<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1996
REGISTRATION NO. 333-3830
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BIGMAR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2834 31-1445779
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
6660 DOUBLETREE AVENUE
COLUMBUS, OH 43229
(614) 848-8380
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN G. TRAMONTANA
BIGMAR, INC.
6660 DOUBLETREE AVENUE
COLUMBUS, OH 43229
(614) 848-8380
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
EDWARD KLIMERMAN, ESQ. SAMUEL F. OTTENSOSER, ESQ.
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN BAER MARKS & UPHAM LLP
30 ROCKEFELLER PLAZA 805 THIRD AVENUE
NEW YORK, NEW YORK 10112 NEW YORK, NEW YORK 10022
(212) 698-7700 (212) 702-5700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
BIGMAR, INC.
CROSS REFERENCE SHEET
REQUIRED BY ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM LOCATION IN PROSPECTUS
----------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page of
Prospectus............................................................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus................ Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors and Ratio of Earnings to Fixed
Charges................................................................ Prospectus Summary; Risk Factors
4. Use of Proceeds........................................................ Prospectus Summary; Use of Proceeds
5. Determination of Offering Price........................................ Outside Front Cover Page;
Underwriting
6. Dilution............................................................... Dilution
7. Selling Security Holders............................................... Not Applicable
8. Plan of Distribution................................................... Outside Front Cover Page;
Underwriting
9. Description of Securities to Be Registered............................. Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel................................. Legal Matters; Experts
11. Information with Respect to the Registrant............................. Outside Front Cover Page; Prospectus
Summary; Risk Factors; Dividend
Policy; Capitalization; Selected
Financial Data; Management's
Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Principal Stockholders; Certain
Transactions; Description of
Capital Stock; Shares Eligible for
Future Sale; Financial Statements
12. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................ Management
</TABLE>
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 31, 1996
PROSPECTUS
1,250,000 SHARES
BIGMAR, INC. [LOGO]
COMMON STOCK
------------------------
All of the 1,250,000 shares of Common Stock, par value $.001 per share
('Common Stock'), offered hereby are being offered by Bigmar, Inc. ('Company').
It is currently anticipated that the initial public offering price per share
will be between $7.00 and $9.00. See 'Underwriting' for information relating to
the factors considered in determining the initial public offering price.
Prior to the offering ('Offering'), there has been no public market for the
Common Stock. The Company has applied to have the Common Stock quoted on the
Nasdaq SmallCap MarketSM under the trading symbol 'BGMR' and listed on the
Boston Stock Exchange and the Pacific Stock Exchange under the trading symbol
' .'
In this Prospectus, all references to 'Dollars' or '$' are to U.S. Dollars.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE 'RISK
FACTORS' BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================================
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................................... $ $ $
- ----------------------------------------------------------------------------------------------------------------------------
Total(3).................................................... $ $ $
============================================================================================================================
</TABLE>
(1) Does not include (a) warrants to be issued to LT Lawrence & Co., Inc.
('Representative') to purchase 125,000 shares of Common Stock at an exercise
price per share equal to 120% of the initial public offering price per share
('Representative's Warrants') or (b) a non-accountable expense allowance
payable to the Representative equal to 2 1/2% of the gross proceeds of the
Offering. The Representative's Warrants are exercisable for a period of four
years commencing one year from the date of this Prospectus. The
Representative may allow to certain dealers, and such dealers may reallow,
concessions and a portion of the Representative's Warrants. The Company has
agreed to indemnify the Underwriters against, or contribute to losses
arising out of, certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See 'Underwriting.'
(2) Before deducting estimated Offering expenses, including the Representative's
non-accountable expense allowance, of $975,000 in the aggregate (or
$1,012,500 if the Underwriters' over-allotment option is exercised in full),
all of which are payable by the Company. See 'Underwriting.'
(3) The Company has granted to the Underwriters an option, exercisable for a
period of 45 days from the date of this Prospectus, to purchase up to
187,500 additional shares of Common Stock, upon the same terms and
conditions as the shares of Common Stock being offered hereby, solely to
cover over-allotments, if any. If the Underwriters exercise the
over-allotment option in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ , and $ , respectively.
------------------------
The shares of Common Stock are being offered by the several Underwriters
named herein on a firm commitment basis, subject to prior sale, when, as and if
accepted by them and subject to certain conditions. It is expected that delivery
of certificates for the shares of Common Stock will be made against payment
therefor on or about , 1996, at the offices of LT Lawrence & Co.,
Inc., 3 New York Plaza, New York, New York 10004.
------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
LT LAWRENCE & CO., INC.
, 1996
<PAGE>
<PAGE>
[Photograph of packages of calcium leucovorin.]
The Company markets calcium leucovorin, a generic oncological drug used for
rescue therapy, to Medac GmbH for resale to the German market.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKETSM, THE BOSTON STOCK
EXCHANGE, THE PACIFIC STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
The Company intends to furnish its stockholders with annual reports
containing audited financial statements of the Company, after the end of each
fiscal year, and make available such other periodic reports as the Company may
deem appropriate or as may be required by law.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including the financial
statements and notes thereto, appearing elsewhere in this Prospectus. In this
Prospectus, all references to 'Dollars' or '$' are to U.S. Dollars. The
information in this Prospectus gives effect to the following events: (i) a
contribution to the Company on April 8, 1996 of 99% of the shares of Common
Stock then owned by the stockholders of the Company ('Contribution'); (ii) a
stock-for-stock exchange on April 9, 1996 whereby Bigmar Pharmaceuticals SA
('Bigmar Pharmaceuticals') and Bioren SA ('Bioren') became subsidiaries of the
Company ('Exchange'); (iii) a 2.105263-for-1 reverse stock split of the
outstanding shares of Common Stock effected on April 16, 1996 ('Reverse Split');
and (iv) an increase in the number of authorized shares of Common Stock from
10,000,000 to 15,000,000 effected on April 16, 1996. Except where otherwise
indicated, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option or the Representative's Warrants. Certain
technical terms used in this Prospectus are defined in the 'Glossary.' For more
information, see 'The Company,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' 'Certain Transactions' and
'Description of Capital Stock.'
THE COMPANY
The Company is currently engaged in manufacturing and marketing 14 types of
intravenous infusion solutions ('IV Solutions') in Switzerland and Lichtenstein
and marketing in Germany raw materials used to manufacture medications for the
treatment of prostate enlargement ('Prostate Materials') and two generic
oncological products, mercaptopurine and calcium leucovorin. Over the next 24
months, the Company's strategy is to manufacture, in its state-of-the-art
facilities in Switzerland, and market generic oncological drugs. In addition,
the Company is in the process of preparing to market certain licensed
proprietary oncological and biotechnological products.
The Company markets IV Solutions through its own sales force to health care
providers and third-party payors and markets Prostate Materials, mercaptopurine
and calcium leucovorin to pharmaceutical companies. The Company does not intend
to market its other products directly to the public. For the year ended December
31, 1995, on a pro forma basis after giving effect to the Bioren Acquisition (as
defined below) as if the transaction had occurred on January 1, 1995, the
Company's sales of IV Solutions were approximately $6.5 million, sales of
medical products, including Prostate Materials, were approximately $1.4 million,
and sales of generic oncological products were approximately $670,000. For the
three months ended March 31, 1996, sales of these products aggregated
approximately $1.4 million, $319,000 and $210,000, respectively.
In 1995, the Company obtained distribution rights to, among other products,
sodium leucovorin and five generic oncological products, including methotrexate
and calcium leucovorin, from Sapec ('Sapec'), a division of Cerbios Pharma SA, a
privately-held Swiss pharmaceutical company ('Cerbios Pharma'), and
approximately 20 generic oncological products, including mercaptopurine, calcium
leucovorin and methotrexate, from AB Cernelle ('Cernelle'), a privately-held
Swedish pharmaceutical company. Sodium leucovorin is designed to alleviate
certain side effects associated with chemotherapy more effectively than its
currently distributed counterpart, calcium leucovorin.
The Company has received approval for the marketing in Switzerland of two
generic oncological products, methotrexate and doxorubicin, and expects to begin
marketing these products during the second half of 1996. The Company also
expects that all regulatory approvals for the sale of sodium leucovorin in
Germany will be obtained during the second half of 1996 and that the marketing
of this product will begin shortly thereafter. There can be no assurance,
however, that such regulatory approvals will be obtained during these time
periods, or that such approvals will ever be obtained. In addition, the Company
has also obtained the rights to use, manufacture and market, among other
products, a form of recombinant urokinase from Bioferment ('Bioferment'), a
division of Cerbios Pharma. Recombinant urokinase is a biotechnological product
used in the treatment of cardiovascular disease.
3
<PAGE>
<PAGE>
The Company has entered into exclusive arrangements with the following
non-affiliated pharmaceutical companies to market certain proprietary and
generic oncological or biotechnological products, manufactured or licensed by
the Company, in various territories: Medac GmbH ('Medac') in Germany and the
United Kingdom; Boehringer Mannheim Italia Spa ('Boehringer') in Italy; Laevosan
International AG ('Laevosan') in Switzerland; Laboratories Vita SA ('Vita') in
Spain; and Protyde Pharmaceuticals, Inc. ('Protyde') worldwide, except for
certain major European countries. Medac, Boehringer, Laevosan and Vita are
established pharmaceutical companies. Protyde is a development stage company.
The Company's business strategy over the next 24 months is to:
manufacture and market approximately seven injectable and lyophilized
oncological products, including sodium leucovorin;
manufacture and market additional oncological products as the patents
relating to the products expire;
increase the number of pharmaceutical companies in Europe through
which the Company's oncological products are marketed and the
territories in which they are distributed;
market recombinant urokinase; and
expand the marketing of IV Solutions in Switzerland through the
Company's own sales force.
For the past 25 years, John G. Tramontana, the Company's Chairman of the
Board, President and Chief Executive Officer, a United States citizen, served in
various senior executive positions at a number of privately-held pharmaceutical
companies including Adria Laboratories Inc. (acquired by Pharmacia & Upjohn,
Inc.), a company specializing in the manufacture of oncological products, Ben
Venue Laboratories, Inc., a company specializing in the manufacture of sterile,
injectable pharmaceutical products, Sapec, a division specializing in the
manufacture of pharmaceutical products, and Bioferment, a division engaged in
the research and development of biotechnological products. At the time of the
negotiation and execution of the Company's agreements with Sapec, Cernelle and
Bioferment, Mr. Tramontana was the chief operating officer and a director of
Cerbios Pharma, chairman of the board of Cernelle and a director of Chemholding
SA ('Chemholding'), a principal stockholder of the Company. Chemholding is the
sole stockholder of Cerbios Pharma and Cerbios Pharma is the sole stockholder of
Cernelle. In March 1996, Mr. Tramontana resigned from all of his positions with
Chemholding, Cerbios Pharma and Cernelle. There can be no assurance that the
Company will continue its arrangements with Sapec, Cernelle or Bioferment or any
other collaborators. See 'Risk Factors -- Reliance on Collaborative
Arrangements; Management Affiliations with Collaborators.'
The Company was incorporated in Delaware in September 1995 and has three
wholly-owned subsidiaries, Bigmar Pharmaceuticals, a Swiss corporation formed in
January 1992, Bigmar Therapeutics, Inc., a Delaware corporation formed in
September 1995 ('Bigmar Therapeutics'), and Bioren, a Swiss corporation formed
in July 1986. In June 1995, Bigmar Pharmaceuticals purchased all of the
outstanding capital stock of Bioren ('Bioren Acquisition') and simultaneously
sold 50% of the outstanding capital stock of Bioren to certain stockholders of
Bigmar Pharmaceuticals. On April 9, 1996, in the Exchange, all of the
stockholders of Bigmar Pharmaceuticals exchanged all of their shares of capital
stock in Bigmar Pharmaceuticals for an aggregate of 2,000,937 shares of Common
Stock of the Company and all of the stockholders of Bioren, other than Bigmar
Pharmaceuticals, exchanged all of their shares of capital stock in Bioren for an
aggregate of 350,313 shares of Common Stock of the Company. See 'The Company'
and 'Certain Transactions.'
Unless the context indicates otherwise, the term 'Company' as used in this
Prospectus refers to the Company and its subsidiaries as a whole. The Company's
principal executive offices are located at 6660 Doubletree Avenue, Columbus,
Ohio 43229, and its telephone number is (614) 848-8380.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered............................... 1,250,000 shares
Common Stock Outstanding before the Offering....... 2,375,000 shares(1)
Common Stock Outstanding after the Offering........ 3,625,000 shares(1)
Use of Proceeds.................................... Net proceeds from the Offering will be used to acquire, test
and/or manufacture oncological and biotechnological
products; to repay debt; and for general corporate
purposes, including working capital. See 'Use of
Proceeds.'
Risk Factors....................................... An investment in the Common Stock offered hereby involves a
high degree of risk and immediate substantial dilution to
the public investors. See 'Risk Factors' and 'Dilution.'
Proposed Trading Symbols:
Nasdaq SmallCap Market'sm'.................... 'BGMR'
Boston Stock Exchange.........................
Pacific Stock Exchange........................
</TABLE>
- ------------
(1) Does not include: (i) 300,000 shares of Common Stock reserved for issuance
under the Company's 1996 stock option plan ('Option Plan'); (ii) 50,000
shares of Common Stock reserved for issuance under the Company's director
option plan ('Director Option Plan'); (iii) up to 187,500 shares of Common
Stock issuable upon exercise of the Underwriters' over-allotment option; and
(iv) 125,000 shares of Common Stock issuable upon exercise of the
Representative's Warrants. See 'Management -- Option Plan and -- Director
Option Plan,' 'Description of Capital Stock' and 'Underwriting.'
5
<PAGE>
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical financial data for (i)
Bioren SA (predecessor company) for the years ended December 31, 1993 and 1994
and for the six months ended June 30, 1995, and (ii) Bigmar, Inc. for the years
ended December 31, 1993, 1994 and 1995 and for the three months ended March 31,
1995 and 1996 (after giving effect to the reorganization described in Note 1 to
the Company's financial statements). The summary historical financial data of
Bioren and Bigmar, Inc. has been derived from the audited financial statements
(and notes thereto) of the respective companies included elsewhere in this
Prospectus. The summary financial data presented as of March 31, 1995 and 1996
and for the three months ended March 31, 1995 and 1996 are derived from the
unaudited financial statements of the Company which appear elsewhere in this
Prospectus. In the opinion of management, the summary financial data for the
three months ended March 31, 1995 and 1996 have been prepared on the same basis
as the audited financial statements and reflect all adjustments, which are of a
normal recurring nature, necessary to present fairly the financial data for the
periods presented. The results of operations for any interim period are not
necessarily indicative of the Company's results of operations for the full
fiscal year. The summary historical financial data should be read in conjunction
with the financial statements (and notes thereto) of Bioren and Bigmar, Inc. and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Prospectus. The following table also sets
forth pro forma operating data of the Company as if the Bioren Acquisition had
occurred as of January 1, 1995. The unaudited pro forma financial data is for
informational purposes only, does not purport to represent what the Company's
results of operations would have been if such transaction had in fact occurred
as of such date and is not necessarily indicative of the Company's future
results of operations.
<TABLE>
<CAPTION>
BIOREN SA (PREDECESSOR COMPANY)
-------------------------------------- BIGMAR, INC.(1)
----------------------------------------------------------
SIX MONTHS THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED ENDED
JUNE 30, YEARS ENDED DECEMBER 31, MARCH 31,
------------------------- ---------- -------------------------------- -----------------------
1993 1994 1995 1993 1994 1995(1) 1995 1996
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales..................... $ 4,103,921 $ 5,879,685 $2,928,965 $264,077 $707,627 $5,600,362 $1,185,710 $1,898,002
Cost of sales................. 3,558,350 4,479,243 1,694,290 182,075 611,040 4,001,891 1,059,955 1,151,099
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
Gross profit.................. 545,571 1,400,442 1,234,675 82,002 96,587 1,598,471 125,755 746,903
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
Operating Expenses:
Research and development
expense................... 61,297 40,736 26,671 -- -- 23,144 -- 88,394
Selling, general and
administrative expense.... 1,572,903 1,858,192 1,060,049 50,810 16,269 1,493,055 21,452 547,463
Loss on abandonment of
building improvements and
machinery................. 830,912 2,295,850 -- -- -- -- -- --
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
Total operating expenses...... 2,465,112 4,194,778 1,086,720 50,810 16,269 1,516,199 21,452 635,857
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
Operating income (loss)....... (1,919,541) (2,794,336) 147,955 31,192 80,318 82,272 104,303 111,046
Other income (expense)........ 115,349 (190,066) (28,644) (7,909) (1,660) (179,476) (13,532) (59,365)
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
Income (loss) before
extraordinary item.......... (1,804,192) (2,984,402) 119,311 23,283 78,658 (97,204) 90,771
Extraordinary item............ -- 1,468,429 -- -- -- -- -- --
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
Net income (loss)............. $(1,804,192) $(1,515,973) $ 119,311 $ 23,283 $ 78,658 $ (97,204) $ 90,771 $ 51,681
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
----------- ----------- ---------- -------- -------- ---------- ---------- ----------
PER SHARE DATA:
Net income (loss)..................................................... $.06 $.20 $(.07) $.23 $.02
Weighted average number of shares outstanding......................... 400,188 400,188 1,337,292 400,188 2,375,000
-------- -------- ---------- ---------- ----------
-------- -------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
BIGMAR, INC.
-----------------------------------
PRO FORMA
THREE MONTHS PRO FORMA
ENDED YEAR ENDED
MARCH 31, 1995 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
PRO FORMA OPERATING DATA:
Net sales..................... $2,702,351 $ 8,529,327
Cost of sales................. 1,984,306 5,696,181
-------------- -----------------
Gross profit.................. 718,045 2,833,146
-------------- -----------------
Research and development
expense..................... 10,855 49,815
Selling, general and
administrative expense(2)... 575,186 2,553,104
-------------- -----------------
Total operating expenses...... 586,041 2,602,919
-------------- -----------------
Operating income (loss)....... 132,004 230,227
Other income (expense)........ (31,133) 208,120
-------------- -----------------
Net income.................... $ 100,871 $ 22,107
-------------- -----------------
-------------- -----------------
PER SHARE DATA:
Net income.................. $0.04 $0.01
Weighted average number of
shares outstanding........ 2,375,000 2,375,000
(table continued on next page)
</TABLE>
6
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
BIGMAR, INC.
-----------------------------
MARCH 31, 1996
-----------------------------
HISTORICAL AS ADJUSTED(3)
----------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............... $ (437,811) $ 7,859,763
Total assets.................. 19,050,275 25,328,091
Long-term obligations......... 10,539,064 10,539,064
Retained earnings............. 56,619 56,619
Stockholders' equity.......... 3,845,877 11,970,877
</TABLE>
- ------------
(1) On April 9, 1996, a reorganization of companies under common control took
place whereby the Company acquired 100% of Bigmar Pharmaceuticals and 50% of
Bioren. Accordingly, the financial statements of the Company include the
results of operations of Bigmar Pharmaceuticals for all periods presented
and the results of operations of Bioren from July 1, 1995 (the date of
acquisition).
(2) Effective upon consummation of the Offering, John G. Tramontana, the
Company's Chairman of the Board, President and Chief Executive Officer, will
begin to receive an annual base salary of $200,000, subject to adjustment,
plus a bonus of at least 25% of his base salary and Gerald T. Sweeney, the
Company's Chief Financial Officer and Vice President -- Finance, will begin
to receive an annual base salary of $80,000, subject to adjustment, plus a
bonus of 15% of his base salary. The pro forma operating data does not
reflect such salaries or bonuses (if any). See 'Management.'
(3) As adjusted to give effect to the sale of 1,250,000 shares of Common Stock
in the Offering (after deduction of underwriting discounts and commissions
and estimated expenses to be incurred by the Company in connection with the
Offering) and the application of a portion of the net proceeds thereof to
pay approximately $2,000,000 in indebtedness. See 'Use of Proceeds' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'
7
<PAGE>
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prior to making any investment decision, prospective investors should
carefully consider the following risk factors together with the other
information presented in this Prospectus including the financial statements (and
notes thereto).
DEVELOPMENT STAGE; HISTORY OF LOSSES. The Company was incorporated in
September 1995 and was a development stage company until it effectuated the
Exchange resulting in the Company's ownership of Bioren and Bigmar
Pharmaceuticals. In addition, the Company and its subsidiaries have incurred net
losses in the past. For the years ended December 31, 1993 and 1994, Bioren
incurred net losses of approximately $1,804,000 and $2,984,000, respectively,
and for the year ended December 31, 1995, the Company (which includes the
results of operations of Bioren from July 1, 1995) incurred a net loss of
approximately $97,000. For at least the current fiscal year, the Company may
incur additional losses which may be substantial as a result of, among other
things, its expansion strategy. There can be no assurance that the Company's
operations will achieve profitability at any time in the future or, if achieved,
that such profitability will be sustained. See 'Selected Financial Data' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
EXPANSION OF OFFERED PRODUCTS. The Company's business strategy relies
primarily on its success in manufacturing and marketing oncological products and
marketing biotechnological products, an area in which the Company has limited
experience. The success of its business strategy should be considered in light
of the risks, expenses and difficulties frequently encountered in entering into
industries characterized by intense competition; completing product development;
obtaining regulatory approvals in certain European countries, the United States
and elsewhere for its proposed products; gaining market acceptance of the
Company's proposed products; entering into new collaborative agreements and
maintaining existing collaborative arrangements. There can be no assurance that
the Company will be able to manufacture or market its proposed products,
maintain or expand its market share or achieve commercial revenues from its
proposed products in the future. In addition, aspects of the Company's business
strategy can only be implemented if the Company's manufacturing facility in
Barbengo, Switzerland ('Bigmar Facility') and a dedicated area of the Company's
manufacturing facility in Couvet, Switzerland ('Bioren Facility') become fully
operational and all necessary regulatory approvals are obtained. Some of the
foregoing factors are not within the Company's control and there can be no
assurance that the Company will be able to implement its business strategy, that
the facility or area under construction will become operational (including
obtaining regulatory approvals) or that its business strategy will result in
profitability. See 'Use of Proceeds,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' 'Business -- Proposed Products
and -- Facilities' and the Company's financial statements and notes thereto.
RELIANCE ON COLLABORATIVE ARRANGEMENTS; MANAGEMENT AFFILIATIONS WITH
COLLABORATORS. The Company has obtained the rights to manufacture and/or market
certain proprietary and generic oncological and biotechnological products
developed by other companies. In 1995, the Company entered into distribution and
supply agreements with (i) Cernelle relating to approximately 20 generic
oncological products, including mercaptopurine, calcium leucovorin, and
methotrexate ('Cernelle Agreement'), and (ii) Sapec relating to, among other
products, certain proprietary and generic oncological products, including sodium
leucovorin ('Sapec Agreement'). In addition, in 1995, the Company entered into a
license and supply agreement with Bioferment relating to certain
biotechnological products, including recombinant urokinase ('Bioferment
Agreement'). Pursuant to the terms of these agreements, the Company is obligated
to, among other things, pay either substantial one-time fees or make payments
that, in some instances, may be substantial upon the completion of certain
regulatory milestones with respect to the products covered by the agreements. In
addition, the Cernelle Agreement, the Sapec Agreement and the Bioferment
Agreement may be terminated by either party under certain specified
circumstances. There can be no assurance that the Company will fulfill its
obligations under any of these agreements or that one or more of these
agreements will not be terminated. The loss or diminution of rights or the
termination of any of these agreements would have a material adverse effect on
the Company. See 'Business -- Products and -- Proposed Products.'
At the time of the negotiation and execution of the Cernelle Agreement, the
Sapec Agreement and the Bioferment Agreement, John G. Tramontana, the Company's
Chairman of the Board, President, and Chief Executive Officer, was the chief
operating officer and a director of Cerbios Pharma, chairman of the board of
Cernelle and a director of Chemholding. Chemholding, a principal stockholder of
the
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Company, is the sole stockholder of Cerbios Pharma and Cerbios Pharma is the
sole stockholder of Cernelle. In March 1996, Mr. Tramontana resigned from all of
his positions with Chemholding, Cerbios Pharma and Cernelle. See ' -- Conflicts
of Interest,' 'Use of Proceeds,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' 'Business -- Products
and -- Proposed Products' and 'Certain Transactions -- Transactions with
Principal Stockholders.'
CONFLICTS OF INTEREST. Chemholding, a principal stockholder of the Company,
is the sole stockholder of Cerbios Pharma. Sapec and Bioferment are divisions of
Cerbios Pharma and Cerbios Pharma is the sole stockholder of Cernelle. Certain
officers, directors and stockholders of Chemholding own directly and indirectly
in the aggregate approximately 51% of the Company's issued and outstanding
Common Stock prior to the Offering and will own approximately 34% of the
Company's issued and outstanding Common Stock following the consummation of the
Offering. The Company is a party to agreements with Sapec, Bioferment and
Cernelle. Prior to March 1996, Mr. Tramontana was an officer and/or director of
each of the foregoing companies. The Company believes that the terms of these
agreements are no more favorable to the Company or the other parties thereto
than they would be to unaffiliated third parties. There can be no assurance,
however, that the Company will continue to maintain its rights under these
agreements or that these agreements will not be terminated in the future. John
G. Tramontana is not a stockholder of Chemholding, Cerbios Pharma or Cernelle.
See ' -- Reliance on Collaborative Arrangements; Management Affiliations with
Collaborators,' 'Business -- Products and -- Proposed Products,' 'Principal
Stockholders' and 'Certain Transactions.'
RELIANCE ON PLM. For the year ended December 31, 1995, on a pro forma
basis, sales of IV Solutions comprised approximately 76% of the Company's total
sales. For the three months ended March 31, 1996, these sales comprised
approximately 73% of the Company's total sales. In March 1995, Bioren entered
into an agreement with PLM Langeskov A/S ('PLM') pursuant to which Bioren
acquired the exclusive right to purchase intravenous solution containers from
PLM and to package and distribute IV Solutions in these containers in
Switzerland and Lichtenstein ('PLM Agreement'). Under the terms of the PLM
Agreement, PLM is entitled to terminate the exclusivity portion of the agreement
if, among other things, Bioren does not purchase a minimum number of intravenous
solution containers each year. The PLM Agreement expires in the year 2005,
unless it is earlier terminated. In addition, the PLM Agreement may be
terminated by either party upon the occurrence of certain specified conditions,
including if the products or their production infringe, or are alleged to
infringe, the intellectual property rights of third parties. The termination of
the PLM Agreement would have a material adverse effect on the Company. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations' and 'Business -- Products.'
RELIANCE ON NETWORK OF PHARMACEUTICAL COMPANIES FOR MARKETING; DEPENDENCE
ON ADDITIONAL COLLABORATIVE ARRANGEMENTS. The Company has granted certain
companies such as Medac, Boehringer, Laevosan, Vita and Protyde the exclusive
right to market and distribute, in certain territories, selected oncological or
biotechnological products of the Company and the right of first refusal to
market and distribute certain of the Company's proposed products. As a result,
the Company may not market products or proposed products that are covered by
those agreements independently and may not enter into strategic alliances or
collaborative arrangements with others relating to any products covered by (i)
an exclusivity arrangement or (ii) a right of first refusal (without in the
latter instance first offering such right to the holders). Restrictions
regarding exclusivity and rights of first refusal limit the Company's ability to
pursue and negotiate collaborative arrangements with other entities on terms
which may be more favorable to the Company. In addition, the amount of resources
and the time that any of these collaborators devote towards marketing the
Company's products or proposed products are not within the Company's control.
There can be no assurance that any marketing, sales or other efforts undertaken
by the Company or its collaborators will be successful. Each of the agreements
terminates under certain specified circumstances and any termination would have
a material adverse effect on the Company. Consistent with its business strategy,
the Company intends to pursue additional collaborative arrangements with third
parties. There can be no assurance, however, that the Company will be able to
find additional collaborators or negotiate additional collaborative arrangements
on terms acceptable to the Company, if at all, that the collaborative
arrangements with the Company will be successful or, that collaborators will
devote sufficient resources to the Company's products, proposed products or
technologies. In addition, there can be no assurance that future collaborative
arrangements will not allow others to enter into arrangements with the Company's
collaborators for the commercialization of
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the same product or that collaborators will not pursue alternative products
either on their own or in collaboration with others, including the Company's
competitors. See 'Business -- Collaborative Agreements.'
DEPENDENCE ON SIGNIFICANT CUSTOMERS. For the years ended December 31, 1994
and 1995, all of the Company's sales of Prostate Materials were to one customer,
Pharma Stroschein GmbH ('Stroschein'). These sales amounted to approximately
$470,000 and $1,023,000, respectively, and represented approximately 69% and 18%
of the net sales of the Company for the years ended December 31, 1994 and
December 31, 1995, respectively. In addition, for the years ended December 31,
1994 and 1995, and the three months ended March 31, 1996, the Company's sales of
oncological products to Medac amounted to approximately $214,000, $670,000 and
$210,000, respectively and represented approximately 30%, 12% and 11%,
respectively of the net sales. On a pro forma basis, giving effect to the Bioren
Acquisition as if the transaction occurred on January 1, 1995, the 1995 sales to
Stroschein and Medac represented approximately 12% and 8%, respectively, of the
Company's sales. The loss of either of these customers or any other significant
customer would have a material adverse effect on the Company.
DEPENDENCE ON KEY SUPPLIERS. The majority of raw materials needed to
manufacture the Company's products and proposed products generally are not
readily available and must be purchased from limited sources. In addition, the
Company obtains containers for IV Solutions from a sole supplier. See
' -- Reliance on PLM.' The Company's reliance on a sole or limited number of
suppliers involves several risks, including obtaining an adequate supply of raw
materials and components in order to manufacture or market products or proposed
products, increased raw material or component costs and reduced control over
pricing, quality and timely delivery. Any interruption in the supply of raw
materials or components could have a material adverse effect on the Company. In
addition, obtaining raw materials from a new source may require regulatory
approval. Furthermore, certain potential alternative suppliers may have
pre-existing exclusive relationships with competitors of the Company and others
which may preclude the Company from manufacturing certain of its proposed
products. See 'Business -- Manufacturing and Suppliers.'
MANUFACTURING FACILITIES FOR PROPOSED PRODUCTS. The Company intends to
manufacture cytotoxic oncological products in the Bigmar Facility and
non-cytotoxic oncological products in a dedicated area of the Bioren Facility,
where it currently manufactures IV Solutions. The Bigmar Facility is currently
being equipped and the Company will not begin manufacturing oncological products
until the facility is fully operational and regulatory approvals are obtained,
which the Company believes will occur in the last quarter of 1996. The Company
intends to use a portion of the net proceeds from the Offering to equip a
dedicated area of the Bioren Facility and expects that the area for
manufacturing non-cytotoxic oncological products will be fully operational and
that all regulatory approvals will be obtained by the end of 1996. There can be
no assurance that the Bigmar Facility or the dedicated area of the Bioren
Facility will be successfully equipped, that the anticipated regulatory
approvals will be obtained or that the Company will be able to manufacture these
products directly and any failure to do so would have a material adverse effect
on the Company. The Company may have to enter into contractual arrangements with
other companies to manufacture its proposed oncological products. Further, the
Company intends to enter into an agreement with another party pursuant to which
that company will manufacture recombinant urokinase. The amount of resources and
the time that the other party will devote towards producing recombinant
urokinase on behalf of the Company and manufacturing procedures and quality
control will not be within the Company's control. In addition, there can be no
assurance that the Company will be able to enter into any arrangements with
third parties on acceptable terms, if at all, or that any third party will be
able to meet the demand for the Company's products on a timely basis or that
other parties will meet the standards required to obtain regulatory approvals.
See 'Business -- Manufacturing and Suppliers and -- Facilities.'
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT; UNCERTAINTY OF MARKET
ACCEPTANCE OF CERTAIN PROPOSED PRODUCTS. Although the Company currently markets
certain oncological products, it has not sold any oncological or
biotechnological products manufactured at its facilities and does not anticipate
manufacturing oncological products until the end of 1996. Any unexpected
developmental, regulatory or manufacturing problems could delay the
commercialization of the Company's proposed products and have a material adverse
effect on the Company and its prospects. In addition, the market acceptance of
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any of the Company's proposed products, such as sodium leucovorin and
recombinant urokinase, will be substantially dependent on the ability of the
Company's collaborators to demonstrate to the medical and healthcare communities
the capabilities, perceived benefits, and efficacy of the Company's proposed
products as well as sell commercial quantities of the proposed products at
acceptable costs. There can be no assurance that the Company will be able to
ultimately successfully develop its proposed products or that it will be able to
gain market acceptance for its proposed products. See 'Business -- Proposed
Products and -- Other Proposed Products.'
NEED FOR ADDITIONAL FINANCING. The Company has funded its operations to
date primarily through equity and debt financings. The Company anticipates that
the net proceeds from the Offering, together with cash flow from operations (if
any), should be sufficient to fund the Company's operations, including its
proposed expansion, for approximately 12 months. However, there can be no
assurance that events affecting the Company's operations will not result in the
Company depleting its funds before that time. The Company may need to raise
substantial additional funds to continue to fund operating expenses or its
expansion strategy. There can be no assurance that additional financing will be
available, or, if available, that such financing will be on terms favorable to
the Company. Failure to obtain such additional financing would have a material
adverse effect on the Company. See 'Use of Proceeds,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and the Company's financial statements and notes thereto.
COMPETITION AND RAPID TECHNOLOGICAL CHANGE. The pharmaceutical and
biotechnology industries are subject to intense competition and rapid and
significant technological change. The Company faces competition from other
pharmaceutical and biotechnology companies, many of which have substantially
greater financial and other resources than the Company and, therefore, are able
to spend more than the Company in areas such as product development,
manufacturing and marketing. Although a company with greater resources will not
necessarily receive regulatory approval for a particular generic drug before its
smaller competitors, substantial resources enable a company to support many
regulatory applications simultaneously, thereby improving the likelihood of at
least some of its generic drugs being among the first to receive regulatory
approval. Drug companies have also increasingly introduced generic versions of
their own proprietary products prior to the expiration of the patents for those
drugs in efforts to obtain greater market share following expiration of the
applicable patents. In addition, the market for the Company's products and
proposed products is characterized by frequent product improvements and evolving
technology. The Company's revenues and profitability could be adversely affected
by technological change. Competitors may develop products which may render the
Company's products or proposed products uneconomical or result in products being
commercialized that may be superior to the Company's products. In addition,
alternative treatments for cancer could be developed, which would have a
material adverse effect on the Company. See 'Business -- Proposed Products, --
Competition and -- Patents and Proprietary Rights' and 'Governmental
Regulations.'
UNCERTAIN PROTECTION OF PATENTS AND PROPRIETARY RIGHTS. The Company relies
on a combination of patent applications, licenses, trademarks, and trade secrets
to protect its proprietary technology, rights and know-how. In addition, the
Company is currently in the process of implementing a policy that requires its
personnel to execute non-disclosure agreements. There can be no assurance that
such patent applications or any resulting patents or any licenses or trademarks
will not be infringed upon, that the Company's trade secrets will not otherwise
become known to or independently developed by competitors, that non-disclosure
agreements will not be breached, or that the Company would have adequate
remedies for any such infringement or breach. Litigation may be necessary to
enforce proprietary rights of the Company or to defend the Company against
third-party claims of infringement. Such litigation could result in substantial
cost to, and a diversion of effort by, the Company and its management and may
have a material adverse effect on the Company. The Company currently is the
exclusive and non-exclusive licensee of various oncological and biotechnological
products and technologies and may in the future desire or be required to obtain
other licenses to develop, manufacture and market commercially viable products.
The Company's success and potential competitive advantage is dependent upon its
ability to exploit the technology under these licenses. There can be no
assurance that the Company will be able to exploit the technology covered by
these license agreements or that it will be able to do so exclusively. In
addition, there can be no assurance that any patents or patent applications
pursuant to which the Company has obtained licenses are valid and
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enforceable, or that any licenses required to be obtained by the Company in the
future will be valid and enforceable or obtainable on commercially reasonable
terms, if at all.
Patents concerning pharmaceutical or biotechnological products generally
are highly uncertain, involve complex legal, scientific and factual questions
and have recently been the subject of much litigation. To date, no consistent
policy has emerged regarding the breadth of claims allowed or the degree of
protection afforded under these patents. Accordingly, there can be no assurance
that patent applications which underlie the Company's licenses will result in
patents being issued, or that, if issued, the patents will afford protection
against competitors with similar technology. Although the Company is not aware
of any claim against it for infringement, the Company's ability to commercialize
its products and proposed products depends on is not infringing the proprietary
rights of competitors. Laws regarding the enforceability of intellectual
property vary from country to country. Therefore, there can be no assurance that
intellectual property issues will be uniformly resolved, or that local laws will
provide the Company with consistent rights and benefits. In addition, there can
be no assurance that competitors will not be issued patents which may prevent
the manufacturing or marketing of the Company's products or proposed products or
require licensing and the payment of fees or royalties by the Company in order
for the Company to be able to manufacture or market certain products. See
'Business -- Patents and Proprietary Rights.'
FDA, INTERNATIONAL AND OTHER GOVERNMENTAL REGULATIONS. The development,
manufacturing and marketing of the Company's products and proposed products is
or may be subject to extensive and rigorous governmental regulations in the
United States and other countries. The process of obtaining and maintaining
required regulatory approvals is lengthy, expensive, and uncertain. In the
United States, the United States Food and Drug Administration ('FDA') regulates,
where applicable, the development, testing, labeling, manufacturing,
registration, notification, clearance or approval, marketing, distribution,
recordkeeping, and reporting requirements for drugs. The Company has not
requested or received FDA approval to market any of its products or proposed
products in the United States. The Company intends to submit abbreviated new
drug applications ('ANDAs') to the FDA for six generic oncological products in
the foreseeable future. The average time for obtaining FDA approval for ANDAs is
one to three years. However, due to management's prior experience in submitting
ANDAs to the FDA, the Company believes it will be able to obtain FDA approval of
these ANDAs in approximately one year from the date of the submission of the
applications. There can be no assurance, however, that any of the Company's
products or proposed products will obtain regulatory approval in the time
periods indicated or will ever obtain the regulatory clearance or approval
required for marketing in the United States. Delays in any part of the approval
process or the inability of the Company to obtain regulatory approval of its
products, proposed products or facilities could adversely affect the Company.
The Company will be subject to the FDA's good manufacturing practices
('GMP'), good laboratory practices ('GLP') and extensive record keeping and
reporting requirements for manufacturing products for sale in the United States.
As a result, the Company's manufacturing facilities will be subject to periodic
inspections by the FDA and other United States federal agencies when the
Company's products are offered for sale in the United States. The Company's
operations have not yet been inspected by the FDA and there can be no assurance
they will pass any inspections by the FDA. The Company has retained independent
consultants to assist it in complying with FDA standards including the GMP
requirements. Failure to comply with applicable regulatory requirements can
result in, among other things, import detentions, fines, civil penalties,
suspensions or losses of approvals, recalls or seizures of products, operating
restrictions and criminal prosecutions.
To date, substantially all of the Company's revenues have been derived from
the sales of its products in Switzerland, Lichtenstein and Germany. The
distribution of the Company's products and proposed products outside the United
States is subject to extensive governmental regulations. These regulations,
including the requirements of inspections and approvals to market, the time
required for regulatory review and the sanctions imposed for violations, vary
from country to country. There can be no assurance that the Company will pass
any such inspections, that the Company or its collaborators will obtain or
maintain the required regulatory approvals in any particular country or that the
Company will not be required to incur significant costs in obtaining or
maintaining its regulatory approvals. Failure to obtain necessary regulatory
approvals, the restriction, suspension or revocation of existing
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approvals or any other failure to comply with regulatory requirements would have
a material adverse effect on the Company.
Because the Company's products are currently being sold primarily in
Germany, Switzerland and Lichtenstein, the Company is subject to regulation by
these countries, and the European Medicines Evaluation Agency ('EMEA') of the
European Union ('EU'). In Germany, drugs for human use may be sold only if they
are approved in advance by either the German regulatory authority or the EU
after a review of all applicable safety, quality and effectiveness data.
Clinical trials in Germany are monitored by the state authorities and must
comply with those portions of the EU good clinical practices recommendation that
have been adopted into German law. In practice, it takes the German authority
generally three to five years to approve drugs for use on humans, although the
Company believes it will receive regulatory approval for certain of its proposed
products earlier.
In January 1995, the EU established new procedures that provide for a
compulsory review of biotechnological preparations and an optional review of
certain other pharmaceutical products by the EMEA in London. For other types of
products, there is a decentralized procedure under which a marketing application
is submitted first to one EU member state where it is reviewed. Once marketing
approval in such country is obtained, a company can then file additional
applications in the other EU member states.
Although recombinant urokinase is a biotechnological product, the Company
believes that marketing clearance will be obtained in the second half of 1997
from the German regulatory authority as opposed to from the EMEA because
recombinant urokinase does not pose a risk of viral contamination and would
replace the naturally derived urokinase that is currently on the market in
Germany. There can be no assurance, however, that the requisite approval of
recombinant urokinase will be obtained in Germany, that approval from the EMEA
in London will not be required, or that approval will be obtained in 1997 or at
any time thereafter.
In Switzerland, approval of the production and sale of drugs for human use
is regulated on a cantonal level rather than a federal level. The cantons of
Switzerland have organized the Intercantonal Office for the Control of
Medications ('IKS') as an authority for the approval of pharmaceuticals. Based
on approval by the IKS, the cantons then grant permission for the production and
sale of such approved pharmaceuticals, although each canton is still entitled to
deny approval of a particular medication.
The IKS reviews all applicable safety, quality and efficacy data as well as
data relating to the cost effectiveness of a particular product. To obtain
approval from the IKS, the manufacturer must submit analytical, chemical,
pharmacological and toxicological data based on animal trials and human clinical
studies. The IKS also will inspect the manufacturing facility to determine if
the manufacturer is complying with good manufacturing practices before approval
is granted to produce the drug product. For generic products, pharmacological
and toxicological data is not required to be submitted to the IKS. To date, all
of the Company's pharmaceutical products which have been approved by the IKS are
generic products. There can be no assurance, however, that the Company will
obtain the requisite approvals to market its proposed products in Switzerland in
the time periods indicated or at any time thereafter. See
'Business -- Governmental Regulations.'
