UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
JANUARY 8, 2003
Date of Report (date of Earliest Event Reported)
BIGMAR, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 31-1445779
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
001-14416
(Commission File No.)
9711 SPORTSMAN CLUB ROAD, JOHNSTOWN, OHIO 43031
(Address of principal executive offices and zip code)
740-966-5800
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed from last report)
ITEM 5. OTHER EVENTS
LOAN MODIFICATION AND FORBEARANCE AGREEMENT
On January 8, 2003, Bigmar, Inc., a Delaware corporation (the
"Company") and John G. Tramontana, the Company's President and Chairman of the
Board of Directors of the Company ("Tramonanta") entered into a certain Loan
Modification and Forbearance Agreement (the "Loan Modification Agreement").
Under the terms and provisions of this agreement, Tramontana agreed to (i)
convert a portion of the total indebtedness in the amount of $1,879,932.43 owed
to Tramontana by the Company into 9,617 shares (the "Stock Consideration") of
the Company's Series C Convertible Preferred Stock (the "Series C Stock") for a
total consideration of forgiveness of $879,932.43 of debt, or at a price of
$91.50 per share (the "Shares"), and (ii) forbear from collecting upon the
remaining indebtedness of the Company in the amount of $1,000,000 (the
"Surviving Debt") until February 28, 2005 (the "Termination Date"). The interest
on the Surviving Debt through the Termination Date is 5% per annum commencing on
the date of the Loan Modification Agreement, and will be paid in arrears and in
full on February 28, 2006. The Loan Modification Agreement contains other
standard provisions found in similar agreements including but not limited to
borrower default, bankruptcy, investment representations, etc. The Stock
Consideration represents restricted stock of the Company and is subject to
restrictions on transfer under the applicable federal and state laws.
At its January 7, 2003 special meeting, the Company's Board of
Directors (the "Board") reviewed and approved, upon and in accordance with the
recommendation of the Special Committee of the Company, the terms and conditions
of the above-referenced loan modification transaction with Tramontana and
authorized, INTER ALIA, the conversion under the Loan Modification Agreement and
the issuance of the Stock Consideration to Tramontana. Tramontana was not
present at the January 7, 2003 Board meeting.
The foregoing is a summary description of the terms of the Loan
Modification Agreement and by its nature is incomplete. It is qualified in the
entirety by the text of the Loan Modification Agreement, a copy of which
attached hereto as Exhibit 99.1. All readers of this Current Report are
encouraged to read the entire text of the Loan Modification Agreement that is
attached hereto.
Series C Convertible Preferred Stock
------------------------------------
The designations, preferences, relative rights and other distinguishing
characteristics of the Series C Stock authorized for issuance to Tramontana
under the terms and provisions of the Loan Modification Agreement and of the
Assignment Agreement (as described and defined below), are set forth in the
Certificate of Designations, Preferences, Relative Rights and Other
Distinguishing Characteristics of the Series C Convertible Preferred Stock of
the Company dated November 12, 2002 (the "Certificate"). The total number of
authorized shares of the Series C Stock is 50,000. Further, the Certificate sets
forth the following distinguishing characteristics of the Series C Stock:
(i) DIVIDEND RIGHTS - the Series C Stock is on par with the Company's
common stock in terms of its right to receive dividends;
(ii) VOTING RIGHTS - the Series C Stock votes equally with the shares
of the common stock and not as a separate class, at any annual or special
meeting of stockholders of the Company, and each holder of shares of the Series
C Stock is entitled to the number of votes equal to the whole number of shares
of common stock into which such holder's aggregate number of shares of Series C
Stock are convertible. Additionally, for so long as at least a majority of the
shares of Series C Stock (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series C Stock) issued remains
outstanding, the vote or written consent of the holders of at least a majority
of the outstanding Series C Stock is necessary for effecting or validating any
amendment, alteration, or repeal of any provision of the Certificate of
Incorporation (including any filing of a Certificate of Designation), that
materially alters or changes the voting powers, preferences, or other special
rights or privileges, or restrictions of the Series C Stock in a manner
different than other classes of stock;
(iii) LIQUIDATION RIGHTS - Upon any liquidation, dissolution, or
winding up of the Company, voluntary or involuntary, before any distribution or
payment is made to the holders of any junior stock, the holders of Series C
Stock are entitled to be paid out of the assets of the Company an amount per
share of Series C Stock equal to $0.01 per share plus all declared and unpaid
dividends on the Series C Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Series C Stock held by them; and
(iv) CONVERSION RIGHTS - subject to certain adjustments, either the
Company at its sole option, or the holders of the Series C Stock have the right
to convert the Series C Stock, at their option, at any time, into shares of the
Company's common stock at the conversion rate of one thousand (1,000) shares of
common stock for each share of Series C Stock. Additionally, all shares of
Series C Stock automatically convert into the Company's common stock at the then
applicable conversion rate in the event (i) that the authorized number of shares
of the Company's common stock is increased to 25,000,000 or more or (ii) upon an
asset transfer or acquisition, as defined in the Certificate.
