EXHIBIT 4.3
DONLAR CORPORATION
March 18, 2002
CONFIDENTIAL
Xxxxxx Xxxxx & Partners, L.P.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Star Polymers, L.L.C.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Dear Sirs:
This letter agreement (this "Letter Agreement") sets forth certain
understandings between Xxxxxx Xxxxx & Partners, L.P. ("Xxxxxx Xxxxx") and Star
Polymers, L.L.C. ("Star," together with Xxxxxx Xxxxx are sometimes referred to
as the "Xxxxxx Xxxxx Group"), and Donlar Corporation, an Illinois corporation
("Donlar"), regarding a Bridge Facility to be provided to Donlar and its
subsidiary, Donlar Biosyntrex Corporation, a Nevada corporation ("Biosyntrex")
(Donlar and Biosyntrex are referred to collectively in this Letter Agreement as
the "Company"), by Tennessee Farmers Insurance Company or one of its affiliates
("Tennessee Farmers").
Attached to this Letter Agreement as Schedule A is the form of the
Bridge and Consolidated Term Loan Agreement (the "Loan Agreement") among Donlar,
Biosyntrex and Tennessee Farmers, which sets forth (i) the material terms and
conditions of the Bridge Facility, (ii) the restructuring of other indebtedness
of the Company to Tennessee Farmers, (iii) the restructuring of other
indebtedness of the Company, including indebtedness owed by the Company to the
Xxxxxx Xxxxx Group and (iv) Tennessee Xxxxxx'x agreement to a merger (the
"Merger") of Donlar and Biosyntrex subject to certain conditions and on the
terms as set forth on Schedule F. Attached to this Letter Agreement as Schedule
B is a list of the indebtedness of the Company to the Xxxxxx Xxxxx Group (the
"Xxxxxx Xxxxx Indebtedness").
Section 6.3 of the Loan Agreement contains the conditions to the
initial extension of credit under the Bridge Facility, including the agreement
of the Xxxxxx Xxxxx Group to the following (capitalized terms have the same
meaning as in the Loan Agreement):
A. exchange all the equity securities of the Company the Xxxxxx
Xxxxx Group holds as of the date hereof into shares of common
stock of Donlar;
B. convert the Xxxxxx Xxxxx Indebtedness into new senior
convertible preferred stock; and
C. execute a subordination agreement acceptable to the lenders
under the Bridge Facility.
In order to facilitate the completion of the Bridge Facility and the
Merger, and subject to the completion of the definitive documentation for the
foregoing transactions and, in the case of paragraphs 1, 2 and 4, the Conditions
for Conversion (defined below) being satisfied, the Xxxxxx Xxxxx Group agrees
to:
1. The conversion of the Xxxxxx Xxxxx Indebtedness into shares of
new convertible senior preferred stock (the "Senior Preferred")
containing the terms attached hereto as Schedule C and having a
stated liquidation value of $9 million dollars, which shares
will be convertible into 13,235,294 shares of the Company's
common stock and will represent 14.14% of the total outstanding
equity of the Company on a fully diluted basis.
2. The exchange of all the equity securities of the Company the
Xxxxxx Xxxxx Group holds into one (1) million shares of common
stock, which shares will represent 1.07% of the total
outstanding equity of the Company on a fully diluted basis.
3. Execute the Subordination Agreement in the form of Schedule H.
4. Vote any shares of voting securities of the Company owned by the
Xxxxxx Xxxxx Group in favor of the Merger.
5. Subject to the terms and conditions contained herein, execute
and deliver such further instruments, certificates or documents
and take such further action as may be reasonably necessary to
more fully carry out the intent and the purposes of paragraphs 1
and 2.
6. Acknowledge that Tennessee Farmers is an express third party
beneficiary of this Letter Agreement and shall have all of the
claims, rights, powers and remedies of such a third party
beneficiary to the maximum extent permitted under applicable
law.
The obligations of the Xxxxxx Xxxxx Group set forth in paragraphs 1, 2
and 4 above are subject to the following conditions ("Conditions for
Conversion") being met:
(i) the amendment to the Company's Certificate of
Incorporation (the "Amendment") shall contain the terms
of the Senior Preferred described in Schedule C and no
other terms that are inconsistent with those set forth on
Schedule C, or otherwise detrimental to the holders of
Senior Preferred;
(ii) the Company shall have received all requisite consents
and approvals to the transactions described herein,
including receiving approval from its
board of directors and shareholders for filing the
Amendment; and the Company shall have duly executed and
filed with the Secretary of State of Illinois the
Amendment; and such Amendment shall be in full force and
effect at the time of conversion;
(iii) any and all indebtedness owing to, and all equity of, Xx.
Xxxx Xxxxxx shall have been exchanged for: (a) shares of
Senior Preferred having a stated liquidation value of
nine (9) million dollars, which shares shall be
convertible into for 13,235,294 shares of common stock;
(b) five (5) million shares of common stock (the "Common
Stock"); and (c) a warrant for an additional three (3)
million shares of common stock (the "Warrant"). The
Senior Preferred, Common Stock and Warrant issued to Xx.
Xxxx Xxxxxx will represent 22.68% of the total
outstanding equity of the Company on a fully diluted
basis;
(iv) the Company and Tennessee Farmers shall have executed
definitive documents which are consistent with the Loan
Agreement set forth in Schedule A hereto and Tennessee
Farmers has committed to lend approximately $2,127,000 to
the Company in accordance therewith;
(v) Donlar, Biosyntrex and Tennessee Farmers enter into an
agreement regarding the restructuring of the Company
consistent with the terms set forth in Schedule F hereto;
(vi) the 1998 and 2000 notes set forth on Schedule G shall be
simultaneously exchanged for shares of Senior Preferred
having a stated liquidation value of $1,905,500 which
shares will be convertible into 2,802,206 shares of
common stock;
(vii) the capitalization of the Company on a fully diluted
basis immediately prior to the Merger is as set forth on
Schedule D and the capitalization of the Company on a
fully diluted basis upon consummation of the Merger shall
be as set forth on Schedule E; and
(viii) the Company shall have represented and warranted to the
Xxxxxx Xxxxx Group that all of the Conditions for
Conversion have been satisfied.
If the foregoing is in accordance with your understanding of our
agreement, please sign where indicated below and deliver a copy of this Letter
Agreement as provided for herein, whereupon this Letter Agreement shall
represent a binding agreement between us and shall be governed by the internal
laws of the State of Illinois.
Very truly yours,
DONLAR CORPORATION
By:
---------------------------------
Name: Xxxxx Xxxxxx
Title: President and CEO
Accepted and agreed to as of
the date first above written:
XXXXXX XXXXX & PARTNERS, L.P.
By:
---------------------------------
Name:
Title:
STAR POLYMERS, L.L.C.
By:
---------------------------------
Name:
Title:
