Janay 51,000 497,250
APPENDIX B
**PROPOSED**
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
UNIMANN, INC.
Pursuant to the provisions of ss. 17-16-1006 and ss. 17-16-1007 of the
Wyoming Business Corporation Act, the undersigned corporation adopts the
following Amended and Restated Articles of Incorporation as of this date:
FIRST: The name of the corporation is Unimann, Inc.
SECOND: The corporation was originally incorporated under the name of
Unimann, Inc. and the original Articles of Incorporation of the corporation were
filed with the Secretary of State on September 12, 1997.
I, the undersigned Daniel L. Hodges, Inc., do hereby certify that the
Board of Directors of said corporation at a meeting duly convened, held on the
___ day of __________, 2001, adopted a resolution to amend and restate the
original articles in their entirety as follows:
1. Name. The name of the Corporation is:
SINO PHARMACEUTICALS CORPORATION
2. Registered Office. The street address of the Corporation's initial registered
office is 1704 Westland Road, Cheyenne, Wyoming 82001.
3. Registered Agent. The name and address of the Corporation's initial
registered agent is Laughlin, Wyoming, Inc., 1704 Westland Road, Cheyenne,
Wyoming 82001.
4. Purpose. The purpose for which the Corporation is organized is the
transaction of any and all lawful activities for which corporations may be
incorporated under the laws of the State of Wyoming, as the same may be amended
from time to time.
5. Capital Stock. The aggregate number of shares of capital stock that the
Corporation shall be authorized to issue is One Hundred Ten Million
(110,000,000) shares which shall consist of the following:
(a) Common Stock. The authorized common stock of the Corporation shall be One
Hundred Million (100,000,000) shares of Common Stock with a par value of $.001
per share. The holders of the Common Stock shall be entitled to one vote for
each share held by them of record on the books of the Corporation. Such shares
of Common Stock may be issued by the corporation from time to time for such
consideration greater than or equal to par value as may be fixed from time to
time by the Board of Directors. The designations and preferences of the Common
Stock are as follows:
(1) Dividends; Distributions. Each share of Common Stock shall be entitled to
receive dividends and other distribution paid in cash, securities, property or
otherwise, when and if declared by the Board of the Corporation.
(2) Liquidation. In the event of any liquidation, dissolution, or winding up of
the affairs of the Corporation, voluntarily or involuntarily, the holders of
shares of Common Stock shall be entitled to receive out of any remaining assets
of the corporation legally available for distribution which shall be distributed
pro rata among the holders of Common Stock in proportion to the number of shares
of Common Stock held by such holders.
(b) Preferred Stock. The authorized preferred stock of the Corporation shall be
Ten Million (10,000,000) shares of preferred stock with a par value of $.001 per
share. Subject to the terms and provisions of this Article 5, the Board of
Directors of the Corporation is authorized to provide, from time to time, for
the issuance of shares of preferred stock in series and to fix from time to time
before issuance the designation, preferences, privileges and voting powers of
the shares of each series of preferred stock and the restrictions or
qualifications thereof, including, without limiting the generality of the
foregoing, the following:
(1) The serial designation and authorized number of shares;
(2) The dividend rate, the date or dates on which such dividends will be payable
and the extent to which such dividends may be cumulative;
(3) The amount or amounts to be received by the holders in the event of
voluntary or involuntary dissolution or liquidation of the Corporation;
(4) The voting rights, if any, of the holders;
(5) The price or prices at which shares may be redeemed and any terms,
conditions and limitations upon such redemption;
(6) Any sinking fund provisions for redemption or purchase of shares of such
series; and
(7) The terms and conditions, if any, on which shares may be converted at the
election of holders thereof into shares or other capital stock, or of other
series of serial preferred stock of the Corporation.