The foregoing is a summary description of the terms of Certificate and
by its nature is incomplete. It is qualified in the entirety by the text of the
Certificate, a copy of which attached hereto as Exhibit 99.2. All readers of
this Current Report are encouraged to read the entire text of the Certificate
that is attached hereto.
ADVANCE AGREEMENT AND GUARANTEE
On February 20, 2003, American Pharmaceutical Partners, Inc., a
Delaware corporation and the Company's customer ("APP") and Bigmar
Pharmaceuticals, SA, a Swiss corporation and a wholly-owned subsidiary of the
Company ("Bigmar SA") entered into a certain Advance Agreement (the "Advance
Agreement"). The Company was a party to the Advance Agreement as a guarantor of
the performance thereunder by the Company and its affiliates including Bigmar
SA. Under the terms and provisions of the Advance Agreement, APP agreed, INTER
ALIA, to pay to a certain supplier of Bigmar SA the full amount of outstanding
and past due invoices unpaid by Bigmar SA, any interest that such supplier may
charge on the outstanding amount and advance amounts due for further orders of a
certain pharmaceutical ingredient to be shipped to Bigmar SA by the same
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supplier. In turn, Bigmar SA agreed to repay in full all amounts so paid by APP
to such Bigmar SA supplier within twelve months of the date of the Advance
Agreement. However, in the event that the outstanding amount advanced by APP on
Bigmar SA's behalf is not repaid fully within twelve months of the date of the
Advance Agreement, Bigmar SA will have an opportunity to cure such non-payment
within thirty days of the twelve month repayment period. Bigmar SA granted a
security interest in certain of its abbreviated new drug applications and the
respective approvals, together with any supplements Bigmar SA may file
subsequent to the date of the Advance Agreement. Bigmar SA will remain in
possession of and own the collateral unless and until it "defaults" on its
repayment obligations to APP, i.e. Bigmar SA receives a notice of default and
for forty-five days thereafter fails to cure such failure to pay the amount due.
As a signatory to the Advance Agreement, the Company guaranteed unconditionally
to APP Bigmar SA's full repayment of the outstanding advance made by APP on
Bigmar SA's behalf. The total amount to be repaid under the Advance Agreement
and guaranteed by the Company is (euro) 716,096 or approximately US$786,440 as
measured on May 21, 2003.
On February 20, 2003, Tramontana executed a personal guarantee to APP
in connection with the Advance Agreement (the "Guarantee"). Under the terms and
provisions of the Guarantee, Tramontana guaranteed absolutely and
unconditionally to APP Bigmar SA's full repayment of the outstanding advance
made by APP on Bigmar SA's behalf.