RESTRICTIONS ON RETAINED EARNINGS. The Company is a Delaware corporation
which owns 100% of the capital stock of two Swiss corporations. The Swiss
Federal Code of Obligation provides that at least 5% of a Swiss company's net
income each year must be appropriated to a legal reserve until such time as the
reserve equals 20% of the company's paid-in share capital. In addition, 10% of
any distribution made by a company in excess of a 5% dividend also must be
appropriated to the Company's legal reserve. The reserve of up to 50% of the
share capital is not available for distribution to stockholders. These
requirements may adversely impact the amount of dividends to be issued by the
Company through its subsidiaries and may limit cash flow. See 'Dividend Policy'
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
ENVIRONMENTAL MATTERS. As an enterprise engaged in the pharmaceutical
business in Switzerland, the Company's facilities are or will be subject to
comprehensive environmental laws and regulations governing, among other things,
air emissions, waste water discharge and solid and hazardous waste disposal.
Although there can be no assurance, the Company believes its current facilities
are in
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compliance in all material respects with applicable Swiss environmental laws.
However, environmental laws have changed in recent years and the Company may
become subject to increasingly stringent environmental standards in the future.
While the Company anticipates that from time to time it will incur capital
expenditures in connection with environmental matters, it is unable to predict
the extent or timing of future expenditures which may be required in connection
with complying with environmental laws. There can be no assurance that future
developments, administrative actions or liabilities arising from environmental
matters will not have a material adverse effect on the Company. See 'Business --
Environmental Regulations.'
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT; PRICE CONTROLS; HEALTH CARE REFORM
MEASURES. The Company's success in generating revenues from the sale of certain
products may depend on the extent to which reimbursement for the costs of such
products and related treatments will be available from third-party payors such
as government health administration authorities, private insurance companies,
self-insured employers, health maintenance organizations and other
organizations. The level of revenues and profitability of the Company, like
those of other companies in the pharmaceutical and biotechnology industry, are
affected by the continuing efforts of third-party payors to contain or reduce
the costs of health care by lowering reimbursement or payment rates, increasing
case management review of services and negotiating reduced contract pricing and
reimbursement caps.
In some markets outside of the United States, such as Germany, government
reimbursement is generally available for the purchase of the Company's products
and proposed products, subject to constraints such as reimbursement limitations.
In addition, third-party payors may refuse to provide reimbursement in cases
where drugs, such as oncological drugs, are used for unapproved uses.
Approximately 70% of the drugs sold in Germany are subject to maximum
reimbursement. To date, no oncological products have been affected by a maximum
reimbursement limitation, although there can be no assurance that the Company's
oncological products or proposed products will not be affected by a maximum
reimbursement limitation in the future. Although a manufacturer may sell its
products at prices that are higher than the maximum reimbursement rate, patients
are required to pay any difference between that price and the maximum
reimbursement rate. If the products of the Company become subject to a maximum
reimbursement rate, this may adversely affect the prices the Company will be
able to charge.
In Switzerland, reimbursement for pharmaceutical products is regulated on
the federal level. There are two categories of drugs subject to reimbursement.
The first category consists of medications which are required to be reimbursed
by private health insurers. The second category contains medications for which
reimbursement by health insurers is recommended. Private health insurers
generally provide reimbursement for products on the recommended list. There can
be no assurance that payments under governmental and third-party payor programs
will remain at levels comparable to present levels or will, in the future, be
sufficient to cover the costs allocable to patients eligible for reimbursement
pursuant to such programs.
From time to time, the Clinton Administration, the U.S. Congress and
legislators of certain foreign governments have proposed or are considering a
variety of reforms to the health care systems. The Company cannot predict what
health care reform legislation, if any, will be enacted in the United States or
elsewhere. Changes in the health care system in the United States or elsewhere
could have a significant impact on the manner in which the Company conducts its
business and may impose additional regulations governing the conduct of the
Company's business. These changes could have a material adverse effect on the
Company. See 'Business -- Third-Party Reimbursement.'
POTENTIAL PRODUCT LIABILITY; AVAILABILITY OF INSURANCE; RISK OF PRODUCT
RECALL. The testing, clinical trials, manufacturing, and marketing of the
Company's products and proposed products involve the inherent risks of product
liability claims or similar legal theories against the Company, some of which
may cause the Company to incur significant defense costs. Although the Company
currently maintains product liability insurance coverage which it believes is
adequate, there can be no assurance that the coverage limits of its insurance
are adequate or that all such claims will be covered by insurance. In addition,
these policies generally must be renewed every two years. While the Company has
been able to obtain product liability insurance in the past, there can be no
assurance it will be able to obtain insurance in the future on its products or
proposed products. Product liability insurance varies in cost, is
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difficult to obtain and may not be available in the future on terms acceptable
to the Company, if it is available at all. A successful product liability claim
or other judgment against the Company in excess of its insurance coverage could
have a material adverse effect upon the Company or its reputation. Certain of
the Company's collaborative arrangements contain cross indemnification
provisions with respect to product liability claims concerning products covered
by the arrangements. The Company may be required to make payments, which in some
cases could be substantial, under these arrangements. In addition, products such
as those sold or proposed to be sold by the Company may be subject to recall for
unforeseen reasons. Such a recall could have a material adverse effect on the
Company and its reputation. In Germany, an injured party may recover for damages
on a strict liability basis without having to prove negligence on the part of
the manufacturer or distributor. In Switzerland, there is no special product
liability law for pharmaceuticals. The Swiss federal product liability law,
which covers drug products, provides that manufacturers are subject to strict
liability for injuries caused by defective products. See 'Business -- Product
Liability and Insurance.'
UNCERTAINTY OF CURRENCY FLUCTUATIONS. All of the Company's revenues for the
fiscal years ended December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1996 were derived from sales outside of the United States.
Because the Company's international operations are conducted in various foreign
currencies, it may be materially and adversely affected by fluctuations in
currency exchange rates. As a result, the Company will be exposed to foreign
currency exchange risks due to fluctuations in the exchange rates between the
foreign currencies and the U.S. dollar. If the Company executes hedging
transactions in the future, there can be no assurance that the Company will be
successful in these activities. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the experience,
abilities and continued services of John G. Tramontana, its Chairman of the
Board, President and Chief Executive Officer. The Company has entered into a
five-year employment agreement with Mr. Tramontana which begins upon the
consummation of the Offering and expires in 2001 and will obtain a $2,000,000
key man life insurance policy on the life of Mr. Tramontana, for the benefit of
the Company, effective on the date of this Prospectus. The loss or reduction of
services of Mr. Tramontana or any other key employee could have a material
adverse effect on the Company. In addition, the Company's future success depends
in large part upon its ability to attract and retain highly qualified personnel,
including experienced manufacturing personnel. The Company faces competition for
such personnel from other companies and organizations, many of which have
significantly greater resources than the Company. There can be no assurance that
the Company will be able to attract and retain the necessary personnel on
acceptable terms or at all. See 'Management -- Directors, Executive Officers and
Key Personnel and -- Employment Agreements.'
CONTROL OF COMPANY. Upon consummation of the Offering, the Company's
directors, executive officers and existing stockholders will beneficially own,
in the aggregate, approximately 2,375,000 shares of the outstanding Common
Stock, representing approximately 65.5% of the issued and outstanding Common
Stock. Accordingly, these stockholders will be in a position to control the
management and policies of the Company in general, and can determine the outcome
of any corporate transaction or other matter submitted to the Company's
stockholders for approval including the election of directors, mergers,
acquisitions, consolidations or the sale of all or substantially all of the
Company's assets. See 'Principal Stockholders' and 'Description of Capital
Stock.'
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST THE COMPANY. Substantially all
of the assets of the Company are located outside of the United States. As a
result, it may be difficult for investors to enforce judgments against the
Company obtained in United States courts including judgments predicated on the
civil liability provisions of the United States securities laws. The United
States does not currently have a treaty providing for reciprocal recognition and
enforcement of judgments in civil and commercial matters with Switzerland or
Germany and there is doubt whether (i) a final judgment for the payment of money
rendered by a Federal or state court in the United States based on civil
liability, whether or not predicated solely upon the civil liability provisions
of the United States securities laws, would be enforceable in Switzerland or
Germany against the Company and (ii) an action could be brought in Switzerland
or Germany against the Company in the first instance on the basis of liability
predicated solely upon the provisions of the United States securities laws.
15
<PAGE>
<PAGE>
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY.
Prior to the Offering, there has been no public trading market for the Company's
Common Stock and there can be no assurance that an active trading market will
develop following the Offering or, if developed, will be sustained. The initial
public offering price of the Common Stock will be determined by negotiations
between the Company and the Representative. There can be no assurance that the
Common Stock will trade in the public market at or above the initial public
offering price following the consummation of the Offering. The trading price of
the Common Stock could be subject to significant fluctuations in response to
variations in quarterly operating results and other factors and such
fluctuations could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock markets in the United States have, from
time to time, experienced significant price and volume fluctuations that are
unrelated or disproportionate to the operating performance of individual
companies. Such fluctuations may adversely affect the price of the Common Stock.
See 'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and 'Underwriting.'
LACK OF UNDERWRITING HISTORY. The Representative was organized in February
1992 and first registered as a broker-dealer in 1993. Prior to this Offering,
the Representative has participated as a sole or co-manager in three public
offerings. Prospective purchasers of the Common Stock offered hereby should
consider the lack of experience of the Representative in being a manager of an
underwritten public offering. See 'Underwriting.'
CONTINUED QUOTATION ON THE NASDAQ SMALLCAP MARKET.SM The Company has
applied to have the Common Stock approved for quotation on the Nasdaq SmallCap
MarketSM and believes it will meet the initial listing requirements upon
consummation of the Offering. However, there can be no assurance that it will be
able to satisfy the criteria for continued quotation on the Nasdaq SmallCap
MarketSM following the Offering. Failure to meet the maintenance criteria in the
future may result in the Common Stock not being eligible for quotation on the
Nasdaq SmallCap MarketSM or otherwise. In such event, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the market
value of, the Common Stock. See 'Description of Capital Stock.'
POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER
PROVISIONS. The Company's Restated and Amended Certificate of Incorporation
('Restated Certificate') authorizes the issuance of a maximum of 5,000,000
shares of preferred stock, par value $.001 per share ('Preferred Stock'), with
designations, rights and preferences as determined from time to time by the
Board of Directors. As a result of the foregoing, the Board of Directors can
issue, without further stockholder approval, Preferred Stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of the Common Stock. The issuance of
Preferred Stock could, under certain circumstances, discourage, delay or prevent
a change in control of the Company. In addition, the issuance of Preferred Stock
could dilute the rights of holders of the Common Stock and the market price of
the Common Stock. Although the Company has no plans to issue any shares of
Preferred Stock, there can be no assurance that it will not issue Preferred
Stock at some future date. Upon consummation of the Offering, the Company will
be subject to Delaware General Corporation Law ('DGCL') provisions that prohibit
the Company from entering into certain business combinations without the
approval of its Board of Directors and, as such, could prohibit or delay mergers
or other transactions or changes in control with respect to the Company. Such
provisions, accordingly, may discourage attempts to acquire the Company. See
'Description of Capital Stock -- Preferred Stock and -- Delaware Anti-Takeover
Law.'
SHARES ELIGIBLE FOR FUTURE SALE; EXERCISE OF REGISTRATION RIGHTS. Upon
consummation of the Offering, there will be 3,625,000 shares of Common Stock
outstanding, of which 2,375,000 shares of Common Stock are 'restricted
securities' under Rule 144 under the Securities Act of 1933, as amended (the
'Securities Act'), and (except for shares purchased by 'affiliates' of the
Company as such term is defined in Rule 144) would be eligible for sale in May
1998, without regard to lock-up restrictions with the Representative. In the
future, the 2,375,000 shares may be sold only pursuant to a registration
statement under the Securities Act or an applicable exemption, including
pursuant to Rule 144. Under Rule 144, a person who has owned Common Stock for at
least two years may, under certain circumstances, sell within any three-month
period, a number of shares of Common Stock that does not exceed the greater of
1% of the then outstanding shares of Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. In addition, a person
who is not
16
<PAGE>
<PAGE>
deemed to have been an affiliate of the Company at any time during the three
months preceding a sale, and who has beneficially owned the restricted
securities for the last three years is entitled to sell all such shares without
regard to the volume limitations, current public information requirements,
manner of sale provisions and notice requirements. Sales or the expectation of
sales of a substantial number of shares of Common Stock in the public market
following this Offering could adversely affect the prevailing market price of
the Common Stock. The Securities and Exchange Commission ('Commission') has
proposed an amendment to Rule 144 which would reduce the holding period before
shares subject to Rule 144 become eligible for sale in the public market. This
proposal, if adopted, could substantially increase the number of shares of
Common Stock eligible for sale following the lock-up restriction described
immediately below.
The Company and its officers, directors and existing stockholders have
agreed with the Representative not to directly or indirectly register, issue,
offer, sell, offer to sell, contract to sell, hypothecate, pledge or otherwise
dispose of any shares of Common Stock (or any securities convertible into or
exercisable or exchangeable for shares of Common Stock) for a period of one year
from the date of this Prospectus, without the prior written consent of the
Representative, subject to certain exceptions. See 'Underwriting' and 'Shares
Eligible for Future Sale.'
The holders of the Representative's Warrants have been granted registration
rights with respect to the 125,000 shares issuable upon exercise of the
Representative's Warrants. The sale, or availability for sale, of the
outstanding Common Stock underlying the Representative's Warrants in the public
market subsequent to the Offering could adversely affect the prevailing market
price of the Common Stock and could impair the Company's ability to raise
additional capital. See 'Description of Capital Stock -- Registration Rights'
and 'Shares Eligible for Future Sale.'
IMMEDIATE AND SUBSTANTIAL DILUTION; NO DIVIDENDS ANTICIPATED. Purchasers of
shares of the Common Stock offered hereby will incur immediate and substantial
dilution of the net tangible book value of the Common Stock of $4.88 per share
(or 61%) from the assumed initial public offering price of $8.00 per share. In
addition, an immediate increase in the Company's net tangible book value of
$1.85 per share to the existing shareholders will result upon the consummation
of the Offering. Thus, the net tangible book value per share will be
significantly lower than the price per share paid by the public investors. The
Company has never paid any dividends on its Common Stock and does not anticipate
the payment of dividends in the foreseeable future. See 'Dividend Policy,'
'Dilution' and 'Description of Capital Stock.'
17
<PAGE>
<PAGE>
THE COMPANY
The Company is currently engaged in manufacturing and marketing 14 types of
IV Solutions in Switzerland and Lichtenstein and marketing in Germany Prostate
Materials and two generic oncological products, mercaptopurine and calcium
leucovorin. Over the next 24 months, the Company's strategy is to
manufacture, in its state-of-the-art facilities in Switzerland, and market
generic oncological drugs. In addition, the Company is in the process of
preparing to market certain licensed proprietary oncological and
biotechnological products.
The Company markets IV Solutions through its own sales force to health care
providers and third-party payors and markets Prostate Materials, mercaptopurine
and calcium leucovorin to pharmaceutical companies. The Company does not intend
to market its other products directly to the public. For the year ended December
31, 1995, on a pro forma basis after giving effect to the Bioren Acquisition as
if the transaction had occurred on January 1, 1995, the Company's sales of IV
Solutions were approximately $6.5 million, sales of medical products, including
Prostate Materials, were approximately $1.4 million, and sales of generic
oncological products were approximately $670,000. For the three months ended
March 31, 1996, sales of these products aggregated approximately $1.4 million,
$319,000 and $210,000, respectively.
The Company was incorporated in Delaware in September 1995 and has three
wholly-owned subsidiaries, Bigmar Pharmaceuticals, Bigmar Therapeutics and
Bioren. Bigmar Pharmaceuticals is a Swiss corporation that was formed in January
1992 under the name BVI, SA. Bigmar Therapeutics is a Delaware corporation that
was formed in September 1995 under the name Bioren, Inc. Bioren is a Swiss
corporation that was formed in July 1986.
In June 1995, all of the outstanding capital stock of Bioren was purchased
by Bigmar Pharmaceuticals in the Bioren Acquisition, for an aggregate purchase
price of approximately $9.4 million, consisting of approximately $5.2 million in
cash and the assumption of certain of the seller's liabilities in the aggregate
principal amount of $4.2 million. In addition, in connection with the Bioren
Acquisition, Bigmar Pharmaceuticals became a guarantor on a bank loan to Bioren
in the principal amount of $2.6 million, which was collateralized by the Bioren
Facility, and provided a guarantee on a second mortgage in the aggregate
principal amount of approximately $1.7 million on the Bioren Facility. In
addition, in June 1995, Bigmar Pharmaceuticals sold one-half of its equity
interest in Bioren to Bigmar Pharmaceuticals' stockholders ('Bioren Holders')
for approximately $2.6 million. See 'Certain Transactions.'
In September 1995, the Company sold an aggregate of 2,375,000 shares of
Common Stock to its existing stockholders and on April 8, 1996 the existing
stockholders contributed 99% of these shares of Common Stock to the Company in
the Contribution. On April 9, 1996, in the Exchange, all of the stockholders of
Bigmar Pharmaceuticals exchanged all their shares of capital stock in Bigmar
Pharmaceuticals for an aggregate of 2,000,938 shares of Common Stock of the
Company and all of the Bioren Holders exchanged all of their shares of capital
stock in Bioren for an aggregate of 350,312 shares of Common Stock of the
Company. See 'Certain Transactions.'
18
<PAGE>
<PAGE>
The following illustrates the series of transactions leading to the current
structure of the Company:
<TABLE>
<CAPTION>
July 1986 January 1992 June 1995 September 1995 April 8, 1996 April 9, 1996
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Bioren is formed Bigmar Bigmar Bigmar, Inc. is Stockholders of The Bioren Hold-
as a Swiss com- Pharmaceuticals Pharmaceuticals incorporated as a Bigmar, Inc. con- ers exchange all
pany is formed as a acquires all of Delaware corpo- tribute 99% of of their shares
Swiss company the capital stock ration and issues their common of capital stock
of Bioren 2,375,000 shares stock to Bigmar, of Bioren for
Bigmar of common stock Inc. 350,312 shares of
Pharmaceuticals Bigmar Therapeu- common stock of
sells one-half of tics is Bigmar, Inc.
its equity incorporated as a All stockholders
interest in Delaware of Bigmar
Bioren to the corporation and Pharmaceuticals
Bioren Holders. issues 5,000,000 exchange all of
shares of common their shares of
stock to Bigmar, capital stock of
Inc. Bigmar
Pharmaceuticals
for 2,000,938
shares of common
stock of Bigmar,
Inc.
</TABLE>
19
<PAGE>
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,250,000 shares of
Common Stock offered hereby, after deduction of underwriting discounts and
commissions, Offering expenses including the Representative's non-accountable
expense allowance, will be approximately $8,125,000 ($9,452,500 if the
Underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $8.00 per share. The Company intends to use the net
proceeds of the Offering as follows: (i) approximately $4,000,000 to acquire,
test and/or manufacture oncological and biotechnological products, including (a)
payments of up to $500,000 to Bioferment, pursuant to the Bioferment Agreement,
and up to $100,000 to each of Cernelle and Sapec pursuant to the Cernelle
Agreement and the Sapec Agreement, respectively, (b) approximately $1,000,000
for the purchase of equipment that will be used to manufacture the Company's
generic oncological products for which it will be seeking approvals from the FDA
and (c) approximately $400,000 to purchase raw materials and pay for the costs
incurred in conducting stability and bioequivalence studies and clinical trials
for oncological and biotechnological products; (ii) approximately $1,850,000 to
repay in full a working capital loan originally assumed pursuant to the Bioren
Acquisition from Sigal SA ('Sigal'), a company owned by Galenica Holding AG
('Galenica'), the seller of Bioren, bearing interest at the rate of 6% and
payable upon consummation of the Offering; and (iii) approximately $2,275,000
for general corporate purposes, including working capital. See 'The Company' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
John G. Tramontana, the Company's Chairman of the Board, President and
Chief Executive Officer, was an officer and director of Cerbios Pharma, of which
Bioferment and Sapec are divisions, and the chairman of the board of Cernelle at
the time of the negotiation and execution of the Bioferment Agreement, the Sapec
Agreement and the Cernelle Agreement. See 'Risk Factors -- Reliance on
Collaborative Arrangements; Management Affiliations with Collaborators' and
'Certain Transactions -- Transactions with Principal Stockholders.'
The foregoing represents the Company's estimate of its allocation of the
net proceeds from the Offering. The actual cost, timing and amount of funds
required for any particular project may vary depending on numerous factors
including the rate of the Company's progress in the development of some of its
proposed products, the results of clinical trials, the timing of regulatory
approvals, the amount and timing of payments under collaborative agreements
entered into by the Company, the activities of competitors, the costs in
prosecuting or defending patent claims or license rights and other factors.
Pending application of the net proceeds of the Offering, the Company will
make temporary investments in interest-bearing savings accounts, certificates of
deposit, money market accounts established by major commercial banks or
financial institutions, United States government obligations or high-grade
commercial paper. The Company currently intends to use any additional net
proceeds that it may receive upon the exercise of the Underwriters'
over-allotment option to reduce outstanding indebtedness. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'
The Company believes that the proceeds from the Offering, together with
cash flow from operations (if any), should be sufficient to fund its operations,
including its proposed expansion, for approximately 12 months. However, there
can be no assurance that events affecting the Company's operations will not
result in the Company depleting its funds before that time. The Company may need
to raise substantial additional funds to continue to fund operating expenses or
its expansion strategy. The Company may seek this funding through public or
private financings, corporate collaborations or other sources. However, there
can be no assurance that additional financing will be available through any of
these sources or, if available, that such financing will be on acceptable terms.
See 'Risk Factors -- Need for Additional Financing' and 'Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources.'
20
<PAGE>
<PAGE>
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company currently
intends to retain future earnings, if any, to finance its expansion strategy.
The payment of future cash dividends by the Company on its Common Stock will be
at the discretion of the Board of Directors and will depend on the Company's
earnings (if any), financial condition, cash flows, capital requirements, any
contractual prohibitions with respect to the payment of dividends and other
considerations as the Board of Directors may consider relevant. In addition, the
Swiss Federal Code of Obligation provides further restrictions on the Company's
ability to pay dividends to its stockholders. See 'Risk Factors -- Restrictions
on Retained Earnings.'
21
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
March 31, 1996 giving effect to the Contribution, the Exchange and the Reverse
Split as if each of the transactions had occurred on such date, and (ii) as of
March 31, 1996 as adjusted to reflect the issuance and sale by the Company of
the 1,250,000 shares of Common Stock offered hereby (at an assumed initial
public offering price of $8.00 per share), after deduction of underwriting
discounts and commissions and estimated Offering expenses payable by the Company
and the application of a portion of the net proceeds therefrom to repay
indebtedness.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
HISTORICAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Current portion of long-term debt.................................................. $ 1,897,562 $ 50,378
----------- -----------
Non-current portion of long-term debt.............................................. 10,539,064 10,539,064
----------- -----------
Stockholders' Equity(1):
Preferred Stock, $.001 par value per share; 5,000,000 shares authorized, no
shares issued and outstanding................................................ -- --
Common Stock, $.001 par value per share; 15,000,000 shares authorized,
2,375,000 shares presently issued and outstanding; 3,625,000 shares
outstanding as adjusted(1)................................................... 2,375 3,625
Additional paid in capital(1)................................................. 3,900,875 12,024,625
Cumulative translation adjustment............................................. (113,992) (113,992)
Retained earnings............................................................. 56,619 56,619
----------- -----------
Total stockholders' equity.................................................... 3,845,877 11,970,877
----------- -----------
Total capitalization................................................ $16,282,503 $22,560,319
----------- -----------
----------- -----------
</TABLE>
- ------------
(1) Does not include: (i) 300,000 shares of Common Stock reserved for issuance
under the Option Plan; (ii) 50,000 shares of Common Stock reserved for
issuance under the Director Option Plan; (iii) up to 187,500 shares of
Common Stock issuable upon exercise of the Underwriters' over-allotment
option; and (iv) 125,000 shares of Common Stock issuable upon exercise of
the Representative's Warrants. See 'Management -- Option Plan and
-- Director Option Plan,' 'Description of Capital Stock' and
'Underwriting.'
22
<PAGE>
<PAGE>
DILUTION
At March 31, 1996, the net tangible book value of the Company was
$3,016,725, or $1.27 per share of Common Stock after giving effect to the
Exchange as if it had occurred on such date. Net tangible book value per share
is determined by dividing tangible book value (total tangible assets less total
liabilities) by the number of shares of issued and outstanding Common Stock at
that date. After giving effect to the sale of the 1,250,000 shares of Common
Stock offered hereby (at an assumed initial public offering price of $8.00 per
share) and the application of the net proceeds therefrom, after deducting
underwriting discounts and commissions and Offering expenses, the pro forma net
tangible book value of the Company at March 31, 1996 would have been $11,314,299
or $3.12 per share. This represents an immediate increase in net tangible book
value of $1.85 per share to existing stockholders and an immediate dilution of
$4.88 per share to investors purchasing shares of Common Stock in the Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................................................ $8.00
Net tangible book value per share at March 31, 1996......................................... $1.27
Increase in net tangible book value per share attributable to new investors................. 1.85
-----
Pro forma net tangible book value per share after the Offering................................... 3.12
-----
Dilution per share to new investors.............................................................. $4.88
-----
-----
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the difference between existing stockholders and investors purchasing shares of
Common Stock in the Offering with respect to the number and percentage of shares
of Common Stock purchased from the Company, the total consideration and
percentage of total consideration paid to the Company and the average
consideration per share paid (at an assumed initial public offering price of
$8.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 2,375,000 65.5% $ 3,863,301 27.9% $1.63
New investors....................... 1,250,000 34.5 10,000,000 72.1 8.00
--------- ------- ----------- -------
Total.......................... 3,625,000 100.0% $13,863,301 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
- ------------
(1) Does not include: (i) 300,000 shares of Common Stock reserved for issuance
under the Option Plan; (ii) 50,000 shares of Common Stock reserved for
issuance under the Director Option Plan; (iii) up to 187,500 shares of
Common Stock issuable upon exercise of the Underwriters' over-allotment
option; and (iv) 125,000 shares of Common Stock issuable upon exercise of
the Representative's Warrants. See 'Management -- Option Plan
and -- Director Option Plan,' 'Description of Capital Stock' and
'Underwriting.'
23
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presents historical financial data for (i)
Bioren SA (predecessor company) for the years ended December 31, 1991, 1992,
1993 and 1994 and for the six months ended June 30, 1995, and (ii) Bigmar, Inc.
for the years ended December 31, 1992, 1993, 1994 and 1995 and for the three
months ended March 31, 1995 and 1996 (after giving effect to the reorganization
described in Note 1 to the Company's financial statements). The historical
financial data of Bioren and Bigmar, Inc. has been derived from the financial
statements (and notes thereto) of the respective companies, which financial
statements have been audited by Richard A. Eisner & Company, LLP, independent
auditors, included elsewhere in this Prospectus. The selected data presented as
of March 31, 1995 and 1996 and for the three months ended March 31, 1995 and
1996 are derived from the unaudited financial statements of the Company which
appear elsewhere in this Prospectus. In the opinion of management, the selected
financial data for the three months ended March 31, 1995 and 1996 have been
prepared on the same basis as the audited financial statements and reflect all
adjustments, which are of a normal recurring nature, necessary to present fairly
the financial data for the periods presented. The results of operations for any
interim period are not necessarily indicative of the Company's results of
operations for the full fiscal year. The selected financial data should be read
in conjunction with the financial statements (and notes thereto) of Bioren and
Bigmar, Inc. and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' included elsewhere in this Prospectus. The selected
financial data also sets forth pro forma operating data of the Company as if the
Bioren Acquisition had occurred as of January 1, 1995. The unaudited pro forma
financial data is for informational purposes only, does not purport to represent
what the Company's results of operations would have been if such transaction had
in fact occurred as of such date and is not necessarily indicative of the
Company's future results of operations.
<TABLE>
<CAPTION>
BIOREN SA (PREDECESSOR COMPANY)
------------------------------------------------------------------
SIX MONTHS
ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
----------------------------------------------------- ----------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.............. $ 6,858,044 $ 6,055,311 $ 4,103,921 $ 5,879,685 $2,928,965
Cost of sales.......... 6,616,425 5,747,043 3,558,350 4,479,243 1,694,290
----------- ----------- ----------- ----------- ----------
Gross profit........... 241,619 308,268 545,571 1,400,442 1,234,675
----------- ----------- ----------- ----------- ----------
Operating Expenses:
Research and
development
expense............ 8,866 41,122 61,297 40,736 26,671
Selling, general and
administrative
expense............ 1,693,536 1,427,353 1,572,903 1,858,192 1,060,049
Loss on abandonment
of building
improvements and
machinery.......... -- -- 830,912 2,295,850 --
----------- ----------- ----------- ----------- ----------
Total operating
expenses............. 1,702,402 1,468,475 2,465,112 4,194,778 1,086,720
----------- ----------- ----------- ----------- ----------
Operating income
(loss)............... (1,460,783) (1,160,207) (1,919,541) (2,794,336) 147,955
Other income
(expense)............ (241,987) (201,521) 115,349 (190,066) (28,644)
----------- ----------- ----------- ----------- ----------
Net income (loss)
before extraordinary
item................. (1,702,770) (1,361,728) (1,804,192) (2,984,402) 119,311
Extraordinary item..... 2,758,620 -- -- 1,468,429 --
----------- ----------- ----------- ----------- ----------
Net income............. $ 1,055,850 $(1,361,728) $(1,804,192) $(1,515,973) $ 119,311
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
PER SHARE DATA:
Net income (loss)..........................................................................
Weighted average number of shares outstanding..............................................
<CAPTION>
BIGMAR, INC.(1)
--------------------------------------------------------------------
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------ -----------------------
1992 1993 1994 1995(1) 1995 1996
------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.............. $ $264,077 $707,627 $5,600,362 $1,185,710 $1,898,002
Cost of sales.......... 182,075 611,040 4,001,891 1,059,955 1,151,099
------- -------- -------- ---------- ---------- ----------
Gross profit........... 82,002 96,587 1,598,471 125,755 746,903
------- -------- -------- ---------- ---------- ----------
Operating Expenses:
Research and
development
expense............ -- -- -- 23,144 -- 88,394
Selling, general and
administrative
expense............ 10,012 50,810 16,269 1,493,055 21,452 547,463
Loss on abandonment
of building
improvements and
machinery.......... -- -- -- -- --
------- -------- -------- ---------- ---------- ----------
Total operating
expenses............. 10,012 50,810 16,269 1,516,199 21,452 635,857
------- -------- -------- ---------- ---------- ----------
Operating income
(loss)............... (10,012) 31,192 80,318 82,272 104,303 111,046
Other income
(expense)............ 10,212 (7,909) (1,660) (179,476) (13,532) (59,365)
------- -------- -------- ---------- ---------- ----------
Net income (loss)
before extraordinary
item................. 200 23,283 78,658 (97,204) 90,771 51,681
Extraordinary item..... -- -- -- -- -- --
------- -------- -------- ---------- ---------- ----------
Net income............. $ 200 $ 23,283 $ 78,658 $ (97,204) $ 95,771 $ 51,681
------- -------- -------- ---------- ---------- ----------
------- -------- -------- ---------- ---------- ----------
PER SHARE DATA:
Net income (loss)...... $.00 $.06 $.20 $(.07) $.23 $.02
------- -------- -------- ---------- ---------- ----------
------- -------- -------- ---------- ---------- ----------
Weighted average number 400,188 400,188 400,188 1,337,292 400,188 2,375,000
------- -------- -------- ---------- ---------- ----------
------- -------- -------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
BIGMAR, INC.
-----------------------------------
PRO FORMA
THREE MONTHS PRO FORMA
ENDED YEAR ENDED
MARCH 31, 1995 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
PRO FORMA OPERATING DATA:
Net sales..................... $2,702,351 $ 8,529,327
Cost of sales................. 1,984,306 5,696,181
-------------- -----------------
Gross profit.................. 718,045 2,833,146
-------------- -----------------
Research and development
expense..................... 10,855 49,815
Selling, general and
administrative expense(2)... 575,186 2,553,104
-------------- -----------------
Total operating expenses...... 586,041 2,602,919
-------------- -----------------
Operating income.............. 132,004 230,227
Other expense................. (31,133) 208,120
-------------- -----------------
Net income.................... $ 100,871 $ 22,107
-------------- -----------------
-------------- -----------------
PER SHARE DATA:
Net income.................. $0.04 $0.01
---------- ----------
---------- ----------
Weighted average number of
shares outstanding........ 2,375,000 2,375,000
----------- -----------
----------- -----------
</TABLE>
(table continued on next page)
24
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<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
BIGMAR, INC.
------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, 1996
------------------------------------------------ --------------------------------
1992 1993 1994 1995 HISTORICAL AS ADJUSTED(3)
------- -------- ---------- ----------- -------------- --------------
(HISTORICAL)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........... $80,772 $113,574 $ 98,526 $ 1,052,513 $ (437,811) $ 7,859,763
Total assets.............. 84,560 179,113 2,173,621 15,393,126 19,050,275 25,328,091
Long-term obligations..... -- -- 1,500,767 8,285,023 10,539,064 10,539,064
Retained earnings......... 149 23,484 101,767 4,938 56,619 56,619
Stockholders' equity...... 90,239 113,574 192,492 3,911,404 3,845,877 11,970,877
</TABLE>
- ------------
(1) On April 9, 1996, a reorganization of companies under common control took
place whereby the Company acquired 100% of Bigmar Pharmaceuticals and 50% of
Bioren. Accordingly, the financial statements of the Company include the
results of operations of Bigmar Pharmaceuticals for all periods presented
and the results of operations of Bioren from July 1, 1995 (the date of
acquisition). See 'The Company.'
(2) Effective upon consummation of the Offering, John G. Tramontana, the
Company's Chairman of the Board, President and Chief Executive Officer, will
begin to receive an annual base salary of $200,000, subject to adjustment,
plus a bonus of at least 25% of his base salary and Gerald T. Sweeney, the
Company's Chief Financial Officer and Vice President -- Finance, will begin
to receive an annual base salary of $80,000, subject to adjustment, plus a
bonus of 15% of his salary. The pro forma operating data does not reflect
such salaries or bonuses (if any). See 'Management.'
(3) As adjusted to give effect to the sale of 1,250,000 shares of Common Stock
in the Offering (after deduction of underwriting discounts and commissions
and estimated expenses to be incurred by the Company in connection with the
Offering) and the application of a portion of the net proceeds thereof to
pay approximately $2,000,000 in indebtedness. See 'Use of Proceeds' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'
25
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
Prospectus.
OVERVIEW
The Company is currently engaged in manufacturing and marketing 14 types of
IV Solutions in Switzerland and Lichtenstein and marketing in Germany Prostate
Materials and two generic oncological products, mercaptopurine and calcium
leucovorin. Over the next 24 months, the Company's strategy is to manufacture,
in its state-of-the-art facilities in Switzerland, and market generic
oncological drugs. In addition, the Company is in the process of preparing to
market certain licensed proprietary oncological and biotechnological products.
The Company markets IV Solutions through its own sales force to health care
providers and third-party payors and markets Prostate Materials, mercaptopurine
and calcium leucovorin to pharmaceutical companies. The Company does not intend
to market its other products directly to the public. For the year ended December
31, 1995, on a pro forma basis after giving effect to the Bioren Acquisition as
if the transaction had occurred on January 1, 1995, the Company's sales of IV
Solutions were approximately $6.5 million, sales of medical products, including
Prostate Materials, were approximately $1.4 million, and sales of generic
oncological products were approximately $670,000. For the three months ended
March 31, 1996, sales of these products aggregated approximately $1.4 million,
$319,000 and $210,000, respectively.
The Company's revenues and profitability may be affected by the ongoing
efforts of third-party payors to contain or reduce the costs of healthcare by
lowering reimbursement payment rates, increasing case management review of
services and negotiating reduced contract pricing and reimbursement caps. In the
event any of the Company's products become subject to a maximum reimbursement
rate, the prices the Company will be able to charge its customers and, as a
result its results of operations, may be adversely affected. See 'Risk
Factors -- Dependence on Third-Party Reimbursement; Price Controls; Health Care
Reform Measures.'
PLAN OF OPERATION
The Company intends to expand its manufacturing operations to produce
generic oncological products in its facilities and market oncological and
biotechnological products to pharmaceutical companies for resale to the public.
The Company expects to begin marketing methotrexate and doxorubicin (two generic
oncological products) to pharmaceutical companies during the second half of
1996. In addition, the Company obtained the distribution rights to, among other
products, sodium leucovorin and five generic oncological products including
methotrexate and calcium leucovorin from Sapec and approximately 20 generic
oncological products including mercaptopurine, calcium leucovorin and
methotrexate from Cernelle. The Company anticipates that all regulatory
approvals for the sale of sodium leucovorin in Germany will be obtained during
the second half of 1996 and that the marketing of this product will begin
shortly thereafter. There can be no assurance, however, that such regulatory
approvals will be obtained during these time periods, or that such approvals
will ever be obtained. The Company also has obtained the rights to use,
manufacture and market, among other products, a form of recombinant urokinase
from Bioferment. Although the Company does not intend to manufacture recombinant
urokinase, the Company anticipates that all regulatory approvals for the sale of
recombinant urokinase in Germany will be obtained during the second half of 1997
and that the marketing of this product will begin shortly thereafter. There can
be no assurance, however, that such regulatory approvals will be obtained during
this time period, or at all. The Company's management had affiliations with
Sapec, Cernelle and Bioferment at the time of the negotiation and execution of
the agreements with these parties. See 'Risk Factors -- Reliance on
Collaborative Arrangements; Management Affiliations with Collaborators' and
'Management -- Directors, Executive Officers and Key Personnel.'
26
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<PAGE>
The Company's business strategy over the next 24 months is to:
manufacture and market approximately seven injectable and lyophilized
oncological products, including sodium leucovorin;
manufacture and market additional oncological products as the patents
relating to the products expire;
increase the number of pharmaceutical companies in Europe through
which the Company's oncological products are marketed and the
territories in which they are distributed;
market recombinant urokinase; and
expand the marketing of IV Solutions in Switzerland through the
Company's own sales force.
The Company has entered into exclusive arrangements with non-affiliated
pharmaceutical companies to market certain proprietary and generic oncological
or biotechnological products in various territories. The following table lists
the generic oncological products that the Company intends to manufacture and
market to pharmaceutical companies for resale in Switzerland, Germany and the
United States over the next 24 months and the estimated time periods for each
product.
<TABLE>
<CAPTION>
ESTIMATED YEAR OF INTRODUCTION
--------------------------------
PRODUCT NAME DOSAGE FORM PRESCRIBED USE SWITZERLAND GERMANY USA
- ------------------- ----------------- -------------------------------- ----------- ------- ----
<S> <C> <C> <C> <C> <C>
Calcium Leucovorin Injection/Liquid Rescue Therapy 1996 1995* 1997
Doxorubicin Injection Neoplastic Conditions 1996 1997 1997
Dacarbazine Injection Malignant Melanoma 1997 1996 1997
Fluorouracil Injection Colon, Rectum, Breast, Stomach, 1997 1996 1999
Pancreas Carcinomas
Methotrexate Injection/Liquid Neoplastic Conditions 1996 1996 1997
Vinblastine Sulfate Injection Neoplastic Conditions -- -- 1998
</TABLE>
- ------------
* Introduced.
There can be no assurance that the Company will manufacture or market any
of the foregoing products during the time periods indicated or at all. The
commercialization of these products will depend on a number of factors
including, but not limited to, the successful results of the Company's clinical
toxicity studies and obtaining regulatory approval. Although the Company
believes that each of these proposed products has commercial value, the Company
may choose not to manufacture or market some or all of these products. See 'Risk
Factors -- No Assurance of Successful Product Development; Uncertainty of Market
Acceptance of Certain Proposed Products and -- FDA, International and other
Governmental Regulations' and 'Business -- Proposed Products.'
RESULTS OF OPERATIONS
BIGMAR, INC.
Bigmar, Inc. was incorporated in September 1995. On April 9, 1996, in the
Exchange, Bigmar, Inc. acquired 100% of Bigmar Pharmaceuticals and 50% of the
Bioren capital stock owned by the Bioren Holders. Accordingly, both Bigmar
Pharmaceuticals and Bioren are 100% owned subsidiaries of Bigmar, Inc. The
acquisition was accounted for as a reorganization of companies under common
control. Accordingly, the financial statements of Bigmar, Inc. were restated to
include the results of Bigmar Pharmaceuticals for all periods presented and
Bioren from July 1, 1995 (the date of acquisition).
BIGMAR THERAPEUTICS
Bigmar Therapeutics was incorporated in September 1995 and its only
activity since inception has been the execution and delivery of an agreement
with Protyde Oncology Therapeutics, Inc. ('Protyde Therapeutics') to form a
partnership, Protyde - Bigmar Therapeutics ('Partnership'), for the purpose of
coordinating the manufacturing and marketing of certain pharmaceutical products
for the treatment of cancer, such as mercaptopurine, calcium leucovorin,
methotrexate and doxorubicin, worldwide, except for certain major European
countries.
27
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<PAGE>
BIGMAR PHARMACEUTICALS AND BIOREN
Bigmar Pharmaceuticals commenced operations in January 1992. The following
discussion and analysis describes the results of operations of the Company for
the years ended December 31, 1993, 1994 and 1995 and Bioren from July 1, 1995 .
Effective June 30, 1995, Bigmar Pharmaceuticals acquired 100% of the outstanding
capital stock of Bioren in the Bioren Acquisition, and immediately sold 50% of
the stock to the Bioren Holders. The Company's financial statements include the
results of Bigmar Pharmaceuticals for all periods presented and Bioren from July
1, 1995.
Bioren currently manufactures IV Solutions and other hospital-based
products. Since the Bioren Acquisition, sales of IV Solutions have increased
while sales of antibiotics (the other market in which Bioren historically
operated) have been progressively abandoned. In the near future, Bioren intends
to continue to manufacture and market IV Solutions and expects to add
non-cytotoxic products used in the treatment of cancer.