Each series of preferred stock, in preference to the Common Stock, will
be entitled to dividends from funds or other assets legally available therefor,
at such rates, payable at such times and cumulative to the extent as may be
fixed by the Board of Directors of the Corporation pursuant to the authority
herein conferred upon it. In the event of dissolution or liquidation of the
Corporation, voluntary or involuntary, the holders of preferred stock, in
preference to the Common Stock, will be entitled to receive such amount or
amounts as may be fixed by the Board of Directors of the Corporation pursuant to
the authority herein conferred upon it. Preference stock of any series redeemed,
converted, exchanged, purchased or otherwise acquired by the Corporation shall
be canceled by the Corporation and returned to the status of authorized but
unissued preference stock. All shares of any series of serial preferred stock,
as between themselves, shall rank equally and be identical; and all series of
serial preferred stock, as between themselves, shall rank equally and be
identical except as set forth in resolutions of the Board of Directors
authorizing the issuance of the series.
6. Governing Board. The governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation,
providing that the number of directors shall not be reduced to fewer than one
(1). The names and addresses of the Board of Directors are as follows:
NAME POST OFFICE ADDRESS
Michael P. Martin 1704 Westland Road
Cheyenne, Wyoming 82001
7. Payment for Stock. The capital stock, after the amount of the subscription
price or par value has been paid in, shall not be subject to assessment to pay
the debts of the corporation.
8. Incorporator. The name and post office address of the incorporator signing
the Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
Michael P. Martin 1704 Westland Road
Cheyenne, Wyoming 82001
9. Perpetual Existence. The Corporation is to have perpetual existence.
10. Amendment, Alteration or Change of these Articles of Incorporation. The
Corporation reserves the right to amend, alter, change or repeal any provision
contained in the Articles of Incorporation, in the manner now or hereafter
prescribed by statute, or by Articles of Incorporation, and all rights conferred
upon shareholders herein are granted subject to this reservation.
11. Meetings of Shareholders. Meetings of shareholders may be held within or
without the State of Wyoming, as the Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside the State of Wyoming at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the corporation.
12. Elimination of Director Liability. No director or officer of the corporation
shall be personally liable to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director or officer; provided,
however, that nothing contained herein shall eliminate or limit the liability of
a director or officer of the corporation to the fullest extent provided by
applicable laws (i) for acts or omissions which involve intentional misconduct,
fraud or knowing violation of law or (ii) for authorizing the payment of
dividends in violation of Wyoming law, or any successor to such section. The
limitation of liability provided herein shall continue after a director or
officer has ceased to occupy such position as to acts or omissions occurring
during such director's or officer's term or terms of office.
13. Indemnification. To the fullest extent permitted by Wyoming law, the
Corporation shall indemnify and pay the expenses of any person who is or was
made, or threatened to be made, a party to an action or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was a director, officer, employee, trustee or agent of or for
the Corporation or is or was serving at the request or with the prior approval
of the Corporation as a director, officer, employee, trustee or agent of another
corporation, trust or enterprise, against any liability asserted against such
person and incurred by such person in any capacity arising out of that persons
status as such, whether or not the Corporation would have the power to indemnify
that person against such liability under the provisions of the Bylaws of the
Corporation. Further, the Corporation will pay the expenses of such persons as
they are incurred in advance of the final disposition of the action or
proceeding, upon the receipt of an undertaking by or on behalf of such person to
repay the amount if it is ultimately determined by a court of competent
jurisdiction that such person is not entitled to be indemnified by the
Corporation.
_____________ is the ___________ of UNIMANN, INC.; that ________ has
been authorized to execute the foregoing certificate by resolution of the Board
of Directors, adopted at a meeting of the Directors duly called and that such
meeting was held on the ____ day of _________, 2001 and that the foregoing
certificate sets forth the text of the Articles of Incorporation as amended and
restated to the date of the certificate.
Dated: ________________, 2001.
UNIMANN, INC., a Wyoming corporation
By:
------------------------------------
Name:
------------------------------------
Title:
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APPENDIX C
SINO PHARMACEUTICALS CORPORATION
2001 STOCK OPTION PLAN
The following definitions shall be applicable throughout the Plan:
(a) "Board" means the Board of Directors of the Company.
(b) "Articles of Incorporation" means the Company's Articles of Incorporation,
as amended or restated from time to time.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Reference in the Plan to any Section of the Code shall be deemed to
include any amendments or successor provisions to such Section and any rules or
regulations under such Section.
(d) "Committee" means the committee appointed by the Board to administer the
Plan as referred to in Article V.
(e) "Commission" means the Securities and Exchange Commission or any successor
agency.
(f) "Company" means Sino Pharmaceuticals Corporation, a Wyoming corporation.
(g) "Date of Grant" means the date on which the granting of an Option is
authorized by the Board or such later date as may be specified by the Board in
such authorization as referred to in Article V.
(h) "Eligible Employee" means any person regularly employed by the Company or a
Subsidiary on a full-time salaried basis who satisfies all of the requirements
of Article IX.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
(j) "Fair Market Value" is defined in Article IV.
(k) "Holder" means an employee of the Company or a Subsidiary who has been
granted an Option.
(l) "Incentive Stock Option" means any Option intended to be and designated as
an "incentive stock option" within the meaning of ss.422 of the Code.
(m) "Non-Employee Director" means a member of the Board who qualifies as a
"Non-Employee Director" as defined in Rule 16b-3, as promulgated by the
Commission under the Exchange Act or any successor definition adopted by the
Commission.
(n) "Non-Incentive Options" means an Option which is not an Incentive Stock
Option
(o) "Normal Termination" means termination at retirement pursuant to the Company
or Subsidiary retirement plan then in effect.
(p) "Option" means an award granted under Article IX of the Plan and includes
both Non-Incentive Options and Incentive Stock Options.
(q) "Plan" means this 2001 Stock Option Plan.
(r) "Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder.
(s) "Share" means a share of Stock.
(t) "Stock" means common stock of the Company as described in the Articles of
Incorporation.
(u) "Subsidiary" means "subsidiary corporation" as defined inss.424(f) of the
Code.
(v) "Termination" means separation from employment with the Company or any of
its Subsidiaries for any reason except due to death.
(w) "Treasury" means the Department of the Treasury of the United States of
America.
ARTICLE I.
Designation and Purpose of the Plan
The Plan shall be known as the "2001 Stock Option Plan." The purpose of
the Plan is to provide additional incentives to Employees and Non-Employee
Directors of the Company to achieve financial results aimed at increasing
shareholder value and to attract and retain the best available personnel for
positions of responsibility within the Company through the grant of options to
purchase shares of the Company's Common Stock. The Plan was approved by the
Board, subject to the approval by the shareholders of the Company, on October
31, 2001. Subject to the determination of the Board or a Committee appointed by
the Board, Options granted under this Plan may be Incentive Stock Options or
Non-Incentive Options.
ARTICLE II.
Shares Available for Purchase
A maximum of 1,000,000 authorized but unissued shares of the Company's
common stock may be issued upon the exercise of Options granted pursuant to the
Plan. Shares reserved for issuance shall be deemed to have been used in the
exercise of Options whether actually delivered or whether the Fair Market Value
equivalent of such Shares is paid in cash. If an Eligible Employee pays the
exercise price of any given Option by having shares withheld which, upon
exercise, would have a Fair Market Value at the time the Option is exercised
equal to the Option price, then the withheld shares will not be deducted from
those shares reserved for issuance under the Plan. Also, if the Company, at any
time during the effective period of this plan, repurchases Shares on the open
market, then the Board may, but is not required to, add such Shares to the pool
of Shares reserved for issuance under this Plan. However, the number of shares
authorized for issuance under the Plan may never exceed 1,000,000 at any given
time.
In the event that any Option granted under the Plan expires or
terminates for any reason whatsoever without having been exercised in full, the
Shares subject to, but not delivered under such Option shall become available
for other Options which may be granted under the Plan; or shall be available for
any other lawful corporate purpose.