At its February 27, 2003 special meeting, the Board reviewed and
approved the terms and provisions of the Advance Agreement, with Tramontana
abstaining from the vote, the terms and conditions of the above-referenced
payment Guarantee executed by Tramontana and authorized, INTER ALIA, the
issuance of the 800,000 warrants, with term of 10 years and exercise price of
$0.32 per share, to Tramontana.
The foregoing is a summary description of the terms of the Advance
Agreement and the Guarantee and by its nature is incomplete. It is qualified in
the entirety by the texts of the Advance Agreement and the Guarantee, copies of
which are attached hereto as Exhibits 99.3 and 99.4, respectively. All readers
of this Current Report are encouraged to read the entire texts of those
documents attached hereto.
ACCOUNT RECEIVABLE ASSIGNMENT
On April 30, 2003, the Company, Tramontana and De Martino Finkelstein
Rosen & Virga, a professional corporation that formerly provided legal services
to the Company and that ceased its operations as of January 1, 2003 ("DFRV")
entered into a certain Assignment Satisfaction and Investment Agreement (the
"Assignment Agreement"). Under the terms and provisions of the Assignment
Agreement, DFRV agreed to sell to Tramontana a certain account receivable owed
by the Company to DFRV in the amount of $292,110.61 (the "Receivable") in
consideration of (i) the cash payment by Tramontana to DFRV in the amount of
$185,500, and (ii) Tramontana's commitment to pay the remaining balance due on
the Receivable within 24 months of the date of the Assignment Agreement. DFRV
agreed to transfer, assign and sell all of its right, title and interest in the
Receivable to Tramontana thus releasing the Company from its obligation to pay
any or all of the Receivable. The Company, in turn, agreed to issue to
Tramontana 3,203 shares of the Series C Stock (the "Shares") in full
satisfaction of the Company's indebtedness represented by the Receivable. The
Shares represent restricted stock of the Company and are subject to all
restrictions on transfer under the applicable federal and state laws.
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The parties to the Assignment Agreement represented that each had an
opportunity to confer with independent counsel and neither DFRV nor its
affiliates or the Company's current counsel has provided legal advice to any
party in connection with the transaction.
At its April 29, 2003 special meeting, the Board reviewed and approved,
with Tramontana abstaining from vote, the terms and conditions of the
above-referenced receivable assignment from DFRV to Tramontana and authorized,
INTER ALIA, the issuance of the Shares to Tramontana.
The foregoing is a summary description of the terms of the Assignment
Agreement and by its nature is incomplete. It is qualified in the entirety by
the text of the Assignment Agreement, a copy of which attached hereto as Exhibit
99.5. All readers of this Current Report are encouraged to read the entire text
of the Assignment Agreement that is attached hereto.
Subsequent to and as a result of the issuance of the Stock
Consideration and the Shares under the respective terms and provisions of the
Loan Modification Agreement and the Assignment Agreement described hereinabove,
John G. Tramontanta holds 12,820 shares of the Series C Stock. Thus, Mr.
Tramontana may be deemed a beneficial owner of 12,820,000 shares of the
Company's common stock (for the purposes of the definition of "beneficial
ownership" set forth in Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended) in addition to 9,923,539 shares of the Company's common
stock beneficially owned by Mr. Tramontana (prior to loan modification and debt
assignment transactions described hereinabove) as reported in Schedule 13D filed
on October 10, 2002.
LITIGATION MATTERS
On or about September 26, 2002, Cynthia R. May ("Ms. May"), a former
Officer and Director of the Company, filed a Complaint against the Company in
the Court of Chancery of the State of Delaware for New Castle County (the
"Delaware Chancery Court") pursuant to Delaware Code Section 145(c) seeking
indemnification in the amount of $593,273.32 for attorneys' fees and expenses
allegedly incurred in connection with Ms. May's claim to have prevailed on the
point that a valid Board meeting of the Company did not occur on November 16 and
18, 2001 in certain litigation styled In re Bigmar, Inc. Section 225 Litigation,
Del. Ch. Cons. C.A. 19289-NC, Jacobs, V.C. (April 5, 2002) (the "Section 225
Action"), May v. Bigmar, Inc., Civil Action No. 19936NC. By Order dated January
8, 2003, the Delaware Chancery Court granted partial summary judgment in Ms.