The following sets forth, in tabular form, a comparison of the results of
operations of the Company as a percentage of the Company's sales for the years
ended December 31, 1993, 1994 and 1995 (including the operating results of
Bioren from July 1, 1995), and for the three months ended March 31, 1995 and
1996. The fiscal year of the Company ends on December 31 of each year. The
financial information included in this Prospectus is not necessarily indicative
of the Company's future operating results or financial condition.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales.................................. 100% 100% 100% 100% 100%
Cost of goods sold..................... 68.9% 86.4% 71.5% 89.4% 60.6%
Selling, general and administrative
expenses............................. 18.8% 2.3% 24.4% 1.8% 25.9%
Depreciation and amortization.......... 0.4% -- 2.3% -- 3.0%
Interest expense....................... (.1%) (.1%) 3.3% -- 4.4%
Income taxes........................... 3.1% 1.5% (0.1%) 1.9% 0%
Net income (loss)...................... 8.8% 11.1% (1.7%) 7.7% 2.7%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Net Sales. Net sales increased by $712,292 to $1,898,002 for the three
months ended March 31, 1996 as compared to $1,185,710 for the comparable period
in 1995. This increase was attributable to the addition of Bioren sales of
$1,525,672 in 1996, offset by a decline of $813,380 in Bigmar Pharmaceutical
sales to $372,330. Bigmar Pharmaceuticals sales in 1995 were disproportionately
skewed in the first quarter, as the Company made two large sales of Prostate
Materials amounting to $1.0 million. Although there can be no assurance, the
Company expects to generate similar sales of Prostate Materials for the year
ended December 31, 1996. Sales of other products, primarily calcium leucovorin,
increased in 1996 by approximately $200,000. Bioren sales for the three months
ended March 31, 1996 increased by $9,030 from the comparable period in 1995.
Cost of Goods Sold. Cost of goods sold increased by $91,144 to $1,151,099
for the three months ended March 31, 1996 as compared to $1,059,955 for the
comparable period in 1995. This increase was primarily due to increased sales.
Gross Profit. Gross profit increased by $621,148 to $746,903 for the three
months ended March 31, 1996 over the comparable period in 1995. This increase
was attributable to the addition of Bioren gross profit in 1996 of $651,694,
partially offset by a decline in gross profit from Bigmar Pharmaceutical sales.
Without the addition of Bioren, gross profit for the period ended March 31, 1996
declined by $30,547 to $95,208 as compared to $125,755 for the comparable period
in 1995. This decline was due to lower sales partially offset by improved gross
margins. Gross profit on Bioren sales for the three months ended March 31, 1996
was $651,694, an increase of $59,404 over the comparable period in 1995. This
increase was due to a more favorable product mix.
28
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<PAGE>
As a percentage of sales, gross profit for the three months ended March 31,
1996 was 39.4%, an increase from 10.6% for the comparable period in 1995. Bigmar
Pharmaceuticals gross profit as a percentage of sales increased to 25.6% from
10.6% for the comparable period in 1995. This improvement reflects a change in
the mix of products sold from period to period as Prostate Materials were sold
in 1995 at materially lower margins than other products. No sales of Prostate
Materials were made during the three months ended March 31, 1996. Bioren gross
profit as a percentage of sales for the three months ended March 31, 1996
increased to 42.7% from 39.1% for the comparable period in 1995. This increase
resulted primarily from a reduced emphasis on antibiotics in favor of infusion
products.
Research and Development Expenses. Research and development expenses for
the three months ended March 31, 1996 were $88,394, with no such expenses in the
comparable period in 1995. The increase reflects expenditures related to the
formulation and development of oncology and related products. Bigmar
Pharmaceuticals incurred additional expenditures of approximately $300,000
during the three months ended March 31, 1996 related to equipment and facility
validation activities. These expenditures were deferred and will be expensed
upon commencement of operations at the Bigmar Facility. Pursuant to its business
strategy, the Company expects to significantly expand its research and
development activities in order to obtain regulatory approval for manufacturing
and marketing oncology products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $526,011 to $538,148 for the three months
ended March 31, 1996 as compared to $21,452 for the comparable period in 1995.
The increase was due to, the addition of Bioren's selling, general and
administrative expenses of $499,418. Bioren's selling, general and
administrative expenses were $553,734 in the comparable period in 1995.
Approximately 50% of Bioren's selling, general and administrative expenses
related to employee salaries and benefits.
Interest Expense. Interest expense for the three months ended March 31,
1996 amounted to $83,460 primarily due to approximately $6.0 million of debt
incurred in conjunction with, and assumed in, the Bioren Acquisition. The
Company also incurred debt, aggregating approximately $5.3 million at March 31,
1996, for the construction of the Bigmar Facility and validation and other
facility start-up activities. Interest on these borrowings of approximately
$62,000 was capitalized in the three months ended March 31, 1996. See
' -- Liquidity and Capital Resources.'
Other Income (net). Other income for the three months ended March 31, 1996
was $24,095, an increase of $116 over the comparable period in 1995. This income
represents payments to Bioren from a company which leases a portion of the
Bioren Facility on a year-to-year basis.
Income Taxes. The Company is a Delaware corporation which owns 100% of the
capital stock of two Swiss corporations. The tax charge in Switzerland is an
accumulation of taxes due to the city, canton (state) and the federal
authorities. While the actual rate is a function of the percentage of
profitability in relation to taxable equity, the Company believes that 20% is a
fair approximation of the effective accumulative rate. Swiss law precludes
consolidated tax filings and thus the ability to offset taxable income in one
entity by losses of another. The tax liability for the three months ended March
31, 1996 is not significant, particularly because the Company's income for the
period was generated by Bioren which has a significant tax loss carry-forward.
Net Income. The consolidated net income of $60,996 for the three months
ended March 31, 1996 represents a decline of $49,775 from the comparable period
in 1995 and was primarily attributable to higher interest expense.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
(INCLUDING BIOREN FOR THE PERIOD FROM JULY 1, 1995 TO DECEMBER 31, 1995)
Net Sales. Net sales increased by $4,892,735 to $5,600,362 for the year
ended December 31, 1995 as compared to $707,627 for the year ended December 31,
1994. Excluding Bioren sales, the increase in net sales was $1,350,745, from
$707,627 in 1994 to $2,058,372 in 1995. This increase was primarily due to the
increases in sales of pharmaceutical products by $515,955, Prostate Materials by
$443,461, and oncological products by $391,329 which the Company began selling
in June 1993, November 1994, and August 1994, respectively. For the years ended
December 31, 1995 and 1994, sales of Prostate Materials
29
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<PAGE>
to Stroschein were approximately $1.0 million and $470,000, respectively. These
sales were pursuant to an agreement ('Stroschein Agreement') with Stroschein, a
German pharmaceutical company, pursuant to which Bigmar Pharmaceuticals acts as
the exclusive supplier of Prostate Materials to Stroschein, and Stroschein
distributes the Prostate Materials in Germany and other countries. See
'Business -- Products.' For the year ended December 31, 1995, sales of generic
oncological products consisting of mercaptopurine and calcium leucovorin were
approximately $670,000. For the period from July 1, 1995 through December 31,
1995 Bioren sales were $3,541,990.
Cost of Goods Sold. Cost of goods sold increased by $3,390,851 to
$4,001,891 for the year ended December 31, 1995 as compared to $611,040 for the
year ended December 31, 1994. This increase was primarily due to the increase in
sales.
Gross Profit. Gross profit increased by $1,501,884 to $1,598,471 for the
year ended December 31, 1995 as compared to $96,587 for the year ended December
31, 1994. Gross profit on Bigmar Pharmaceuticals sales was $439,535 for the year
ended December 31, 1995 as compared to $96,587 for the year ended December 31,
1994. The increase of $342,948 was due primarily to increased sales. Gross
profit as a percentage of net sales increased to 28.5% for the year ended
December 31, 1995 as compared to 13.6% for the year ended December 31, 1994.
Without Bioren sales, gross profit as a percentage of sales in 1995 would have
been 21.3%, an increase of 7.7%, as compared to 13.6% for 1994. This increase
was due primarily to the introduction of a new dosage form of lyophilized
calcium leucovorin in April 1995 which yielded a higher margin.
Gross profit on Bioren sales for the period from July 1, 1995 to December
31, 1995 was $1,158,936 or 32.7% of such sales. Bioren gross profit decreased
from 42.2% of net sales for the six months prior to the Bioren Acquisition as a
result of a shutdown of the Bioren Facility for a four-week period during the
latter half of 1995 for the installation of a new tank in order to increase the
capacity of the Bioren Facility's water system.
Research and Development Expenses. Research and development expenses were
$23,144 for the year ended December 31, 1995 with no such expenses for the year
ended December 31, 1994. The research costs were incurred by Bioren in the
second half of 1995 for the registration of new IV Solutions. Pursuant to its
business strategy, the Company intends to expand its business by manufacturing
and marketing certain oncological and biotechnological products and expects its
research and development expenses to be significant in future years.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1,473,786 to $1,493,055 (26.7% of net
sales) for the year ended December 31, 1995 as compared to $16,269 (2.3% of net
sales) for the year ended December 31, 1994. The increase was primarily due to
the addition of Bioren expenses of $1,091,074 since July 1, 1995 (the date of
the Bioren Acquisition). Bioren expenses include consulting fees of $332,055,
promotional expenses of $227,471, employee benefits and other personnel costs of
$170,631, shipping costs of $92,084 and other administrative costs of $265,806.
Without the Bioren expenses, selling, general and administrative expenses were
$401,981 for the year ended December 31, 1995. The increase of $385,712 as
compared to selling, general and administrative expenses of $16,269 in 1994 was
due to greater marketing costs and expenses associated with efforts to increase
sales.
Interest Expense. Interest expense was $182,476 for the year ended December
31, 1995 as compared to no interest expense in 1994. The interest expense was
primarily due to interest on indebtedness incurred in connection with the Bioren
Acquisition and interest on borrowings owed by Bioren to its former owner,
Galenica. In addition, the Company capitalized interest costs of $235,000 and
$40,000 for the years ended December 31, 1995 and 1994, respectively. The
capitalized interest was incurred in connection with borrowings used to finance
the construction and equipment of the Bigmar Facility. See ' -- Liquidity and
Capital Resources.'
Income Taxes. The tax charge in Switzerland is an accumulation of the taxes
due to the city, the canton (state) and the federal authorities. Therefore, the
tax burden varies from one entity to another depending upon its location. While
the actual tax rate is a function of the percentage of profitability in relation
to taxable equity, the Company believes that 20% is a fair approximation of the
effective cumulative rate. In addition, as Swiss tax laws do not permit
consolidated tax filings, possible tax losses
30
<PAGE>
<PAGE>
in one entity do not offset taxable income in another. Tax expense for the year
ended December 31, 1995 was not significant due to the amount of the loss and
the provision of a full valuation allowance on the deferred tax asset arising
from the benefit of the Company's operating losses. Tax expense for the year
ended December 31, 1994 was $10,553.
Net Loss. The Company sustained a net loss of $97,204 for the year ended
December 31, 1995 as compared to net income of $78,658 for the year ended
December 31, 1994. Such loss was primarily due to higher interest and other
expenses of Bioren.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
BIGMAR PHARMACEUTICALS
Net Sales. Net sales increased by $443,550 to $707,627 for the year ended
December 31, 1994 as compared to $264,077 for the year ended December 31, 1993.
The increase was due to sales of $205,000 of calcium leucovorin in Germany
beginning in August 1994, increased sales of $442,000 of Prostate Materials, a
reduction of $224,000 in other medical product sales and $21,000 due to a change
in the average exchange rate between the Swiss franc and the U.S. dollar.
Cost of Goods Sold. Cost of goods sold increased by $428,965 to $611,040
(86% of net sales) for the year ended December 31, 1994 as compared to $182,075
(69% of net sales) for the year ended December 31, 1993. The increase was due to
increased sales of Prostate Materials which have a higher cost of goods sold
than the Company's other products.
Gross Profit. Gross profit increased by $14,585 to $96,587 for the year
ended December 31, 1994 as compared to $82,002 for the year ended December 31,
1993. Gross profit as a percentage of net sales decreased to 14% for the year
ended December 31, 1994 as compared to 31% for the year ended December 31, 1993.
This decrease was due to changes in the Company's product mix, including the
introduction of oncological products in August 1994 and Prostate Materials in
November 1994, which have a higher cost of goods sold than the Company's other
products.
Research and Development Expenses. The Company incurred no research and
development expenses in either of the years ended December 31, 1994 and 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $34,541 to $16,269 for the year ended
December 31, 1994 as compared to $50,810 for the year ended December 31, 1993.
The decrease was primarily due to lower selling expenses, related travel
expenses and lower levels of legal services required by the Company.
Income Taxes. The Company's income taxes increased by $2,257 to $10,553 for
the year ended December 31, 1994 as compared to $8,296 for the year ended
December 31, 1993.
Net Income. Net income for the year ended December 31, 1994 was $78,658 as
compared to $23,283 for the year ended December 31, 1993. The increase was due
primarily to increased sales and decreased selling, general and administrative
expenses.
BIOREN SA (PREDECESSOR COMPANY)
Net Sales. Net sales increased by $1,775,764 to $5,879,685 for the year
ended December 31, 1994 as compared to $4,103,921 for the year ended December
31, 1993. The increase in sales was attributable to sales of $914,000 in
antibiotics, $409,000 in IV Solution products and $451,000 due to a change in
the average exchange rate between the Swiss franc and the U.S. dollar.
Cost of Goods Sold. Cost of goods sold increased by $920,893 to $4,479,243
(76% of net sales) for the year ended December 31, 1994 as compared to
$3,558,350 (87% of net sales) for the year ended 1993. This increase was
primarily due to an increase in sales.
Gross Profit. Gross profit increased by $854,871 to $1,400,442 for the year
ended December 31, 1994 as compared to $545,571 for the year ended December 31,
1993. Gross profit as a percentage of sales increased to 24% for the year ended
December 31, 1994 as compared to 13% for the comparable period in 1993. The
increase in the gross profit percentage was the result of higher sales, an
increase in sales of higher margin infusion products and a more favorable mix
within the antibiotics product line.
31
<PAGE>
<PAGE>
Research and Development Expenses. Research and development expenses
decreased by $20,561 to $40,736 for the year ended December 31, 1994 as compared
to $61,297 for the year ended December 31, 1993. The decrease was primarily due
to the reduction in antibiotic product registrations resulting from management's
decision to re-focus the business toward infusion products sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $285,289 to $1,858,192 for the year ended
December 31, 1994 as compared to $1,572,903 for the year ended December 31,
1993. The increase was primarily due to higher salary and personnel expenses in
support of the increase in sales.
Loss on Abandonment of Building Improvements and Machinery. Bioren incurred
a loss on the abandonment of building improvements and machinery for the years
ended December 31, 1994 and 1993 of $2,295,850 and $830,912, respectively. These
losses reflect the reduction in net value of certain equipment and building
improvements due to excess capacity and a change in product strategy.
Other Income (net). Other income decreased by $189,127 to $94,178 for the
year ended December 31, 1994 as compared to $283,305 for the year ended December
31, 1993. This decrease was a result of a reduction in consulting fees for
accounting and technical services provided to a subsidiary of Galenica.
Interest Expense. Interest expense increased by $116,288 to $284,244 for
the year ended December 31, 1994 as compared to $167,956 for the year ended
December 31, 1993. This increase was primarily due to an increase in borrowings
for the year ended December 31, 1994.
Extraordinary Income. Extraordinary income of $1,468,429 was recorded
during the year ended December 31, 1994 reflecting the forgiveness of a bank
loan.
Net Loss. Net loss was $1,515,973 for the year ended December 31, 1994 as
compared to a net loss of $1,804,192 for the year ended December 31, 1993. The
decrease in the net loss for the year ended December 31, 1994 as compared to the
prior year was the result of higher gross profit and the bank loan forgiveness
partially offset by a larger loss on abandonment of building improvements and
machinery.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996 and December 31, 1995, the Company had cash and cash
equivalents of $1,007,555 and $1,325,603, respectively. The Company's working
capital approximated ($437,811) and $1,052,513 at March 31, 1996 and December
31, 1995, respectively.
In March 1996, Protyde Therapeutics paid $750,000 to the Company. This
payment is part of its required capital contributions to the Partnership. See
'Business -- Collaborative Agreements.'
Trade accounts payable to third parties was $2,673,835 and $826,532 at
March 31, 1996 and December 31, 1995, respectively. The increase is due mainly
to liabilities incurred from construction at the Bigmar Facility of $1,297,924.
These liabilities are expected to become due in the second half of 1996. The
Company intends to pay $1,071,821 of these liabilities with proceeds from its
current credit lines.
At March 31, 1996, the Company had an aggregate of $11,364,805 in
outstanding indebtedness, including $1,847,184 which is payable upon
consummation of the Offering.
Through March 31, 1996, the Company had borrowed an aggregate of $1,794,312
from a company owned by certain stockholders of the Company. This loan is
payable in installments of approximately $179,431 per annum from June 30, 1997
through December 31, 2006 and bears interest at a rate of 9% per annum.
Through June 30, 1995 (the date of the Bioren Acquisition), the operations
of Bioren were financed with loans from Galenica and Sigal. At March 31, 1996,
outstanding loans due to Galenica and Sigal were $1,679,261 and $1,847,187,
respectively. The $1,679,261 loan is due in installments of principal of
$419,815 in 1997, $419,815 in 1998 and $839,631 in 1999. The $1,847,187 loan
will be paid in full upon consummation of the Offering from a portion of the net
proceeds received by the Company.
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The Company's capital expenditures for the three months ended March 31,
1996 aggregated $1,441,417. The majority of these expenditures were for the
purchase of manufacturing equipment at the Bigmar Facility and were financed
with a bank loan aggregating $1,551,428 at March 31, 1996 which is payable with
interest at 5% through December 31, 1998 and at an adjustable rate not to exceed
6.5% through 2005. This loan commitment has a ceiling of $1,847,187 from which
the Company may draw, and is collateralized by the building and machinery at the
Bigmar Facility. Principal is payable as follows: 3 semi-annual payments of
$83,963 commencing December 31, 1997 and eleven semi-annual payments of $146,935
commencing June 30, 1999.
The Company has other outstanding bank loans aggregating $1,973,728 used
for the construction of the Bigmar Facility. These loans accrue interest at the
rate of 5% per annum through December 31, 1998 and at an adjustable rate not to
exceed 6.5% per annum through 2005 and are collateralized by the building and
machinery at the Bigmar Facility and require quarterly principal payments of
$31,247 commencing December 31, 1997. The bank loan has a ceiling of $2,749,790
from which the company may draw.
The Company has a bank mortgage on the Bioren Facility in the amount of
$2,518,892. This loan bears interest at 5% per annum through May 16, 1999, and
at a variable rate thereafter tied to the then existing competitive commercial
mortgage rate. The mortgage requires principal payments of $50,378 per year
through 2045.
Anticipated capital expenditures for the next 12 months include
approximately $1.0 million for the purchase of equipment that will be used to
manufacture the Company's generic oncological products for which it will be
seeking approvals from the FDA. See 'Use of Proceeds.'
In May 1995, Bigmar Pharmaceuticals issued 1,380 shares of its capital
stock to two principal stockholders of the Company and received net proceeds
therefor of approximately $1.2 million. See 'Certain Transactions.'
The results of the Company's operations are affected by changes in exchange
rates between currencies. Changes in exchange rates may negatively affect the
Company's consolidated net sales and gross profit margins from international
operations. The Company is exposed to the risk that the dollar-value equivalent
of anticipated cash flow will be adversely affected by the changes in foreign
currency exchange rates. At such time as the Company determines that this risk
is significant, the Company may attempt to manage the risk by utilizing hedging
techniques, although there can be no assurance that the Company will be
successful in these activities. See 'Risk Factors -- Uncertainty of Currency
Fluctuations.'
The Company anticipates that the net proceeds from the Offering, together
with cash flow from operations (if any), should be sufficient to fund the
Company's operations, including its proposed expansion, for approximately 12
months. However, there can be no assurance that events affecting the Company's
operations will not result in the Company depleting its funds before that time.
The Company may be required to raise substantial additional funds to continue to
fund operating expenses or its expansion strategy. There can be no assurance
that the Company will be able to obtain such additional financing or that such
financing, if available, will be on acceptable terms. See 'Risk Factors -- Need
for Additional Financing,' and 'Use of Proceeds.'
At December 31, 1995, the Company had a net operating loss carryforward for
Swiss federal and canton income tax purposes of approximately $14,122,000 which
can only be used to offset future taxable income, if any, of Bioren. See Note 10
of Notes to the consolidated financial statements of Bigmar, Inc. In the future,
the Company will also be subject to taxes in the United States.
The Company is a Delaware corporation which owns 100% of the capital stock
of two Swiss corporations. The Swiss Federal Code of Obligation provides that at
least 5% of a Swiss company's net income each year must be appropriated to a
legal reserve until such time as this reserve is equivalent to 20% of the
company's paid-in share capital. In addition, 10% of any distribution made by a
company in excess of a 5% dividend must also be appropriated to the legal
reserve. The reserve of up to 50% of the share capital is not available for
distribution to stockholders. See 'Risk Factors -- Restrictions on Retained
Earnings.'
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BUSINESS
GENERAL
The Company is currently engaged in manufacturing and marketing 14 types of
IV Solutions in Switzerland and Lichtenstein and marketing in Germany of
Prostate Materials and two generic oncological products, mercaptopurine and
calcium leucovorin. Over the next 24 months, the Company's strategy is to
manufacture, in its state-of-the-art facilities in Switzerland, and market
generic oncological drugs. In addition, the Company is in the process of
preparing to market certain licensed proprietary oncological and
biotechnological products.
The Company markets IV Solutions through its own sales force to health care
providers and third-party payors and markets Prostate Materials, mercaptopurine
and calcium leucovorin to pharmaceutical companies. The Company does not intend
to market its other products directly to the public. For the year ended December
31, 1995, on a pro forma basis after giving effect to the Bioren Acquisition as
if the transaction had occurred on January 1, 1995, the Company's sales of IV
Solutions were approximately $6.5 million, sales of medical products, including
Prostate Materials, were approximately $1.4 million, and sales of generic
oncological products were approximately $670,000. For the three months ended
March 31, 1996, sales of these products aggregated approximately $1.4 million,
$319,000 and $210,000, respectively.
In 1995, the Company obtained distribution rights to, among other products,
sodium leucovorin and five generic oncological products including methotrexate
and calcium leucovorin, from Sapec, and approximately 20 generic oncological
products, including mercaptopurine, calcium leucovorin and methotrexate, from
Cernelle. Sodium leucovorin is designed to alleviate certain side effects
associated with chemotherapy more effectively than its currently distributed
counterpart, calcium leucovorin.
The Company has received approval for the marketing in Switzerland of two
generic oncological products, doxorubicin and methotrexate, and expects to begin
marketing these products during the second half of 1996. The Company anticipates
that all regulatory approvals for the sale of sodium leucovorin in Germany will
be obtained during the second half of 1996 and that the marketing of this
product will begin shortly thereafter. There can be no assurance, however, that
such regulatory approvals will be obtained during these time periods, or that
such approvals will ever be obtained. In addition, the Company has also obtained
the rights to use, manufacture and market, among other products, a form of
recombinant urokinase from Bioferment. Recombinant urokinase is a
biotechnological product used in the treatment of cardiovascular disease.
The Company has entered into exclusive arrangements with the following
non-affiliated pharmaceutical companies to market certain proprietary and
generic oncological or biotechnological products, manufactured or licensed by
the Company, in various territories: Medac in Germany and the United Kingdom;
Boehringer in Italy; Laevosan in Switzerland; Vita in Spain; and Protyde
worldwide, except for certain major European countries. Medac, Boehringer,
Laevosan and Vita are established pharmaceutical companies. Protyde is a
development stage company.
BUSINESS STRATEGY
GENERAL
The Company's business strategy over the next 24 months is to:
manufacture and market approximately seven injectable and lyophilized
oncological products, including sodium leucovorin;
manufacture and market additional oncological products as the patents
relating to the products expire;
increase the number of pharmaceutical companies in Europe through
which the Company's oncological products are marketed and the
territories in which they are distributed;
market recombinant urokinase; and
expand the marketing of IV Solutions in Switzerland through the
Company's own sales force.
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PRODUCTS
IV SOLUTIONS
The Company manufactures, at its Bioren Facility, and markets 14 different
IV Solutions. The Company's IV Solutions generally consist of different chemical
entities, such as sodium chloride, electrolytes, carbohydrates and other
nutrients, which are intravenously administered to a patient. The Company
markets IV Solutions, through its own sales force, to hospitals, clinics,
retirement homes, nursing homes, managed health care organizations, home
infusion providers and other health care providers in Switzerland and
Lichtenstein. For the year ended December 31, 1995, on a pro forma basis after
giving effect to the Bioren Acquisition and the Exchange as if each of the
transactions had occurred on January 1, 1995, the Company's sales of IV
Solutions were approximately $6.5 million. For the three months ended March 31,
1996, sales of IV Solutions approximated $1.4 million. The Company intends to
continue manufacturing and marketing IV Solutions and is seeking to penetrate
additional markets in Switzerland. See ' -- Marketing and Sales.'
In March 1995, Bioren and PLM entered into the PLM Agreement which grants
Bioren the exclusive right to distribute its IV Solutions throughout Switzerland
and Lichtenstein in PLM's collapsable containers. The PLM Agreement expires in
the year 2005, unless it is earlier terminated. Under the terms of the PLM
Agreement, PLM is entitled to terminate the exclusive right contained in the
agreement if, among other things, Bioren does not purchase a minimum number of
intravenous solution containers each year. In addition, the PLM Agreement may be
terminated by either party, upon the occurrence of certain specified conditions,
including if the products or the production infringe, or are alleged to
infringe, upon any intellectual property right of any third party. The
termination of the PLM Agreement would have a material adverse effect on the
Company. See 'Risk Factors -- Reliance on PLM.'
PROSTATE MATERIALS
The Company markets natural medications used for the treatment of
non-infectious prostate enlargement. The Prostate Materials are composed of
natural pollen derived from plant extracts. For the year ended December 31,
1995, the Company's sales of Prostate Materials to Stroschein were approximately
$1.0 million. For the three months ended March 31, 1996, there were no sales of
Prostrate Materials to Stroschein.
In October 1994, Bigmar Pharmaceuticals entered into the Stroschein
Agreement with Stroschein, pursuant to which Bigmar Pharmaceuticals acts as the
exclusive supplier of Cernilton, a Prostate Material, and Stroschein distributes
the Prostate Material in Germany. The Stroschein Agreement provides for annual
minimum quantity requirements in order to maintain exclusivity. The Stroschein
Agreement expires in October 1999 and will be automatically renewed for
consecutive two year periods, unless terminated by the parties. In the event
that Stroschein terminates the agreement as a result of Bigmar Pharmaceuticals'
breach or default thereunder, Bigmar Pharmaceuticals is required to transfer to
Stroschein the Cernilton product registration and the necessary know-how and
authorizations to enable Stroschein to manufacture Cernilton. The termination of
the Stroschein Agreement would have a material adverse effect on the Company.
See 'Risk Factors -- Dependence Upon Significant Customers.'
ONCOLOGICAL PRODUCTS
The Company currently markets two generic oncological products in Germany,
mercaptopurine and calcium leucovorin. For the year ended December 31, 1995, on
a pro forma basis, the Company's sales of generic oncological products were
approximately $670,000. For the three months ended March 31, 1996 these sales
aggregated approximately $210,000.
In November 1995, Bigmar Pharmaceuticals and Cernelle entered into the
Cernelle Agreement pursuant to which Bigmar Pharmaceuticals obtained the
exclusive worldwide distribution rights to approximately 20 generic oncological
products including calcium leucovorin, methotrexate and mercaptopurine
('Cernelle Products') manufactured by Cernelle. The Cernelle Agreement provides
for a one time payment of $100,000 for the grant of such exclusive rights and
licenses which is payable upon notification by Cernelle that the Cernelle
Products are ready for initial shipment to Bigmar Pharmaceuticals. In addition,
Bigmar Pharmaceuticals will be responsible for ongoing fees based upon
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the size of its orders for Cernelle Products. The initial term of the Cernelle
Agreement is 15 years, commencing on the date of the first commercial sale by
Bigmar Pharmaceuticals of the Cernelle Products. Upon termination of the
Cernelle Agreement, Bigmar Pharmaceuticals will retain a non-exclusive worldwide
right to distribute the Cernelle Products for three additional years, at prices
and on terms no less favorable to Bigmar Pharmaceuticals than the prices and
terms extended by Cernelle to any other person or entity for the Cernelle
Products. Either party may terminate the Cernelle Agreement upon the occurrence
of certain specified conditions. The termination of the Cernelle Agreement would
have a material adverse effect on the Company. See 'Risk Factors -- Reliance on
Collaborative Arrangements; Management Affiliations with Collaborators.'
In November 1995, Bigmar Pharmaceuticals and Cernelle entered into an
exclusive technical services agreement ('Cernelle TSA'), pursuant to which
Cernelle will prepare abbreviated new drug application ('ANDA') submissions for
Bigmar Pharmaceuticals to submit to the FDA or other appropriate authority with
jurisdiction over the Cernelle Products. Generally, Bigmar Pharmaceuticals is
obligated to pay Cernelle a fee of $20,000 for each ANDA submitted to and
accepted by Bigmar Pharmaceuticals with respect to a Cernelle Product. Cernelle
will assign to Bigmar Pharmaceuticals the sole and exclusive right, title and
interest in and to each ANDA. The term of the Cernelle TSA is 15 years and is
renewable upon the mutual written agreement of the parties. Either party may
terminate the Cernelle TSA upon the occurrence of certain specified conditions.
The termination of the Cernelle TSA would have a material adverse effect on the
Company. See 'Risk Factors -- Reliance on Collaborative Arrangements; Management
Affiliations with Collaborators.'
PROPOSED PRODUCTS
GENERIC ONCOLOGICAL PRODUCTS
The Company has identified approximately 30 oncological drugs which are
currently generic and 15 additional oncological drugs that the Company believes
will become generic by the year 2000. Generic drugs are the chemical and
therapeutic equivalents of brand name (proprietary) drugs and generally are
marketed once the patent on the proprietary drug has expired.
The following table lists the generic oncological products that the Company
intends to manufacture and market to pharmaceutical companies for resale in
Switzerland, Germany and the United States over the next 24 months and the
estimated time periods for each product.
<TABLE>
<CAPTION>
ESTIMATED YEAR OF INTRODUCTION
------------------------------
PRODUCT NAME DOSAGE FORM PRESCRIBED USE SWITZERLAND GERMANY USA
- -------------------- ----------------- -------------------------------------- ----------- ------- ----
<S> <C> <C> <C> <C> <C>
Calcium Leucovorin Injection/Liquid Rescue Therapy 1996 1995* 1997
Doxorubicin Injection Neoplastic Conditions 1996 1997 1997
Dacarbazine Injection Malignant Melanoma 1997 1996 1997
Fluorouracil Injection Colon, Rectum, Breast, Stomach, 1997 1996 1999
Pancreas Carcinomas
Methotrexate Injection/Liquid Neoplastic Conditions 1996 1996 1997
Vinblastine Sulfate Injection Neoplastic Conditions -- -- 1998
</TABLE>
- ------------
* Introduced.
The Company believes that it will be able to obtain approval of these
products in Germany, as indicated above, because it intends to purchase approved
marketing applications from Medac and transfer the manufacturing site from
Germany to the Bigmar Facility. Although this transfer of manufacturing site
requires the approval of the German regulatory authority, the time for such
approval is much faster than the three to five year time period for approval of
full marketing applications in Germany.
Over the next 24 months the Company's strategy is to manufacture, in its
state-of-the-art facilities, in Switzerland and market additional oncological
products as their patents expire.
There can be no assurance that the Company will manufacture or market any
of the foregoing products during the time periods indicated if at all. The
commercialization of these products will depend on a number of factors
including, but not limited to, the successful results of the Company's clinical
toxicity studies and obtaining regulatory approval. Although the Company
believes that each of these proposed products has commercial value, the Company
may choose not to manufacture or market some
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or all of these products. See 'Risk Factors -- No Assurance of Successful
Product Development; Uncertainty of Market Acceptance of Certain Proposed
Products and -- FDA, International and Other Governmental Regulations.'
SODIUM LEUCOVORIN AND OTHER PROPOSED PRODUCTS
Sodium leucovorin is designed to alleviate certain side effects of
chemotherapy more effectively than its currently distributed counterpart,
calcium leucovorin. For many years, the calcium salt of leucovorin has been used
as a major adjuvant drug in oncology. Specifically, calcium leucovorin is used
in rescue therapy for purposes of reducing toxicity in methotrexate treatments.
When combined with high-dosage calcium leucovorin, high dosage methotrexate
therapy has shown strong clinical results.
Some oncologists have identified a need for the development of a more
soluble form of leucovorin to reduce the overall volume of solution injected as
well as to reduce the amount of salts administered that are not directly related
to the active drug substance. In response to this need, a more soluble form of
leucovorin, sodium leucovorin, has been developed by Sapec. Sodium leucovorin is
more than five times as soluble as calcium leucovorin, allowing solutions to be
prepared containing sodium leucovorin at 5% (50 mg/ml) in isotonic saline.
Solutions of sodium leucovorin at 50 mg/ml are isotonic and do not require
supplementation with additional salts. As a result, sodium leucovorin reduces
the overall volume of solution injected and reduces the amount of salts
administered which are not directly related to the active drug. See 'Risk
Factors -- No Assurance of Successful Product Development; Uncertainty of Market
Acceptance of Certain Proposed Products.'
In February 1994, Sapec filed a patent application in Switzerland and then
extended the application to the United States and the EU covering the
composition of matter and the manufacturing process for sodium leucovorin. An
application was filed for the sale of calcium leucovorin in Germany in 1993. In
1995, an amendment to this application was filed to change the liquid form of
calcium leucovorin to sodium leucovorin. Sodium leucovorin is a new chemical
entity which has never been approved before in Germany. The Company believes
that the German regulatory authority might act on its application more quickly
than it does for generic drugs because of its similarity to calcium leucovorin.
The Company believes that all regulatory approvals will be obtained during the
second half of 1996 and that marketing of this product will begin shortly
thereafter. However, there can be no assurance the Company will obtain the
requisite regulatory approvals by that time or at all. See 'Risk Factors --
Reliance on Collaborative Arrangements; Managment Affiliations with
Collaborators, -- Uncertain Protection of Patents and Proprietary Rights, and
-- FDA, International and Other Governmental Regulations.'
In 1995, Bioren and Sapec entered into the Sapec Agreement which provides
that, subject to restrictions on the resale of certain Sapec Products (as
hereinafter defined) to pharmaceutical companies in selected territories, Bioren
shall be the exclusive worldwide distributor of, among other products, sodium
leucovorin and five generic oncological products developed by Sapec ('Sapec
Products'). The Sapec Agreement provides that Sapec will obtain all regulatory
approval necessary for Bioren, or its designee, to import, distribute and sell
any Sapec Products throughout the world. Bioren has agreed to pay Sapec a
one-time fee of $100,000 for the grant of such exclusive rights and licenses
which is payable upon notification by Sapec that the Sapec Products are ready
for initial shipment to Bioren. The Sapec Agreement provides for a one time
payment of $100,000 for the grant of such exclusive rights and licenses which is
payable upon notification by Sapec that the Sapec Products are ready for initial
shipment to Bioren. In addition, Bioren will be responsible for ongoing fees
based upon the size of its orders for Sapec Products. The Sapec Agreement
terminates 15 years from the date of the first commercial sale by Bioren of a
Sapec Product. Bioren will have a non-exclusive worldwide right to distribute
the Sapec Products for three additional years after the expiration of the
initial term or any renewal term, as the case may be, at prices and on terms, no
less favorable to Bioren than the prices and terms extended by Sapec to any
other person or entity. Either party may terminate the Sapec Agreement upon the
occurrence of certain specified conditions. The termination of the Sapec
Agreement would have a material adverse effect on the Company. See 'Risk
Factors -- Reliance on Collaborative Arrangements; Management Affiliations with
Collaborators.'
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BIOTECHNOLOGICAL PRODUCTS
In November 1995, Bigmar Pharmaceuticals and Bioferment entered into the
Bioferment Agreement pursuant to which Bioferment granted Bigmar Pharmaceuticals
the exclusive worldwide rights to use, manufacture and market recombinant
urokinase, a recombinant form of human growth hormone and a recombinant form of
interferon as well as other pharmaceutical products that Bioferment may develop
as may be agreed upon by Bioferment and Bigmar Pharmaceuticals (collectively
'Bioferment Products'). Bioferment either owns the intellectual property rights
with respect to the Bioferment Products or has the exclusive rights to make, use
and sell the Bioferment Products.
The Bioferment Agreement provides that all regulatory applications for
approval to import, register and market, the Bioferment Products shall be filed
in the name of, and owned by, Bigmar Pharmaceuticals. The Bioferment Agreement
will terminate 15 years after the first commercial sale of the last Bioferment
Product introduced by Bigmar Pharmaceuticals, its affiliates or sublicensees.
The Bioferment Agreement may be terminated by either party upon the occurrence
of certain specified conditions. The termination of the Bioferment Agreement
would have a material adverse effect on the Company. See 'Risk
Factors -- Reliance on Collaborative Arrangements; Management Affiliations with
Collaborators.'
Pursuant to the Bioferment Agreement, Bigmar Pharmaceuticals agreed to pay
Bioferment (i) $100,000 on March 1, 1996 (which has been extended to July 1,
1996), (ii) $100,000 promptly following the first filing by Bigmar
Pharmaceuticals with the FDA of an investigational new drug application ('IND')
relating to a Bioferment Product, (iii) $100,000 promptly following the first
filing with the FDA of a New Drug Application ('NDA') for a Bioferment Product,
and (iv) $100,000 promptly following the approval by the FDA of the NDA or
Product License Application ('PLA') for each Bioferment Product for which
approval is sought by Bigmar Pharmaceuticals (payment not to be required for
more than two products). The license fee aggregating $500,000 shall be credited
against the royalty obligations due to Bioferment from Bigmar Pharmaceuticals
pursuant to the Bioferment Agreement. Commencing with the first commercial sale
of a Bioferment Product by Bigmar Pharmaceuticals, Bigmar Pharmaceuticals has
agreed to pay Bioferment, on a quarterly basis, a royalty equal to a percentage
of the Company's net sales of these products. The license fee due under this
agreement, will be paid from the net proceeds of the Offering. See 'Use of
Proceeds.'
During the first three years of the Bioferment Agreement, if Bioferment
materially breaches any material provision relating to purchase and supply, and
such breach shall fail to be cured within 60 days after written notice is given
by Bigmar Pharmaceuticals, or in the event that Bioferment is unable to
adequately provide Bigmar Pharmaceuticals with a stable and reliable source for
Bioferment Products, Bigmar Pharmaceuticals shall have an exclusive,
transferrable, sublicensable license to manufacture the Bioferment Products for
the use of Bigmar Pharmaceuticals and Bigmar Pharmaceuticals' affiliates and
sublicensees in Bigmar Pharmaceuticals' field of use.
Recombinant Urokinase
Recombinant urokinase is a biotechnological product used in the treatment
of cardiovascular disease. Recombinant urokinase is designed to eliminate the
risk of viral contamination that exists with natural urokinase products.
Bioferment uses a culture media in the manufacturing process of recombinant
urokinase. In 1993, a patent application was filed by Dr. Ferruccio Messi for
this culture media in major European countries. Bioferment and Bigmar
Pharmaceuticals have been granted non-exclusive licenses to use the culture
media. The Company believes that recombinant urokinase is in the final stages of
development. The Company does not intend to manufacture recombinant urokinase.
The Company is collaborating with Medac to initiate the regulatory filings in
Germany, including limited toxicology studies and human clinical trials. The
Company anticipates that regulatory approvals for the sale of recombinant
urokinase in Germany will be obtained during the second half of 1997 and that
the marketing for this product will begin shortly thereafter. The Company
believes that marketing clearance from the German regulatory authority will be
obtained in the second half of 1997, as opposed to from the EMEA because
recombinant urokinase does not pose a risk of viral contamination, and would
replace the naturally derived urokinase that is currently on the market in
Germany. However, there can
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be no assurance that the requisite regulatory approvals will be obtained by that
time or at all. See 'Risk Factors -- Reliance on Collaborative Arrangements;
Management Affiliations with Collaborators, -- Manufacturing Facilities for
Proposed Products, -- Uncertain Protection of Patents and Proprietary Rights,
and -- FDA, International and Other Governmental Regulations.'
OTHER PROPOSED PRODUCTS
Recombinant Human Growth Hormone and Recombinant Interferon
In November 1995, Bigmar Pharmaceuticals acquired the licenses from
Bioferment to use, manufacture and market a form of recombinant human growth
hormone, a biotechnological product which is used in connection with assisting
children in the growth process and a form of recombinant interferon, a
biotechnological product which may be used for and in the treatment of cancer.
Recombinant human growth hormone and recombinant interferon are in the early
stages of development. No assurance can be given that these proposed products
will ever be developed. See 'Risk Factors -- No Assurance of Successful Product
Development; Uncertainty of Market Acceptance of Certain Proposed Products.'
Virosome and Liposome Technologies
In December 1995, Bigmar Pharmaceuticals and Bioferment entered into an
agreement ('Bioferment Distribution Agreement') for the exclusive worldwide
distribution by Bigmar Pharmaceuticals of existing Bioferment products derived
from Bioferment's other technologies such as the virosome and liposome
technologies and any additional products developed by Bioferment using these
technologies for the term of the Bioferment Distribution Agreement. Pursuant to
the Bioferment Distribution Agreement, Bigmar Pharmaceuticals has the right of
first refusal for any products derived from these technologies. The Bioferment
Distribution Agreement provides for one-time payment by Bigmar Pharmaceuticals
of $100,000 for the grant of such exclusive rights and licenses which is payable
upon notification by Bioferment that the Bioferment Products are ready for
initial shipment to Bigmar Pharmaceuticals. In addition, Bigmar Pharmaceuticals
is responsible for ongoing fees based upon the size of its orders for such
Bioferment products, which are payable pursuant to the Bioferment Distribution
Agreement. The Bioferment Distribution Agreement will terminate 15 years from
the date of the first commercial sale by Bigmar Pharmaceuticals of a product
covered by the Bioferment Distribution Agreement and is renewable upon mutual
agreement of the parties. Bigmar Pharmaceuticals will have a non-exclusive
worldwide right to distribute the products covered by the Bioferment
Distribution Agreement for three additional years after the expiration of the
initial term or any renewal term. No assurance can be given that these proposed
technologies or proposed products will ever be developed.
COLLABORATIVE AGREEMENTS
The Company has entered into exclusive arrangements with the following
non-affiliated companies to market certain proprietary and generic oncological
products, proposed oncological products or biotechnological products,
manufactured or licensed by the Company, in various territories. Restrictions
regarding exclusivity and right of first refusal limit the Company's ability to
pursue and negotiate collaborative arrangements with other entities on terms
which may be more favorable to the Company. See 'Risk Factors -- Reliance on
Network of Pharmaceutical Companies for Marketing; Dependence on Additional
Collaborative Arrangements.'