ARTICLE III.
Limit on Value of Option Shares
In the case of an Incentive Stock Option, the aggregate Fair Market
Value (determined as of the time such Option is granted) of the Shares with
respect to which the Incentive Stock Option is exercisable for the first time by
an individual during any calendar year (under all plans of the Company) shall
not exceed $100,000.
ARTICLE IV.
Determination of Fair Market Value
As used herein the term "Fair Market Value" shall mean, with respect to
the date a given Option is granted or exercised, the value determined by the
Board or any Committee appointed in accordance with Article VI hereof in good
faith using a generally accepted valuation method and, in the case of an
incentive stock option, determined in accordance with applicable Treasury
regulations; provided, however, that where there is a public market for the
common stock of the Company, the Fair Market Value per share shall be the mean
of the final bid and asked prices of the Stock on the date of grant, as reported
in The Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation System) or, in
the event the stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on the date of grant of the
option, as reported in The Wall Street Journal.
ARTICLE V.
Stock Options and Option Agreements
5.1 Stock Options under the Plan may be of two types: Incentive Stock Options
and Non-Incentive Options. Any Stock Option granted under the Plan will be in
such form as the Board may from time to time approve. The Board will have the
authority to grant any optionee Incentive Stock Options, Non-Incentive Options
or both types of Options. The Date of Grant of an Option will be the date the
Board by resolution selects an individual to be a participant in any grant of an
Option, determines the number of Shares to be subject to such Option to be
granted to such individual and specifies the terms and provisions of the Option.
Incentive Stock Options may only be granted to Eligible Employees. To the extent
that any Option is not designated as an Incentive Stock Option or even if so
designated does not qualify as an Incentive Stock Option, it will be deemed to
be a Non-Incentive Option. The Board may grant Non-Incentive Options to
Non-Employee Directors under the Plan. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options will be
interpreted, amended or altered nor shall any discretion or authority granted
under the Plan be exercised so as to disqualify the Plan under ss.422 of the
Code or, without the consent of the optionee, to disqualify any Incentive Stock
Option under such ss.422.
5.2 Each Option granted under the Plan shall be evidenced by an option agreement
("Option Agreement"), which shall indicate on its face whether it is an
agreement for an Incentive Stock Option or a Non-Incentive Option, or both and
shall be signed by an officer of the Company on behalf of the Company and by the
employee who was granted the Option and which shall contain such provisions as
may be approved by the Board or any Committee appointed by the Board according
to Article VI. The provisions shall be subject to the following terms and
conditions:
5.2.1 Any Option or portion thereof that is exercisable shall be exercisable as
to such number of Shares and at such times as set forth in the Stock Option
Agreement, except as limited by the terms of the Plan heretofore;
5.2.2 Every Share purchased through the exercise of an Option shall be paid for
in full at the time of the exercise. Each Option shall cease to be exercisable,
as to any Share, when the Holder purchases the Share, or when the Option lapses;
5.2.3 Options shall not be transferable by the Holder except by will, the laws
of descent and distribution or pursuant to a qualified domestic relations order
and shall be exercisable during the Holder's lifetime only by the Holder; and
5.2.4 An unexpired Option shall become immediately exercisable (1) automatically
on the Holder's Normal Termination, (2) at the discretion of the Board, in whole
or in part, on the date the Holder becomes eligible to receive early retirement
benefits, as defined under the retirement plan of the Company then in effect,
(3) upon any change in control of the Company, and (4) under such other
circumstances as the Board may direct.
5.3 The Option Agreements shall constitute binding contracts between the Company
and the employee. Every employee, upon acceptance and execution of such option
agreement, shall be bound by the terms and conditions of this Plan and of the
Option Agreement.
5.4 The terms and conditions of the Option Agreement shall be in accordance with
this Plan, but may include additional provisions and restrictions, provided that
the same are not inconsistent with the Plan.
ARTICLE VI.