May's favor that she is entitled to indemnification for all expenses, including
attorneys' fees and costs, she actually and reasonably incurred in her
successful defense of all claims and issues arising out of the November 16 and
18, 2001 invalidated Board meeting in the Section 225 Action, and for fees and
expenses expended in establishing her right to indemnification. The Delaware
Chancery Court set a date of July 7, 2003 for a trial on the question of how
much, if any, money the Company must pay Ms. May for the indemnification. The
Company believes that it has meritorious defenses to Ms. May's claims, but there
can be no assurance as to the outcome.
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On or about March 28, 2003, GRQ, LLC, a Michigan limited liability
company of which Ms. May is the Member Manager, filed an action in Delaware
Chancery Court styled GRQ, LLC v. Bigmar, Inc., C.A. No 20216-NC. In that
action, GRQ seeks to examine certain books and records of the Company pursuant
to Delaware Code Section 220. The Company has voluntarily given Ms. May access
to a stockholders' list and certain financial and other information originally
demanded in this litigation. The Court has set a trial date of June 27, 2003.
On or about March 28, 2003 Cynthia May filed an action in the Court of
Common Pleas for Licking County, Ohio against the Company, Tramontana, and
Philippe Rohrer (collectively, "Defendants") for $43,846.10 in back salary the
Company allegedly owes Ms. May, with interest, and punitive damages. May v.
Bigmar, Inc., No. 2003 CV00377. The Defendants filed an answer denying the
material allegations of the complaint. The Company believes that it has
meritorious defenses to Ms. May's claims, but there can be no assurance as to
the outcome.
On or about June 11, 2002, Harold Baldauf filed an action against the
Company in the Circuit Court for the County of Saginaw, Michigan (the
"Complaint") asserting claims for breach of contract, promissory estoppel and
QUANTUM MERUIT and seeking to recover compensation for services he claims to
have rendered in attempting to obtain financing for the Company. Mr. Baldauf
contends that these services were performed pursuant to the terms of a certain
Consulting Agreement executed on October 24, 1998 (the "Consulting Agreement")
which provides that consultant under the agreement shall provide various
consulting services and that the Company shall pay a fee in the amount of
$1,500,000 payable in semi-annual installments beginning on the last day of the
first month in which the Company closes its first financing transaction after
the date hereof and continuing on each six month anniversary thereof until paid
in full.
The Company removed this case to the United States District
Court for the Eastern District of Michigan and moved to dismiss the action on
the grounds of lack of personal jurisdiction and venue and improper service. The
Company also challenged the substantive viability of the Complaint on the
grounds that the Consulting Agreement by its express terms was not binding
unless approved by the Board and that the plaintiff failed to plead that the
Board approved the Consulting Agreement. As of the date of this Current Report,
the court has not ruled on the Company's motion The Company believes that it has
meritorious defenses to Mr. Baldauf's claims, but there can be no assurance as
to the outcome. Harold Baldauf is Ms. May's father.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
N/A.
(b) PRO FORMA FINANCIAL INFORMATION.
N/A.
(c) EXHIBITS.
99.1 Loan Modification and Forbearance Agreement, dated January
8, 2003.
99.2 Certificate of Designations, Preferences, Relative Rights
and Other Distinguishing Characteristics of the Series C
Convertible Preferred Stock of the Company, dated November
12, 2002.
99.3 Advance Agreement, dated February 20, 2003.
99.4 Guarantee, dated February 20, 2003
99.5 Assignment Satisfaction and Investment Agreement, dated
April 29, 2003.
[THE SIGNATURE PAGE FOLLOWS.]
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BIGMAR, INC.
Date: June 16, 2003 By: /s/ John G. Tramontana
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Chairman of the Board, President and
Chief Executive Officer
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