Medac
In September 1995, Bigmar Pharmaceuticals and Medac entered into a series
of international distribution agreements (the 'Medac Agreements') relating to
certain oncological products such as mercaptopurine and doxorubicin. Pursuant to
these agreements, Bigmar Pharmaceuticals and Medac have divided, subject to
future adjustment, the exclusive right to sell the oncological products covered
by the agreements in various countries in Europe, South America, Asia and the
United States. Pursuant to the Medac Agreements, the Company anticipates that
Medac will market certain of the Company's oncological products and proposed
products in Germany and the United Kingdom.
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Boehringer
In December 1995, Bigmar Pharmaceuticals and Boehringer entered into an
agreement ('Boehringer Agreement') for the exclusive distribution by Boehringer
of certain oncological products such as methotrexate, doxorubicin, calcium
leucovorin and mercaptopurine ('Boehringer Products') in Italy, Vatican City and
the San Marino Republic ('Boehringer Territory'). Pursuant to the Boehringer
Agreement, the Company will supply Boehringer with the products on an exclusive
basis and has granted Boehringer an option to (i) distribute new products in the
Boehringer Territory and (ii) expand the Boehringer Territory to include
Belgium, the Netherlands, Luxembourg, Greece and Turkey. Under the terms of the
Boehringer Agreement, the Company will receive a flat payment from Boehringer
for each product distributed in the Boehringer Territory. The Boehringer
Agreement terminates in December 2005, but is subject to automatic one year
extensions unless earlier terminated by the parties. Either party may terminate
the Boehringer Agreement upon the occurrence of certain specified conditions.
Laevosan
In December 1995, Bigmar Pharmaceuticals and Laevosan entered into an
exclusive distribution agreement ('Laevosan Agreement') pursuant to which Bigmar
Pharmaceuticals will supply certain oncological products such as doxorubicin and
methotrexate to Laevosan for sale in Switzerland. Under the Laevosan Agreement,
Laevosan is required to sell minimum quantities each year and, if Laevosan fails
to sell such amounts, Bigmar Pharmaceuticals can convert the Laevosan Agreement
to a non-exclusive distribution arrangement. The Laevosan Agreement terminates
on December, 1998, but is subject to automatic one year extensions, unless
earlier terminated by the parties. Either party may terminate the Laevosan
Agreement upon the occurrence of certain specified conditions.
Vita
In July 1995, Bigmar Pharmaceuticals and Vita entered into a distribution
agreement ('Vita Agreement') pursuant to which Vita will buy certain oncological
products exclusively from Bigmar Pharmaceuticals and will commercialize such
products in Spain. In the event Vita ceases to commercialize any product, the
marketing authorization for that product will be transferred to Bigmar
Pharmaceuticals at a nominal fee. The Vita Agreement terminates in September
2005 but may be extended automatically for an additional one year period. Either
party may terminate the Vita Agreement upon the occurrence of certain specified
conditions.
Protyde
In October 1995, Bigmar Therapeutics and Protyde Therapeutics, a
wholly-owned subisidiary of Protyde, a development stage company, formed the
Partnership, for the purpose of manufacturing and marketing certain
pharmaceutical products ('Partnership Products'). The business of the
Partnership is to obtain FDA approval to market the Partnership Products, and to
commence the manufacturing and marketing of the Partnership Products. Each of
the partners initially has a 50% interest in the Partnership and neither may
sell, assign, pledge or otherwise transfer any portion of their respective
interests, except to affiliates of the Company and Protyde, without the other
partner's prior consent. As its initial capital contribution to the Partnership,
Protyde Therapeutics will contribute to the Partnership up to $3,075,000 in
cash, the first $750,000 of which was paid to the Company on March 29, 1996,
with the balance to be contributed at such times and in such amounts so as to
enable the Partnership to timely satisfy its obligations, and to make its
payments under the terms of its manufacturing agreement. As Bigmar Therapeutics'
capital contribution to the Partnership, Bigmar Therapeutics will cause the
Company to make its manufacturing capacity available to the Partnership under
the terms of the Manufacturing Agreement (as defined below). Under the
Partnership Agreement, the Partnership is the sole owner of all right, title and
interest in all FDA-approved ANDAs for the Partnership Products. Unless
terminated by either party upon the occurrence of certain specified conditions,
the Partnership will continue until December 31, 2005.
In October 1995, the Partnership and Protyde entered into a sales and
marketing agreement ('Marketing Agreement') pursuant to which the Partnership
appointed Protyde, on an exclusive basis, to market, sell and distribute the
Partnership Products worldwide, except for certain designated countries, and to
assist the Partnership in certain pre-manufacturing activities relating to the
Partnership
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Products. Unless terminated by either party upon the occurrence of certain
specified conditions, the Marketing Agreement will remain in effect until the
earlier of the dissolution of the Partnership or December 31, 2005.
In October 1995, the Partnership and the Company entered into a
manufacturing agreement ('Manufacturing Agreement') pursuant to which the
Partnership engaged the Company to, among other things (i) acquire and perform
stability testing on all raw materials and packaging materials necessary for the
manufacture of the Partnership Products, (ii) make its production capacity
available to the Partnership in order to meet production obligations, and (iii)
undertake all measures for quality control which are either required by the FDA
or requested by the Partnership. The Manufacturing Agreement sets forth the
minimum production capacity which the Company must make available to fill
Partnership orders and the minimum annual orders of Partnership Products which
the Partnership must place. If, with respect to any Partnership Product, the
Partnership fails to satisfy the minimum annual orders, the Company may
terminate the Manufacturing Agreement with respect to that product on 180 days
prior notice. Unless terminated by either party upon the occurrence of certain
specified conditions, the Manufacturing Agreement shall remain in effect until
the earlier of the dissolution of the Partnership or December 31, 2005.
MANUFACTURING AND SUPPLIERS
The Company has two facilities, the Bioren Facility and the Bigmar
Facility. The Bioren Facility is a 57,000 square foot, state-of-the-art,
facility in Couvet, Switzerland where the Company manufactures and markets IV
Solutions and will develop and manufacture non-cytotoxic oncological products.
The Company intends to dedicate approximately 25,000 square feet of the Bioren
Facility to test and manufacture certain oncological products such as sodium
leucovorin. The Bigmar Facility is a 25,000 square foot, state-of-the-art,
facility, in Barbengo, Switzerland where the Company will develop and
manufacture cytotoxic oncological products. There can be no assurance that the
Bigmar Facility or the dedicated area of the Bioren Facility will be fully
operational or that regulatory approvals will be obtained in a timely manner, if
at all. Further, the Company intends to enter into an agreement with another
party pursuant to which such company will manufacture recombinant urokinase,
which the Company will market. The amount of resources and the time that the
other party will devote towards producing the products on behalf of the Company
and the manufacturing procedures and quality control will not be within the
Company's control. See 'Risk Factors -- Manufacturing Facilities for Proposed
Products.'
The Company's manufacturing facilities will be subject to periodic
inspections by the FDA and other United States federal agencies and the FDA may
choose to inspect the Company's facilities before approving the Company's
products for sale in the United States. The Company's facilities have not yet
been inspected by the FDA, however, the Company has retained independent
consultants to assist in this process of ensuring compliance with GMP
requirements. The IKS will also inspect the manufacturing facility to determine
if the manufacturer is complying with good manufacturing practices before
approval is granted to produce the drug product.
Quality monitoring and testing programs and procedures have been
established by the Company to assure that all critical activities associated
with the production, control and distribution of its products will be carefully
controlled and evaluated. The Company's strategy is to seek to meet the highest
quality standards, with the goal of assuring the purity and safety of each of
its products.
The capital costs associated with equipping a facility and manufacturing
oncological products are substantial and the manufacturing process is complex.
Further, because some oncological products are highly toxic, the facility in
which they are manufactured, the method of manufacture, as well as the
employees' working conditions, are regulated by the FDA and foreign regulatory
authorities. As the manufacturing of cytotoxic oncological products is expensive
and complex, only a few companies throughout the world engage in their
manufacture.
The majority of raw materials needed to manufacture the Company's products
and proposed products generally are not readily available and must be purchased
from limited sources. In addition, the Company obtains containers for IV
Solutions from a sole supplier. The Company's reliance on a sole or a limited
number of suppliers involves several risks including, among others, the
inability to obtain
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an adequate supply of required raw materials and components in order to
manufacture or market a product or proposed product, increased raw material or
component costs and reduced control over pricing, quality and timely delivery.
Any interruption in the supply of raw materials or components could have a
material adverse effect on the Company. Furthermore, obtaining raw materials
from a new source may require additional regulatory approval. In addition,
certain potential alternate suppliers may have pre-existing exclusive
relationships with competitors of the Company and others which may preclude the
Company from being able to manufacture certain of its proposed products. See
'Risk Factors -- Reliance on PLM and -- Dependence on Key Suppliers.'
RESEARCH AND DEVELOPMENT
To date, substantially all of the Company's research and development
efforts have been performed by collaborators. Upon consummation of the Offering,
the Company intends to retain approximately 15 employees or consultants,
including chemists, biologists and technical personnel. The Company expects to
use a portion of the proceeds of the Offering for the development of its
proposed products and intends to continue the development and testing of
oncological products, such as sodium leucovorin and biotechnological products,
such as recombinant urokinase; purchasing and formulating raw materials into a
finished product, scaling up the development of the product from the laboratory
phase to the production phase; conducting clinical trials and conducting
stability and bioequivalence testing of the finished product. See 'Use of
Proceeds.'
MARKETING AND SALES
The Company markets IV Solutions through its own sales force to hospitals,
clinics, retirement homes, nursing homes, managed health care organizations,
home infusion providers and other health care providers, and markets Prostate
Materials, mercaptopurine and calcium leucovorin, to pharmaceutical companies.
The Company does not intend to market its other products or proposed products
directly to the public. During 1995, the Company granted certain companies such
as Medac, Boehringer, Laevosan, Vita and Protyde the exclusive marketing and
distribution rights to certain of the Company's oncological products and future
oncological products in certain territories. The amount of resources and the
time that any of these collaborators devote towards marketing and sales of the
Company's products and proposed products are not within the control of the
Company. All of the agreements terminate under certain circumstances. The
termination of any of these agreements would have a material adverse effect on
the Company. See 'Risk Factors -- Reliance on Network of Pharmaceutical
Companies for Marketing; Dependence on Additional Collaborative Arrangements.'
COMPETITION
The pharmaceutical and biotechnology industries are subject to intense
competition and rapid and significant technological change. Competitors of the
Company are numerous and include United States and international companies. In
the intravenous infusion market, the Company faces competition from Braun and
Fresenius and in the Prostate Material market, the Company faces competition
from Allergon, a division of Pharmacia & Upjohn, Inc. In addition, in the
oncological and biotechnological markets, the Company faces competition from
Bristol-Myers Squibb Co., Chiron Inc., Pharmachemie, BV and Pharmacia & Upjohn,
Inc. Furthermore, in oncological and biotechnology markets the Company may face
competition from alternative methods of treatment such as, in the case of its
oncological products, surgical procedures, radiation treatments and other
treatments.
Many of the Company's competitors, including all of the companies referred
to above, have substantially greater financial and technical resources and
production and marketing capabilities than the Company. The Company believes
that the principal competitive factors affecting its products and proposed
products are timing of product introduction, price, quality, and service. The
Company believes that quality and service continue to be an advantage in the
sale of IV Solutions and Prostate Materials. The Company believes that price,
timing, quality, customer service and breadth of its product line are all
important competitive factors for its oncological products, proposed oncological
products and proposed biotechnological products. The ability to introduce
generic versions of products promptly after a
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proprietary drug's patent expires and the breadth of the product line may give
companies a competitive advantage over the Company. See 'Risk
Factors -- Competition and Rapid Technological Change.'
PATENTS AND PROPRIETARY RIGHTS
The Company relies on a combination of patent applications, licenses,
trademarks, trade secrets and non-disclosure agreements to protect its
proprietary technology, rights and know-how and the technology, rights and
know-how licensed from others. In addition, the Company is currently in the
process of implementing a policy that requires its personnel to execute
non-disclosure agreements. There can be no assurance that such patent
applications or any resulting patents or any licenses or trademarks will not be
infringed upon, that the Company's trade secrets will not otherwise become known
to or independently developed by competitors, that non-disclosure agreements
will not be breached, or that the Company would have adequate remedies for any
such infringement or breach. Litigation may be necessary to enforce patents
issued to the Company, to protect the Company's proprietary rights, or to defend
the Company against third-party claims of infringement of proprietary rights of
others. Such litigation could result in substantial cost to the Company and a
diversion of effort of the Company and its management. Patents concerning
pharmaceutical or biotechnological products generally are highly uncertain,
involve complex legal, scientific and factual questions and have recently been
the subject of much litigation. To date, no consistent policy has emerged
regarding the breadth of claims allowed or the degree of protection afforded
under these patents. Accordingly, there can be no assurance that patent
applications which underlie the Company's licenses will result in patents being
issued, or that, if issued, the patents will afford protection against
competitors with similar technology. Because of the extensive time required for
development, testing and regulatory review of a potential product, it is
possible that before any of the Company's potential products can be
commercialized, any related patent may expire, or remain in existence for only a
short period following commercialization, thus reducing any advantage of the
patent. Although the Company is not aware of any claim against it of patent
infringement, the Company's ability to commercialize its products will depend on
not infringing the patents of others. Litigation concerning patents and
proprietary technologies can be protracted and expensive. Laws regarding the
enforceability of intellectual property vary from country to country. Therefore,
there can be no assurance that intellectual property issues will be uniformly
resolved, or that local laws will provide the Company with consistent rights and
benefits. In addition, there can be no assurance that others will not be issued
patents which may prevent the sale of the Company's products or require
licensing and the payment of fees or royalties by the Company in order for the
Company to be able to market certain products.
The Company currently is the exclusive and non-exclusive licensee of
various oncological and biotechnological products and technologies. The Company
may in the future be required or may desire to obtain other licenses to develop,
manufacture and market other products or to market products in additional
territories, the rights to which may be held by additional parties. There can be
no assurance that licenses will be obtainable on commercially reasonable terms,
if at all, or that any licensed patents or proprietary rights will be valid and
enforceable. Bioferment and Bigmar Pharmaceuticals have the rights to patent
applications for the culture media used for the process of manufacturing
recombinant urokinase that were filed on July 11, 1993. Cerbios Pharma has the
rights to patent applications for sodium leucovorin that were filed on February
14, 1994. See ' -- Proposed Products.'
To the extent that consultants, key employees or other third parties apply
technological information independently developed by them or by others to the
Company's projects, third parties may own all or part of the proprietary rights
to such information, and disputes may arise as to the ownership of the
proprietary rights to such information which may not be resolved in favor of the
Company. To the extent that the Company requires rights to any resulting
technologies, it may be necessary to negotiate additional license agreements or
the Company may be unable to utilize such technologies. See 'Risk
Factors -- Uncertain Protection of Patents and Proprietary Rights.'
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GOVERNMENTAL REGULATIONS
UNITED STATES. The Company's research and development activities and the
production and marketing of the Company's licensed and owned products and
proposed products are subject to regulation for safety, efficacy and compliance
with a wide range of regulatory requirements by numerous governmental
authorities in the United States, in states thereof and in other countries. In
the United States, drugs are subject to rigorous FDA review. The Federal Food,
Drug, and Cosmetic Act and other Federal statutes and regulations govern or
influence the research, testing, manufacture, safety, labeling, storage,
recordkeeping, approval, distribution, reporting, advertising and promotion of
such products. Noncompliance with applicable requirements can result in recall,
injunction or seizure of products, refusal to permit products to be imported
into the United States, refusal of the government to approve or clear product
approval applications or to allow the Company to enter into government supply
contracts, withdrawal of previously approved applications and criminal
prosecution.
In order to obtain FDA approval of a drug, companies must generally submit
proof of safety and efficacy. In some cases such proof entails extensive
clinical and preclinical laboratory tests. The testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and
may take several years to complete. There is no assurance that the FDA will act
favorably or in a timely manner in reviewing submitted applications, and the
Company may encounter significant difficulties or costs in its efforts to obtain
FDA approvals which could delay or preclude the Company from marketing any
products it may develop. The FDA may also require postmarketing testing and
surveillance of approved products, or place other conditions on the approvals.
These requirements could cause it to be more difficult or expensive to sell the
products, and could therefore restrict the commercial applications of such
products. Product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
For patented products or technologies, delays imposed by the governmental
approval process may materially reduce the period during which the Company will
have the exclusive right to exploit such technologies; however, an additional
period of up to five years may be added to the term of the patent in such
circumstance.
New Drug Application ('NDA'). Generally, with respect to drugs with active
ingredients not previously approved by FDA, a prospective manufacturer must
conduct and submit to FDA adequate and well-controlled clinical studies to prove
that drug's safety and efficacy. Currently, FDA approval of an NDA takes
approximately two to three years on average after its initial submission to FDA,
based on information published by FDA.
Following drug discovery, the steps required before a new pharmaceutical
product may be marketed in the United States include (1) preclinical laboratory
and animal tests, (2) the submission to the FDA of an application for an IND,
(3) clinical and other studies to assess safety and parameters of use, (4)
adequate and well-controlled clinical trials to establish the safety and
effectiveness of the drug, (5) the submission of an NDA to the FDA, and (6) FDA
approval of the NDA prior to any commercial sale or shipment of the drug.
Typically, preclinical studies are conducted in the laboratory and in
animal model systems to gain preliminary information on the drug's pharmacology
and toxicology and to identify any potential safety problems that would preclude
testing in humans. The results of these studies are submitted to the FDA as part
of the IND application. Testing in humans may commence 30 days after submission
of the IND unless the FDA places the IND on 'clinical hold.' A three phase
clinical trial program is usually required for FDA approval of a pharmaceutical
product. Phase I clinical trials are designed to determine the metabolism and
pharmacologic effects of the drug in humans, the side effects associated with
increasing doses, and, possibly, to obtain early indications of efficacy. These
studies generally involve a small number of healthy volunteer subjects, but may
be conducted in people with the disease the drug is intended to treat. Phase II
studies are conducted to evaluate the effectiveness of the drug for a particular
indication and thus involve patients with the disease under study. These studies
also provide evidence of the short term side effects and risks associated with
the drug. Phase III studies are generally designed to provide the substantial
evidence of safety and effectiveness of a drug required to obtain FDA approval.
They often involve a substantial number of patients in multiple study centers
and may include chronic administration of the drug in order to assess the
overall benefit-risk relationship of the
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drug. Upon completion of clinical testing which demonstrates that the product is
safe and effective for a specific indication, an NDA may be submitted to the
FDA. This application includes details of the manufacturing and testing
processes, preclinical studies and clinical trials. The FDA closely monitors the
progress of each of the three phases of clinical testing and may, at its
discretion, re-evaluate, alter, suspend or terminate the testing based on the
data that have been accumulated to that point and its assessment of the
risk/benefit ratio to the patient. Typical estimates of the total time required
for completing such clinical testing vary between four and ten years. The
clinical testing and FDA review process for new drugs are likely to require
substantial time, effort and expense. The Company anticipates that proprietary
oncological products will be approved through the NDA process. There can be no
assurance that any approval will be granted to the Company on a timely basis, if
at all. The FDA may refuse to approve an NDA if applicable statutory and/or
regulatory criteria are not satisfied, or may require additional testing or
information. There can be no assurance that such additional testing or the
provision of such information, if required, will not have a material adverse
effect on the Company. The regulatory process can be modified by Congress or the
FDA in specific situations.
Abbreviated New Drug Application ('ANDA'). The Drug Price Competition and
Patent Term Restoration Act of 1984 ('Drug Price Act') established a new
abbreviated procedure for obtaining FDA approval for those generic drugs that
are equivalents of brand name drugs. For drugs that contain the same active
ingredient as drugs already approved for use in the United States, FDA
ordinarily requires bioequivalence data illustrating that the generic drug
formulation is, within an acceptable range, equivalent to a previously approved
drug. A generic drug manufacturer is not required to submit the clinical data to
establish the safety and effectiveness of the product. Instead, the Drug Price
Act allows the FDA to rely on bioequivalence data to approve ANDAs.
'Bioequivalence' compares the bioavailability of one drug product with another
and, when established, indicates that the rate of absorption and the levels of
concentration of a generic drug in the body are substantially equivalent to
those of the previously approved drug. The Company anticipates that ANDAs will
be submitted to the FDA for approval of those generic oncological products which
are intended to be marketed in the United States. See ' -- Proposed Products.'
According to information published by FDA, currently it takes approximately one
to three years on average to obtain FDA approval of an ANDA following the date
of its first submission to FDA. Due to the experience of its senior management
in submitting ANDAs to the FDA, the Company believes that it will be able to
obtain FDA approval for each of its proposed oncological products approximately
one year after each ANDA is submitted. Generally, a generic manufacturer may not
submit an ANDA for a period of five years from the date of approval of the brand
name product.
The Drug Price Act, in addition to establishing a new ANDA procedure,
created new statutory protection for approved brand name drugs. Prior to
enactment of the Drug Price Act, FDA gave no consideration to the patent status
of a previously approved drug in deciding whether to approve an ANDA. Under the
Drug Price Act, however, the effective date of approval of an ANDA can depend,
under certain circumstances, on the patent status of the brand name drug.
Additionally, the Drug Price Act, in certain circumstances, provides for
extension of the term of certain patents to cover a drug by up to an additional
five years to compensate the patent holder for the reduction of the effective
market life of a patent due to the time involved in federal regulatory review.
Good Manufacturing Practices ('GMP'). The Company will be subject to the
FDA's GMP, GLP and extensive record keeping and reporting requirements for
manufacturing products for sale in the United States. As a result, the Company's
manufacturing facilities will be subject to periodic inspections by the FDA and
other United States federal agencies when the Company's products are offered for
sale in the United States. The Company's operations have not yet been inspected
by the FDA and there can be no assurance they will pass any inspections by the
FDA. The Company has retained independent consultants to assist it in complying
with FDA standards including the GMP requirements. Failure to comply with
applicable regulatory requirements can result in, among other things, import
detentions, fines, civil penalties, suspensions or losses of approvals, recalls
or seizures of products, operating restrictions and criminal prosecutions.
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GERMANY. In Germany, drugs for human use can be marketed only if they are
approved in advance either by the Federal Institute for Medicinal Products and
Medical Devices ('BfArM') in Berlin or by the European Union ( 'EU') Commission
after a substantive review of all safety, quality and efficacy data. The
application for a marketing authorization requires the preparation and
submission of extensive data and files. The applicant must produce the results
of analytical, pharmacological/toxicological and clinical studies and related
experts' opinions. The production of these data usually requires a long-term
pre-clinical examination phase. The details of the requirements are prescribed
in administrative regulations such as the Medicinal Products Guidelines.
Clinical trials in Germany are monitored by the state authorities.
The BfArM can reject the application if the data are incomplete, the drug
product has not been sufficiently examined, the product does not conform with
the acknowledged pharmaceutical quality rules, effectiveness has not been
established, or there is a suspicion of unacceptable side effects. In theory,
once a complete application has been submitted to the BfArM, a decision must be
issued within four months, in exceptional cases within seven months. In
practice, however, these terms are not met and a term of review by the BfArM is
expected to take generally three to five years. The marketing authorization of a
new substance triggers fees to the BfArM of over $66,000. The exact amount of
fees can vary, depending on the amount of work required of the authority, the
kind of procedure and the result of such procedure.
For safety reasons, drug products are also subject to close monitoring
after approval is granted. There are a variety of restrictions which the federal
agencies and the state authorities may impose including the withdrawal of
marketing authorizations and the recall of products.
The importation of drug products into Germany from other EU and E.E.A.
(European Economic Area) countries does not require special permission. However,
the product must be approved in Germany. Approval of the drug product in other
EU member states does not replace German approval. The importer must obtain a
separate approval for the repackaging and labeling of imported products.
Sales of high-price pharmaceuticals (such as oncology drugs) are affected
by parallel imports and re-imports. Independent importers purchase products in
the producing EU country, ship them to Germany and, in most cases, offer them at
far lower prices than the manufacturers of the original preparations and/or
their official importers. The European Court of Justice has ruled that the
importing member state may not prohibit parallel imports.
Where a drug product has not been produced in an EU country or imported
through another EU member country (such as from Switzerland or the U.S.), the
importer must obtain special permission to import the product. To do so, the
importer must produce a certificate from the regulatory authority of the country
where the drug was manufactured showing, among other things, that the product is
approved in that country and that it conforms to applicable standards of the
World Health Organization ('WHO') or of the Pharmaceutical Inspection Convention
('PIC'). See 'Risk Factors -- FDA, International and Other Governmental
Regulations.'
SWITZERLAND. In Switzerland, approval of the production and sale of drugs
for human use is regulated on a cantonal level rather than a federal level. The
cantons of Switzerland have organized the IKS as an authority for the approval
of pharmaceuticals. Based on approval by the IKS, the cantons then grant
permission for the production and sale of such approved pharmaceuticals.
Theoretically, each canton is still entitled to deny approval of a particular
medication. However, cantons generally follow the decision of the IKS as they
are bound by the Intercantonal Treaty for the Control of Medications.
The IKS reviews all applicable safety, quality and effectiveness data, as
well as data relating to the cost effectiveness of the product. To obtain
approval from the IKS, the manufacturer must submit analytical, chemical,
pharmacological and toxicological data based on animal trials and human clinical
studies. The IKS approves the manufacturing of products only after having
checked the conformity to applicable standards of the WHO or the PIC. The IKS
also will inspect the manufacturing facility to determine if the manufacturer is
complying with good manufacturing practices before approval is granted to
produce the drug product. For generic products, pharmacological and
toxicological data are not required to be submitted to the IKS. To date, all of
the Company's pharmaceutical products which have been approved by the IKS to
date are generic products.
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RECENT EU PROCEDURES. On January 1, 1995, the EU established new procedures
for the approval of pharmaceuticals, and a new coordinating body, the EMEA was
created. Germany is a member of the EU; Switzerland is not an EU member. Under
the new procedures, which are compulsory for biotechnological preparations and
optional for certain other pharmaceutical products, in particular those with new
chemical agents, applications are filed with the EMEA and are evaluated
scientifically by the Committee for Proprietary Medicinal Products ('CPMP').
This is known as the centralized procedure. The CPMP consists of representatives
of the national registration authorities. For each application, a Rapporteur,
(i.e. one of the national authorities) is appointed and has the overall
responsibility for the review of the application. The Rapporteur prepares an
assessment report for the CPMP. The EU Commission will generally follow the
CPMP's scientific evaluation. If one or more member states objects, the EU
Council will decide the matter, otherwise the decision is rendered by the EU
Commission on the basis of the CPMP evaluation.
A decentralized approval procedure is used for most other marketing
authorization applications. The applicant submits the application to one member
state where the application is reviewed. Once the first marketing authorization
is obtained, the company files identical applications in the other EU member
states. The marketing authorities of such other member states are supposed to
acknowledge the first decision within 90 days. If there is disagreement between
the authorities that cannot be resolved, the CPMP will be involved and will
issue a scientific evaluation. If this scientific evaluation is not further
disputed, the EU Commission will render a decision on this basis. If the
disagreement continues, the EU Council will vote to decide the matter.
Because the EMEA guidelines have been in effect for a limited period of
time, the Company is unable to reliably predict how long it will take on average
for drugs to be approved under these new procedures.
THIRD-PARTY REIMBURSEMENT
Successful commercialization of the Company's own or licensed products may
depend in part on the availability of adequate reimbursement from third-party
health care payors such as Medicare, Medicaid, and private insurance plans.
Reimbursement rules vary from payor to payor, and reimbursement also may depend
upon the setting in which a particular item or service is furnished.
In general, payors exclude payment for items and services that are deemed
to be not medically 'reasonable and necessary,' or which are considered to be
not safe and effective, experimental or investigative, or not medically
appropriate for the patient. In making these determinations, payors typically
rely on studies published in peer-reviewed medical journals, the opinions of
recognized medical specialty societies, and the practices of physicians in the
local medical community. Some payors are also beginning to consider the cost of
a new item or service in comparison to existing alternatives in determining
whether and how much they will reimburse for a new technology. FDA clearance or
approval to begin marketing a drug generally is required by payors as a
condition of coverage, but such clearance or approval alone does not assure that
the payor will reimburse for the drug treatment.
Most medical procedures involve payment for the physician service and, in
cases where the service is provided outside of the physician's office, payment
for the facility costs, including supplies, furnished in connection with the
procedure. Medicare, which is a Federal government program that primarily
reimburses health care furnished to the elderly and disabled, pays for physician
services based on a physician fee schedule, which assigns a payment weight for
each covered physician procedure.
The trend towards managed health care and the concurrent growth of HMOs
which could control or significantly influence the purchase of health care
services and products, as well as legislative proposals to reform health care,
may all result in lower prices for the Company's products. There can be no
assurance that the Company's products will be considered cost-effective by
third-party payors, that reimbursement will be available or, if currently
available, will continue to be available, or that payors' reimbursement policies
will not adversely affect the Company's ability to sell products on a profitable
basis, if at all. The cost containment measures that health care providers are
instituting in the face of the uncertainty and the ultimate effect of any health
care reform could have an adverse effect on the Company's ability to sell its
products and may have a material adverse effect on the Company.
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Virtually every state as well as the District of Columbia has enacted
legislation permitting the substitution of equivalent generic prescription drugs
for brand name drugs where authorized or not prohibited by the prescribing
physician and currently 13 states mandate generic substitution in Medicaid
programs.
In Germany, about 90% of the population are members of statutory health
insurance programs. These health insurance providers are public bodies
independent from the government and are funded equally by employers and
employees. Their catalogue of services for which they will provide reimbursement
is widely influenced by government regulations. Managed Care and HMO's are still
unknown in Germany although various elements of these systems will probably be
adopted in the future. The economic success of a drug product in Germany is
widely dependent upon acceptance of the drug by the statutory health insurance
providers.
Certain drugs are generally excluded from reimbursement, however. This
includes medications to treat minor diseases like colds and influenza and drugs
which have been determined by the Federal Ministry of Health to be
'uneconomical,' e.g., medicinal products with more than three active
ingredients. The Federal Ministry of Health is authorized to amend this
'negative list' at any time. Health insurance providers generally deny
reimbursement for drugs used in clinical trials. Although drugs can generally be
prescribed by a doctor off label, i.e., beyond their approved indication, and
still be reimbursed, there are cases where the reimbursement of oncological
drugs off-label was denied on the basis that the treatment was experimental.
The health insurance providers are also authorized to set maximum
reimbursement levels for generic drugs. As soon as two products with identical
or chemically similar ingredients or similar therapeutic effects are on the
market, the health insurance providers may set a maximum reimbursement amount.
This amount will usually be an average of the lowest and the highest price.
Typically, the maximum reimbursement is fixed on the basis of the lowest price
plus 1/3 of the price range to the most expensive product. About 70% of drugs
sold in Germany are subject to maximum reimbursement. So far, no oncological
products have been affected by a maximum reimbursement cap. This may, however,
change at any time. A manufacturer is legally free to continue to sell its
products at higher than the maximum reimbursement rate, but patients must then
pay the difference. So far, the Company believes no manufacturer has tried to
sell its products at prices exceeding the maximum reimbursement. If the products
of the Company become subject to a maximum reimbursement rate, this may
adversely affect the prices the company will be able to charge. See 'Risk
Factors -- Dependence on Third-Party Reimbursement; Price Controls; Health Care
Reform.'
In addition to maximum reimbursement caps, pharmaceutical prices are
subject to statutory limitations on the amounts that can be spent on drugs by
the statutory health insurance providers. As a consequence, pharmaceutical
prices decreased in the last several years and may decrease further in the
future.
In Switzerland, reimbursement for pharmaceuticals is regulated on a federal
level. There are two categories of drugs subject to reimbursement. The first
category consists of medications which are required to be reimbursed by private
health insurers. The second category contains specialty medications for which
reimbursement is recommended. In practice, private health insurers grant
reimbursement for the specialty products on the recommended list.
ENVIRONMENTAL REGULATIONS
In Switzerland, Bigmar Pharmaceuticals and Bioren are subject to applicable
environmental laws such as the Environment Protection Act of 1983, the Water
Protection Act of 1991 and the Toxic Substance Act of 1969, as well as all
applicable regulations. Swiss environmental protection laws govern, among other
things, all emissions to the air, soil and water, waste water discharge and
solid and hazardous waste disposal. Bigmar Pharmaceuticals and Bioren are
subject periodically to environmental compliance reviews by various Swiss
regulatory offices.
The Company believes its facilities in Switzerland are in compliance with
applicable environmental laws. However, environmental laws have changed in
recent years and the Company may become subject to increasingly stringent
environmental standards in the future. While the Company anticipates that it
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may from time to time incur expenditures in connection with environmental
matters, it does not anticipate making substantial expenditures for those
matters within the next twelve months and beyond that is unable to predict the
extent or timing of future expenditures which may be required in connection with
complying with environmental laws.
PRODUCT LIABILITY AND INSURANCE
The testing, clinical trials, manufacturing, and marketing of the Company's
products and proposed products involve the inherent risks of product liability
claims against the Company. The Company currently maintains product liability
insurance coverage on IV Solutions in the amount of $45,000,000, but such
insurance is expensive, subject to various exclusions and may not be obtainable
or maintainable by the Company in the future on terms acceptable to the Company.
There can be no assurance that the amount and scope of any coverage will be
adequate to protect the Company in the event that a product liability claim is
successfully asserted against the Company. Products, such as those sold or
proposed to be sold by the Company, may be subject to recall for unforeseen
reasons. A recall of the Company's products could have a material adverse effect
on the Company and its reputation.
Rules on strict liability of drugs are in effect in Germany. The person
responsible for placing the product on the market (who can, but need not be, the
manufacturer) is liable. Only personal injuries are recoverable, and there is no
mandated compensation for pain or suffering. The maximum amount recoverable by
an individual is DM 1 million (approximately US $666,000).
The manufacturer or the person responsible for placing the product on the
market is obliged to obtain insurance coverage against potential liabilities.
This obligation can be fulfilled either by entering into a contract with a
German insurance company, or by obtaining a confirmation of coverage from a
credit institution in Germany or within the EU. The German insurance industry
has created a so-called 'pharma pool.' This working relationship enables all
major German insurance companies to pool the risks from the statutory strict
liability and therefore provide affordable insurance.
Compensation for pain and suffering or for personal damages exceeding the
amounts set forth above can only be demanded on the basis of tort rules as laid
down in the Civil Code. If a claim is sustained there is unlimited liability. No
compulsory insurance coverage is prescribed by statute. Compensation for pain
and suffering can be assessed by the courts but usually remains below the levels
under United States law.
In Switzerland, there is no special product liability law for
pharmaceuticals. The Swiss federal product liability law, which covers drug
products, provides that manufacturers are subject to strict liability for
injuries caused by defective products.
FACILITIES
The Company's principal executive offices are located in approximately
1,440 square feet in Columbus, Ohio. The Company entered into a sublease
agreement, dated March 1, 1996, with Cernitin America, Inc. ('Cernitin'). The
sublease terminates on February 28, 1998. The sublease is at a rental of
approximately $22,315 per annum. Mr. Tramontana was the President and a director
of Cernitin and Michael K. Medors was the treasurer and general manager of
Cernitin at the time of the negotiation and execution of the sublease. See
'Certain Transactions.'
The Company owns two pharmaceutical plants, the Bigmar Facility and the
Bioren Facility.
During 1995, Bigmar Pharmaceuticals purchased the Bigmar Facility, a 25,000
square foot facility in Barbengo, Switzerland, for developing and manufacturing
oncological products. The Bigmar Facility also houses warehousing and storage,
manufacturing, labeling and packaging, and administrative and record-keeping
areas. The Bigmar Facility and the equipment contained therein is subject to two
bank loans in the principal amounts of approximately $1,551,000 and $1,974,000,
respectively. The loans are secured by mortgages on the Bigmar Facility and
certain machinery. Interest on the loans until December 31, 1998 is payable at a
rate of 5% per annum and thereafter interest is payable at a variable rate up to
6.5%. The first loan is pursuant to a bank commitment with a ceiling of
$1,847,187 from which the Company may draw, and requires three semi-annual
principal payments of $83,963 commencing December 31, 1997 and eleven semiannual
payments of $146,935 commencing June 30,
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1999. The second loan requires quarterly principal payments of $31,247
commencing December 31, 1997 and has a ceiling of $2,749,790 from which the
Company may draw. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources.' The
Bigmar Facility is currently being equipped and the Company will not begin
manufacturing oncological products until the facility is fully operational and
regulatory approval is obtained, which the Company believes will occur in the
last quarter of 1996. See 'Risk Factors -- Manufacturing Facilities for Proposed
Products.'
The Bioren Facility is a 57,000 square foot facility in Couvet, Switzerland
that houses manufacturing operations, laboratory facilities for quality
assurance and quality control activities, including batch testing and
multiple-batch stability testing operations, labeling and packaging operations,
warehousing and storage operations, administrative and record-keeping areas. A
25,000 square foot area in the Bioren Facility will be used as a dedicated area
for scaling up the development and manufacturing supporting (rescue therapy)
oncological products, such as sodium leucovorin. A 21,000 square foot area in
the Bioren Facility is used for manufacturing and marketing IV Solutions. A
portion of the Bioren Facility is leased to an unaffiliated third party on a
year-to-year basis. The Bioren Facility is subject to a 50 year mortgage in the
approximate principal amount of $2,500,000 which provides for an annual
principal payment of approximately $50,000 for the remainder of the mortgage.
Interest until May 16, 1999 is 5% per annum and thereafter the interest rate is
subject to adjustment based upon current commercial mortgage rates. The Bioren
Facility is also subject to a second mortgage payable to Galenica in the amount
of $1,679,261. This second mortgage is payable $419,815 in 1997, $419,815 in
1998 and $839,631 in 1999. Interest on this second mortgage is at a variable
rate which is currently 5.5% and is subject to adjustment based upon commercial
mortgage rates. In addition, the Bioren Facility is subject to a third mortgage
payable to Sigal securing a debt of $1,847,187 which debt will be paid out of
the proceeds of the Offering. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
The Company believes that its facilities are sufficient for its current and
reasonably anticipated operations. The Company owns all of its manufacturing
equipment, subject to the mortgage referred to above, and believes that its
equipment is well maintained and suitable for its requirements. Additionally,
the Company maintains property and casualty insurance in amounts it believes are
sufficient and consistent with practices for firms of its size in the
prescription drug industry. See ' -- Manufacturing and Suppliers.'
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
HUMAN RESOURCES
As of May 28, 1996, the Company employed 40 full-time employees, three
employees in development, 30 employees in manufacturing and quality control,
three employees in marketing, and four employees in management and
administration. The Company has one part-time employee providing secretarial
services and three consultants providing technical services (not including
medical and scientific advisors). Substantially all of the Company's employees
are located in Switzerland. The Company believes that the success of its
business will depend, in part, on its ability to attract and retain highly
qualified personnel.
During the 12-month period following completion of the Offering, the
Company intends to hire approximately 15 additional employees, including one
employee in the area of marketing, 10 employees in the area of development, two
employees in the areas of manufacturing and quality control and one employee in
the area of management and administrative services. See 'Use of Proceeds,'
' -- Research and Development,' and 'Management.'
The Company's employees are not a party to any collective bargaining
agreements. The Company believes that it has good relations with its employees.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL
The following table sets forth certain information with respect to the
directors, executive officers and key personnel of the Company. Eric M. Chen, a
managing director of the Representative, James M. McCormick and Thomas W.
D'Alonzo will be elected directors of the Company effective upon consummation of
the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- --- --------------------------------------------------------------
<S> <C> <C>
John G. Tramontana............... 50 Chairman of the Board, President and Chief Executive Officer
Albert Z. Hodge.................. 43 Vice President -- Quality Assurance
Michael K. Medors................ 37 Treasurer, Secretary and Director
Gerald T. Sweeney................ 47 Chief Financial Officer and Vice President -- Finance
Bernard Kramer................... 42 Vice President -- Marketing and Director
Kandid Oehen..................... 36 Director of Production
Eric M. Chen..................... 25 Director
James M. McCormick............... 71 Director
Thomas W. D'Alonzo............... 51 Director
</TABLE>
The business experience of each of the directors, executive officers and
key employees of the Company for at least the last five years is as follows:
John G. Tramontana has served as Chairman of the Board, President and Chief
Executive Officer of the Company since its inception in September 1995. From
November 1989 to March 1996, Mr. Tramontana was the chief operating officer and
a director of Chemholding, a holding company for five pharmaceutical companies
involved in the development, manufacture, and commercialization of active
pharmaceutical ingredients and finished pharmaceutical products. Chemholding is
a principal stockholder of the Company. Mr. Tramontana had significant
responsibilities in the development, manufacture and commercialization of
products of Chemholding. Mr. Tramontana was the chief operating officer and a
director of Cerbios-Pharma, chairman of the board of Cernelle and the president
and a director of Cernitin, a cosmetic and health products distributor. In March
1996, Mr. Tramontana resigned from all his positions with Chemholding,
Cerbios-Pharma, Cernelle and Cernitin. From 1985 to 1989, Mr. Tramontana was
chief operating officer, vice president -- finance and a director of Ben Venue
Laboratories, Inc., a pharmaceutical company specializing in the manufacture of
sterile, injectable pharmaceutical products. From 1974 until 1985, Mr.
Tramontana worked at Adria Laboratories Inc. (now Pharmacia & Upjohn, Inc.), the
U.S. operating division of Erbamont NV, a prominent manufacturer and marketer of
oncological products where from 1978 to 1984 he was treasurer, vice-
president -- finance. Mr. Tramontana and Mr. Medors are brothers-in-law.
Albert Z. Hodge has served as Vice President -- Quality Assurance of the
Company since May 1996. From April 1993 to April 1996, Mr. Hodge served as
Director of Quality Compliance and Manager of Regulatory Compliance for CIBA
Vision Corp. where he was responsible for the development and implementation of
ISO/GMP Quality Systems and facility validation programs. From February 1992 to
March 1993, Mr. Hodge served as Regulatory Compliance Manager at Bausch and Lomb
Pharmaceuticals, Inc. From 1989 to 1992, Mr. Hodge was Director of Quality
Assurance at Life Technologies, Inc., a biotechnology company. From 1985 to
1989, Mr. Hodge served as Quality Assurance Manager at Organon Teknika, Inc., a
pharmaceutical and medical device company. From 1980 to 1985, Mr. Hodge was a
Safety and Quality Service Inspector for the United States Department of
Agriculture.