Compensation and Stock Option Committee
The Plan shall be administered by the Board or a Committee appointed by
the Board in accordance with Rule 16b-3 of the Exchange Act ("Rule 16b-3"). Any
Committee which has been delegated the duty of administering the Plan by the
Board shall be composed of two or more persons each of whom (i) is a
Non-Employee Director and (ii) is an "outside director" as defined in
ss.162(m)(4) of the Code. To the extent reasonable and practicable, the Plan
shall be consistent with the provisions of Rule 16b-3 to the degree necessary to
ensure that transactions authorized pursuant to the Plan are exempt from the
operation of Section 16(b) of the Exchange Act. If such a Committee is
appointed, the Committee shall have the same power and authority to construe,
interpret and administer the Plan and from time to time adopt such rules and
regulations for carrying out this Plan as it may deem proper and in the best
interests of the Company as does the Board. Any reference herein to the Board
shall, where appropriate, encompass a Committee appointed to administer the Plan
in accordance with this Article VI.
The Board shall, from time to time, in its discretion, determine which
of the Eligible Employees are to be granted Options and the form, amount and
timing of such Options and, unless otherwise provided herein, the terms and
provisions thereof and the form of payment of an Option, if applicable, and such
other matters specifically delegated to It under this Plan. Subject to the
express provisions of the Plan, the Board shall have authority to interpret the
Plan and Options granted hereunder, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to make all other determinations necessary
or advisable in administering the Plan, all of which determinations shall be
final and binding upon all persons. A quorum of the Board shall consist of a
majority of its members and the Board may act by vote of a majority of its
members at a meeting at which a quorum is present, or without a meeting by a
written consent to the action taken signed by all members of the Board. No
member of the Board shall be liable for any action, interpretation or
construction made in good faith with respect to the Plan or any Option granted
hereunder.
ARTICLE VII.
Option Price
The Option price at which Shares may be purchased under an Option
granted pursuant to this Plan shall be set by the Board, but shall in no
instance be less than the Fair Market Value of such Shares on the Date of Grant
in the case of Incentive Stock Options. Such Fair Market Value shall be
determined by the criteria set forth in Article IV hereof. The Option price will
be subject to adjustments in accordance with provisions of Article X herein.
In the event that an employee granted an Incentive Stock Option
hereunder owns, directly or indirectly, immediately after such grant, more than
10% of the total combined voting power of all classes of the issued and
outstanding stock of the company, the option price shall be at least 110% of the
Fair Market Value of the stock subject to the Option and such Option by its
terms shall not be exercisable after the expiration of five (5) years from the
date such Option is granted.
ARTICLE VIII.
Exercise of Option
8.1 Subject to the provisions of Articles VII and IX the period during which
each Option may be exercised shall be fixed by the Board at the time such Option
is granted, subject to the following rules:
8.1.1 such Option is granted within ten (10) years from the date the Plan is
adopted, or the date such Plan is approved by the stockholders, whichever is
earlier;
8.1.2 such Option by its terms is not exercisable after the expiration of ten
(10) years (in the case if Incentive Stock Options, not to exceed five years for
Eligible Employees owning 10% or more of the combined voting power of all
classes of stock of the Company) from the Date of Grant as shall be set forth in
the Stock Option Agreement relating to such grant; and,
8.1.3 such Option by its terms states that a person's rights and interests under
the Plan, including amounts payable, may not be assigned, pledged, or
transferred except, in the event of an employee's death, to a designated
beneficiary as provided in the Plan, or in the absence of such designation, by
will or the laws of descent and distribution and pursuant to a qualified
domestic relations order.
8.2 An Option shall lapse under the following circumstances:
8.2.1 Ten (10) years after it is granted, three months after Normal Termination,
twelve months after the date of Termination if due to permanent disability,
three months after any other Termination or any earlier time set by the grant.
