EXHIBIT
LOAN MODIFICATION AND FORBEARANCE AGREEMENT
This LOAN MODIFICATION AND FORBEARANCE AGREEMENT (the "Agreement")
dated as of January 8, 2003, is made by and between Bigmar, Inc., a Delaware
corporation (the "Borrower") and Xxxx Xxxxxxxxxx (the "Lender").
WITNESSETH
WHEREAS, the Borrower is now indebted to the Lender on account of
various loans and other extensions of credit and financial accommodations
previously made or granted by the Lender to the Borrower in the aggregate amount
of US$1,879,932.43; and
WHEREAS, the Borrower has agreed to convert a portion of the
indebtedness owed by it to the Lender into shares of its Series C convertible
preferred stock (the "Series C Convertible Preferred Stock"); and
WHEREAS, the Lender has agreed to make certain modifications of the
indebtedness that would survive such equity conversion, and to forbear from
collecting upon such surviving indebtedness as more specifically described
hereinbelow; and
WHEREAS, the Lender may hereafter make loans or grant other financial
accommodations to the Borrower; and
WHEREAS, various potential lenders to the Borrower have stated that
they would not consider lending funds to the Borrower unless the Lender agreed
to forbear from collecting his existing indebtedness from the Borrower and from
seeking any recourse against the assets of the Borrower, including without
limitation the equity securities of its operating subsidiaries; and
WHEREAS, various equity investors have expressed similar concerns
regarding investing in the Borrower absent such forbearance; and
WHEREAS, the parties have entered into an employment agreement on the
date of this Agreement;
NOW, THEREFORE, in consideration of the respective covenants set forth
in this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Borrower and the Lender
agree as follows:
1. DEFINITIONS. As used herein, the following terms have the meanings
set forth below:
"Borrower Default" shall be defined as any material violation
by the Borrower of any representation, warranty or covenant in
this Agreement, or in any other agreement executed by and
between the Borrower and the Lender on or after this date.
"Collateral" shall be defined as all collateral that now or
hereafter secures any of the Surviving Indebtedness.
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"Lien" shall be defined as any security interest, mortgage,
deed of trust, pledge, lien, charge, encumbrance, title
retention agreement or analogous instrument or device, in or
on any of the assets, or properties, of the Borrower, whether
now owned or hereafter acquired and whether arising by
agreement or operation of law.
"Surviving Indebtedness" shall have the definition set forth
in Section 3 of this Agreement.
"Termination Date" shall be defined as February 28, 2005, as
the same may be modified by the provisions of Sections 5 and 6
of this Agreement.
2. CONVERSION. The Lender hereby agrees to convert the monetary
amount of all accrued but unpaid bonuses, vacation pay, and
certain of the indebtedness owed by the Borrower to the Lender
in the aggregate amount of Eight Hundred Seventy-Nine
Thousand, Nine Hundred Thirty- Two Dollars and Forty-Three
Cents (US$879,932.43) into shares of Series C Convertible
Preferred Stock at a price per share of Ninety-One Dollars and
Fifty Cents (US$91.50) (the "Conversion Shares"). The Borrower
represents, warrants and agrees that it will deliver
certificates representing 9,617 Conversion Shares promptly
following the execution and delivery of this Agreement.
3. FORBEARANCE. The parties represent, warrant and agree that (a)
the dollar amount of the indebtedness owed by the Borrower to
the Lender that will survive the execution of this Agreement
(the "Surviving Indebtedness"), is One Million Dollars
(US$1,000,000); (b) as of the date hereof, there are no other
amounts owed to the Lender by the Borrower; PROVIDED, HOWEVER,
that both parties represent, warrant and agree that Lender has
certain claims against the Borrower for indemnification
arising out of certain litigation that was prosecuted in the
Court of Chancery in the State of Delaware captioned IN RE
BIGMAR 225 LITIGATION, the validity of which claims have not
yet been addressed, and which claims shall survive the
execution and delivery of this Agreement; (c) Lender will
forbear and refrain from attempting to collect any portion of
the Surviving Indebtedness until the Termination Date; (d)
interest on the Surviving Indebtedness will accrue at the
simple annual rate of five percent (5%), commencing on the
date of this Agreement and shall be paid in arrears, and in
full, on February 28,2006; thereafter interest shall be paid
monthly, in arrears, and within seven (7) days of the close of
each month. Nothing herein shall preclude or prohibit the
Lender from securing, perfecting or otherwise protecting any
Lien that it has, or has a right to pursue, in the Collateral;
provided that the Lender represents, warrants and agrees that
it will not take any action to execute upon that Collateral in
contravention of this Agreement.
4. ACTIONS CONCERNING COLLATERAL. Notwithstanding any Lien now
held or hereafter acquired by the Lender, the Lender may not
take possession of, sell, dispose of, or otherwise transfer,
all or any part of the Collateral, and may not enforce any
right or remedy available to it with respect to the Borrower
or the Collateral until the Termination Date.
5. BORROWER DEFAULT. In the event of a Borrower Default, the
Lender shall give written notice of such Borrower Default
(specifying the actions or omissions constituting the Borrower
Default, and which written notice is hereafter referred to as
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the "Default Notice") to the Borrower. During the twenty (20)
business days following delivery of a Default Notice, the
Borrower shall have an opportunity to cure the Borrower
Default; if the Borrower fails to cure the Borrower Default
during such twenty (20) business days, the Termination Date
referenced in this Agreement shall for all purposes be
accelerated and shall become the twenty-first business day
following delivery of the Default Notice.