Michael K. Medors has served as Treasurer, Secretary and a director of the
Company since its inception in September 1995. From 1991 to 1995, Mr. Medors was
treasurer and general manager of Cernitin, a cosmetic and health products
distributor. From 1983 to 1991, Mr. Medors was manager of the Banking and Tax
Services Division of ADP, Columbus, Ohio, a company offering a diverse portfolio
of employer, tax, banking and insurance services. Mr. Tramontana and Mr. Medors
are brothers-in-law.
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Gerald T. Sweeney has served as the Chief Financial Officer and Vice
President -- Finance of the Company since April 1996. From June 1994 to December
1995, Mr. Sweeney served as the chief financial officer of Neurovation, Inc., a
pharmaceutical company. From October 1992 to March 1994, Mr. Sweeney was the
chief financial officer of Adria Laboratories Inc. (now Pharmacia & Upjohn,
Inc.). From April 1989 to October 1992, Mr. Sweeney served as director of
finance at Liebert Corporation, a manufacturer and marketer of computer
environment control systems. From 1984 to 1989, Mr. Sweeney served in various
financial management positions at Erbamont NV. From 1979 to 1984, Mr. Sweeney
served as a senior financial analyst for the Upjohn Company (now Pharmacia &
Upjohn, Inc.).
Bernard Kramer has served as Vice President -- Marketing and a director of
the Company since April 1996. From January 1988 until April 1996, Mr. Kramer
worked at Bioren where he was a manager, responsible for quality control and
business development of pharmaceutical products. Prior to 1988, Mr. Kramer held
various senior management positions in the technical, quality control and
regulatory affairs areas. From 1980 to 1987, Mr. Kramer was manager of the
biological quality control and validation department at Vifor SA in Geneva. From
1979 to 1980, Mr. Kramer successfully completed postgraduate practice in
research and development at Ciba-Geigy in Basel.
Kandid Oehen has served as Director of Production of the Company since
April 1996. From 1995 until March 1996, Mr. Oehen was manager of drug regulatory
affairs at Cerbios-Pharma. From 1991 to 1995, Mr. Oehen was production director
at Togal-Werk SA, Lugano, Switzerland where he was responsible for manufacturing
pharmaceutical products. From 1982 to 1991, Mr. Oehen worked at Hoffman-La Roche
AG, Basel, Switzerland initially in formulation development and then in the
development of organic electrochemical synthesis.
Eric M. Chen will, upon consummation of the Offering, serve as a director
of the Company. Since April 1996, Mr. Chen has served as a managing director of
the Representative. From April 1995 to April 1996, Mr. Chen was a vice-president
of Fechtor, Detwiler & Co., Inc., an investment banking firm. From June 1994 to
April 1995, Mr. Chen was a research associate with Hambrecht & Quist
Incorporated where he was responsible for selected biotechnology companies. From
October 1992 to June 1994, Mr. Chen was an analyst with Furman Selz
Incorporated, where he was working with a variety of companies in the media and
entertainment and consumer retailing industries. Mr. Chen received a B.A. in
Biology from Harvard University in 1992.
James M. McCormick will, upon consummation of the Offering, serve as a
director of the Company. Mr. McCormick has more than 40 years experience in the
oncology sector of the pharmaceutical industry. Since 1990, Mr. McCormick has
been the president and chief executive officer of Market Initiatives, Inc., a
consulting firm specializing in oncology and other select health care markets.
From June 1995, through December 1995, Mr. McCormick was the president and chief
executive officer of Neurovation, Inc., a pharmaceutical company. Since then,
Mr. McCormick has served as consultant to Neurovation, Inc. From June 1991 until
November 1994 Mr. McCormick was the president and chief executive officer of
Optical Analytical Inc., a company engaged in diagnostic laser technology. Prior
to starting Market Initiatives, Inc. in September 1990, Mr. McCormick held
various senior management positions at Adria Laboratories Inc., a company which
he founded in 1974. From 1967 to 1974, Mr. McCormick was vice president of
marketing for Beecham Pharmaceuticals, a pharmaceutical company which he founded
in the United States in 1967. Prior to starting Beecham Pharmaceuticals, Mr.
McCormick held various sales and marketing positions within Pfizer Laboratories
for 16 years. Mr. McCormick is currently a director of Ascalon Pharmaceuticals
Inc., a pharmaceutical company and was previously a director of several other
pharmaceutical companies.
Thomas W. D'Alonzo will, upon consummation of the Offering, serve as a
director of the Company. Since June 1993, Mr. D'Alonzo has been chief executive
officer of Genvec, a biotechnology company developing gene therapy products for
life-threatening diseases. Prior to 1993, Mr. D'Alonzo held a number of
positions at Glaxo Inc., ultimately serving as president. In addition to his
corporate responsibilities, Mr. D'Alonzo also is a member of various industrial
associations including The National Wholesale Druggists Association, The
National Pharmaceutical Council and the North Carolina Healthy Start Foundation.
Mr. D'Alonzo is a director of Goodmark Foods, Inc.
All directors hold office until the next annual meeting of stockholders of
the Company and until their successors are elected and qualified or until their
earlier resignation or removal. All officers of the
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Company are appointed by and serve at the discretion of the Board of Directors,
except that John G. Tramontana has an employment agreement with the Company. See
' -- Employment Agreements.'
John G. Tramontana and Michael K. Medors are brothers-in-law. There are no
other family relationships between any director, executive officer or person
nominated or chosen to become a director or executive officer and any other such
person.
Pursuant to the Underwriting Agreement (as defined below), for a period of
five years from the consummation of the Offering, the Representative may
designate one representative to be a member of the Board of Directors of the
Company. The Representative has initially designated Eric M. Chen, a managing
director of the Representative, to be a director of the Company. See
'Underwriting.'
BOARD COMMITTEES
The Company will establish, effective upon consummation of the Offering, an
Executive Committee, a Compensation and Stock Option Committee, and an Audit
Committee. The Executive Committee will exercise all the power and authority of
the Board of Directors in the management and affairs of the Company between
meetings of the Board of Directors, to the extent permitted by law. The members
of the Executive Committee will be Eric M. Chen, Thomas W. D'Alonzo and John G.
Tramontana.
The Compensation and Stock Option Committee will make recommendations to
the Board of Directors concerning compensation, including incentive
arrangements, of the Company's officers and key employees and others and will
administer the Option Plan and will determine the officers, key employees and
others to be granted options under the Option Plan and the number of shares
subject to such options. In addition, the Compensation and Stock Option
Committee will administer the Director Option Plan. The members of the
Compensation and Stock Option Committee will be Michael K. Medors, Eric M. Chen,
and Thomas W. D'Alonzo.
The Audit Committee will review and evaluate the results and scope of the
audit and other services provided by the Company's independent accountants, as
well as the Company's accounting principles and system of internal accounting
controls. The members of the Audit Committee will be Eric M. Chen, Thomas W.
D'Alonzo and James M. McCormick.
MEDICAL ADVISORS AND SCIENTIFIC ADVISORS
The following is a list of the medical advisors ('Medical Advisors') and
scientific advisors ('Scientific Advisors') of the Company and, based upon
information supplied by each of them, the institutions with which they are
affiliated. The affiliations are provided for informational purposes only and do
not indicate a relationship between such institutions and the Company. To date,
neither the Medical Advisors nor the Scientific Advisors have held any meetings.
<TABLE>
<S> <C>
Dr. Francesco Cavalli............ Director, Division of Oncology, Saint John Hospital, Bellinzona, Switzerland;
responsible for coordination of all medical oncology within the southern part
of Switzerland; member of key European oncology societies, including Early
Clinical Trials Group (past Chairman), Scientific Board of the European
School of Oncology, European Organization for Research on Treatment of
Cancer, and the Federation of European Cancer Societies of Europe; Editor-in-
Chief of the Annals of Oncology; and serves on the editorial boards of four
additional scientific journals.
Dr. F. Messi..................... Biologist; founder of 'Dr. F.M. Cell Culture Technologies'; consultant for
Ciba-Geigy Switzerland and for Boehringer Mannheim Germany; Collaborator of
Research Group at National Institute of Health (NIH) Bethesda, Maryland;
Medical Department Oncology and Hematology, Albert Ludwig Clinic, Germany;
Biomedical Laboratories, University of Kent, Cambridge, UK.
</TABLE>
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<TABLE>
<S> <C>
Dr. Carlo M. Croce............... Director, Kimmel Cancer Institute; Professor and Chairman, Department of
Microbiology and Immunology, Jefferson Medical School of Thomas Jefferson
University; immediate past Member, Board of Scientific Counselors, Division
of Cancer Treatment, National Cancer Institute; 1995 recipient of the CLAS
Distinguished Scientist Award; author of over 450 scientific publications;
and Editor-in-Chief of the journal Cancer Research.
Dr. Thomas G. Tachovsky.......... Biologist; Executive Vice President, Research and Development Protyde
Pharmaceuticals; over 22 years of academic and industrial research and
development experience; founding partner of MATCO & Associates, a management
consulting firm specializing in the identification and evaluation of new
health care technologies; has held a variety of research and management
positions with Ortho Diagnostics, a division of Johnson & Johnson, Creative
BioMolecules and Cytogen Corporation.
</TABLE>
Each of the Medical Advisors and Scientific Advisors will enter into
medical or scientific advisory agreements ('Advisory Agreements') which
generally require the Medical Advisor or Scientific Advisor to: (i) advise the
Company of advances in his field of expertise; (ii) consult with the Company;
(iii) assess the feasibility of research and development programs under
consideration by the Company in his field; and (iv) offer guidance for future
research and clinical applications of the Company's technology in his field. The
Medical Advisors and Scientific Advisors will agree to meet individually and in
groups to advise the Company on its research, development, operations and
commercialization of its technology, to consult on the Company's projects and to
attend meetings of the Medical Advisors or Scientific Advisors. Generally, any
further activities if requested shall be on an 'as available' basis and at an
agreed upon fee. The agreements with each Medical Advisor and Scientific Advisor
will contain confidentiality provisions.
The Medical Advisors and Scientific Advisors are not expected to otherwise
actively participate in the development of the Company's technologies or
products. Each Advisory Agreement will be for a term of three years. In
consideration for their services, each Medical Advisor or Scientific Advisor
will receive a fee of $1,000 per annum, and each will be reimbursed for
reasonable expenses incurred in the performance of their duties for the Company.
In addition, upon the consummation of the Offering, each Medical Advisor or
Scientific Advisor will be granted options to purchase 3,000 shares of Common
Stock, under the Option Plan at an exercise price per share equal to the initial
public offering price, which options will vest in three equal installments, the
first commencing one year following the date of this Prospectus and the second
and third commencing on the second and third anniversary dates of the date of
this Prospectus, each of which will be exercisable for a period of three years
following the date of vesting. The Advisory Agreements will provide for
indemnification of the Medical Advisor or Scientific Advisor, against any
liabilities arising from their good faith services thereunder.
The Company's Medical Advisors or Scientific Advisors are employed on a
full-time basis by employers other than the Company, and certain of those
individuals have additional consulting or other advisory arrangements.
Accordingly, they are expected to devote only a small portion of their time to
the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company has included in its Restated Certificate provisions to
indemnify its directors and officers to the fullest extent permitted by Delaware
law. The Company's Restated Certificate also includes provisions to eliminate
the personal liability of the Company's directors and officers to the fullest
extent permitted by Delaware law. Under current law, such exculpation would
extend to an officer's or director's breaches of fiduciary duty, except for (i)
breaches of such person's duty of loyalty, (ii) those instances where such
person is found not to have acted in good faith and (iii) those instances where
such person received an improper personal benefit as the result of such breach.
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The Company's Restated By-Laws ('By-Laws') provide that the Company may
indemnify any person, including officers and directors, with regard to any
action or proceeding to the fullest extent permitted by Delaware law.
The Company will enter into an indemnification agreement ('Indemnification
Agreement') with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any civil or criminal action or administrative proceeding arising out of
his performance of his duties as a director or officer, other than an action
instituted by the director or officer. Such indemnification is available if the
indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal action, had no reasonable cause to believe his conduct was unlawful.
Each Indemnification Agreement also will require that the Company indemnify the
director or other party thereto in all cases to the fullest extent permitted by
applicable law. The term of each Indemnification Agreement will be the later of
(i) 10 years after the date that the indemnitee ceases to serve as a director or
officer of the Company, or (ii) the final termination of all proceedings, as
defined in the Indemnification Agreement, in which the indemnitee is granted
rights of indemnification.
Each Indemnification Agreement will permit the indemnitee to bring suit to
seek recovery of amounts due under such Indemnification Agreement and will
require that the Company indemnify the director or other party thereto in all
cases to the fullest extent permitted by applicable law. Although the Company
intends to seek to obtain directors' and officers' liability insurance, such
insurance is generally very expensive. If the Company is not able to obtain
director' and officers' liability insurance to cover such amounts, any payments
made by the Company under an Indemnification Agreement will have an adverse
impact on the Company.
It is the position of the Commission that insofar as the Company's Restated
Certificate, By-Laws or any Indemnification Agreement may be invoked by any
director, officer or stockholder as a means of indemnifying them against
liabilities arising under the Securities Act, that such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
EXECUTIVE COMPENSATION
The Company did not pay any compensation exceeding $100,000 to its
executive officers for the year ended December 31, 1995. John G. Tramontana, the
Company's President and Chief Executive Officer received no compensation during
this period. See ' -- Employment Agreements.'
DIRECTOR COMPENSATION
Directors of the Company who are not salaried officers will receive a fee
of $500 for attending each Board meeting or meeting of a committee of the Board
of which they are a member. In addition, all directors will be reimbursed for
their reasonable out-of-pocket expenses in connection with attending meetings of
the Board or any committee thereof. All directors who are not otherwise
affiliated with the Company will receive options to purchase Common Stock. See
' -- Directors Option Plan.'
EMPLOYMENT AGREEMENTS
In April 1996, the Company entered into an employment agreement with Mr.
Tramontana to serve as the Company's President and Chief Executive Officer. The
employment agreement is for a five-year term effective upon consummation of the
Offering and is subject to automatic annual renewal unless earlier terminated.
Pursuant to the terms of this employment agreement, Mr. Tramontana is required
to devote his full business time and attention to fulfill his duties and
responsibilities to the Company. Mr. Tramontana will receive a base salary of
$200,000 for the first year of the term of the employment agreement with
subsequent annual cost of living increases at the discretion of the Company's
Board of Directors. In addition to his base salary, Mr. Tramontana is entitled
to receive an annual bonus, at the discretion of the Board of Directors,
provided such bonus is equal to at least 25% of his base salary. Mr.
Tramontana's employment agreement provides that the Company is required to
provide Mr.
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Tramontana with an automobile allowance of $6,000 per annum and the Company is
required to obtain life insurance coverage on the life and for the benefit of
Mr. Tramontana in an amount equal to $500,000, assuming he is insurable. Mr.
Tramontana will also have the right to participate in all benefit plans afforded
or which may be afforded to other executive officers during the term of the
agreement including, without limitation, group insurance, health, hospital,
dental, major medical, life and disability insurance, stock option plans and
other similar fringe benefits. If Mr. Tramontana dies or is unable to perform
his duties on account of illness or other incapacity and the agreement is
terminated, he or his legal representative shall receive from the Company the
base salary which would otherwise be due to the end of the month during which
the termination of employment occurred plus three additional months of base
salary in the event of death and six additional months of base salary in the
event of illness or other incapacity. The agreement further provides that if the
Company terminates Mr. Tramontana's employment for cause or if Mr. Tramontana
voluntarily leaves the employment of the Company, Mr. Tramontana shall receive
his salary through the end of the month in which the termination occurred. If
Mr. Tramontana's employment is terminated by the Company without cause, Mr.
Tramontana shall receive from the Company the base salary which would otherwise
be due to the end of the month during which the termination of employment
occurred plus four additional months. Mr. Tramontana's employment agreement
contains certain confidentiality and non-competition provisions. The Company
intends to obtain $2,000,000 of key-person life insurance for the benefit of the
Company on the life of Mr. Tramontana effective on the date of this Prospectus.
Upon the consummation of the Offering, the Company intends to enter into an
employment agreement with Mr. Sweeney to serve as the Company's Vice President
and Chief Financial Officer for a two-year term. Pursuant to the terms of this
employment agreement, Mr. Sweeney will be required to devote his full time and
attention to the Company's business and affairs and will receive a base salary
of $80,000 for the first year of the term with an annual review of such salary.
In addition to his base salary, Mr. Sweeney will be entitled to receive an
annual bonus of 15% of his base salary. Mr. Sweeney's employment agreement will
contain certain confidentiality and non-competition provisions.
OPTION PLAN
In April 1996, the Board of Directors adopted and the stockholders approved
the Option Plan. The Option Plan provides for the grant of incentive stock
options ('ISOs') (within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended) and non-qualified stock options ('NQSOs') to directors,
officers and employees of the Company. The Option Plan further provides for the
grant of NQSOs to directors and agents of, and consultants to, the Company,
whether or not employees of the Company. The purpose of the Option Plan is to
attract and retain exemplary directors, employees, agents, and consultants. All
options granted under the Option Plan will be at an exercise price of not less
than the fair market value of the Common Stock on the date of grant. All options
granted under the Option Plan will not be transferable by the optionee other
than by will, by the laws of descent and distribution or as required by law.
Options granted under the Option Plan may not be exercisable for terms in
excess of 10 years from the date of grant. In addition, no options may be
granted under the Option Plan later than 10 years after the Option Plan's
effective date. The total number of shares of Common Stock with respect to which
options will be granted under the Option Plan is 300,000. The shares subject to
and available under the Option Plan may consist, in whole or in part, of
authorized but unissued stock or treasury stock not reserved for any other
purpose. Any shares subject to an option that terminates, expires or lapses for
any reason, and any shares purchased pursuant to an option and subsequently
repurchased by the Company pursuant to the terms of the option, shall again be
available for grant under the Option Plan.
The Option Plan is administered by the Board of Directors of the Company
which determines, in its discretion, among other things, the recipients of
grants, whether a grant will consist of ISOs or NQSOs, or a combination thereof,
and the number of shares of Common Stock to be subject to such options. The
Board of Directors of the Company may, in its discretion, delegate its power,
duties and responsibilities under the Option Plan to a committee consisting of
two or more directors who are 'disinterested persons' within the meaning of Rule
16b-3 promulgated under the Securities Act of 1934,
56
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<PAGE>
as amended. The Compensation and Stock Option Committee, which is responsible
for administering the Option Plan, will be composed of Michael K. Medors, Eric
M. Chen and Thomas W. D'Alonzo.
The Option Plan contains certain limitations applicable only to ISOs
granted thereunder. To the extent that the aggregate fair market value, as of
the date of grant, of the shares to which ISOs become exercisable for the first
time by an optionee during the calendar year exceeds $100,000, the ISO will be
treated as a NQSO. In addition, if an optionee beneficially owns more than 10%
of the Common Stock at the time the individual is granted an ISO, the option
price per share cannot be less than 110% of the fair market value per share and
the term of the option cannot exceed five years.
DIRECTOR OPTION PLAN
Prior to the consummation of the Offering, the Company intends to adopt a
director stock option plan ('Director Option Plan') pursuant to which directors
who are not otherwise affiliated with the Company (such as employees or
consultants of the Company, or an affiliate thereof) will receive options to
purchase Common Stock. The purpose of the Director Option Plan is to promote the
overall financial objectives of the Company and its stockholders by motivating
directors to achieve long-term growth in stockholder equity in the Company, to
further align the interest of the directors with those of the Company's
stockholders and to recruit and retain the association of these directors. The
Director Option Plan will provide for the award of up to an aggregate of 50,000
shares of Common Stock and will be administered by the Compensation and Stock
Option Committee.
The Director Option Plan will provide for (i) the grant of an option to
purchase 3,000 shares of Common Stock to each director who was not an employee
or consultant of the Company upon the consummation of the Offering and (ii) the
grant of an option to purchase 1,500 shares of Common Stock on the date of each
regular annual stockholder meeting to each participant who either is continuing
as a director subsequent to the meeting or who is elected at such meeting to
serve as a director. Options granted under the Director Option Plan must provide
for the purchase of shares of Common Stock at an exercise price of not less than
the fair market value of the Common Stock on the date of grant. No option under
the plan may be exercisable 10 years after its date of grant. Options granted
under the Director Option Plan will not be transferable by the optionee other
than by will, by the laws of descent and distribution or as required by law.
57
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock, as of the date of this Prospectus, and as
adjusted to reflect the sale by the Company of the 1,250,000 shares of Common
Stock offered hereby, by (i) each person who is known by the Company to
beneficially own more than five percent of the outstanding Common Stock, (ii)
each director of the Company, (iii) each of the Company's executive officers,
and (iv) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED
PRIOR TO OFFERING PERCENT OF CLASS
------------------ -----------------------------------
BENEFICIAL OWNER SHARES BEFORE OFFERING AFTER OFFERING
- ------------------------------------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
Chemholding SA(1)..................................... 1,010,563 42.6% 27.9%
John G. Tramontana(2)................................. 973,368 41.0 26.9
Albert Z. Hodge....................................... -- -- --
Gerald T. Sweeney..................................... -- -- --
Eric M. Chen(3)(4).................................... -- -- --
James M. McCormick(3)(4).............................. -- -- --
Thomas W. D'Alonzo(3)(4).............................. -- -- --
Bernard Kramer........................................ -- -- --
Michael K. Medors..................................... -- -- --
All executive officers and directors (including
director designees) as a group(3) (8 persons)....... 973,368 41.0 26.9
</TABLE>
- ------------
(1) Chemholding is a Swiss holding company for five pharmaceutical companies
involved in the development, manufacture, and commercialization of active
pharmaceutical ingredients and finished pharmaceutical products. Maria Pia
Melera, Jan Jacob Van Troostenburg, Pier Angelo Ghirlanda and Patrizia
Melera Kaar are each officers, directors and/or principal stockholders of
Chemholding and own in the aggregate approximately 80% of its outstanding
capital stock. As such, these individuals may be considered to beneficially
own, and have shared investment and voting power with respect to, all of the
shares of Common Stock owned by Chemholding. Maria Pia Melera is the mother
of Patrizia Melera Kaar. Each of Ms. Melera, Mr. Van Troostenburg and Mr.
Ghirlanda directly own an additional 70,775 shares of Common Stock. The
address of Chemholding is Via Pian Scairolo 6, CH-6917 Barbengo,
Switzerland.
(2) Mr. Tramontana's business address is 6660 Doubletree Avenue, Columbus, Ohio
43229.
(3) Does not include options to purchase 3,000 shares of Common Stock to be
granted to each of Messrs. Chen, McCormick and D'Alonzo under the Director
Option Plan upon consummation of the Offering. See 'Management -- Director
Option Plan.'
(4) Messrs. Chen, McCormick and D'Alonzo will become directors of the Company
upon the consummation of this Offering. See 'Management -- Directors,
Executive Officers and Key Personnel.'
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<PAGE>
CERTAIN TRANSACTIONS
BIOREN ACQUISITION
In June 1995, all of the outstanding capital stock of Bioren was purchased
by Bigmar Pharmaceuticals in the Bioren Acquisition for an aggregate purchase
price of approximately $9.4 million, consisting of approximately $5.2 million in
cash, and the assumption of certain of the seller's liabilities in the aggregate
principal amount of approximately $4.2 million. In addition, in connection with
the Bioren Acquisition, Bigmar Pharmaceuticals became a guarantor on a new bank
loan to Bioren in the principal amount of $2.6 million, which was collateralized
by the Bioren Facility, and provided a guarantee of a second mortgage in the
aggregate principal amount of approximately $1.7 million on the Bioren Facility.
In addition, in June 1995 Bigmar Pharmaceuticals sold one-half of its equity
interest of Bioren to the Bioren Holders for approximately $2.6 million. This
sale included 500 shares (10% of Bioren's outstanding stock) to John G.
Tramontana, the Company's Chairman of the Board, President and Chief Executive
Officer, for $500,000.
CONTRIBUTION
On April 8, 1996, in the Contribution, all of the then existing
stockholders of the Company contributed 99% of the shares of Common Stock then
owned by each of these stockholders to the Company for no cash consideration.
EXCHANGE
On April 9, 1996, in the Exchange, the Bioren Holders exchanged their
capital stock in Bioren (representing 50% of the outstanding Bioren capital
stock) for 350,312 shares of Common Stock of the Company with an approximate
fair market value (based on an estimated initial public offering price of $8.00
per share) of $2,802,504 and the stockholders of Bigmar Pharmaceuticals
exchanged all of the capital stock of Bigmar Pharmaceuticals for 2,000,938
shares of Common Stock of the Company with an approximate fair market value
(based on an estimated initial public offering price of $8.00 per share) of
$16,007,496.
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS
In November 1995, Bioren entered into an exclusive distribution and supply
agreement with Sapec and Bigmar Pharmaceuticals entered into an exclusive
distribution and supply agreement with Cernelle, each relating to certain
oncological products. Pursuant to the terms of each agreement, Bioren or Bigmar
Pharmaceuticals, as the case may be, is obligated to pay either Sapec or
Cernelle a one-time fee of $100,000 upon notification by Sapec or Cernelle that
their respective oncological products are ready for shipment. In addition, in
November 1995, Bigmar Pharmaceuticals entered into an exclusive license and
supply agreement with Bioferment relating to certain biotechnological products.
Pursuant to the terms of this agreement, Bigmar Pharmaceuticals will pay
Bioferment a license fee aggregating $500,000 upon the completion of certain
regulatory milestones. The full amount of this license fee shall be credited
against future royalty obligations due to Bioferment under the agreement. See
'Business -- Products.' At the time of negotiation and execution of the
foregoing agreements, John G. Tramontana, the Company's Chairman of the Board,
President, and Chief Executive Officer, was the Chief Operating Officer and a
director of Cerbios Pharma, Chairman of the Board of Cernelle and a director of
Chemholding, a principal stockholder of the Company. Chemholding is the sole
stockholder of Cerbios Pharma of which Sapec and Bioferment are divisions.
Cerbios Pharma is the sole stockholder of Cernelle. Certain stockholders of the
Company own in the aggregate approximately 80% of the capital stock of
Chemholding. John G. Tramontana is not a stockholder of Chemholding, Cerbios
Pharma or Cernelle. The Company believes that the terms of these agreements are
no more favorable to the Company or the other parties thereto than they would be
to unaffiliated third parties. See 'Risk Factors -- Reliance on Collaborative
Arrangements; Management Affiliations with Collaborators.'
59
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<PAGE>
In 1995, Unione Farmaceutica SA, which is owned by certain stockholders of
the Company, loaned $1,809,524 to the Company bearing interest at the rate of 9%
per annum. The principal on the loan is payable over a 10 year period in the
amount of approximately $179,000 per annum commencing June 30, 1997. For the
fiscal year ended December 31, 1995, the Company made interest payments to
Unione Farmaceutica in the amount $151,000. For the three months ended March 31,
1996, interest expense on this loan aggregated $39,000. As of March 31, 1996,
accrued interest to Unione Farmaceutica on this loan was approximately $115,000.
For the fiscal year ended December 31, 1995, the Company purchased
inventory from Cernelle and Cerbios Pharma in the aggregate amount of $206,000
and paid selling, general and administrative expenses and freight charges to
Cerbios Pharma in the amount of $169,000. For the three months ended March 31,
1996, such purchases aggregated $100,000 and such selling, general and
administrative expenses aggregated $66,000.
In May 1995, Chemholding purchased 690 shares of the capital stock of
Bigmar Pharmaceuticals for $575,000.
In September 1995, Chemholding purchased 10,094 shares of Common Stock from
the Company for $2,125.
In September 1995, the Company sold an aggregate of 2,375,000 shares of
Common Stock to its existing stockholders for $5,000 and on April 8, 1996, in
the Contribution, the existing stockholders contributed 99% of these shares of
Common Stock to the Company for no cash consideration.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In May 1995, John G. Tramontana, the Company's Chairman of the Board,
President and Chief Executive Officer, purchased 690 shares of the capital stock
of Bigmar Pharmaceuticals for $575,000.
In June 1995, John G. Tramontana, the Company's Chairman of the Board,
President and Chief Executive Officer, purchased 500 shares of the capital stock
of Bioren for an aggregate purchase price of $500,000. See ' -- Bioren
Acquisition.'
In September 1995, John G. Tramontana, the Company's Chairman of the Board,
President and Chief Executive Officer, purchased 9,889 shares of Common Stock
from the Company for $2,082.
In March 1996 the Company entered into a sublease agreement with Cernitin.
The sublease terminates on February 28, 1998. The sublease is at a rental of
approximately $22,315 per annum. Mr Tramontana was the President and a director
of Cernitin and Michael K. Medors was the treasurer and general manager of
Cernitin at the time of the negotiation and execution of the sublease. See
'Business -- Facilities.'
In April 1996, John G. Tramontana entered into five-year employment
agreement with the Company. See 'Management.'
Upon consummation of the Offering, Gerald T. Sweeney will enter into a
two-year employment agreement with the Company. See 'Management.'
Eric M. Chen, a director designee, is a managing director of the
Representative. The Representative and the Company have entered into certain
arrangements with respect to the Offering. See 'Management' and 'Underwriting.'
Mr. Tramontana and Chemholding may be deemed to be founders or promoters of
the Company as that term is defined under the Securities Act.
Certain of the transactions set forth above have been entered into by the
Company with certain persons who, at the time of such transactions, might have
been deemed control persons or affiliates of the Company. Notwithstanding the
foregoing, the Company believes that the terms of these transactions are no less
favorable to the Company than it would have obtained from unaffiliated third
parties. The Company anticipates that all future transactions and loans between
the Company and its officers, directors, 5% stockholders and affiliates will be
on terms no less favorable than could be obtained from unaffiliated third
parties and that such transactions and loans will be approved by a majority of
the independent disinterested directors of the Company.
60
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares,
of which 15,000,000 shares are Common Stock, par value $.001 per share, and
5,000,000 are Preferred Stock, par value $.001 per share. There are 2,375,000
shares of Common Stock held of record by seven stockholders and no shares of
Preferred Stock outstanding. All information in this Prospectus gives effect to
the following events: (i) the Contribution, on April 8, 1996, to the Company of
99% of the shares of Common Stock then owned by the stockholders of the Company;
(ii) the Exchange, on April 9, 1996, whereby Bigmar Pharmaceuticals and Bioren
became subsidiaries of the Company; (iii) a Reverse Split, effected on April 16,
1996, of the outstanding shares of Common Stock; and (iv) an increase in the
number of authorized shares of Common Stock from 10,000,000 to 15,000,000,
effected on April 16, 1996. Upon consummation of the Offering, 3,625,000 shares
of Common Stock will be issued and outstanding, assuming no exercise of the
Underwriters' over-allotment option and no exercise of the Representative's
Warrants.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The Company has applied to have the Common Stock quoted on the
Nasdaq SmallCap MarketSM under the trading symbol 'BGMR' and listed on the
Boston Stock Exchange and the Pacific Stock Exchange under the trading symbol
' .'
The following description of the capital stock of the Company and certain
provisions of the Company's Restated Certificate and By-Laws is a summary and is
qualified in its entirety by the provisions of the Restated Certificate and
By-Laws, which have been filed as exhibits to the Company's Registration
Statement, of which this Prospectus forms a part.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares being
offered hereby will, upon payment therefor, be validly issued, fully paid and
nonassessable. Subject to the rights of the holders of the Preferred Stock, the
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may from time to time determine. See 'Risk
Factors -- Restrictions on Retained Earnings' and 'Dividend Policy.' The shares
of Common Stock are neither redeemable nor convertible, and the holders thereof
have no preemptive or subscription rights to purchase any securities of the
Company. Upon liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to receive, pro rata, the assets of the Company
which are legally available for distribution, after payment of all debts and
other liabilities and subject to the prior rights of any holders of Preferred
Stock then outstanding. Each outstanding share of Common Stock is entitled to
one vote on all matters submitted to a vote of stockholders. There is no
cumulative voting for the election of directors.
PREFERRED STOCK
The Company's Restated Certificate authorizes the Board of Directors to
issue the Preferred Stock in classes or series and to establish the
designations, preferences, qualifications, limitations and restrictions of any
class or series with respect to the rate and nature of dividends, the price and
terms and conditions on which shares may be redeemed, the terms and conditions
for conversion or exchange into any other class or series of such stock, voting
rights and other terms. The Company may, without approval of the holders of
Common Stock, issue Preferred Stock which has voting, dividend or liquidation
rights superior to those of the Common Stock and which may adversely affect the
rights of holders of Common Stock. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of the holders of Common Stock and could have the effect of delaying, deferring
or preventing a change in control of the Company. See 'Risk Factors -- Possible
Adverse Effects of Issuance of Preferred Stock.'
61
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<PAGE>
OPTIONS AND WARRANTS
As of the date of this Prospectus, other than as described in this
Prospectus, there will be no outstanding options or warrants to purchase, or
securities convertible into, Common Stock of the Company.
DELAWARE ANTI-TAKEOVER LAW
The Company is subject to Section 203 ('Section 203') of DGCL which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any 'business combination' with any 'interested stockholder' for a period of
three years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the Board of Directors of the
corporation, approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by persons who are directors and also officers
and by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (iii) on or subsequent to such date,
the business combination is approved by the Board of Directors and authorized at
an annual or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. Under Section 203, the restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the announcement or notification of one of
certain extraordinary transactions involving the corporation and a person who
had not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors and which transaction is approved or not opposed by the
majority of the board of directors then in office.
Section 203 generally defines a business combination to include: (i) any
merger or consolidation involving the corporation and the interested
stockholders; (ii) any sale, transfer, pledge or other disposition of 10% or
more of the assets of the corporation to the interested stockholder; (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the receipt
by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholders as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
REGISTRATION RIGHTS
Upon the consummation of the Offering, the Company will sell to the
Representative warrants to purchase 125,000 shares of Common Stock. The
Representative's Warrants will be exercisable for a period of four years
commencing one year from the date of this Prospectus. In addition, holders of
the Representative's Warrants will have demand registration rights for a period
of five years and piggyback registration rights for a period of seven years from
the date of this Prospectus with respect to the Representative's Warrants and
the underlying shares of Common Stock. See 'Underwriting.'
THE COMPANY'S TRANSFER AGENT
American Stock Transfer & Trust Company, 40 Wall Street, New York, NY
10005, will serve as the Company's transfer agent for the Common Stock.
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SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon the consummation of the Offering, the Company will have outstanding an
aggregate of 3,625,000 shares of Common Stock (exclusive of (i) the 300,000
shares of Common Stock reserved for issuance under the Option Plan, (ii) 50,000
shares of Common Stock reserved for issuance under the Director Option Plan,
(iii) 125,000 shares of Common Stock issuable upon exercise of the
Representative's Warrants and (iv) up to 187,500 shares of Common Stock issuable
upon exercise of the Underwriters' over-allotment option). All of the 1,250,000
shares of Common Stock sold in the Offering will be freely tradeable without
restriction under the Securities Act except for any shares purchased by
'affiliates' of the Company (as that term is defined in the rules and
regulations under the Securities Act). The remaining 2,375,000 shares of Common
Stock were issued by the Company in private transactions not involving a public
offering, are treated as 'restricted securities' for purposes of Rule 144, and
may not be resold unless they are registered under the Securities Act or are
resold pursuant to an exemption from registration, including the exemption
provided under Rule 144 of the Securities Act.
In general, under Rule 144, as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned for at
least two years shares of Common Stock that are treated as 'restricted
securities,' would be entitled to sell, within any three-month period, that
number of shares which does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume in the Common Stock
during the four calendar weeks preceding the date on which notice of such sale
is given. A stockholder who is not deemed to have been an affiliate of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned for at least three years shares of Common Stock that are
treated as 'restricted securities,' would be entitled to sell such shares under
Rule 144(k) immediately upon the effectiveness of the Offering without regard to
foregoing volume limitations and manner of sale, notice and availability of
current public information requirements. Sales or the expectation of sales of a
substantial number of shares of Common Stock in the public market following the
Offering could adversely affect the prevailing market price of the Common Stock.
In addition, the sale of substantial amounts of Common Stock acquired through
the exercise of the (i) options granted pursuant to the Option Plan or Director
Option Plan, (ii) Representative's Warrants, or (iii) the Underwriters'
over-allotment option could adversely affect prevailing market prices for the
Common Stock. The Company and its officers, directors and existing stockholders
have agreed with the Representative not to, directly or indirectly, register,
issue, offer, sell, offer to sell, contract to sell, hypothecate, pledge or
otherwise dispose of any shares of Common Stock, (or any securities convertible
into or exercisable or exchangeable for shares of Common Stock), for a period of
one year from the date of this Prospectus, without the prior written consent of
the Representative, subject to certain exceptions.
The Commission has recently proposed shortening the basic Rule 144 holding
period from two years to one year; no assurance can be given as to when or
whether such change will occur.
In connection with the Offering, the Company has agreed to sell to the
Representative the Representative's Warrants. See 'Underwriting.'
On or about 18 months following the consummation of the Offering, the
Company may file a Registration Statement under the Securities Act to register
an aggregate of 300,000 shares of Common Stock reserved for issuance under the
Option Plan and/or 50,000 shares of Common Stock reserved for issuance under the
Director Option Plan, thus permitting the resale of these shares of Common Stock
in the public market without restriction under the Securities Act, subject to
the vesting requirements of the options pursuant to which these shares of Common
Stock may be issued, the lock-up agreements described above and the provisions
of the Option Plan or Director Option Plan. See 'Management.'
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UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement ('Underwriting Agreement'), dated the date of this Prospectus, each
Underwriter named below has severally agreed to purchase, and the Company has
agreed to sell to such Underwriters, shares of Common Stock which equal the
number of shares set forth opposite the name of such Underwriter below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------------------------------------------------------------------------------- ----------------
<S> <C>
LT Lawrence & Co., Inc...............................................................
----------------
Total........................................................................... 1,250,000
----------------
----------------
</TABLE>
The Underwriters are obligated to purchase all of the shares of Common
Stock, if any are purchased.
The Underwriters for whom LT Lawrence & Co., Inc. is acting as the
representative ('Representative') have advised the Company that they propose
initially to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow a
concession of not more than $ per share to selected dealers; and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After the consummation of the
Offering, the consession to selected dealers and the reallowance to other
dealers may be changed by the Underwriters. The shares of Common Stock are
offered subject to receipt and acceptance by the Underwriters and to certain
other conditions, including the right to reject orders in whole or in part.
Upon the consummation of the Offering, the Company will grant to the
Underwriters an option to purchase up to 187,500 additional shares of Common
Stock solely to cover over-allotments, if any. The option is exercisable for 45
days from the date of this Prospectus at the initial public offering price, less
the underwriting discount set forth on the cover page of this Prospectus. To the
extent the Representative exercises the option, the Underwriters will be
committed, subject to certain conditions, to purchase the additional shares.
The Company has agreed to sell to the Representative, for an aggregate of
$125, Representative's Warrants to purchase 125,000 shares of Common Stock at an
exercise price per share equal to 120% of the initial public offering price set
forth on the cover page of this Prospectus. The Representative's Warrants will
be exercisable for a period of four years, commencing one year from the date of
this Prospectus, and will contain anti-dilution provisions providing for
appropriate adjustment of the exercise price and number of shares that may be
purchased upon the occurrence of certain events. The Representative's Warrants
may not be sold, transferred or pledged until one year from the date of this
Prospectus, except that they may be transferred, in whole or in part, at any
time to, among others, any officer, director or stockholder of the
Representative. Holders of the Representative's Warrant have demand and
piggyback registration rights with respect to the Representative's Warrants and
the underlying securities. See 'Description of Capital Stock -- Registration
Rights.'
For a period of five years from the date of this Prospectus, the
Representative will have the right to nominate one member to the Company's Board
of Directors. Eric M. Chen, a managing director of the Representative, will be
the Representative's initial nominee to the Board of Directors. See
'Management -- Directors, Executive Officers and Key Personnel.'
The Company and its officers, directors and existing stockholders have
agreed with the Representative not to directly or indirectly register, issue,
offer, sell, offer to sell, contract to sell, hypothecate, pledge or otherwise
dispose of any shares of Common Stock (or any securities convertible into or
exercisable or exchangeable for shares of Common Stock) for a period of one year
from the date
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<PAGE>
of this Prospectus, without the prior written consent of the Representative,
subject to certain exceptions.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined
through negotiations between the Company and the Representative. Among the
factors considered in making such determination are the prevailing market
conditions, the Company's financial condition and operating history, the
operating history of Bioren and Bigmar Pharmaceuticals, the Company's prospects,
the prospects for the pharmaceutical and biotechnology industries in general,
the management of the Company, the market prices of securities for companies in
businesses similar to that of the Company and other factors deemed relevant.
The Company has agreed to pay the Representative a non-accountable expense
allowance equal to 2.5% of the gross proceeds of the Offering, of which none has
been paid as of the date of this Prospectus. The Company has also agreed to
indemnify the Underwriters against, or contribute to losses arising out of,
certain liabilities, including liabilities arising under the Securities Act.
The Representative was organized in February 1992 and was registered as a
broker-dealer in 1993. Prior to this Offering, the Representative has
participated as a sole or co-manager in three public offerings. See 'Risk
Factors -- Lack of Underwriting History.'
The Representative does not intend to sell Common Stock from the Offering
to any discretionary accounts.
65
<PAGE>
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Rubin Baum Levin Constant & Friedman, New York, NY.
Rubin Baum Levin Constant & Friedman serves as general counsel to Protyde. Irwin
M. Rosenthal, a partner of Rubin Baum Levin Constant & Friedman, is a director
and principal stockholder of Protyde. Other partners or attorneys associated
with Rubin Baum Levin Constant & Friedman are stockholders of Protyde. From time
to time, Rubin Baum Levin Constant & Friedman has acted as counsel for the
Representative in connection with other public offerings. The statements related
to United States regulatory matters have been passed upon by Hyman, Phelps &
McNamara, P.C., Washington, D.C. The statements related to Swiss matters have
been passed upon by Wenger Mathys Plattner, Basel, Switzerland. Wenger Mathys
Plattner is acting as special counsel to the Company and the Underwriters in
connection with the Offering. Certain United States legal matters will be passed
upon for the Underwriters by Baer Marks & Upham LLP, New York, NY.