8.2.2 If the Holder dies within the Option period, the Option shall lapse unless
it is exercised within the Option period and in no event later than twelve
months after the date of his death by the Holder's legal representative or
representatives or by the person or persons entitled to do so under the Holder's
last will and testament or, if the Holder shall fail to make testamentary
disposition of such Option or shall die intestate, by the person or persons
entitled to receive said Option under the applicable laws of descent and
distribution.
8.2.3 Notwithstanding the foregoing, in no event shall the period of exercise be
less than thirty days after Normal Termination or the death of the Holder;
provided, however, that in no event shall an Incentive Stock Option be exercised
more than ten years after the Date of Grant.
8.3 No Shares shall be delivered pursuant to any exercise of an Option until the
requirements of such laws and regulations, as may be deemed by the Board to be
applicable, are satisfied and until payment in full of the option price
specified in the applicable Stock Option Agreement is received by the Company.
No employee shall be deemed to be an owner of any Shares subject to any Option
unless and until the certificate or certificates for them have been issued, as
reflected on the stock record and transfer books of the Company.
ARTICLE IX.
Eligibility
All employees of the Company, including officers and directors who are
salaried employees, shall be Eligible Employees eligible to participate under
this Plan. The fact that an employee has been granted an Option under this Plan
shall not in any way affect or qualify the right of the employee to terminate
his employment at any time. Nothing contained in this Plan shall be construed to
limit the right of the Company to grant Options otherwise than under the Plan
for any proper and lawful corporate purpose, including but not limited to
Options granted to employees. Employees to whom Options may be granted under the
Plan will be those selected by the Committee from time to time who, in the sole
discretion of the Committee, have contributed in the past or who may be expected
to contribute materially in the future to the successful performance of the
Company.
ARTICLE X.
Capital Adjustments Affecting Stock
10.1 If the outstanding Stock of the Company shall at any time be changed or
exchanged by declaration of a stock dividend, split-up, combination of Shares,
recapitalization, merger, consolidation, or other corporate reorganization in
which the Company is the surviving corporation, the number and kind of Shares
subject to the Plan or subject to any Options theretofore granted, and the
Option prices, shall be appropriately and equitably adjusted so as to maintain
the proportionate number of Shares without changing the aggregate Option price
and the Board may make any other adjustments as the Board deems appropriate for
purposes of the Plan. The determination of the Board as to the terms of any
adjustment shall be conclusive except to the extent governed by Treasury
regulations applicable to Incentive Stock Options.
10.2 In the event of a liquidation or dissolution of the Company, sale of all or
substantially all of its assets, or a merger, consolidation or other corporate
reorganization in which the Company is not the surviving corporation, or any
merger or other reorganization in which the Company is the surviving corporation
but the holders of its Stock receive securities of another corporation, or in
the event a person makes a tender offer to the stockholders of the Company, the
Board may, but need not, accelerate the time at which unexercised Options may be
exercised. Nothing herein contained shall prevent the substitution of a new
Option by the surviving or acquiring corporation.
ARTICLE XI.
Amendments, Suspension or Termination
11.1 The Board shall have the right, at any time, to amend, suspend or terminate
the Plan, and if suspended, reinstate the Plan in whole or in part in any
respect which it may deem to be in the best interests of the Company, provided,
however, no amendments shall be made in the Plan which:
11.1.1 Increase the total number of Shares for which Options may be granted
under this Plan for all employees or for any one of them except as provided in
Article X;
11.1.2 Change the minimum purchase price for the optioned Shares, except as
provided in Article X;
11.1.3 Affect outstanding Options or any unexercised rights thereunder, except
as provided in Article VIII;
11.1.4 Extend the option period provided in Article VIII or make an Option
exercisable earlier than as specified in Article VIII; or
11.1.5 Extend the termination date of the Plan.
11.2 The Board shall also have the right, with the express written consent of an
individual participant, to cancel, reduce or otherwise alter such participant's
outstanding Options under the Plan.