6. BANKRUPTCY. Notwithstanding any other provision of this
Agreement, each and anyone of the following events shall upon
its occurrence cause the immediate acceleration of the
Termination Date, for all purposes contemplated in this
Agreement, to the date of such event: any receivership,
bankruptcy, assignment for the benefit of creditors,
reorganization or accommodation among creditors, whether or
not pursuant to bankruptcy law or subject to judicial order,
the sale of all or substantially all of the assets of the
Borrower, or the dissolution, liquidation or any other
marshalling of the assets of the liabilities of the Borrower;
provided, HOWEVER, that the current sequestration of the
shares of stock of the Borrower's subsidiaries or any
sequestration sought by the Borrower or obtained by the
Borrower shall not in and of itself cause an acceleration or
modification of the Termination Date.
7. RESTRICTIVE LEGENDS.
(a) The Lender represents, warrants and agrees that it
will cause all notes or evidence relating to the
Surviving Indebtedness, or any part thereof, to
contain a specific statement thereon to the effect
that the indebtedness evidenced thereby is subject to
the provisions of this Agreement; and the Borrower
represents, warrants and agrees that it will xxxx its
books conspicuous to evidence the forbearance of the
Surviving Indebtedness effected hereby.
(b) The parties represent, warrant and agree that the
certificate or certificates representing the
Conversion Shares shall be imprinted on its/their
face with the restrictive legend generally utilized
by the Borrower in connection with the issuance of
restricted stock, to the effect that the subject
securities have not been registered under United
States securities laws and may not be transferred or
sold absent registration or a legal opinion
acceptable in form and substance to the Borrower that
an exemption from registration is available.
8. ADDITIONAL REPRESENTATIONS AND WARRANTIES.
(a) The Borrower represents and warrants that it has all
corporate power to execute this Agreement and issue
the Conversion Shares; that the execution of this
Agreement has been duly authorized by the Borrower;
that the Conversion Shares, when issued, will be duly
issued, fully paid and non-assessable; and that this
Agreement is enforceable against the Borrower in
accordance with its terms.
(b) The Lender represents and warrants that it has full
title to all of the indebtedness that is subject to
this Agreement, including, without limitation, to
indebtedness converted into the Conversion Shares and
the Surviving Indebtedness; that such indebtedness
has not been sold, transferred, assigned or
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hypothecated and that there is no other person with a
valid claim of right to such indebtedness; that this
Agreement is enforceable against the Lender in
accordance with its terms; that the Lender is
accepting the Conversion Shares for investment
purposes and not with a view to resale or
distribution; that the Lender is an "accredited
investor" as that term is defined by Rule 501(a) of
Regulation D promulgated under the Securities Act of
1933, as amended; and that the Lender is a
sophisticated investor with access to any and all
information regarding the Borrower and its
subsidiaries.
(c) Each of the parties represent and warrant that it has
been represented by legal counsel in connection with
the negotiation and execution of this Agreement.
9. NOTICES. All notices hereunder shall be in writing and shall
be (a) delivered by hand or (b) transmitted by telecopier,
e-mail or mail, in each case addressed to the party to whom
notice is being given at its address set forth below:
If to Lender: Xxxx X. Xxxxxxxxxx
Bigmar Pharmaceutical SA
Xxx Xxxxxxxxx 00/00
XX -0000 Xxxxxxxx, Xxxxxxxxxxx
Facsimile: (000) 00-00-000-0000
E-mail: XXXX.XXXXXXXXXX@XXXXXX.XX
With a copy to: Xxxxx Xxxxxxxxx Xxxxxxxxx, Esquire
Cozen X'Xxxxxx
0000 Xxxxxx Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
E-mail: XXXXXXXXXX@XXXXX.XXX
If to Borrower: Bigmar, Inc.
c/o Xxxxxx XX
0, Xxx xxx Xxxx
0000 Xxxxxx, Xxxxxxxxxxx
Facsimile: (000) 00-00-000-0000
E- mail: XXXXXXXX@XXXXXX.XX
With a copy to: Xxxxx X. Xx Xxxxxxx, Esquire
Xxxxxxxx Xxxxxx LLP
0000 X Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
E-mail: XXXXXXXXXX@XXXXXXXXXXX.XXX
or at such other address as may hereafter be designated in
writing by that party. All such notices shall be deemed to
have been given on (i) the date received, if delivered by
hand; (ii) the date of posting if delivered by mail; or (iii)
the date of transmission if delivered by telecopy or e-mail.
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10. GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of
Delaware. Each party consents to the personal jurisdiction of
the state and federal courts located in the State of Delaware
in connection with any controversy related to this Agreement,
waives any argument that venue in any such forum is not
convenient, and agrees that any litigation initiated by any of
them in connection with this Agreement may be venued in either
the state or federal courts located in New Castle County,
Delaware.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement as of the date and year first above-written.
BORROWER:
BIGMAR, INC.
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Name: Philippe X.X. Xxxxxx
Title: Chief Financial Officer
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