EXPERTS
The consolidated financial statements of Bigmar, Inc. and Subsidiaries as
of December 31, 1994 and 1995, and for the years ended December 31, 1993,
December 31, 1994, and December 31, 1995 included herein and elsewhere in the
Registration Statement, of which this Prospectus forms a part, have been audited
by Richard A. Eisner & Company, LLP, independent auditors, as set forth in their
report thereon appearing elsewhere in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Bioren SA for the six months ended June 30,
1995, and the two years ended December 31, 1994 included herein and elsewhere in
the Registration Statement, of which this Prospectus forms a part, have been
audited by Richard A. Eisner & Company, LLP, independent auditors, as set forth
in their report thereon appearing elsewhere in the Registration Statement, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, schedules and exhibits thereto, 'Registration
Statement') under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
to which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference hereby is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
For further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement. The Registration
Statement filed by the Company may be inspected, without charge, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, NW, Washington, DC 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Room 1400,
Chicago, IL 60661, and 7 World Trade Center, Suite 1300, New York, NY 10048.
Copies of such material also may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, NW, Washington, DC 20549, upon payment of
certain fees prescribed by the Commission.
66
<PAGE>
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
Biotechnological...................... Products manufactured using molecular biology and genetic engineering
technologies.
Calcium Leucovorin.................... The chemically synthesized calcium salt of folinic acid.
Cancer................................ Uncontrolled growth resulting in the development of a mass of cells,
commonly called a tumor or neoplasm (new growth); often characterized by
the spread (metastasis) of cells and their invasion into other tissues.
Chemotherapy.......................... Special chemicals used to treat disease, also called pharmaceutical
products or drugs.
Cytotoxic............................. A toxin or antibody that has a specific toxic action upon cells of special
organs.
Human Growth Hormone.................. The substance produced by the body that is responsible for growth.
Intravenous Infusion Solutions........ Substances, including electrolytes, carbohydrates and chemotherapy drugs,
administered by direct introduction into the body via a blood vessel.
Lyophilized........................... The result of removing water through freezing under a vacuum, a process
called freeze drying.
Methotrexate.......................... An anti-neoplastic antimetabolite used in the treatment of certain
neoplastic diseases.
Neoplastic Condition.................. Any new and abnormal growth; specifically a new growth of tissue in which
the growth is uncontrolled and progressive and the multiplication of
cells under conditions that would not elicit, or would cause cessation
of, multiplication of normal cells.
Oncology.............................. The medical discipline that studies and treats cancer.
Oral Dosage Form...................... Chemotherapy agents manufactured as capsules or tablets to be taken orally
for the treatment of disease.
Prostate Enlargement.................. Swelling of the prostate gland in the male which surrounds the neck of the
bladder and the urethra. Symptoms include diminution in the caliber and
force of the urinary stream, hesitating in initiating voiding, inability
to terminate voiding abruptly, and others, depending of the severity of
the condition.
Recombinant Urokinase................. Urokinase that is produced from the recombination of genes within the
deoxyribonucleic acid molecule.
Rescue Therapy........................ Therapy employed to alleviate the side effects of chemotherapy.
Sodium Leucovorin..................... A proprietary, new form of chemically synthesized folinic acid.
Urokinase............................. An enzyme produced by the body that is responsible for the dissolution of
blood clots.
</TABLE>
67
<PAGE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
<PAGE>
BIGMAR, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Bigmar, Inc. and subsidiaries
Report of Independent Auditors........................................................................ F-2
Consolidated Balance Sheets........................................................................... F-3
Consolidated Statements of Operations................................................................. F-4
Consolidated Statements of Changes in Stockholders' Equity............................................ F-5
Consolidated Statements of Cash Flows................................................................. F-6
Notes to Consolidated Financial Statements............................................................ F-7
Bioren SA
Report of Independent Auditors........................................................................ F-15
Statements of Operations.............................................................................. F-16
Statements of Cash Flows.............................................................................. F-17
Notes to Financial Statements......................................................................... F-18
Bigmar, Inc. and subsidiaries
Pro forma Statements of Operations.................................................................... F-20
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
BIGMAR, INC.
We have audited the accompanying consolidated balance sheets of Bigmar,
Inc., and subsidiaries as at December 31, 1994 and December 31, 1995 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1995. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 enumerated above present fairly,
in all material respects, the consolidated financial position of Bigmar, Inc.
and Subsidiaries, as at December 31, 1994 and December 31, 1995, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
RICHARD A. EISNER & COMPANY, LLP
New York, New York
March 25, 1996
With respect to Note 1,
April 16, 1996
With respect to Note 11D
March 29, 1996
F-2
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
---------- ----------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 117,475 $ 1,325,603 $ 1,007,555
Accounts receivable, net of allowances of $39,039, $51,948 and
$50,378 at December 31, 1994, December 31, 1995 and March 31,
1996, respectively.............................................. 458,240 1,588,345 1,971,783
Due from related party............................................ 170,648
Inventory (Notes 3 and 4)......................................... 1,986 1,051,948 1,132,620
Prepaid expenses and other current assets......................... 1,187 112,668 115,565
---------- ----------- -----------
Total current assets......................................... 578,888 4,249,212 4,227,523
Property, plant and equipment, at cost, less accumulated depreciation
and amortization (Notes 3 and 5)..................................... 1,594,733 10,717,834 12,425,939
Deposits on equipment.................................................. 1,567,661
Goodwill (Notes 1 and 3)............................................... 328,564 320,350
Deferred charges and other assets...................................... 97,516 508,802
---------- ----------- -----------
Total........................................................ $2,173,621 $15,393,126 $19,050,275
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................. $ 51,948 50,378
Accounts payable.................................................. $ 451,471 826,532 1,602,014
Note payable (Note 6)............................................. 1,960,385 1,847,184
Due to related parties............................................ 175,440
Advances on reimbursable expenses (Note 11)....................... 750,000
Accrued expenses and other current liabilities.................... 28,891 357,834 240,318
---------- ----------- -----------
Total current liabilities.................................... 480,362 3,196,699 4,665,334
Long-term debt (Note 7)................................................ 1,154,073 6,475,499 7,672,931
Accounts payable-equipment (Note 7).................................... 1,071,821
Related party loan (Note 8)............................................ 346,694 1,809,524 1,794,312
---------- ----------- -----------
Total liabilities............................................ 1,981,129 11,481,722 15,204,398
---------- ----------- -----------
Stockholders' equity (Notes 1, 9 and 16):
Preferred Stock ($.001 par value; 5,000,000 shares authorized;
none issued)....................................................
Common stock ($.001 par value; 15,000,000 shares authorized;
400,188 shares issued and outstanding December 31, 1994,
2,375,000 shares issued and outstanding December 31, 1995 and
March 31, 1996)................................................. 400 2,375 2,375
Additional paid in capital........................................ 89,690 3,900,875 3,900,875
Cumulative translation adjustment................................. 260 3,216 (113,992)
Retained earnings................................................. 102,142 4,938 56,619
---------- ----------- -----------
Total stockholders' equity................................... 192,492 3,911,404 3,845,877
---------- ----------- -----------
Total........................................................ $2,173,621 $15,393,126 $19,050,275
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-3
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ------------------------
1993 1994 1995 1995 1996
-------- -------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales (Note 14)............................ $264,077 $707,627 $5,600,362 $1,185,710 $1,898,002
Cost of goods sold............................. 182,075 611,040 4,001,891 1,059,955 1,151,099
-------- -------- ---------- ---------- ----------
Gross margin................................... 82,002 96,587 1,598,471 125,755 746,903
-------- -------- ---------- ---------- ----------
Operating expenses:
Research and development.................. 23,144 88,394
Selling, general and administrative....... 50,810 16,269 1,493,055 21,452 547,463
-------- -------- ---------- ---------- ----------
Total................................ 50,810 16,269 1,516,199 21,452 635,857
-------- -------- ---------- ---------- ----------
Operating income............................... 31,192 80,318 82,272 104,303 111,046
Other income................................... 7,927 24,095
Interest expense (income)...................... (387) (966) 182,476 (9,168) 83,460
-------- -------- ---------- ---------- ----------
Income (loss) before income taxes.............. 31,579 89,211 (100,204) 113,471 51,681
-------- -------- ---------- ---------- ----------
Income taxes (benefit) (Note 9):
Current................................... 1,296 1,553 13,000 20,100 5,400
Deferred.................................. 7,000 9,000 (16,000) 2,600 (5,400)
-------- -------- ---------- ---------- ----------
8,296 10,553 (3,000) 22,700 0
-------- -------- ---------- ---------- ----------
Net income (loss).............................. $ 23,283 $ 78,658 $ (97,204) $ 90,771 $ 51,681
-------- -------- ---------- ---------- ----------
-------- -------- ---------- ---------- ----------
Net income (loss) per share.................... $0.06 $0.20 ($0.07) $0.23 $0.02
Weighted average shares outstanding............ 400,188 400,188 1,337,292 400,188 2,375,000
-------- -------- ---------- ---------- ----------
-------- -------- ---------- ---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-4
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
NUMBER CUMULATIVE
OF ADDITIONAL PAID RETAINED TRANSLATION
SHARES AMOUNT IN CAPITAL EARNINGS ADJUSTMENT
--------- ------ --------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance -- December 31, 1992..................... 400,188 $ 400 $ 89,690 $ 201
Net income, year ended
December 31, 1993.............................. 23,283
--------- ------ --------------- -------- -----------
Balance -- December 31, 1993..................... 400,188 400 89,690 23,484
Net income, year ended
December 31, 1994.............................. 78,658
Translation adjustment........................... $ 260
--------- ------ --------------- -------- -----------
Balance -- December 31, 1994..................... 400,188 400 89,690 102,142 260
Purchase of Bioren SA by stockholders of the
Company........................................ 350,312 350 2,599,199
Issuance of common stock to Bigmar
Pharmaceuticals stockholders................... 1,600,750 1,601 1,207,010
Issuance of common stock to Bigmar Inc.,
stockholders................................... 23,750 24 4,976
Net (loss), year ended December 31, 1995......... (97,204)
Translation adjustment........................... 2,956
--------- ------ --------------- -------- -----------
Balance -- December 31, 1995..................... 2,375,000 2,375 3,900,875 4,938 3,216
Net income, three months ended March 31, 1996.... 51,681
Translation adjustment........................... (117,208)
--------- ------ --------------- -------- -----------
Balance -- March 31, 1996 (unaudited)............ 2,375,000 $2,375 $ 3,900,875 $ 56,619 $ (113,992)
--------- ------ --------------- -------- -----------
--------- ------ --------------- -------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-5
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- --------------------------
1993 1994 1995 1995 1996
-------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ 23,283 $ 78,658 $ (97,204) $ 90,771 $ 51,681
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................ 174,184 48,743
Loss on sale of equipment.................... 48,693
Changes in operating assets and liabilities:
(Increase) in accounts receivable........ (25,393) (421,634) (424,712) (191,607) (425,615)
(Increase) decrease in related party
receivable............................. (170,648) 163,975
(Increase) decrease in inventory......... (1,943) 578,755 2,172 (111,439)
(Increase) decrease in other current
assets................................. 1,295 (1,160) 206,671 1,297 95,522
Increase in due to related party......... 68,013
(Increase) in other assets............... (37,782)
Increase in accounts payable............. 8,112 430,073 492,777 537,083 793,198
Increase in advances on reimbursable
expenses............................... 750,000
Increase (decrease) in accrued expenses
and other current liabilities.......... 30,704 (7,048) 29,634 (8,264) (105,729)
-------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities......................... 38,001 76,946 800,368 431,452 1,328,349
-------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment........ (1,560,488) (3,120,133) (965,463) (988,633)
Deposits on equipment............................ (1,553,315)
Purchase of Bioren SA (net of cash acquired)..... (2,306,561)
Increase of other assets......................... (35,324) (240,566)
Proceeds from sale of equipment.................. 255,972
-------- ----------- ----------- ----------- -----------
Net cash (used in) investing
activities......................... (1,560,488) (5,206,046) (965,463) (2,782,514)
-------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Short-term borrowings............................ 20,140
Proceeds from issuance of common stock........... 1,182,474
Long-term borrowings............................. 1,467,711 4,355,955 1,621,933 1,409,731
Deferred offering costs.......................... (31,059) (141,515)
-------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities......................... 1,467,711 5,507,370 1,642,073 1,268,216
-------- ----------- ----------- ----------- -----------
Effect of exchange rate changes on cash.............. 411 10,096 106,436 73,141 (132,099)
-------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash...................... 38,412 (5,735) 1,208,128 1,181,203 (318,048)
Cash -- at beginning of period....................... 84,798 123,210 117,475 117,475 1,325,603
-------- ----------- ----------- ----------- -----------
Cash -- at end of period............................. $123,210 $ 117,475 $ 1,325,603 $ 1,298,678 $ 1,007,555
-------- ----------- ----------- ----------- -----------
-------- ----------- ----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest....................................... $ 0 $ 36,032 $ 427,311 $ 0 $ 13,284
Income taxes................................... $ 809 $ 0 $ 12,195 $ 0 $ 8,673
Equipment purchases included in accounts payable --
equipment.......................................... $ 1,071,821
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 1) -- THE COMPANY:
Bigmar, Inc. (the 'Company') was formed in September 1995 by Chemholding
SA, Chemholding's principal stockholders and John G. Tramontana for the purpose
of manufacturing and distributing various oncological and biotechnical products
including six oncological products, the distribution rights to which were
acquired from affiliates of Chemholding SA. Certain stockholders of the Company
owned 100% of Bigmar Pharmaceuticals SA ('Pharmaceuticals') and 50% of Bioren SA
('Bioren'), two Swiss corporations. The other 50% of Bioren is owned by
Pharmaceuticals. On April 9, 1996 the Company acquired 100% of Pharmaceuticals
and 50% of Bioren in a stock for stock exchange. Since there was a high degree
of common ownership, the acquisition was accounted for as a reorganization of
companies under common control. Accordingly, the financial statements of the
Company have been restated to include the results of operations of
Pharmaceuticals for all periods presented and the results of Bioren from July 1,
1995, the date that Pharmaceuticals and certain stockholders of the Company
acquired their interests.
Pharmaceuticals is engaged in the distribution of oncological products in
various countries in Europe and Bioren is primarily a manufacturer and
distributor of intravenous infusion solutions in Switzerland. In addition, the
Company intends to become a manufacturer and a distributor of pharmaceutical
products and under the four collaborative agreements described in Note 11.
The Company intends to have an initial public offering of its common stock.
In connection therewith, the Company expects to incur significant costs which,
if the offering is not consummated, will be charged to expense.
In April, 1996 the stockholders of the Company contributed 99% of their
shares to the Company. Also in April, 1996, the Company restated and amended its
certificate of incorporation, increasing its authorized shares of common stock
from 10,000,000 to 15,000,000, authorizing 5,000,000 shares of preferred stock,
and effecting a 2.105262 for one reverse stock split. These transactions are
reflected retroactively in the accompanying financial statements.
(NOTE 2) -- BIOREN ACQUISITION:
On June 30, 1995, Pharmaceuticals acquired 100% of the outstanding stock of
Bioren for $5,195,000 and immediately sold 50% of the stock to certain
stockholders of Pharmaceuticals and the Company.
The consolidated financial statements include the accounts of Bioren from
July 1, 1995, the date of acquisition from a nonaffiliated party. Had the
acquisition of Bioren occurred at the beginning of 1994, the Company's results
would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
------------------------- MARCH 31,
1994 1995 1995
----------- ---------- ------------
<S> <C> <C> <C>
Sales............................................ $ 6,587,312 $8,529,327 $2,702,351
Gross profit..................................... 1,497,029 2,833,146 718,045
Income (loss) before extraordinary item.......... (2,905,744) 32,968 100,871
</TABLE>
(NOTE 3) -- SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PREPARATION:
The consolidated financial statements include the accounts of Bigmar, Inc.
and its wholly owned subsidiaries, Pharmaceuticals, Bioren and Bigmar
Therapeutics, Inc. ('Therapeutics'), a Delaware corporation formed in September
1995 to enter into a partnership agreement (see Note 11). All significant
intercompany accounts and transactions have been eliminated in the consolidated
financial statements.
F-7
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that afffect the reported amounts of 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of cash, trade receivables and trade payables
approximates the fair value because of the short maturity of those instruments.
For long-term debt, the carrying value approximates the fair value because
no major changes have occurred in the applicable interest rates.
INVENTORY:
Inventory is stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Maintenance and repairs
are charged to operations as incurred. Depreciation is calculated on a
straight-line basis utilizing the assets' estimated useful lives of 3 to 25
years.
ORGANIZATION EXPENSES:
Costs associated with the organization of the Company are capitalized and
amortized over five years.
GOODWILL:
Goodwill is amortized over a 10 year period. The Companies intend to
evaluate the continuing value of goodwill based on undiscounted cash flows.
INCOME TAXES:
Income taxes are accounted for by the asset/liability approach. Deferred
taxes arise from differences between the financial reporting and tax bases of
assets and liabilities.
FOREIGN CURRENCY TRANSACTIONS:
Gains and losses resulting from foreign currency transactions and changes
in foreign currency positions are included in income or expense currently. Such
amounts were insignificant in 1995, 1994, and 1993.
FOREIGN CURRENCY TRANSLATION:
The Company's operations are located in Switzerland and its net assets,
revenues and expenses are substantially all denominated in Swiss francs, while
the Company presents its consolidated financial statements in US dollars. Assets
and liabilities are translated at the exchange rates in effect at the balance
sheet date. Revenues and expenses are translated at the weighted average
exchange rates for the period. Net gains and losses arising upon translation of
local currency financial statements to US dollars are accumulated in a separate
component of stockholders' equity, the cumulative translation adjustment
account, which may be realized upon the eventual disposition by the Company of
part or all of its investments in its Swiss operations.
F-8
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PER SHARE DATA:
Net income (loss) per share is based on the weighted average number of
shares outstanding during each period after giving retroactive effect to the
reorganization, the capital contribution and the reverse stock split, all
described in Note 1.
(NOTE 4) -- INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
------ ---------- ----------
<S> <C> <C> <C>
Raw materials..................................................... $ 519,414 $ 412,110
Finished goods.................................................... $1,986 532,534 720,510
------ ---------- ----------
Total........................................................ $1,986 $1,051,948 $1,132,620
------ ---------- ----------
------ ---------- ----------
</TABLE>
(NOTE 5) -- PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Building and building improvements......................... $1,551,288 $ 8,455,743 $ 9,815,669
Land....................................................... 121,212 117,548
Machinery.................................................. 43,445 2,205,390 2,591,503
Equipment.................................................. 66,162 75,357
---------- ----------- -----------
1,594,733 10,848,507 12,600,077
Less accumulated depreciation.............................. 130,673 174,138
---------- ----------- -----------
Total................................................. $1,594,733 $10,717,834 $12,425,939
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
For the years ended December 31, 1994, December 31, 1995 and the three
months ended March 31, 1996 interest of $40,000, $235,000 and $62,000,
respectively was capitalized. Such interest was incurred in connection with bank
and related party borrowings which were utilized to finance the construction of
the Pharmaceuticals facility. Total interest incurred, including such
capitalized amounts was approximately $40,000 and $417,000 in 1994 and 1995,
respectively and $12,000 and $145,000 for the three months ended March 31, 1995
and March 31, 1996, respectively.
(NOTE 6) -- NOTE PAYABLE:
The note payable of $1,960,385 and $1,847,184 at December 31, 1995 and
March 31, 1996, respectively is due to a company owned by the seller of Bioren
with interest at 6%. Repayment is due in 1996.
F-9
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(NOTE 7) -- LONG-TERM DEBT:
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
<S> <C> <C>
Bank loan collateralized by mortgage on the Bioren building, interest at
5.75% per annum through May 1999, adjustable thereafter; $50,378
repayable annually through 2045.......................................... $2,597,405 $2,518,892
Installment loan from seller of Bioren collateralized by a second mortgage
on the Bioren building, interest rate based on market rate on industrial
mortgages; rate at December 31, 1995 and March 31, 1996 was 5.5% per
annum; payable in installments of $419,815 in 1997, $419,815 in 1998 and
$839,631 in 1999......................................................... 1,731,602 1,679,261
Construction loans due to a bank under a $2,749,790 line of credit
agreement; partially secured by the Pharmaceuticals building and
equipment; interest at 5% through December 31, 1998, adjustable
thereafter; principal payable in equal annual installments commencing
December 31, 1997 through 2019(1)........................................ 575,065 1,973,728
Bank loan pursuant to a $1,847,187 line of credit agreement; collateralized
by mortgage on the Pharmaceuticals building and equipment; interest at 5%
through December 31, 1998, adjustable thereafter; principal payable
$167,926 per annum December 31, 1997 through June 30, 1999 then $293,871
per annum through 2005(1)................................................ 1,623,375 1,551,428
------------ ----------
6,527,447 7,723,309
Less balance due in less than one year..................................... (51,948) (50,378)
------------ ----------
$6,475,499 $7,672,931
------------ ----------
------------ ----------
</TABLE>
- ------------
(1) Accounts payable -- equipment of $1,071,821 will be paid using the remaining
proceeds of these credit facilities.
Future maturities of Long Term Debt are as follows:
<TABLE>
<CAPTION>
LONG TERM RELATED
YEAR ENDED DECEMBER 31, DEBT PARTY LOAN
- ------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
1996........................................................... $ 50,378
1997........................................................... 585,222 $ 179,432
1998........................................................... 764,064 179,432
1999........................................................... 1,246,852 179,431
2000........................................................... 470,192 179,431
Thereafter..................................................... 4,606,601 1,076,586
---------- ----------
$7,723,309 $1,794,312
---------- ----------
---------- ----------
</TABLE>
(NOTE 8) -- RELATED PARTY LOAN:
Pharmaceuticals owes $1,809,524 and $1,794,312 at December 31, 1995 and
March 31, 1996, respectively, to a company owned by certain stockholders of the
Company. This loan bears interest at 9% and is payable in semiannual
installments of $89,716 from June 30, 1997 through December 31, 2006. The
balance includes accrued interest of approximately $78,000 and $115,050 at
December 31, 1995 and March 31, 1996, respectively.
F-10
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(NOTE 9) -- LEGAL RESERVE:
The Swiss Federal Code of Obligation provides that at least 5% of a
company's net income each year must be appropriated to a legal reserve until
such time as this reserve equals 20% of the company's share capital. In
addition, 10% of any distribution in excess of a 5% dividend also must be
appropriated to the legal reserve. The legal reserve of up to 5% of the share
capital is not available for distribution.
(NOTE 10) -- INCOME TAXES:
Deferred income tax assets and liabilities are provided for temporary
differences between financial statement amounts and the amounts currently
taxable in the jurisdictions in which the Companies operate. Deferred taxes are
provided principally in relation to operating loss carryforwards of Bioren which
can only be utilized to offset future taxable income, if any, of Bioren for up
to six years after incurring the losses, depending on the applicable tax
legislation. The deferred tax asset at December 31, 1995 has been fully reserved
as the future utilization of such asset is uncertain.
The deferred tax asset as of December 31, 1995 and March 31, 1996, was as
follows:
<TABLE>
<S> <C>
Benefit of operating loss carryforwards of Bioren.................... $ 2,500,000
Valuation allowance.................................................. (2,500,000)
-----------
Total........................................................... $ 0
-----------
-----------
</TABLE>
The tax charge in Switzerland is an accumulation of the taxes due to the
city, the canton (state) and the federal authorities. Therefore, the tax burden
varies from one entity to another depending upon its location. While the actual
tax rate is a function of the percentage of profitability in relation to taxable
equity, the Companies believe that 20% is a fair approximation of their
effective cumulative tax rates. In addition, as Swiss tax laws do not permit
consolidated tax filings, possible tax losses in one entity do not offset
taxable income in another.
On January 1, 1995, a new federal tax law, and for most Swiss cantons, a
new cantonal tax law, came into force in Switzerland. The new laws provide for a
change in the system of assessment from a two-year past assessment period to a
one-year current assessment period. Because these changes may create a gap
during which certain profits made in prior years may not be taxed or may be only
partially taxed, the new laws have provided for a transition period during which
a special method is followed to calculate income taxes. Since the 1995 taxes due
based on the old methods of assessment had been fully accrued for during 1993
and 1994, the 1995 tax charge only relates to the adjustment needed based on the
1995 income.
A reconciliation between the actual income tax expense and income taxes
computed by applying the United States Federal income tax rate of 34% to
earnings before taxes is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ ------------------
1993 1994 1995 1995 1996
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Computed income taxes (benefit) at 34% rate..... $10,737 $30,332 $(34,069) $38,580 $17,572
Impact of difference between Swiss effective
rate and US tax rate.......................... (4,421) (12,490) 14,029 (15,886) (7,235)
Increase (decrease) in valuation reserve on
deferred tax assets resulting from net
operating loss carryforwards.................. 14,868 (10,337)
Other........................................... 1,980 (7,289) 2,172 6
------- ------- -------- ------- -------
$ 8,296 $10,553 $ (3,000) $22,700 $ 0
------- ------- -------- ------- -------
------- ------- -------- ------- -------
</TABLE>
F-11
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(NOTE 11) -- COLLABORATIVE AGREEMENTS WITH RELATED PARTIES:
(A) THE CERNELLE AGREEMENT:
On November 5, 1995 Pharmaceuticals entered into an exclusive distribution
and supply agreement ('Cernelle Agreement') with AB Cernelle, a Swedish
corporation owned by a principal stockholder of Bigmar ('Cernelle'). The
Cernelle Agreement provides that Pharmaceuticals shall be the exclusive
worldwide distributor of certain oral dosage cancer products ('Cernelle
Products') and is for a term of 15 years from the date of the first commercial
sale by Pharmaceuticals of the Cernelle Products. Pharmaceuticals shall pay to
Cernelle a one-time amount of $100,000 upon notification by Cernelle that the
Cernelle Products are ready for shipment to Pharmaceuticals and shall purchase
the Cernelle Products at certain prices as defined in the agreement. In the
event the term of the Cernelle Agreement or any renewal thereof is not extended,
Pharmaceuticals shall have, at a minimum, a nonexclusive worldwide right to
distribute the Cernelle Products for three additional years.
Pharmaceuticals also entered into a technical services agreement, dated
November 5, 1995, with Cernelle ('Cernelle TSA'). The Cernelle TSA provides that
Cernelle will prepare abbreviated new drug applications ('ANDA') submissions to
the United States Food and Drug Administration ('FDA') covering the Cernelle
Products. Pharmaceuticals shall pay Cernelle a fee of $20,000 for each ANDA
submitted to and accepted by Pharmaceuticals. Pursuant to the agreement,
Cernelle assigned to Pharmaceuticals the sole and exclusive right, title and
interest in and to the technical services without further consideration. The
term of this agreement is for 15 years and is renewable on the mutual written
agreement of the parties.
(B) THE BIOFERMENT AGREEMENT:
Pharmaceuticals entered into a license and supply agreement dated November
14, 1995, with Bioferment, a division of Cerbios Pharma, a Swiss corporation
owned by a principal stockholder of Bigmar ('Bioferment'), which develops
pharmaceutical products. Subject to the payment of the license fees and subject
to a contingent license to manufacture and a security agreement, Bioferment
grants to Pharmaceuticals an exclusive paid-up license to make, use and sell
certain Bioferment products worldwide.
Pursuant to the agreement Pharmaceuticals shall pay to Bioferment a
$500,000 license fee, all of which is nonrefundable and shall be payable
$100,000 on July 1, 1996, and four further $100,000 payments as certain FDA
filing and approval milestones are met. The license fee shall be credited
against future royalty obligations due to Bioferment from Pharmaceuticals.
The agreement will terminate fifteen years after the first commercial sale
of the last Bioferment product introduced by Pharmaceuticals, its affiliates or
sublicensees.
On December 14, 1995, Pharmaceuticals and Bioferment entered into another
agreement for the worldwide exclusive distribution by Pharmaceuticals of
products derived from certain other Bioferment technologies. This agreement
requires a one-time payment by Pharmaceuticals of $100,000 and terminates
fifteen years from the date of the first commercial sale by Pharmaceuticals of
the products.
(C) THE SAPEC AGREEMENT:
Bioren entered into an exclusive distribution and supply agreement, dated
November 14, 1995, with Sapec, a division of Cerbios Pharma, a company owned by
a principal stockholder of Bigmar ('Sapec Agreement'). Sapec is a manufacturer
of pharmaceutical products for commercial distribution. Pursuant to the Sapec
Agreement, Bioren was appointed Sapec's exclusive worldwide distributor, subject
to certain exceptions, of products developed by Sapec. The Sapec Agreement
provides that Bioren obtain any private or public regulatory or licensing
approval necessary for Bioren or its designee to import, distribute and sell the
Sapec Products in any country throughout the world. Bioren shall pay Sapec a
one-time fee for the grant of such exclusive rights and licenses in the amount
of $100,000, which
F-12
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
is payable upon notification by Sapec that the Sapec Products are ready for
initial shipment to Bioren. The pricing for the Sapec Products is set forth in
the Sapec Agreement.
The Sapec Agreement shall continue for a term of fifteen years from the
date of first commercial sale by Bioren of Sapec Products and is renewable as
mutually agreed upon.
(D) THE PROTYDE AGREEMENTS:
Pursuant to an agreement dated as of October 1995 Therapeutics and a wholly
owned subsidiary of Protyde Pharmaceuticals, Inc. 'Protyde', have formed a
partnership, Protyde-Bigmar Therapeutics ('Partnership'), for the purpose of
coordinating the manufacture and marketing of certain pharmaceutical products
('products'), for the treatment of human cancer.
The business of the Partnership is to obtain FDA approval to market certain
products, to manufacture the products, and to market the products. Pursuant to
the Partnership Agreement, each of the partners initially has a 50% interest in
the Partnership. The Company will account for its investment in the Partnership
on the equity method. As its initial contribution to the Partnership, Protyde
will contribute to the Partnership up to $3,075,000 in cash, the first $750,000
of which was paid to the Company on March 29, 1996, with the balance to be
contributed at such times and in such amounts so as to enable the Partnership to
timely satisfy its obligations, and to make its payments under the terms of its
manufacturing agreement. As Therapeutics' capital contribution to the
Partnership, Therapeutics will cause the Company to make its manufacturing
capacity available to the Partnership under the terms of the manufacturing
agreement.
Under the Partnership Agreement, the Partnership is the sole owner of all
right, title and interest in all FDA-approved ANDAs for any products submitted
for approval by the Partnership. The Partnership is also the sole owner of all
right, title and interest in and to proprietary information and marketing
information which is developed or acquired by a partner or its affiliates, using
partnership funds, or while performing activities subject to reimbursement by
the Partnership. However, during the term of the Partnership each of the
partners has a royalty-free, worldwide right to use and practice any such
proprietary information and marketing information for any purpose outside the
scope of the Partnership's business.
Pursuant to the Partnership Agreement, the Partnership will continue until
December 31, 2005, unless earlier terminated.
The Company has entered into a manufacturing agreement with the Partnership
and Protyde has entered into a marketing agreement with the Partnership.
Pursuant to the manufacturing agreement, the Company's responsibilities include
(i) acquiring and performing stability testing on all raw materials and
packaging materials necessary for the manufacture of the products, (ii)
providing production capacity available to the Partnership in order to meet
production obligations, and (iii) undertaking all measures for quality control
which are either required by the FDA or requested by the Partnership.
(NOTE 12) -- COMMITMENTS:
EMPLOYMENT AGREEMENT:
In April 1996 the Company entered into a five year employment agreement
with its President and Chief Executive Officer providing for an annual salary of
$200,000, commencing upon consummation of the initial public offering subject to
increases based on the consumer price index, and bonuses of at least 25% of the
base salary.
The Company also intends to enter into a two-year employment agreement with
its Vice President and Chief Financial Officer providing for an annual salary of
$80,000 subject to an annual review and bonuses of 15% of the base salary.
F-13
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LEASES:
In March, 1996 the Company entered into an agreement to sublease executive
office space from a company of which the Company's President was formerly an
officer. The sublease is for a term of two years and provides for rent of
$22,315 per annum.
Bioren sub-leases part of its Couvet facility pursuant to a year to year
lease. The rental income from July 1, 1995 (date of acquisition of Bioren) to
December 31, 1995 and for the three months ended March 31, 1996 was $49,144 and
$24,095, respectively.
(NOTE 13) -- CONCENTRATION OF CREDIT RISK:
Bioren's main customers for intravenous products are hospitals located in
Switzerland. A significant number of these hospitals are owned by the canton
(state) or the city where they are located and the credit risk traditionally is
not significant. For other pharmaceutical products, the customers are privately
owned and credit risk is greater. The management has recorded its estimate of
credit loss through the allowance for doubtful accounts.
(NOTE 14) -- SIGNIFICANT CUSTOMERS:
Sales to significant customers were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------- ---------------------------------------
1994 1995 1995 1996
------------------ -------------------- ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- ---------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prostate materials (one customer)... $470,000 69% $1,023,340 18% $984,100 83% $ 0 0%
Oncological products (one
customer)......................... 214,000 30 668,511 12 0 0 210,000 11
</TABLE>
(NOTE 15) -- RELATED PARTY TRANSACTIONS:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------- -------------
1994 1995 1995 1996
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Freight charges paid to related party................................. $ 35
Purchases from related party.......................................... $31 206 $100
Selling, general and administrative expenses paid to related party.... 11 134 66
Interest paid to related parties...................................... 151 51
</TABLE>
(NOTE 16) -- COMMON STOCK:
The Company intends to adopt an option plan providing for the grant of
incentive stock options and non-qualified stock options to directors, officers,
employees, agents and consultants of the Company. The plan provides for the
grant of options to purchase up to 300,000 shares with exercise terms not to
exceed ten years. In addition, the Company intends to adopt a director option
plan providing for awards of up to 50,000 shares of Common Stock to directors
who are not otherwise affiliated with the Company.
F-14
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
BIOREN SA
We have audited the accompanying statements of operations and cash flows of
Bioren SA for the six months ended June 30, 1995 and for each of the years in
the two-year period ended December 31, 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 enumerated above present fairly,
in all material respects, the results of operations and cash flows of Bioren SA
for the six months ended June 30, 1995 and for each of the years in the two-year
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
RICHARD A. EISNER & COMPANY, LLP
New York, New York
March 25, 1996
F-15
<PAGE>
<PAGE>
BIOREN SA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
-------------------------- ENDED JUNE
1993 1994 30, 1995
----------- ----------- ----------
<S> <C> <C> <C>
Net sales............................................................. $ 4,103,921 $ 5,879,685 $2,928,965
Cost of goods sold.................................................... 3,558,350 4,479,243 1,694,290
----------- ----------- ----------
Gross profit.......................................................... 545,571 1,400,442 1,234,675
----------- ----------- ----------
Operating expenses:
Research and development......................................... 61,297 40,736 26,671
Selling, general and administrative.............................. 1,572,903 1,858,192 1,060,049
Loss on abandonment of building improvements and machinery....... 830,912 2,295,850
----------- ----------- ----------
Total....................................................... 2,465,112 4,194,778 1,086,720
----------- ----------- ----------
Operating income (loss)............................................... (1,919,541) (2,794,336) 147,955
Other income.......................................................... 283,305 94,178 57,969
Interest expense...................................................... 167,956 284,244 86,613
----------- ----------- ----------
Income (loss) before extraordinary income............................. (1,804,192) (2,984,402) 119,311
Extraordinary income -- forgiveness of bank indebtedness (Note 6)..... 1,468,429
----------- ----------- ----------
Net income (loss)..................................................... $(1,804,192) $(1,515,973) $ 119,311
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-16
<PAGE>
<PAGE>
BIOREN SA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
-------------------------- ENDED JUNE
1993 1994 30, 1995
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................. $(1,804,192) $(1,515,973) $ 119,311
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization................................ 1,636,559 741,132 15,448
Loss on abandonment of building improvements and machinery... 2,295,850
Gain on sale of equipment.................................... (8,954) (61,674)
Changes in operating assets and liabilities:
Decrease in accounts receivable......................... 840,870 392,784 178,667
(Increase) decrease in inventory........................ 345,997 36,711 (239,466)
(Increase) decrease in other current assets............. (26,557) 39,191 (264,213)
Increase (decrease) in accounts payable................. 193,476 (103,131) 151,400
Increase (decrease) in payable to related party......... (7,180,643) 526,671 630,917
Increase (decrease) in accrued expenses................. (109,390) (120,588) 121,050
----------- ----------- ----------
Net cash provided by (used in) operating
activities....................................... (6,112,834) 2,230,973 713,114
----------- ----------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment......................... (68,778) (100,124) (108,102)
Proceeds from sale of equipment................................... 45,115 61,674
----------- ----------- ----------
Net cash (used in) investing activities............ (23,663) (38,450) (108,102)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock............................ 678,426
Repayment of long-term borrowings................................. (2,909,324) (394,625)
Borrowings from parent company.................................... 5,452,816
----------- ----------- ----------
Net cash provided by (used in) financing
activities....................................... 6,131,242 (2,909,324) (394,625)
----------- ----------- ----------
Effect of exchange rate changes on cash................................ (3,336) 49,114 18,659
----------- ----------- ----------
Net increase (decrease) in cash........................................ (8,591) (667,687) 229,046
Cash at beginning of year.............................................. 777,833 769,242 101,555
----------- ----------- ----------
Cash at end of year.................................................... $ 769,242 $ 101,555 $ 330,601
----------- ----------- ----------
----------- ----------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest..................................................... $ 339,531 $ 319,110 $ 100,611
Income taxes................................................. 12,052 14,107 22,326
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
F-17
<PAGE>
<PAGE>
BIOREN SA
NOTES TO FINANCIAL STATEMENTS
(NOTE 1) -- NATURE OF BUSINESS:
Bioren SA ('Company') manufactures intravenous and pharmaceutical products
for the Swiss and foreign markets.
Bigmar Pharmaceuticals SA ('Pharmaceuticals') acquired 100% of the
outstanding stock of the Company on June 30, 1995 for $5,195,000 and immediately
sold 50% of the stock to certain shareholders of Pharmaceuticals and
shareholders of Bigmar, Inc., a Delaware corporation for $2,597,500.
(NOTE 2) -- SIGNIFICANT ACCOUNTING POLICIES:
INVENTORY:
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method. Provisions for obsolete items are recorded to the
extent considered necessary by the Company.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are carried at cost. Maintenance and repairs
are charged to operations. Depreciation is calculated on a straight-line basis
utilizing the assets' estimated useful lives of 3 to 25 years.
INCOME TAXES:
Income taxes are accounted for by the asset/liability approach. Deferred
taxes arise from differences between the financial reporting and tax bases of
assets and liabilities.
FOREIGN CURRENCY TRANSACTIONS
Gains and losses resulting from foreign currency transactions and changes
in foreign currency positions are included in income or expense currently. Such
amounts were insignificant for the six months ended June 30, 1995 and for each
of the years in the two year period ended December 31, 1994.
FOREIGN CURRENCY TRANSLATION
The Company's operations are located in Switzerland and its net assets,
revenues and expenses are substantially all denominated in Swiss francs, while
the Company presents its consolidated financial statements in US dollars. Assets
and liabilities are translated at the exchange rates in effect at the balance
sheet date. Revenues and expenses are translated at the weighted average
exchange rates for the period. Net gains and losses arising upon translation of
local currency financial statements to US dollars are accumulated in a separate
component of Stockholders' Equity, the Cumulative Translation Adjustment
account, which may be realized upon the eventual disposition by the Company of
part or all of its investments in its Swiss operations.
(NOTE 3) -- INCOME TAXES:
The tax charge in Switzerland is an accumulation of the taxes due to the
city, the canton (state) and the federal authorities. Therefore, the tax burden
varies from one entity to another depending upon its location. While the actual
tax rate is a function of the percentage of profitability in relation to taxable
equity, the Company believes that 20% is a fair approximation of its effective
cumulative tax rate.
On January 1, 1995, a new federal tax law, and for most Swiss cantons, a
new cantonal tax law, came into force in Switzerland. The new laws provide for a
change in the system of assessment from a two year past assessment period to a
one year current assessment period. Because these changes may create a gap
during which certain profits made in prior years may not be taxed or may be only
partially
F-18
<PAGE>
<PAGE>
BIOREN SA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
taxed, the new laws have provided for a transition period during which a special
method is followed to calculate income taxes. Since the 1995 taxes due based on
the old methods of assessment had been fully accrued for during 1993 and 1994,
the 1995 tax charge only relates to the adjustment needed based on the 1995
income.
There is no tax expense in 1995 due to the reduction of the valuation
allowance on the Company's deferred tax asset, resulting from the utilization of
the Company's operating loss carryforwards, offsetting the provision for income
taxes.
(NOTE 4) -- LEASE:
The Company leases part of its Couvet facility. The rental income for 1995,
1994 and 1993 was $49,144 (six months), $84,477 and $84,704, respectively.
(NOTE 5) -- RELATED PARTY TRANSACTIONS:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1993 1994 1995
------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt forgiveness from stockholder treated as additional paid-in capital............ $ 2,713 $1,468
Other selling, general and administrative expenses paid to stockholder............. 45 38 $117
Interest paid to stockholder....................................................... 135 47
Interest paid to a company owned by a principal stockholder of the Company......... 71 3 25
Consulting fees charged to stockholder............................................. 129
Gain on sale of machine to a company owned by a principal stockholder of the
Company.......................................................................... 23
</TABLE>
(NOTE 6) -- EXTRAORDINARY INCOME:
Extraordinary income of $1,468,429 consists of forgiveness of bank
indebtedness.