11.3 Any such amendment, termination, suspension, cancellation, reduction or
alteration shall be further approved by the shareholders of the Company if such
approval is required to preserve or comply with any exemption, whether under
Rule 16b-3 or otherwise, from Section 16(b) of the Exchange Act or to preserve
the status of Incentive Stock Options within the meaning of ss.422 of the Code.
ARTICLE XII.
Effective Date, Term and Approval
The effective date for this Amended Plan shall be upon approval by the
stockholders. Options may be granted as provided herein for a period of ten
years after such date unless an earlier termination date after which no Options
may be granted under the Plan is fixed by action of the Board, but any Option
granted prior thereto may be exercised in accordance with its terms. The grant
of any Options under the Plan is effective only upon approval of the Plan by the
stockholders. The Plan and all Options granted pursuant to it are subject to all
laws, approvals, requirements, and regulations of any governmental authority or
securities exchange which may be applicable thereto and, notwithstanding any
provisions of the Plan or option agreement, the Holder of an Option shall not be
entitled to exercise his Option nor shall the Company be obligated to issue any
Shares to the Holder if such exercise or issuance shall constitute a violation
by the Holder or the Company of any provisions of any such laws, approvals,
requirements, or regulations. The Plan shall continue in effect until all
matters relating to the payment of Options granted under the Plan and
administration of the Plan have been settled.
ARTICLE XIII.
General
13.1 Government and Other Regulations. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act, the
Exchange Act, and the requirements of any stock exchange upon which the Shares
may then be listed and shall be further subject to the approval of counsel for
the Company with respect to such compliance. Inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
13.2 Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
13.3 Tax Withholding. The employee or other person receiving Stock upon exercise
of an Option may be required to pay to the Company or to a Subsidiary, as
appropriate, the amount of any such taxes which the Company or Subsidiary is
required to withhold with respect to such Stock. In connection with such
obligation to withhold tax, the Company may defer making delivery of such Stock
unless and until indemnified on such withholding liability to its satisfaction.
13.4 Claim to Options and Employment Rights. No employee or other person shall
have any claim or right to be granted an Option under the Plan. Neither this
Plan nor any action taken hereunder shall be construed as giving any employee
any right to be retained in the employ of the Company or a Subsidiary.
13.5 Beneficiaries. Any issuance of shares upon exercise of Options issued under
this Plan to be made to a deceased participant shall be paid to the beneficiary
designated by the participant and filed with the Board. If no such beneficiary
has been designated or survives the participant, issuance shall be made to the
participant's legal representative. A beneficiary designation may be aged or
revoked by a participant at any time provided the change or revocation is filed
with the Board. The designation by a married participant of one or more persons
other than the participant's spouse must be consented to by the spouse.
13.6 Indemnification. Each person who is or shall have been a member of the
Board shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be involved by reason
of any action or failure to act under the Plan and against and from any and all
amounts paid by him in satisfaction of judgment in such action, suit, or
proceeding against him. He shall give the Company an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and defend
it on his own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Bylaws or Articles of Incorporation, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
13.7 Reliance on Reports. Each member of the Board shall be fully justified in
relying or acting in good faith upon any report made by the independent public
accountants of the Company and its Subsidiaries and upon any other information
furnished in connection with the Plan by any person or persons other than
himself. In no event shall any person who is or shall have been a member of the
Board be liable for any determination made or other action taken, including the
furnishing of information, or failure to act, if in good faith.
13.8 Relationship to Other Benefits. No grant of any Options under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company or any Subsidiary.
13.8.1 Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
13.9 Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
13.10 Titles and Headings. The titles and headings of the Sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
13.11 Fractional Shares. No fractional Shares shall be issued and the Board
shall determine whether cash shall be given in lieu of fractional Shares or
whether such fractional Shares shall be eliminated by rounding up or rounding
down unless otherwise provided in the Plan.
13.12 Construction of Plan. The place of administration of the Plan shall be in
the State of Arizona, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined in accordance with the laws of
the State of Arizona.