F-19
<PAGE>
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
PRO FORMA STATEMENTS OF OPERATIONS
The accompanying unaudited pro forma statement of operations combines the
results of operations of Bioren with the results of operations of the Company
for the year ended December 31, 1995 as if the acquisition of Bioren by the
Company had taken place on January 1, 1995. The pro forma statement of
operations is not necessarily indicative of results of operations that would
have resulted if the transaction had occurred at the earlier date. This
statement should be read in conjunction with the audited financial statements of
Bioren and the Company and the respective notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
BIGMAR, INC. BIOREN SA RESULTS OF
& SUBSIDIARIES SIX MONTHS OPERATIONS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, 1995 JUNE 30, 1995 DECEMBER 31, 1995
----------------- ------------- -----------------
<S> <C> <C> <C>
Net sales................................................. $ 5,600,362 $ 2,928,965 $ 8,529,327
Cost of goods sold........................................ 4,001,891 1,694,290 5,696,181
----------------- ------------- -----------------
Gross margin.............................................. 1,598,471 1,234,675 2,833,146
----------------- ------------- -----------------
Operating expenses:
Research and development............................. 23,144 26,671 49,815
Selling, general and administrative.................. 1,493,055 1,060,049 2,553,104
----------------- ------------- -----------------
Total........................................... 1,516,199 1,086,720 2,602,919
----------------- ------------- -----------------
Operating income.......................................... 82,272 147,955 230,227
Other income.............................................. 57,969 57,969
Interest expense (income)................................. 182,476 86,613 269,089
----------------- ------------- -----------------
Income (loss) before income taxes......................... (100,204) 119,311 19,107
----------------- ------------- -----------------
Income taxes (benefit):
Current.............................................. 13,000 13,000
Deferred............................................. (16,000) (16,000)
----------------- ------------- -----------------
(3,000) (3,000)
----------------- ------------- -----------------
Net income (loss)......................................... $ (97,204) $ 119,311 $ 22,107
----------------- ------------- -----------------
----------------- ------------- -----------------
</TABLE>
F-20
<PAGE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
<PAGE>
[Photograph of manufacturing equipment at the Company's
Couvet, Switzerland facility.]
The Company manufactures 14 types of intravenous infusion solutions at its
state-of-the-art facility in Couvet, Switzerland and markets these solutions in
Switzerland and Lichtenstein through its sales force.
[Photograph of quality control equipment at the Company's
Couvet, Switzerland facility.]
The Company's 57,000 square foot facility in Couvet, Switzerland includes
laboratories for quality assurance and quality control activity.
<PAGE>
<PAGE>
_______________________________ _______________________________
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
The Company.................................... 18
Use of Proceeds................................ 20
Dividend Policy................................ 21
Capitalization................................. 22
Dilution....................................... 23
Selected Financial Data........................ 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 26
Business....................................... 34
Management..................................... 51
Principal Stockholders......................... 58
Certain Transactions........................... 59
Description of Capital Stock................... 61
Shares Eligible for Future Sale................ 63
Underwriting................................... 64
Legal Matters.................................. 66
Experts........................................ 66
Additional Information......................... 66
Glossary....................................... 67
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,250,000 SHARES
BIGMAR, INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
LT LAWRENCE & CO., INC.
, 1996
_______________________________ _______________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses of the Company ('Registrant') in
connection with the issuance and distribution of the common stock being
registered.
<TABLE>
<S> <C>
SEC registration fee.............................................................. $ 5,000
NASD filing fee................................................................... 2,000
Listing fees...................................................................... 30,000
Printing and engraving expenses................................................... 200,000
Fees and expenses of counsel...................................................... 325,000
Fees and expenses of accountants.................................................. 90,000
Transfer agent and registrar fees................................................. 4,000
Blue sky fees and expenses........................................................ 50,000
Representative's non-accountable expense allowance................................ 250,000
Miscellaneous..................................................................... 19,000
--------
Total........................................................................ $975,000
--------
--------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law ('DGCL'), the
Registrant has broad powers to indemnify its directors, officers and other
employees. This section (i) provides that the statutory indemnification and
advancement of expenses provisions of the DGCL are not exclusive, provided that
no indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled, (ii) establishes procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the stockholders or directors or an
agreement providing for indemnification and advancement of expenses, (iii)
applies a single standard for statutory indemnification for third-party and
derivative suits by providing that indemnification is available if the director
or officer acted in good faith, for a purpose which he reasonably believed to be
in the best interests of the corporation, and, in criminal actions, had no
reasonable cause to believe that his conduct was unlawful, and (iv) permits the
advancement of litigation expenses upon receipt of an undertaking to repay such
advance if the director or officer is ultimately determined not to be entitled
to indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 145(g) the
DGCL permits the purchase of insurance to indemnify a corporation or its
officers and directors to the extent permitted.
As permitted by Section 145(e) of the DGCL, the Registrant's By-laws
provide that the Registrant shall indemnify its officers and directors, as such,
to the fullest extent permitted by applicable law, and that expenses reasonably
incurred by any such officer or director in connection with a threatened or
actual action or proceeding shall be advanced or promptly reimbursed by the
Registrant in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of such officer or director to repay
such amount if and to the extent that it is ultimately determined that such
officer or director is not entitled to indemnification.
Article Sixth of the Registrant's Restated and Amended Certificate of
Incorporation provides that no director of the Registrant shall be personally
liable to the Registrant or its stockholders for monetary damages for breaches
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
II-1
<PAGE>
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is information as to securities of the Registrant sold
within the past three years which were not registered under the Securities Act.
The issuance of all such securities were made in reliance upon an exemption from
the registration provisions of the Securities Act afforded by Section 4(2)
thereof, as transactions by an issuer not involving a public offering. The
Registrant will place stop transfer instructions with its transfer agent with
respect to all such securities. No underwriters were involved in any of the
sales so there were no underwriting discounts or commissions.
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE AGGREGATE
SHARES CASH NON-CASH
STOCKHOLDER DATE SOLD CONSIDERATION CONSIDERATION
- --------------------------------- ---------- --------- ------------- -----------------------------
<S> <C> <C> <C> <C>
Chemholding SA .................. 9/28/95 10,094* $ 2,125
John G. Tramontana............... 9/28/95 9,889* 2,082
Fabio Giovannini................. 9/28/95 919* 193
Giovanni Pelli................... 9/28/95 712* 150
Maria Pia Melera................. 9/28/95 712* 150
PierAngelo Ghirlanda............. 9/28/95 712* 150
Jan Jacob van Troostenburg de
Bruyn.......................... 9/28/95 712* 150
Chemholding SA .................. 4/10/96 1,000,469** 750 shares of Bigmar
Pharmaceuticals SA
John G. Tramontana............... 4/10/96 900,422** 675 shares of Bigmar
Pharmaceuticals SA
Fabio Giovannini................. 4/10/96 100,046** 75 shares of Bigmar
Pharmaceuticals SA
John G. Tramontana............... 4/10/96 63,057** 450 shares of Bioren SA
Giovanni Pelli................... 4/10/96 70,063** 500 shares of Bioren SA
Maria Pia Melera................. 4/10/96 70,063** 500 shares of Bioren SA***
PierAngelo Ghirlanda............. 4/10/96 70,063** 500 shares of Bioren SA
Jan Jacob van Troostenburg de
Bruyn.......................... 4/10/96 70,063** 500 shares of Bioren SA
Fabio Giovannini................. 4/10/96 7,003** 50 shares of Bioren SA
</TABLE>
- ------------
* The above numbers of shares are reflected after the contribution to the
Registrant of 999,281, 979,061, 90,756, 70,538, 70,538, 70,538 and 70,538 by
Chemholding SA, Mr. Tramontana, Mr. Giovannini, Mr. Pelli, Ms. Melera, Mr.
Ghirlanda and Mr. van Troostenburg, respectively.
** Such shares were issued in a stock-for-stock exchange for all of the
outstanding capital stock of Bigmar Pharmaceuticals SA and Bioren SA.
*** Owned by Attilio Melera.
II-2
<PAGE>
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
----------------------------- -------------------------------------------------------------------------------------------------
<S> <C>
1.1`DD' -- Form of Underwriting Agreement
3.1* -- Restated and Amended Certificate of Incorporation of the Registrant
3.1(a)`DD' -- Certificate of Correction to Restated and Amended Certificate of Incorporation of the
Registrant
3.2* -- Restated By-Laws of the Registrant
4.1** -- Specimen Common Stock Certificate
5.1** -- Opinion of Rubin Baum Levin Constant & Friedman
10.1`DD' -- Form of Representative's Warrant
10.2*** -- Partnership Agreement, dated as of October 1995, between Bigmar Therapeutics, Inc. and Protyde
Oncology Therapeutics, Inc.
10.3*** -- Sales and Marketing Agreement, dated as of October 1995, between Protyde-Bigmar Therapeutics
and Protyde Corporation
10.4*** -- Manufacturing Agreement, dated as of October 1995, between Protyde-Bigmar Therapeutics and the
Registrant
10.5`DD' -- Sublease Agreement, dated as of March 1, 1996, between the Registrant and Cernitin America,
Inc.
10.6`DD' -- Form of Indemnification Agreement
10.7`DD' -- Form of Employment Agreement, between the Registrant and John G. Tramontana
10.8`DD' -- Form of Medical Advisory Agreement
10.9`DD' -- Form of Scientific Advisory Agreement
10.10*** -- Exclusive Distribution and Supply Agreement, dated November 5, 1995, between Bigmar
Pharmaceuticals SA and AB Cernelle
10.11* -- Technical Services Agreement, dated November 5, 1995, between Bigmar Pharmaceuticals SA and AB
Cernelle
10.12*** -- License and Supply Agreement, dated November 14, 1995, between Bigmar Pharmaceuticals SA and
Bioferment division of Cerbios Pharma SA.
10.13*** -- Exclusive Distribution and Supply Agreement, dated as of December 14, 1995, between Bigmar
Pharmaceuticals SA and Bioferment division of Cerbios Pharma SA
10.14*** -- Exclusive Distribution Agreement, dated November 14, 1995, between Bioren SA and SAPEC
division of Cerbios Pharma SA
10.15* -- Stock for Stock Exchange Agreement, dated April 9, 1996, between the Registrant and its
stockholders
10.16* -- Contribution Agreement, dated April 8, 1996, between the Registrant and its stockholders
10.17***`DD'`DD' -- Exclusive Distribution Agreement, dated December 22, 1995, between Bigmar Pharmaceuticals SA
and Boehringer Mannheim Italia S.p.A.
10.18*** -- International Activities Agreements, dated March 3, 1994, between Bigmar Pharmaceuticals SA
and Medac GmbH
10.19*** -- Distribution Agreement, dated October 10, 1994 between Bigmar Pharmaceuticals SA and Pharma
Stroschein GmbH
10.20*** -- Distribution Agreement, dated July 31, 1995, between Bigmar Pharmaceuticals SA and
Laboratorios Vita S.A.
10.21*** -- Supply and Collaboration Agreement, dated March 8, 1995, between Bioren SA and PLM Langeskov
A/S
10.22*** -- Agreement, dated December 21, 1995, between Laevosan International AG and Bigmar
Pharmaceuticals SA
10.23** -- Mortgage, dated September 11, 1995, between Bioren SA and Union Bank of Switzerland and
related loan documentation
10.24** -- Mortgage between Bigmar Pharmaceuticals SA and Union Bank of Switzerland
10.25`DD' -- Registrant's 1996 Stock Option Plan and related loan documentation
10.26`DD' -- Form of Non-qualified Stock Option Agreement under the 1996 Stock Option Plan
10.27`DD' -- Form of Incentive Stock Option Agreement under the 1996 Stock Option Plan
10.28** -- Registrant's Director Option Plan
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
----------------------------- -------------------------------------------------------------------------------------------------
<S> <C>
10.29* -- Acquisition Agreement, dated June 22, 1995, between Galenica Holding AG and the Registrant
10.30`DD' -- Extension of Licensing Agreement, dated October 27, 1995, between Dr. F. Messi Cell Culture
Technologies and Bigmar Pharmaceuticals SA
10.31** -- Agreements between Bigmar Pharmaceuticals SA and Unione Farmaceutica SA
21.1* -- Subsidiaries of the Company
23.1`DD' -- Consent of Richard A. Eisner & Company, LLP
23.2** -- Consent of Rubin Baum Levin Constant & Friedman (contained in Exhibit 5.1)
23.3* -- Consent of Wenger Mathys Plattner
23.4* -- Consent of Hyman, Phelps & McNamara, P.C.
24.1* -- Power of Attorney (contained on the signature page to the Registration Statement)
27 `DD' -- Financial Data Schedule
99.1* -- Consent of Eric M. Chen, director designee
99.2`DD' -- Consent of James M. McCormick, director designee
99.3* -- Consent of Thomas W. D'Alonzo, director designee
</TABLE>
- ------------
`DD' Filed herewith.
* Previously filed.
** To be filed by amendment.
*** Previously filed in redacted form subject to a request for confidential
treatment pursuant to Rule 406 under the Securities Act with the initial
filing of this Registration Statement. The confidential information that has
been omitted has been filed separately with the Commission with the request
for confidential treatment.
`DD'`DD' Previously filed in the original foreign language version and the
English translation of the agreement.
(b) Financial Statement Schedules:
All Schedules are omitted because of the absence of conditions under which
they are required or because the required information is included in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes the following:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the
II-4
<PAGE>
<PAGE>
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Offering.
(b) To provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d)(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement No. 333-3830 on
Form S-1, to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus, State of Ohio, on May 30, 1996.
BIGMAR, INC.
By: /S/ JOHN G. TRAMONTANA
.................................
JOHN G. TRAMONTANA
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement No. 333-3830 on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ JOHN G. TRAMONTANA Chairman of the Board of Directors, May 30, 1996
......................................... President and Chief Executive Officer
(JOHN G. TRAMONTANA) (Principal Executive Officer)
/s/ MICHAEL K. MEDORS Treasurer, Secretary and Director May 30, 1996
......................................... (Principal Financial Officer)
(MICHAEL K. MEDORS) (Principal Accounting Officer)
/s/ BERNARD KRAMER Vice President and Director May 30, 1996
.........................................
(BERNARD KRAMER)
</TABLE>
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION
OF EXHIBIT
IN SEQUENTIAL
NUMBERING
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT SYSTEM
- --------------- -------------------------------------------------------------------------------------------------- --------------
<S> <C> <C>
1.1`DD' -- Form of Underwriting Agreement................................................................
3.1* -- Restated and Amended Certificate of Incorporation of the Registrant...........................
3.1(a)`DD' -- Certificate of Correction to Restated and Amended Certificate of Incorporation of the
Registrant....................................................................................
3.2* -- Restated By-Laws of the Registrant............................................................
4.1** -- Specimen Common Stock Certificate.............................................................
5.1** -- Opinion of Rubin Baum Levin Constant & Friedman...............................................
10.1`DD' -- Form of Representative's Warrant..............................................................
10.2*** -- Partnership Agreement, dated as of October 1995, between Bigmar Therapeutics, Inc. and Protyde
Oncology Therapeutics, Inc....................................................................
10.3*** -- Sales and Marketing Agreement, dated as of October 1995, between Protyde-Bigmar Therapeutics
and Protyde Corporation.......................................................................
10.4*** -- Manufacturing Agreement, dated as of October 1995, between Protyde-Bigmar Therapeutics and the
Registrant....................................................................................
10.5`DD' -- Sublease Agreement, dated as of March 1, 1996, between the Registrant and Cernitin America,
Inc...........................................................................................
10.6`DD' -- Form of Indemnification Agreement.............................................................
10.7`DD' -- Form of Employment Agreement, between the Registrant and John G. Tramontana...................
10.8`DD' -- Form of Medical Advisory Agreement............................................................
10.9`DD' -- Form of Scientific Advisory Agreement.........................................................
10.10*** -- Exclusive Distribution and Supply Agreement, dated November 5, 1995, between Bigmar
Pharmaceuticals SA and AB Cernelle............................................................
10.11* -- Technical Services Agreement, dated November 5, 1995, between Bigmar Pharmaceuticals SA and AB
Cernelle......................................................................................
10.12*** -- License and Supply Agreement, dated November 14, 1995, between Bigmar Pharmaceuticals SA and
Bioferment division of Cerbios Pharma SA......................................................
10.13*** -- Exclusive Distribution and Supply Agreement, dated as of December 14, 1995, between Bigmar
Pharmaceuticals SA and Bioferment division of Cerbios Pharma SA...............................
10.14*** -- Exclusive Distribution Agreement, dated November 14, 1995, between Bioren SA and SAPEC
division of Cerbios Pharma SA.................................................................
10.15* -- Stock for Stock Exchange Agreement, dated April 9, 1996, between the Registrant and its
stockholders..................................................................................
10.16* -- Contribution Agreement, dated April 8, 1996, between the Registrant and its stockholders......
10.17***`DD'`DD' -- Exclusive Distribution Agreement, dated December 22, 1995, between Bigmar Pharmaceuticals SA
and Boehringer Mannheim Italia S.p.A..........................................................
10.18*** -- International Activities Agreements, dated March 3, 1994, between Bigmar Pharmaceuticals SA
and Medac GmbH................................................................................
10.19*** -- Distribution Agreement, dated October 10, 1994 between Bigmar Pharmaceuticals SA and Pharma
Stroschein GmbH...............................................................................
10.20*** -- Distribution Agreement, dated July 31, 1995, between Bigmar Pharmaceuticals SA and
Laboratorios Vita S.A.........................................................................
10.21*** -- Supply and Collaboration Agreement, dated March 8, 1995, between Bioren SA and PLM Langeskov
A/S...........................................................................................
10.22*** -- Agreement, dated December 21, 1995, between Laevosan International AG and Bigmar
Pharmaceuticals SA............................................................................
10.23** -- Mortgage, dated September 11, 1995, between Bioren SA and Union Bank of Switzerland and
related loan documentation....................................................................
10.24** -- Mortgage between Bigmar Pharmaceuticals SA and Union Bank of Switzerland and related loan
documentation.................................................................................
10.25`DD' -- Registrant's 1996 Stock Option Plan...........................................................
10.26`DD' -- Form of Non-qualified Stock Option Agreement under the 1996 Stock Option Plan.................
10.27`DD' -- Form of Incentive Stock Option Agreement under the 1996 Stock Option Plan.....................
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION
OF EXHIBIT
IN SEQUENTIAL
NUMBERING
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT SYSTEM
- --------------- -------------------------------------------------------------------------------------------------- --------------
<S> <C> <C>
10.28** -- Registrant's Director Option Plan.............................................................
10.29* -- Acquisition Agreement, dated June 22, 1995, between Galenica Holding AG and the Registrant....
10.30`DD' -- Extension of Licensing Agreement, dated October 27, 1995, between Dr. F. Messi Cell Culture
Technologies and Bigmar Pharmaceuticals SA....................................................
10.31** -- Agreements between Bigmar Pharmaceuticals SA and Unione Farmaceutica SA.......................
21.1* -- Subsidiaries of the Company...................................................................
23.1`DD' -- Consent of Richard A. Eisner & Company, LLP...................................................
23.2** -- Consent of Rubin Baum Levin Constant & Friedman (contained in Exhibit 5.1)....................
23.3* -- Consent of Wenger Mathys Plattner.............................................................
23.4* -- Consent of Hyman, Phelps & McNamara, P.C......................................................
24.1* -- Power of Attorney (contained on the signature page to the Registration Statement).............
27 `DD' -- Financial Data Schedule.......................................................................
99.1* -- Consent of Eric M. Chen, director designee....................................................
99.2`DD' -- Consent of James M. McCormick, director designee..............................................
99.3* -- Consent of Thomas W. D'Alonzo, director designee..............................................
</TABLE>
- ------------
`DD' Filed herewith.
* Previously filed.
** To be filed by amendment.
*** Previously filed in redacted form subject to a request for confidential
treatment pursuant to Rule 406 under the Securities Act with the initial
filing of this Registration Statement. The confidential information that has
been omitted has been filed separately with the Commission with the request
for confidential treatment.
`DD'`DD' Previously filed in the original foreign language version and the
English translation of the agreement.
STATEMENT OF DIFFERENCES
------------------------
The double dagger symbol shall be expressed as `DD'
The service mark symbol shall be expressed as 'sm'
<PAGE>
<PAGE>
1,250,000 SHARES OF COMMON STOCK
BIGMAR, INC.
UNDERWRITING AGREEMENT
June __, 1996
LT Lawrence & Co., Inc.
350 Park Avenue
New York, New York 10022
as the Representative of the several
Underwriters named in Schedule I
attached hereto.
Ladies and Gentlemen:
The undersigned, Bigmar, Inc., a Delaware corporation (the "Company"),
and each of the Subsidiaries (as defined in Section 2(e) below), hereby confirm
their agreement with you (the "Representative"), and the other underwriters
named in Schedule I hereto (the Representative and the other underwriters being
herein collectively referred to as the "Underwriters"), as follows:
1. General. Subject to the terms and conditions stated herein, the
Company proposes to issue and sell to the Underwriters 1,250,000 shares (the
"Firm Shares") of common stock, par value $.001 per share, of the Company (the
"Common Stock") and to sell to the Representative a warrant (the
"Representative's Warrant") which entitles the holders to purchase 125,000
shares of Common Stock until June __, 2001 at an exercise price of 120% of the
initial public offering price, subject to certain adjustments (the "Warrant
Shares"), which sale will be consummated in accordance with the terms and
conditions of the Representative's Warrant filed as an exhibit to the
Registration Statement described below. In addition, solely for the purpose of
covering over-allotments, if any, the Company proposes to grant the Underwriters
the option to purchase up to an additional 187,500 shares of Common Stock (the
"Additional Shares"). The Firm Shares and the Additional Shares are together
called the "Shares." The Shares, Representative's Warrant and Common Stock are
more fully described in the Prospectus referred to below.
<PAGE>
<PAGE>
2. Representations and Warranties of the Company and the Subsidiaries.
The Company and each Subsidiary, jointly and severally, represents and warrants
to, and agrees with, the several Underwriters that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and may have filed one or more
amendments thereto, on Form S-1 (Registration No. 333-3830), including in such
registration statement and each such amendment and related preliminary
prospectus, for the registration of the Shares under the Securities Act of 1933,
as amended (the "Act"). As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended, on file with the
Commission at the time such registration statement becomes effective under the
Act (including the prospectus, financial statements, exhibits, and all other
documents filed as a part thereof), provided, however, that such registration
statement, at the time it becomes effective under the Act, may omit such
information as is permitted to be omitted from such registration statement when
it becomes effective under the Act pursuant to Rule 430A of the General Rules
and Regulations of the Commission promulgated under the Act (the "Regulations"),
which information (the "Rule 430A Information") shall be deemed to be included
in such registration statement when a final prospectus is filed with the
Commission in accordance with Rules 430A and 424(b)(1) or (4) of the
Regulations; the term "Preliminary Prospectus" means each prospectus included in
the Registration Statement, or any amendments thereto, before the Registration
Statement becomes effective under the Act, the form of prospectus omitting the
Rule 430A Information included in the Registration Statement when the
Registration Statement becomes effective under the Act, if applicable (the "Rule
430A Prospectus"), and any prospectus filed by the Company with your consent
pursuant to Rule 424(a) of the Regulations; and the term "Prospectus" means the
final prospectus included as part of the Registration Statement in the form
first filed with the Commission pursuant to Rule 424(b)(1) or (4) of the
Regulations or, if no such filing is required, the final form of the prospectus
forming a part of the Registration Statement.
(b) When the Registration Statement becomes or became effective under
the Act, and at all times subsequent thereto, to and including the Closing Date
(as defined in Section 3) and each Additional Closing Date (as defined in
Section 3), and during such longer period as the Prospectus may be required to
be delivered in connection with sales by the Underwriters or a dealer, and
during such longer period until any post-effective amendment thereto shall
become effective under the Act, the Registration Statement (and any
post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement to the Registration Statement or the Prospectus) will contain all
statements which are required to be stated therein in accordance with the Act
and the Regulations, will comply with the Act and the Regulations in all
material respects, and will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading (or, in the case of the Prospectus,
will not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading), and no event will
have
2
<PAGE>
<PAGE>
occurred which should have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not then been set forth in
such amendment or supplement; if a Rule 430A Prospectus is contemplated at the
time the Registration Statement becomes effective under the Act, the Prospectus
filed pursuant to Rules 430A and 424(b)(1) or (4) of the Regulations will
contain all Rule 430A Information and all statements which are required to be
stated therein in accordance with the Act and the Regulations, will comply with
the Act and the Regulations in all material respects, and will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; and each Preliminary Prospectus, as of the
date filed with the Commission, contained all statements required to be stated
therein in accordance with the Act and the Regulations, complied with the Act
and the Regulations in all material respects, and did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. No representation or warranty is made in this
Section 2(b), however, with respect to statements in the Registration Statement
or the Prospectus, or any related Preliminary Prospectus or any amendment
thereof or supplement thereto, made in reliance upon, and in conformity with,
written information furnished to the Company as stated in Section 8(b) with
respect to any Underwriter expressly for inclusion in the Registration
Statement, the Prospectus, or any related Preliminary Prospectus, or any
amendment or supplement thereto.
(c) Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction has issued an order (a "Stop Order") suspending the
effectiveness of the Registration Statement, or preventing or suspending the use
of any Preliminary Prospectus, the Prospectus, the Registration Statement, or
any amendment or supplement thereto, or refusing to permit the effectiveness of
the Registration Statement, or suspending the registration or qualification of
the Shares, nor have any of such authorities instituted or threatened to
institute any proceedings with respect to a Stop Order.
(d) Any contract, agreement, instrument, lease, license, certification
or permit or other arrangement, whether written or oral, required by the Act or
the Regulations to be described in the Registration Statement or the Prospectus
has been properly described as required therein. Any contract, agreement,
instrument, lease, license, certification, permit or other arrangement required
to be filed as an exhibit to the Registration Statement has been filed with the
Commission as an exhibit to the Registration Statement. The statements in the
Registration Statement or the Prospectus summarizing the provisions of laws,
rules, regulations, contracts, leases and other arrangements, whether written or
oral, including, without limitation, the statements set forth under the captions
"Risk Factors -- Reliance on Collaborative Arrangements; Management Affiliations
with Collaborators," "Risk Factors -- Reliance on PLM," "Risk Factors --
Manufacturing Facilities for Proposed Products," "Risk Factors -- Uncertain
Protection of Patents and Proprietary Rights," "Risk Factors -- FDA,
International and Other Governmental Regulations," "Risk Factors --
Environmental Matters," "Risk Factors -- Dependence on Third-Party
Reimbursement; Price Controls; Health Care Reform Measures," "Risk Factors --
Potential Product Liability; Availability of Insurance; Risk of Product Recall,"
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"Business -- Products," "Business -- Proposed Products," "Business --
Collaborative Agreements," "Business -- Manufacturing and Suppliers," "Business
- -- Governmental Regulations," "Business -- Patents and Proprietary Rights,"
"Business -- Third-Party Reimbursement," "Business -- Environmental
Regulations," "Business -- Facilities," "Description of Capital Stock," "Certain
Transactions" and "Shares Eligible for Future Sale" and in Part II accurately
reflect the provisions of laws, rules, regulations, contracts, leases and other
arrangements purported to be summarized and there are no proposed amendments or
additions to any such provisions of laws, rules, regulations, contracts, leases
or other arrangements.
(e) The Company's only subsidiaries (as defined in the Regulations) are
(i) Bigmar Therapeutics, Inc. ("Bigmar Therapeutics" or the "Delaware
Subsidiary"), a Delaware corporation, (ii) Bigmar Pharmaceuticals SA ("Bigmar
Pharmaceuticals"), a Swiss corporation, and (iii) Bioren SA, a Swiss corporation
("Bioren," and together with Bigmar Therapeutics and Bigmar Pharmaceuticals,
collectively, the "Subsidiaries" or individually, a "Subsidiary"). The Company
owns directly or through a wholly owned subsidiary (as defined in the
Regulations) 100% of the issued and outstanding capital stock of each
Subsidiary. The Company and each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state or country of
its incorporation, with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of and
from, and declarations and filings with all Federal, state, local and other
governmental authorities and all courts and other tribunals having jurisdiction
over such entities (collectively, the "Consents, Licenses and Approvals") to
own, lease, license and use its properties and assets and to conduct its
businesses in the manner described in the Prospectus, except where the failure
to obtain such Consents, Licenses and Approvals would not have a material
adverse effect on the Company or any Subsidiary, individually or in the
aggregate (a "Material Adverse Effect"). The Company and each Subsidiary is duly
qualified to do business and is in good standing in every jurisdiction in which
its ownership, leasing, licensing or use of property and assets or the conduct
of its businesses makes such qualification necessary, except where the failure
to be so qualified would not have a Material Adverse Effect. Each of the Bioren
Acquisition, the Contribution, the Exchange and the Reverse Split has been duly
authorized by all necessary proceedings and has been consummated in accordance
with applicable law.
(f) The authorized capital stock of the Company consists of 15,000,000
shares of Common Stock, of which 3,625,000 shares are outstanding, 5,000,000
shares of Preferred Stock, $0.001 par value, of which there are no shares
outstanding. Each outstanding share of capital stock of the Company and each
Subsidiary is validly authorized and issued, fully paid and non-assessable,
without any personal liability attaching to the ownership thereof, and has not
been issued and is not owned or held in violation of any preemptive or other
similar rights of stockholders. There is no commitment, plan or arrangement to
issue, and no outstanding option, warrant or other right calling for the
issuance of, any share of capital stock of the Company or any Subsidiary or any
security or other instrument which by its terms is convertible into, exercisable
for, or exchangeable for capital stock of the Company or any Subsidiary, except
as described in the Prospectus. Except as set forth in the Prospectus, there is
outstanding no
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security or other instrument which by its terms is convertible into, or
exchangeable for, capital stock of the Company or any Subsidiary. The
certificates evidencing the Common Stock are in due and proper form.
(g) The financial statements of the Company and Bigmar Therapeutics
(including the notes thereto and the supporting schedules) included in the
Registration Statement and the Prospectus (the "Company Financial Statements")
comply in all material respects with the requirements of the Act and fairly
present the consolidated financial position, results of operations, cash flows,
and the other information purported to be shown therein at the respective dates
and for the respective periods to which they apply with respect to such
entities. The Company Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, are correct and complete in all material respects and are in
accordance with the books and records of the Company. The combined financial
statements of Bigmar Pharmaceuticals and Bioren and the financial statements of
Bioren (in each case including the notes thereto and the supporting schedules)
included in the Registration Statement and the Prospectus) (collectively, the
"Subsidiary Financial Statements") comply in all material respects with the
requirements of the Act and fairly present the financial position, results of
operations, cash flows, and the other information purported to be shown therein
at the respective dates and for the respective periods to which they apply with
respect to such entities. The Subsidiary Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, are correct and complete in all material
respects and are in accordance with the books and records of such Subsidiaries.
Richard A. Eisner & Company, LLP, the accountants whose report on the audited
financial statements is filed with the Commission as a part of the Registration
Statement, is, and during the periods covered by their report(s) included in the
Registration Statement and the Prospectus were, independent certified public
accountants with respect to the Company and each Subsidiary within the meaning
of the Act and the Regulations. No other financial statements are required by
Form S-1 or otherwise to be included in the Registration Statement or the
Prospectus. The assumptions used in preparing the pro forma financial
information included in the Prospectus under the captions "Summary Historical
and Pro Forma Financial Data," "Capitalization," "Dilution" and "Selected
Financial Data" are reasonable. The historical financial information appearing
in the Prospectus under the captions "Summary Historical and Pro Forma Financial
Data" and "Selected Financial Data" presents fairly the information purported to
be shown therein, on the basis stated in the Prospectus as of the dates and for
the periods indicated.
(h) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal) or investigation pending or, to the knowledge of
the Company and its Subsidiaries after due inquiry, threatened, or any basis
therefor known to the Company and its Subsidiaries, with respect to the Company
or any Subsidiary or any of their respective operations, businesses, properties
or assets. The Company and each Subsidiary is not in violation of, or in default
with respect to, any law, rule, regulation, order, judgment or decree, which
would now have, or will in the future have, a Material Adverse Effect, nor is
the
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Company or any Subsidiary required to take any action in order to avoid any such
violation or default of any order, judgment or decree.
(i) The Company and each Subsidiary has (1) good and marketable title
in fee simple absolute to all real properties, and good title to all other
properties and assets, which the Prospectus indicates are owned by it, free and
clear of all liens, claims, security interests, pledges, charges, encumbrances
and mortgages, except as described in the Prospectus, and (2) valid, subsisting
and enforceable leases for the property described in the Prospectus as leased by
it (except as described in the Prospectus). No real property owned, leased,
licensed or used by the Company or any Subsidiary lies in an area which is, or
to the knowledge of the Company and its Subsidiaries after due inquiry, will be,
subject to zoning, use or building code restrictions which would prohibit its
ownership, leasing, licensing or use or which would prevent the continued
effective ownership, leasing, licensing or use of such real property in the
business of the Company or any Subsidiary as presently conducted or as the
Prospectus indicates the Company or any Subsidiary will conduct in the future.
(j) Neither the Company nor any Subsidiary nor, to the knowledge of the
Company and its Subsidiaries after due inquiry, any other party, is now or is
expected to be in violation or breach of, or in default with respect to, any
material provision of any contract, agreement, instrument, lease, license,
arrangement or understanding to which the Company or any Subsidiary is a party
or by which its properties or assets may be bound, and each such contract,
agreement, instrument, lease, license, arrangement and understanding is in full
force and effect and is the legal, valid and binding obligation of the Company
or the Subsidiary, as the case may be, and is enforceable as to the Company or
the Subsidiary, as the case may be, in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the enforceability of creditors' rights generally, by equitable
principles and applicable laws governing indemnification and contribution
provisions. The Company and each Subsidiary enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating. Neither
the Company nor any Subsidiary is a party to, or bound by, any contract,
agreement, instrument, lease, license, arrangement or understanding, whether
written or oral, or subject to any charter or other restriction, which has had,
or is expected to have, a Material Adverse Effect. Neither the Company nor any
Subsidiary is in violation or breach of, or in default with respect to, any term
of its certificate of incorporation (or other charter document) or by-laws.
(k) All patents, patent applications, licenses, trademarks, trademark
applications, trade names, service marks, copyrights, franchises, licenses, and
other intangible properties and assets (all of the foregoing being herein called
"Intangibles") that the Company or any Subsidiary owns or has pending, or under
which it is licensed, are in good standing and, to the knowledge of the Company,
uncontested. There is no right under any Intangible necessary to the business of
the Company or any Subsidiary as presently conducted or as the Prospectus
indicates they contemplate conducting, except as described in the Prospectus.
Neither the Company nor any Subsidiary has infringed, is infringing, or has
received notice of infringement or conflict with respect to Intangibles of
others. Neither the Company nor any
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Subsidiary knows of any infringement by others of Intangibles of the Company
or any Subsidiary.
(l) The Company and each Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent, customary and adequate for the businesses in which it is
engaged, including, but not limited to, general liability insurance and
insurance covering real and personal property owned or leased by the Company or
any Subsidiary against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against by any company that is comparable to the
Company or any Subsidiary in terms of its respective financial condition, all of
which insurance is in full force and effect. Neither the Company nor any
Subsidiary has reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its respective
businesses at a cost that would not now have a Material Adverse Effect.
(m) Neither the Company nor any Subsidiary nor any director, officer,
agent, employee or other person associated with, or acting on behalf of, the
Company or any Subsidiary has, directly or indirectly, at any time since the
inception of the Company or any Subsidiary: used the funds of the Company or any
Subsidiary for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from funds of the Company or any Subsidiary; violated any
provision of the Foreign Corrupt Practices Act of 1977 (the "FCPA"), as amended;
or made any unlawful payment. The internal accounting controls and procedures of
the Company is sufficient to cause the Company to comply in all respects with
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
FCPA.
(n) The Company and each Subsidiary has all requisite power and
authority to execute, deliver and perform this Agreement and the
Representative's Warrant, as the case may be, and to consummate the transactions
contemplated hereby and thereby, including, but not limited to, the power and
authority to issue, sell and deliver the Shares and the Representative's Warrant
being delivered by the Company in accordance with and upon the terms set forth
in this Agreement and the Representative's Warrant. All necessary corporate
proceedings of the Company and each Subsidiary has been duly taken to authorize
the execution, delivery, and performance of this Agreement and the
Representative's Warrant by the Company and each Subsidiary, as the case may be,
and to consummate the transactions contemplated hereby and thereby. This
Agreement has been duly authorized, executed and delivered by the Company and
each Subsidiary, is the legal, valid and binding obligation of the Company and
each Subsidiary and is enforceable against the Company and each Subsidiary in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforceability of
creditors' rights generally, by equitable principles and applicable laws
governing indemnification and contribution provisions. The Representative's
Warrant has been duly authorized by the Company, and when executed and delivered
by the Company, will be the legal, valid and binding obligation of the Company
and enforceable against
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the Company in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting or relating to
creditors' rights generally and by equitable principles. No consent,
authorization, approval, order, registration, license, certificate, or permit of
or from, or declaration or filing with, any Federal, state, local or other
governmental or regulatory authority or any court or other tribunal having
jurisdiction over such entities is required for the execution, delivery or
performance by the Company and each Subsidiary of this Agreement or the
Representative's Warrant, as the case may be, or the consummation of the
transactions contemplated hereby and thereby (including the issuance, sale and
delivery of the Shares and Representative's Warrant to be issued, sold and
delivered by the Company), except filings under the Act which have been or will
be made before the Closing Date (as defined in Section 3) and such consents
consisting only of consents under "blue sky" or securities laws which have been
obtained at or prior to the date of this Agreement. No consent of any party to
any contract, agreement, instrument, lease, license, arrangement or
understanding to which the Company or any Subsidiary is a party, or to which the
Company's or any of the Subsidiaries' properties or assets is subject, is
required for the execution, delivery or performance of this Agreement or the
Representative's Warrant or the consummation of the transactions contemplated
hereby or thereby. The execution, delivery and performance of this Agreement and
the Representative's Warrant and the consummation of the transactions
contemplated hereby or thereby will not: (1) violate, result in a breach of any
of the terms and provisions of, conflict with, result in the creation or
imposition of any lien, charge or encumbrance upon any properties or assets of
the Company or any Subsidiary pursuant to the terms of, or, with or without the
giving of notice or the passage of time or both, entitle any party to terminate
or call a default under, any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company or any Subsidiary is a party
or by which its respective properties or assets may be bound; or (2) violate,
result in a breach of, or conflict with, any term of the certificate of
incorporation (or other charter document) or by-laws of the Company or any
Subsidiary; or (3) violate, result in a breach of, or conflict with, any law,
rule, regulation, order, judgment or decree of any court or any public,
governmental or regulatory authority having jurisdiction over the Company or any
Subsidiary or any of their respective operations, businesses, properties or
assets.
(o) The Shares are validly authorized and, when issued, delivered and
sold in accordance with this Agreement, will be validly issued and outstanding,
fully paid and non-assessable, without any personal liability attaching to the
ownership thereof and will not have been issued in violation of or subject to
any preemptive or similar rights of stockholders to subscribe for or to purchase
such Shares. The Underwriters will receive good and valid title to the Shares
purchased from the Company, free and clear of all liens, claims, security
interests, pledges, charges, encumbrances, stockholders' agreements and voting
trusts and other defects in title. The Shares and the Common Stock conform to
all statements relating thereto contained in the Registration Statement or the
Prospectus.
(p) The Representative's Warrant and the Warrant Shares are validly
authorized (and, in the case of the Warrant Shares, reserved for issuance), and,
when the Warrant Shares are issued and delivered upon exercise of the
Representative's Warrant in
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accordance with the terms thereof will be validly issued and outstanding, fully
paid and non-assessable, without any personal liability attaching to the
ownership thereof and will not have been issued in violation of or subject to
any preemptive or similar rights of stockholders to subscribe for or to purchase
the Representative's Warrant or the Warrant Shares. The holders of the
Representative's Warrant will receive good and valid title to the Warrant Shares
purchased by them, respectively, free and clear of all liens, claims, security
interests, pledges, charges, encumbrances, stockholders' agreements and voting
trusts and other defects in title. The Representative's Warrant and the Warrant
Shares conform to all statements relating thereto contained in the Registration
Statement or the Prospectus.
(q) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as may otherwise be
properly described in the Prospectus, neither the Company nor any Subsidiary
has: (i) issued any securities or incurred any liability or obligation, primary
or contingent, for borrowed money, (ii) entered into any transaction not in the
ordinary course of business, (iii) declared or paid any dividend on their
respective capital stock, (iv) experienced any adverse changes or any
development which is expected to materially adversely affect the condition
(financial or otherwise), net assets or stockholder's equity, operations,
business, key personnel, assets or properties of the Company or any Subsidiary,
individually or in the aggregate or (v) made any change in its capital stock or
made any issuance of options, warrants, convertible securities or other rights
to purchase the capital stock of the Company or any Subsidiary.
(r) Neither the Company or any Subsidiary nor any of the officers,
directors or affiliates (as defined in the Regulations) of the Company or any
Subsidiary, has taken or will take, directly or indirectly, any action designed
to stabilize or manipulate the price of any security of the Company, or which
has caused or resulted in, or which might reasonably be expected in the future
to cause or result in, stabilization or manipulation of the price of any
security of the Company or to facilitate the sale or resale of any the Shares.
(s) The Company has obtained from each of its directors, executive
officers (as defined in the Regulations), all persons deemed to be affiliates
(as defined in the Regulations) of the Company and from any other person who
beneficially owns shares of Common Stock (or any security or other instrument
which by its terms is convertible into, exercisable for, or exchangeable for,
shares of Common Stock) (collectively, the "Insiders") an enforceable written
agreement, in form and substance satisfactory to counsel for the
Representative, which provides that for a period of one (1) year from the date
of the Prospectus each Insider will not, without your prior written consent,
directly or indirectly, register, offer, sell, offer to sell, contract to sell,
grant an option for the sale of, assign, hypothecate, pledge or otherwise
dispose of any securities of the Company, other than the transfer of shares of
the Company's Common Stock by the Insiders to (i) any spouse, parent, sibling or
lineal descendants of the Insiders, (ii) any trust for the benefit of such
Insiders, (iii) any distributee, legatee or devisee of the Insiders who acquires
its shares by will or operation of law upon the death or dissolution of the
Insiders, or (iv) any current holder of capital stock of the Company, provided
that in each case such transferee agrees in writing to be bound by the terms of
this subsection to the same extent as if
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they were parties hereto. Notwithstanding the foregoing, the Representative
acknowledges that at the Closing Date no more than 12% of the Company's issued
and outstanding Common Stock held by certain Insiders may be pledged to third
parties.
(t) Neither the Company nor any Subsidiary is, or intends to conduct
its business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(u) No person or entity has the right to require registration of shares
of Common Stock or other securities of the Company or any Subsidiary.
(v) Neither the Company nor any Subsidiary has incurred any liability
for a fee, commission or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by this
Agreement.
(w) The Company and each Subsidiary is (1) in compliance with any and
all applicable Federal, state and local environmental laws, rules, regulations,
treaties, statutes and codes promulgated by all governmental authorities
relating to the protection of human health and safety, the environment or toxic
substances or wastes, pollutants or contaminants (the "Environmental Laws"), (2)
has received all permits, licenses or other approvals required under applicable
Environmental Laws to conduct its businesses, and (3) is in compliance with all
terms and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, individually or in the
aggregate, have a Material Adverse Effect. No action, proceeding, revocation
proceeding, writ, injunction or claim is pending or threatened (nor, to the
knowledge of the Company and its Subsidiaries, is there any basis therefor)
relating to the Environmental Laws or to the activities of the Company or any
Subsidiary involving Hazardous Materials. "Hazardous Materials" means any
material or substance (i) that is prohibited or regulated by any environmental
law, rule, regulation, order, treaty, statute or code promulgated by any
governmental authority, or any amendment or modification thereto, or (ii) that
has been designated or regulated by any governmental authority as radioactive,
toxic, hazardous or otherwise a danger to health, reproduction or the
environment. There have been no costs or liabilities associated with the
compliance with Environmental Laws that would, individually or in the aggregate,
have a Material Adverse Effect.
(x) No officer, director or stockholder of the Company or any
Subsidiary has any affiliation or association with the National Association of
Securities Dealers, Inc. (the "NASD") or any member thereof.
(y) Except as disclosed in the Prospectus, the Company and each
Subsidiary has filed all necessary Federal, state, local and foreign income,
franchise and other tax returns and other reports required to be filed and has
paid all taxes shown as due thereon; and there is
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no tax deficiency which has been, or, to the best knowledge of the Company and
its Subsidiaries after due inquiry, might be, asserted against the Company or
any Subsidiary.
(z) None of the activities or businesses of the Company or any
Subsidiary is in violation of, or is expected to cause the Company or any
Subsidiary to violate, any law, rule, regulation or order of any foreign country
or foreign governmental agency or body or the United States, any state, county
or locality, or of any agency or body of the United States or of any state,
county or locality, the violation of which would have a Material Adverse Effect.
(aa) Neither Company nor any Subsidiary has distributed or will
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares, other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act and the Regulations to be
distributed.
(ab) Neither the U.S. Food and Drug Administration nor any comparable
regulatory agency outside the United States has commenced or threatened to
initiate any action to withdraw its approval of any product of the Company or
any Subsidiary or, to the best knowledge of the Company and its Subsidiaries
after due inquiry, commenced, or threatened to initiate, any action to withdraw
approval of any facility of the Company or any Subsidiary. All of the products
of the Company and each Subsidiary are in compliance with any and all applicable
laws, rules, regulations and arrangements concerning the development, testing,
handling, manufacturing, distribution and commercialization of hospital,
pharmaceutical, biotechnological or similar products (collectively, the "Drug
Laws").
(ac) Any contract, agreement, instrument, lease, license, certification
or permit or other arrangement described in the Registration Statement or the
Prospectus to which the Company or any Subsidiary is a party is in full force
and effect and is a legal, valid and binding obligation between the parties and
is enforceable against the parties in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the enforceability of creditors' rights generally or by equitable
principles.
3. Purchase, Sale, and Delivery of the Firm Shares and the
Additional Shares.
(a) On the basis of the representations, warranties, covenants and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters, and the Underwriters agree to purchase from the Company, that
number of Firm Shares set forth opposite their respective names in column (2) of
Schedule I hereto.
(b) The purchase price per Firm Share to be paid by the several
Underwriters shall be $[ ]. The initial public offering price per Firm Share
shall be $[ ].
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(c) Payment for the Firm Shares by the several Underwriters shall be
made by certified or official bank check in New York Clearing House funds (or
similar next day funds) payable to the order of the Company at the offices of
Baer Marks & Upham LLP, 805 Third Avenue, New York, New York 10022, or at such
other place as you shall determine and advise the Company by at least two full
days' notice in writing, upon delivery of the Firm Shares to you for the
respective accounts of the Underwriters (the "Closing"). Such delivery and
payment shall be made at 10:00 A.M., New York City local time, on the third
business day following the Effective Date (as defined in Section 11) or as
otherwise provided in Section 11, unless postponed in accordance with the
provisions of Section 9, or at such other time as shall be agreed upon between
you and the Company. The time and date of such delivery and payment are herein
called the "Closing Date."
(d) Certificates for the Firm Shares and the Representative's Warrant
shall be registered in such name or names and in such authorized denominations
as you may request in writing at least two full business days prior to the
Closing Date. The Company shall permit you to examine and package such
certificates for delivery at least one full business day prior to the Closing
Date.
(e) The Company hereby grants to the several Underwriters the option to
purchase all or a portion of the Additional Shares solely to cover
over-allotments, if any, at the same purchase price per share to be paid by the
several Underwriters to the Company for the Firm Shares as provided for in this
Section 3. The Additional Shares shall be purchased by the several Underwriters
from the Company through written notice by the Representative to the Company
and as otherwise provided herein. This option may be exercised only to cover
over-allotments in the sale of the Firm Shares by the several Underwriters and
expires on the close of business (New York time) on the 45th day from the date
of the Prospectus. This option may be exercised by the several Underwriters in
whole, in part or in increments on the basis of the representations, warranties,
covenants and agreements of the Company and its Subsidiaries herein contained,
but subject to the terms and conditions herein set forth. Such notice shall set
forth the aggregate number of Additional Shares as to which the option is being
exercised, the name or names in which the certificates for the Additional Shares
are to be registered, the authorized denominations in which the Additional
Shares are to be issued, and the time and date, as determined by the
Representative, when such Additional Shares are to be delivered (such time and
date are herein called the "Additional Closing Date"); provided, however, that
the Additional Closing Date shall not be earlier than the Closing Date nor
earlier than the second business day after the date on which the notice of the
exercise of the option shall have been given nor later than the eighth business
day after the date on which such notice shall have been given.
(f) The aggregate number of Additional Shares to be sold by the Company
to each Underwriter shall be the number which bears the same ratio as the number
of Firm Shares set forth opposite the name of such Underwriter in column (2) of
Schedule I bears to the total number of Firm Shares to be sold by the Company,
subject, however, to such adjustments as you may at any time approve.
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(g) Payment for the Additional Shares by the several Underwriters shall
be made by certified or official bank check in New York Clearing House funds (or
similar next day funds) payable to the order of the Company at the offices of
Baer Marks & Upham LLP, 805 Third Avenue, New York, New York 10022 or at such
other place as you shall determine and advise the Company by at least two full
days' notice in writing, upon delivery of the Additional Shares to you for the
respective accounts of the several Underwriters.
(h) Certificates for the Additional Shares shall be registered in such
name or names and in such authorized denominations as you may request in writing
at least two full business days prior to the Additional Closing Date. The
Company shall permit you to examine and package such certificates for delivery
at least one full business day prior to the Additional Closing Date.
(i) The Company hereby agrees to issue and sell to you and/or your
designees on the Closing Date, for an aggregate purchase price of $125.00, the
Representative's Warrant to purchase the Warrant Shares.
(j) Delivery and payment for the Representative's Warrant shall be made
on the Closing Date. The Company shall deliver to you, upon payment therefor,
certificates representing the Representative's Warrant in the name or names and
in such authorized denominations as you may request. The Representative's
Warrant shall be exercisable for a period of four years commencing one year from
the date on which the Registration Statement was declared effective under the
Act at an initial exercise price per Warrant Share of 120% of the public
offering price.
4. Offering. Upon your authorization of the release of the Firm Shares
and on or after the date the Registration Statement is declared effective under
the Act, the several Underwriters propose to offer the Firm Shares to the public
at the initial public offering price as provided for in Section 3(b) (such price
being hereinafter called the "public offering price"). After the initial public
offering, you may, from time to time, increase or decrease the public offering
price, in your sole discretion, by reason of changes in general market
conditions or otherwise.
5. Covenants of the Company and the Subsidiaries. The Company and each
Subsidiary, jointly and severally, covenants and agrees with the several
Underwriters that:
(a) If the Registration Statement has not yet been declared effective
under the Act, the Company will use its best efforts to cause the Registration
Statement to become effective under the Act as promptly as possible. If the
Registration Statement has become or becomes effective under the Act with a form
of prospectus omitting Rule 430A Information, or filing of the Prospectus is
otherwise required under Rule 424(b) of the Regulations, the Company
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will file the Prospectus, properly completed pursuant to Rule 424(b) of the
Regulations, within the time period prescribed and will provide evidence
satisfactory to you of such timely filing.
(b) The Company will notify you immediately, and promptly confirm such
notice in writing: (i) when the Registration Statement and any post-effective
amendment thereto becomes effective under the Act; (ii) of the receipt of any
comments from the Commission or the "blue sky" or securities authority of any
jurisdiction regarding the Registration Statement, any post-effective amendment
thereto, the Prospectus, or any amendment or supplement thereto; (iii) of the
filing with the Commission of any supplement to the Prospectus; and (iv) the
receipt of any notification with respect to a Stop Order or the initiation or
threatening of any proceeding with respect to a Stop Order. The Company will use
its best efforts to prevent the issuance of any Stop Order and, if any Stop
Order is issued, to obtain the lifting thereof as promptly as possible.
(c) During the time when a prospectus relating to the Shares is
required to be delivered hereunder or under the Act or the Regulations, the
Company will comply with all requirements imposed upon it by the Act, as now
existing and as hereafter amended, and by the Regulations, as from time to time
in force, so far as necessary to permit the continuance of sales of, or dealings
in, the Shares in accordance with the provisions hereof and the Prospectus. If,
at any time when a prospectus relating to the Shares is required to be delivered
hereunder or under the Act or the Regulations, any event shall have occurred as
a result of which, in the reasonable opinion of counsel for the Company or
counsel for the several Underwriters, the Registration Statement or the
Prospectus as then amended or supplemented contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or if, in the
opinion of either of such counsel, it is necessary at any time to amend or
supplement the Registration Statement or the Prospectus to comply with the Act
or the Regulations, the Company will immediately notify you and promptly prepare
and file with the Commission an appropriate amendment or supplement (in form and
substance satisfactory to you) which will correct such statement or omission or
which will effect such compliance and will use its best efforts to have any such
amendment declared effective under the Act as soon as possible.
(d) The Company will deliver without charge to each of the several
Underwriters such number of copies of each Preliminary Prospectus as may
reasonably be requested by the Underwriters and, as soon as the Registration
Statement, or any amendment thereto, becomes effective under the Act or a
supplement is filed with the Commission, deliver without charge to you two
signed copies of the Registration Statement, including exhibits, or such
amendment thereto, as the case may be, and two copies of any supplement thereto,
and deliver without charge to each of the several Underwriters such number of
copies of the Prospectus, the Registration Statement, and amendments and
supplements thereto, if any, without exhibits, as you may request.
(e) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time the Registration Statement becomes effective under the
Act, to qualify the
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Shares for offering and sale under the "blue sky" or securities laws of such
jurisdictions as you may designate and maintain such qualification in effect for
so long as is required for the distribution of such Shares; provided, however,
that no such qualification shall be required in any jurisdiction where, as a
result thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction to which
it is not then subject. In each jurisdiction where such qualification shall be
effected, the Company will, unless you agree in writing that such action is not
at the time necessary or advisable, file and make such statements or reports at
such times as are or may be required by the laws of such jurisdiction.
(f) The Company will make generally available (within the meaning of
Section 11(a) of the Act and the Regulations) to its security holders and to you
as soon as practicable, but not later than 45 days after the end of its fiscal
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs under the Act, an earnings statement (which need
not be certified by independent certified public accountants unless required by
the Act or the Regulations, but which shall satisfy the provisions of Section
11(a) of the Act and the Regulations) covering a period of at least twelve
months beginning after the date on which the Registration Statement was declared
effective under the Act. For a period of five (5) years from the date hereof,
the Company will furnish its stockholders with copies of its annual reports
containing the audited financial statements of the Company and its subsidiaries
on a consolidated basis.
(g) For a period of one (1) year after the date of the Prospectus, the
Company and each Subsidiary will not, without your prior written consent,
directly or indirectly, issue, register, offer, sell, offer to sell, contract to
sell, grant an option for the sale of, assign, hypothecate, pledge or otherwise
dispose of any securities of the Company or any Subsidiary (or any security or
other instrument which by its terms is convertible into, exercisable for, or
exchangeable for shares of capital stock of the Company or any Subsidiary),
except for (a) the grant of options by the Company pursuant to stock option
plans approved by the Representative or (b) the transfer of shares of the
Company's Common Stock by the Insiders to (i) any spouse, parent, sibling or
lineal descendants of the Insiders, (ii) any trust for the benefit of such
Insiders, (iii) any distributee, legatee or devisee of the Insiders who acquires
its shares by will or operation of law upon the death or dissolution of the
Insider, or (iv) any current holder of Common Stock of the Company, provided
that in each case such transferee agrees in writing to be bound by the terms of
this subsection to the same extent as if they were parties hereto.
(h) For a period of five years after the date the Registration
Statement was declared effective under the Act, furnish you, without charge, the
following:
(i) within 90 days after the end of each fiscal year, three copies of
financial statements certified by independent certified public accountants,
including a balance sheet, statement of income and statement of cash flows of
the Company and its then existing subsidiaries, if any, with supporting
schedules, prepared in accordance with generally accepted
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accounting principles, as at the end of such fiscal year and for the 12 months
then ended, which may be on a consolidated basis;
(ii) as soon as practicable after they have been sent to stockholders
of the Company or filed with the Commission or the Nasdaq SmallCap Market (or a
similar market), three copies of each annual, quarterly and interim financial
and other report or communication sent by the Company to its stockholders or
filed with, or furnished to, the Commission or the Nasdaq SmallCap Market (or a
similar market);
(iii) as soon as practicable, two copies of every press release and
every material news item and article in respect of the Company or any
Subsidiary; and
(iv) such additional documents and information with respect to the
Company or any Subsidiary and any affairs of such entities, if any, as you may
from time to time reasonably request.
(i) The Company will apply the net proceeds received by it from the
sale of the Shares in the manner set forth under the caption "Use of Proceeds"
in the Prospectus.
(j) The Company will furnish to you as early as practicable prior to
the Closing Date and the Additional Closing Date, if any, as the case may be,
but no less than two (2) full business days prior thereto, a copy of the latest
available unaudited interim consolidated financial statements of the Company and
its consolidated subsidiaries which have been read by the Company's independent
certified public accountants, as stated in their letter to be furnished pursuant
to Section 7(i).
(k) The Company will not file any amendment or supplement to the
Registration Statement or Prospectus at any time, whether before or after the
date on which the Registration Statement was declared effective under the Act,
unless such filing shall comply with the Act and the Regulations in all material
respects and unless you shall previously have been advised of such filing and
furnished with a copy thereof, and you and counsel for the Underwriters shall
have approved such filing. Until the later of (i) the completion by you of the
distribution of the Firm Shares and the Additional Shares (but in no event more
than nine months after the date on which the Registration Statement shall have
been declared effective under the Act), or (ii) 25 days after the date on which
the Registration Statement shall have been declared effective under the Act, the
Company will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or the Prospectus
which, in your reasonable opinion, may be necessary or advisable in connection
with the distribution of the Firm Shares and the Additional Shares.
(l) The Company will comply with all registration, filing, and
reporting requirements of the Exchange Act, which may from time to time be
applicable to the Company, in a timely manner.
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(m) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
(n) Prior to the Closing Date or the Additional Closing Date, as the
case may be, the Company will not issue any press release or other
communication, directly or indirectly, or hold any press conference with respect
to the Company, the financial conditions, results of operations, business,
properties, assets, liabilities thereof, or this offering, without your prior
written consent, which consent will not be unreasonably withheld.
(o) The Company will file timely with the Commission an appropriate
form to register the Common Stock pursuant to Sections 12(b) or 12(g) under the
Exchange Act.
(p) The Company will file timely and accurate reports on Form SR with
the Commission in accordance with Rule 463 of the Regulations or any successor
provision.
(q) The Company will use its best efforts to complete the listing of
the Shares, the Common Stock underlying the options issued under the stock
option plans and the Warrant Shares on the Nasdaq SmallCap Market and any
applicable regional stock exchange and maintaining such listing(s) for at least
a period of five (5) years from the date of this Agreement.
(r) Until expiration of the Representative's Warrant, the Company will
keep reserved a sufficient number of shares of Common Stock for issuance upon
exercise of the Representative's Warrant.
(s) The Company will deliver to you, without charge, within a
reasonable period after the Additional Closing Date or the expiration of the
period in which the Underwriters may exercise the over-allotment option (but in
no event later than six (6) months from the date of the Prospectus), such bound
volumes of the Registration Statement and all related materials as you may
reasonably request.
(t) For a period of three years after the date on which the
Registration Statement is declared effective under the Act, the Company will
provide to you, on a confidential basis and at its sole expense, copies of the
Company's daily transfer sheets, if so requested by you.
(u) The Company will execute a letter addressed to the transfer agent
for the Company which instructs the transfer agent to note stop transfer
instructions with respect to all of the shares of Common Stock which are subject
to lock-up agreements.
(v) For a period of five (5) years from the date of the Prospectus, LT
Lawrence shall have the right, at its option, to designate one (1) director to
the Company's Board of Directors. The Company agrees that it shall use its best
efforts to cause such nominee to be elected to the Board. The Company further
agrees that it shall not change the size of its Board within such five (5) year
period without the prior written consent of LT Lawrence.
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(w) For a period of five (5) years from the date of the Prospectus, the
Company shall engage a public relations firm reasonably acceptable to the
Representative.
(x) Until the expiration of five (5) years from the date of the
Prospectus, the Company shall not effect a change in its independent public
accountants unless the Company has received the prior written consent of the
Representative or such substitute independent accountants is one of the big
"six" accounting firms.
(y) For a period of five (5) years from the Closing Date, the Company
shall supply the appropriate parties with such information as may be necessary
so that during such period the Company will be listed in one or more of the
securities manuals published by Standard & Poor's Corporation and Moody's
Investors Service, Inc.
(z) The Company will maintain key-person life insurance payable to the
Company on the life of John G. Tramontana in the amount of at least $1,000,000
for a period of time of no less than three (3) years from the Closing Date.
(aa) For a period of five (5) years from the Closing Date, the Company
will purchase directors' and officers' insurance, on a claims made basis, which
contains normal and customary coverage terms applicable to a public company
comparable to the Company in an amount of not less than $3,000,000.
(ab) The Company and each Subsidiary will do and perform all things
reasonably required or necessary to be done and performed under this Agreement
prior to the Closing Date and the Additional Closing Date and to satisfy all
conditions precedent to the delivery of the Shares.
6. Payment of Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company and each Subsidiary, jointly and severally, hereby agrees with the
several Underwriters that they will pay all costs and expenses (other than fees
of counsel for the Underwriters, except as provided in Section 6(c)) in
connection with the sale of the Shares, including (a) the preparation, printing,
filing, distribution and mailing of the Registration Statement, as originally
filed and all amendments, and the Prospectus and the printing, filing,
distribution and mailing of this Agreement, any selected dealers agreement and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments or supplements
thereto supplied to you in quantities as stated in this Agreement, (b) the
issuance, sale, transfer and delivery of the Shares and the Representative's
Warrant, including any transfer or other taxes payable thereon, (c) the
qualification of the Shares and the Representative's Warrant under state or
foreign "blue sky" or securities laws, including the costs of printing and
mailing the preliminary and final "Blue Sky Survey" and fees of counsel for the
Underwriters in connection therewith in the amount of $35,000 and all reasonable
disbursements of such counsel in connection therewith, (d) the filing fees
payable to the Commission, the NASD and the
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jurisdictions in which such qualification is sought, (e) any fees relating to
the listing (and maintaining the listing) of the Shares on the Nasdaq SmallCap
Market and the Boston Stock Exchange, (f) the fees and disbursements of the
transfer agent for the Shares, (g) the cost of printing certificates
representing the Shares, (h) the costs and expenses of the roadshow, including
without limitation, any meetings with prospective investors for the Shares, (i)
all travel and lodging expenses of the Representative and its agents, (j) the
cost of at least one tombstone advertisement, (k) a non-accountable expense
allowance equal to 2 1/2% of the gross proceeds of the sale of the Shares and
(l) all other costs and expenses incident to the performance of the Company's
obligations hereunder and not otherwise specifically provided for in this
Section. Notwithstanding the foregoing, in the event the initial public offering
contemplated hereby is terminated by any party for any reason, the Company shall
pay the Representatives the out-of-pocket expenses incurred by them (including,
without limitation, the fees and disbursements of their counsel) in connection
with the Registration Statement, this Agreement and the proposed offer, sale and
delivery of the Shares.
7. Conditions of Underwriter's Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject, in your discretion, to the
continuing accuracy of the representations and warranties of the Company and
each Subsidiary contained herein and in each certificate and document
contemplated under this Agreement to be delivered to you, as of the date hereof
and as of the Closing Date (or the Additional Closing Date, as the case may be),
to the performance by the Company of its obligations hereunder, and to the
following conditions:
(a) The Registration Statement shall have become effective under
the Act not later than 6:00 P.M., New York City local time, on the date of this
Agreement or such later date and time as shall be consented to in writing by
you.
(b) At the Closing Date and the Additional Closing Date, as the
case may be, you shall have received the favorable opinion of Rubin Baum Levin
Constant & Friedman, counsel for the Company, dated the date of delivery,
addressed to the Underwriters, and in form and scope satisfactory to counsel for
you, to the effect that:
(i) Each of the Company and the Delaware Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority, and, to the
best of such counsel's knowledge after diligent inquiry, all necessary Consents,
Licenses and Approvals to own, lease, license and use its properties and assets
and to conduct its business in the manner described in the Prospectus. Each of
the Company and the Delaware Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which its
ownership, leasing, licensing or use of its properties and assets or the conduct
of its business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. Each of the Contribution,
the Exchange and the Reverse Split has been duly authorized
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by all necessary corporate action and, to the best of such counsel's knowledge
after diligent inquiry, has been consummated in accordance with applicable law.
(ii) The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, of which 3,625,000 shares are
outstanding, and 5,000,000 of Preferred Stock, of which there are no shares
outstanding. The Company's only subsidiaries are Bigmar Therapeutics, Bigmar
Pharmaceuticals and Bioren. The Company owns directly or indirectly 100% of the
issued and outstanding capital stock of each Subsidiary. The certificates
evidencing the Common Stock are in due and proper legal form and have been duly
authorized for issuance by the Company. All of the outstanding shares of Common
Stock of the Company and the Delaware Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable, and none have been
issued in violation of any preemptive or other similar rights of stockholders.
There is no commitment, plan or arrangement to issue and no outstanding option,
warrant or other right calling for the issuance of, any share of capital stock
of the Company or the Delaware Subsidiary or any security or other instrument
which by its terms is convertible into, exercisable for, or exchangeable for
capital stock of the Company or the Delaware Subsidiary, except as described in
the Prospectus. Except as set forth in the Prospectus, there is outstanding no
security or other instrument which by its terms is convertible into, or
exchangeable for, capital stock of the Company or the Delaware Subsidiary.
(iii) Each of the Company and the Delaware Subsidiary
has all requisite corporate power and authority to execute, deliver and perform
this Agreement and the Representative's Warrant, as the case may be, and to
consummate the transactions set forth thereby, including, but not limited to,
the power and authority to issue, sell and deliver the Shares and the
Representative's Warrant (and when issued, the Warrant Shares). All necessary
corporate action has been duly and validly taken by the Company and the Delaware
Subsidiary to authorize the execution, delivery and performance by the Company
and the Delaware Subsidiary of this Agreement and the Representative's Warrant,
as the case may be, and to consummate the transactions set forth thereby. This
Agreement and the Representative's Warrant have been duly and validly executed
and delivered by the Company and the Delaware Subsidiary, as the case may be,
are the legal, valid and binding obligations of the Company and the Delaware
Subsidiary, as the case may be, and are enforceable against the Company and the
Delaware Subsidiary, as the case may be, in accordance with their respective
terms, except as such enforceability may be limited by (a) the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors generally;
(b) the effect of general principles of equity including, concepts of
materiality, reasonableness, good faith and the possible unavailability of
specific performance, injunctive relief or other equitable remedies, regardless
of whether considered in a proceeding in equity or at law, and (c) the effect of
public policy or applicable laws or equitable principles limiting the
enforceability of indemnification or contribution provisions.
(iv) No consent, authorization, approval, order,
registration, license, certificate, or permit of or from, or declaration or
filing with, any Federal, state, local, or other governmental or regulatory
authority or any court or other tribunal having jurisdiction
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over the Company or the Delaware Subsidiary is required for the execution,
delivery, or performance by the Company or the Delaware Subsidiary of this
Agreement or the Representative's Warrant, as the case may be, and the
consummation of the transactions set forth thereby, except for filings under the
Act which have been made prior to the Closing Date and consents, authorizations,
approvals, orders, certificates or permits of and from state securities
authorities under state "blue sky" or securities laws.
(v) The execution, delivery and performance of this
Agreement and the Representative's Warrant and the consummation of the
transactions set forth thereby will not (a) violate, result in a breach of any
of the terms and provisions of, conflict with, result in the creation or
imposition of any lien, charge or encumbrance upon any properties or assets of
the Company or the Delaware Subsidiary pursuant to the terms of, or, with or
without the giving of notice or the passage of time or both, entitle any party
to terminate or call a default under, any contract, agreement, instrument,
lease, license, arrangement or understanding to which the Company or the
Delaware Subsidiary is a party or by which its properties or assets may be
bound, or (b) violate, result in a breach of, or conflict with, any term of the
certificate of incorporation or by-laws, or other organizational documents, of
the Company or the Delaware Subsidiary, or (c) violate, result in a breach of,
or conflict with any law, rule, regulation, order, judgment or decree of any
court or any public, governmental or regulatory authority having jurisdiction
over the Company or the Delaware Subsidiary or its operations, businesses,
properties or assets.
(vi) To the best of such counsel's knowledge after
diligent inquiry, neither the Company nor the Delaware Subsidiary is in
violation or breach of, or in default with respect to, any term of its
certificate of incorporation (or other organizational documents) or by-laws, and
neither the Company nor the Delaware Subsidiary nor any other party is in
violation or breach of, or in default with respect to, any provision of any
contract, agreement, instrument, lease, license, arrangement or understanding to
which the Company or the Delaware Subsidiary is a party or by which it or any of
their properties may be bound or affected; and, to the best of such counsel's
knowledge after diligent inquiry, each of the Company and the Delaware
Subsidiary is in compliance with all laws, rules, regulations, judgments,
decrees, orders and statutes of any court or jurisdiction to which it is
subject.
(vii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending
or threatened with respect to the Company or any Subsidiary or any of their
respective operations, businesses, properties or assets.
(viii) There are no contracts, agreements,
instruments, leases, licenses or other arrangements (whether written or oral) of
the Company or any Subsidiary required by the Act or the Regulations to be
disclosed in the Registration Statement or Prospectus or to be filed as exhibits
to the Registration Statement which are not disclosed in the Registration
Statement or Prospectus or filed as exhibits therein.
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(ix) The Shares are validly authorized, and when
issued, delivered and sold in accordance with this Agreement, will be validly
issued and outstanding, fully paid and non-assessable and will not have been
issued in violation of or subject to any preemptive or similar rights of the
stockholders to subscribe for or to purchase the Shares. Upon payment for and
delivery of the Shares in accordance with the terms of this Agreement, and
assuming that the Underwriters are acquiring the Shares in good faith and
without notice of any adverse claim, the Underwriters will receive good and
valid title to the Shares purchased from the Company, free and clear of any
adverse claims. The Representative's Warrant and the Warrant Shares are validly
authorized and (in the case of the Warrant Shares reserved for issuance) and,
when the Warrant Shares are issued and delivered upon exercise of the
Representative's Warrant in accordance with the terms thereof will be validly
issued and outstanding, fully paid and non-assessable, and will not have been
issued in violation of or subject to any preemptive or similar rights of
stockholders to subscribe for or purchase the Representative's Warrant or the
Warrant Shares. Upon the exercise of the Representative's Warrant in accordance
with its terms and payment for and delivery of the Warrant Shares in accordance
with the Representative's Warrant, and assuming that the holders of the
Representative's Warrant are acquiring the Warrant Shares in good faith and
without notice of any adverse claim, the holders of the Representative's Warrant
will receive good and valid title to the Warrant Shares, free and clear of any
adverse claims. The Shares, Representative's Warrant and Warrants Shares conform
to all statements relating thereto contained in the Registration Statement or
the Prospectus. The Shares are duly authorized for listing on the Nasdaq
SmallCap Market(TM) and the Boston Stock Exchange.
(x) Neither the Company nor any Subsidiary is an
"investment company" under the Investment Company Act and the rules and
regulations promulgated thereunder.
(xi) No holder of securities of the Company or any
Subsidiary or any other person or entity has rights to the registration of
shares of Common Stock or other securities of the Company or any Subsidiary
because of the filing or effectiveness of the Registration Statement by the
Company or otherwise in connection with the sales of Shares or Representative's
Warrant provided for herein.
(xii) The Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge after due inquiry, no
stop order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are pending
or threatened.
(xiii) The Registration Statement, any Rule 430A
Prospectus, and the Prospectus, and any amendment or supplement thereto (other
than the financial statements and other financial data and schedules included
therein, as to which such counsel need express no opinion), comply as to form in
all material respects with the requirements of the Act and the Regulations.
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(xiv) The statements in the Registration Statement and
the Prospectus under the captions "Business," "Management," "Description of
Capital Stock" and "Shares Eligible for Future Sale" and in Part II accurately
reflect in all material respects the provisions of laws, rules, regulations,
contracts, leases and other arrangements purported to be summarized therein.
(xv) The Company and the Delaware Subsidiary possess
such certificates of authority, licenses, permits or other approvals by the
appropriate state and Federal regulatory agencies or bodies as are required to
have been obtained as of this date under Federal law and the laws of the States
of New York and Delaware.
(xvi) All issuances and sales of securities by the
Company and each Subsidiary were exempt from registration under the Act and
compiled in all respects with the provisions of all applicable United States
Federal and state securities laws.
In addition, such counsel shall also include a statement to the effect
that, on the basis of the participation of such counsel in conferences at which
the contents of the Registration Statement and the Prospectus and related
matters were discussed, nothing has come to such counsel's attention that would
lead such counsel to believe that either the Registration Statement (except as
to the financial statements and schedules and other financial data, as to which
such counsel need not express any opinion or belief) at the Effective Date or at
the applicable Closing Date contains or contained any untrue statement of a
material fact or omits or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus (except as to the financial statements and schedules, and other
financial data, as to which such counsel need not express any opinion or belief)
as of its date and at the applicable Closing Date contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
In rendering its opinion as aforesaid, counsel for the Company may rely
on the following: (A) as to matters involving the application of laws, other
than the laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware, to the extent counsel for the
Company deems proper and to the extent specified in such opinion, upon an
opinion or opinions (in form and substance satisfactory to counsel for the
Underwriters) of other counsel, acceptable to counsel for the Underwriters,
familiar with the applicable laws, in which case the opinion of counsel for the
Company shall state that the opinion or opinions of such other counsel are
satisfactory in scope, form and substance to counsel for the Company; (B) as to
matters of fact, to the extent that they deem proper, on certificates of
responsible officers of the Company; and (C) to the extent they deem proper,
upon written statements or certificates of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that, in each case, copies of any such
opinions, statements or certificates shall be
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annexed as exhibits to the opinion of counsel for the Company and reliance
thereon is reasonably acceptable to counsel for the Underwriters.
(c) At the Closing Date and any Additional Closing Date, as the case
may be, you shall have received the favorable opinion of Wenger Mathys Plattner,
Swiss counsel for the Company, dated the date of delivery, addressed to you, and
in form and scope satisfactory to counsel for you, to the effect that:
(i) Each of Bigmar Pharmaceuticals and Bioren
(collectively, the "Swiss Subsidiaries" or, individually, a "Swiss Subsidiary")
is a corporation duly organized, validly existing and in good standing under the
laws of Switzerland, with full power and authority, and to the best of such
counsel's knowledge after diligent inquiry, all necessary Consents, Licenses and
Approvals to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus. Each of the
Swiss Subsidiaries is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership, leasing, licensing or use of its
properties and assets or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. The Bioren Acquisition has been consummated in
accordance with all applicable laws.
(ii) All of the outstanding shares of capital stock of
each Swiss Subsidiary have been duly and validly authorized and issued and are
fully paid and non-assessable, and none have been issued in violation of any
preemptive or other similar rights of stockholders. The Company owns 100% of the
issued and outstanding capital stock of each Swiss Subsidiary. There is no
commitment, plan or arrangement to issue and no outstanding option, warrant or
other right calling for the issuance of, any share of capital stock of the Swiss
Subsidiaries or any security or other instrument which by its terms is
convertible into, exercisable for, or exchangeable for capital stock of the
Swiss Subsidiaries. Except as set forth in the Prospectus, there is outstanding
no security or other instrument which by its terms is convertible into, or
exchangeable for, capital stock of the Swiss Subsidiaries.
(iii) The Swiss Subsidiaries have all requisite
corporate power and authority to execute, deliver and perform this Agreement and
to consummate the transactions set forth thereby. All necessary corporate action
has been duly and validly taken by the Swiss Subsidiaries to authorize the
execution, delivery and performance by the Swiss Subsidiaries of this Agreement.
This Agreement has been duly and validly executed and delivered by the Swiss
Subsidiaries is a legal, valid and binding obligation of each Swiss Subsidiary
and is enforceable against each Swiss Subsidiary in accordance with its terms,
except as such enforceability may be limited by (a) the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting the rights of creditors generally, (b) the effect
of general principles of equity including, concepts of materiality,
reasonableness, good faith and the possible unavailability of specific
performance, injunctive relief or other equitable remedies, regardless of
whether considered in a proceeding in equity or at law, and
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(c) the effect of public policy or applicable laws or equitable principles
limiting the enforceability of indemnification or contribution provisions.
(iv) No consent, authorization, approval, order,
registration, license, certificate, or permit of or from, or declaration or
filing with, any Federal, state, local, or other governmental or regulatory
authority or any court or other tribunal having jurisdiction over the Swiss
Subsidiaries is required for the execution, delivery, or performance by the
Swiss Subsidiary of this Agreement, and the consummation of the transactions set
forth thereby.
(v) The execution, delivery and performance of this
Agreement and the consummation of the transactions set forth thereby by each
Swiss Subsidiary will not (a) violate, result in a breach of any of the terms
and provisions of, conflict with, result in the creation or imposition of any
lien, charge or encumbrance upon any properties or assets of the Swiss
Subsidiaries pursuant to the terms of, or, with or without the giving of notice
or the passage of time or both, entitle any party to terminate or call a default
under, any contract, agreement, instrument, lease, license, arrangement or
understanding to which either of the Swiss Subsidiaries is a party or by which
their properties or assets may be bound, or (b) violate, result in a breach of,
or conflict with, any term of the certificate of incorporation or by-laws, or
other organizational documents of either Swiss Subsidiary, or (c) violate,
result in a breach of, or conflict with any law, rule, regulation, order,
judgment or decree of any court or any public, governmental or regulatory
authority having jurisdiction over a Swiss Subsidiary or any of its operations,
businesses, properties or assets.
(vi) To the best of such counsel's knowledge after
diligent inquiry, neither of the Swiss Subsidiaries is in violation or breach
of, or in default with respect to, any term of its certificate of incorporation
(or other organizational documents) or by-laws, and neither of the Swiss
Subsidiaries nor any other party is in violation or breach of, or in default
with respect to, any provision of any contract, agreement, instrument, lease,
license, arrangement or understanding to which either of the Swiss Subsidiaries
is a party or by which it or any of its properties may be bound or affected;
and, to the best of such counsel's knowledge after diligent inquiry, each of the
Swiss Subsidiaries is in compliance with all laws, rules, regulations,
judgments, decrees, orders and statutes of any court or jurisdiction to which it
is subject.
(vii) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending
or threatened with respect to either of the Swiss Subsidiary or their respective
operations, businesses, properties or assets.
(viii) There are no contracts, agreements,
instruments, leases, licenses or other arrangements (whether written or oral) of
either of the Swiss Subsidiaries required by the Act or the Regulations to be
disclosed in the Registration Statement or Prospectus or to be filed as exhibits
to the Registration Statement which are not disclosed in the Registration
Statement or Prospectus or filed as exhibits therein.
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(ix) To the best of such counsel's knowledge after
diligent inquiry, there are no judicial proceedings pending or threatened
relating to any Intangibles concerning the Company or any of the Subsidiaries
and the Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any Intangibles.
(x) The statements in the Registration Statement and
the Prospectus under the captions "Risk Factors" and "Business" accurately
reflect in all material respects the provisions of laws, rules, regulations and
arrangements purported to be summarized therein as they relate to Swiss Drug
Laws and Environmental Laws.
(xi) Each of the Swiss Subsidiaries has all Consents,
Licenses and Approvals as are necessary to conduct its business in the manner
described in the Registration Statement and the Prospectus, including under any
applicable Drug Laws.
(xii) To the best of such counsel's knowledge after
diligent inquiry, neither of the Swiss Subsidiaries has violated or is in
violation of any Drug Laws or Environmental Laws.
In addition, such counsel also shall include a statement, to the effect
that on the basis of the representations of the Company and its Subsidiaries in
connection with the preparation of the Registration Statement and the Prospectus
and related matters, no facts have come to the attention of such counsel that
would lead it to believe that either the Registration Statement (except as to
the financial statements and schedules and other financial data, as to which
such counsel need not express any opinion) at the Effective Date or at the
applicable Closing Date contains or contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading or that the
Prospectus as of its date and at the applicable Closing Date contains or
contained any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) At the Closing Date and any Additional Closing Date, as the
case may be, you shall have received the favorable opinions of Hyman, Phelps &
McNamara, P.C. and Droste, U.S. and German regulatory counsel for the Company,
dated the date of delivery addressed to the Underwriters, and in form and scope
satisfactory to counsel for you to the effect that:
(i) The statements in the Registration Statement and
the Prospectus under the captions "Risk Factors" and "Business" accurately
reflect in all material respects the provisions of law, rules, regulations and
arrangements purported to be summarized therein as they relate to U.S. or German
regulations concerning Drug Laws.
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(ii) The Company and each Subsidiary has all Consents,
Licenses and Approvals as is necessary to conduct its business in the manner
described in the Registration Statement and the Prospectus under any applicable
Drug Laws.
(iii) To the best of such counsel's knowledge after
diligent inquiry, neither the Company nor any Subsidiary has violated or is in
violation of any Drug Laws.
In addition, such counsel also shall include a statement, to the effect
that on the basis of the representations of the Company and its Subsidiaries in
connection with the preparation of the Registration Statement and the Prospectus
and related matters, no facts have come to the attention of such counsel that
would lead it to believe that either the Registration Statement (except as to
the financial statements and schedules and other financial data, as to which
such counsel need not express any opinion) at the Effective Date or at the
applicable Closing Date contains or contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading or that the
Prospectus as of its date and at the applicable Closing Date contains or
contained any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(e) On or prior to the Closing Date and the Additional Closing Date, as
the case may be, you shall have been furnished such additional information,
documents, certificates and opinions as you may reasonably require for the
purpose of enabling you to review the matters referred to in Sections 7(b), (c)
and (d) and in order to evidence the accuracy, completeness, or satisfaction of
any of the representations, warranties, covenants, agreements, or conditions
herein contained, or as you may reasonably request.
(f) At the Closing Date or the Additional Closing Date, as the case may
be, (i) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be stated
therein in accordance with the Act and the Regulations, and in all material
respects conform to the requirements thereof, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) there shall have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus, no
material adverse change, or any development involving a prospective material
adverse change, in the business, properties, or condition (financial or
otherwise), results of operations, capital stock, long-term or short-term debt,
or general affairs of the Company or any Subsidiary, individually or in the
aggregate, from that set forth in the Registration Statement and the Prospectus,
except changes which the Registration Statement and the Prospectus indicate
might occur after the date on which the Registration Statement becomes effective
under the Act, and the Company or any Subsidiary, individually or in the
aggregate, shall not have incurred any liabilities or entered into any
agreements not in the ordinary course of business, other than
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as referred to in the Registration Statement and the Prospectus, (iii) except as
set forth in the Prospectus, no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation shall be pending,
threatened, or in prospect (or any basis therefor) with respect to the Company
or any Subsidiary, individually or in the aggregate, or any operations,
businesses, properties or assets of the Company or any Subsidiary which would be
required to be set forth in the Registration Statement, and (iv) the Common
Stock shall have been approved for listing on the Nasdaq SmallCap Market and the
Boston Stock Exchange.
(g) At the Closing Date and the Additional Closing Date, as the case
may be, you shall have received a certificate of the President and Chief
Executive Officer, and the Treasurer and Secretary of the Company, dated the
Closing Date or such Additional Closing Date, as the case may be, to the effect
that, among other things, (i) the conditions set forth in Sections 7(a) and 7(f)
have been satisfied, (ii) as of the date of this Agreement and as of the Closing
Date or such Additional Closing Date, as the case may be, the representations
and warranties of the Company and the Subsidiaries contained herein were and are
accurate and correct, and (iii) as of the Closing Date or such Additional
Closing Date, as the case may be, the obligations to be performed by the Company
hereunder on or prior thereto have been fully performed.
(h) All proceedings taken in connection with the issuance, sale,
transfer and delivery of the Shares, the Representative's Warrant (and the
securities underlying the Representative's Warrant) shall be satisfactory in
form and substance to you and to counsel for the Underwriters, and you shall
have received from such counsel for the Underwriters a favorable opinion, dated
as of the Closing Date and the Additional Closing Date, as the case may be, with
respect to such matters as you may reasonably request.
(i) At the time this Agreement is executed and at the Closing Date and
the Additional Closing Date, as the case may be, you shall have received a
letter from Richard A. Eisner & Company, LLP, certified public accountants for
the Company, dated the date of delivery, and addressed to the Underwriters, and
in form and substance satisfactory to you:
(i) confirming that they are, and during the periods
covered by their report(s) included in the Registration Statement and the
Prospectus were, independent certified public accountants with respect to the
Company and the Subsidiaries within the meaning of the Act and the published
Regulations and stating that the answer to Item 13 of the Registration Statement
is correct insofar as it relates to them;
(ii) stating that, in their opinion, the financial
statements of the Company and the Subsidiaries included in the Registration
Statement and Prospectus and covered by their opinion therein comply in form in
all material respects with the applicable accounting requirements of the Act and
the related published rules and regulations;
(iii) stating that, on the basis of procedures (but
not an examination made in accordance with generally accepted auditing
standards) consisting of
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a reading of the latest available unaudited interim financial statements of the
Company and the Subsidiaries (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes (and consents) of the stockholders and Board of Directors of
the Company and the Subsidiaries and committees of such Board of Directors,
inquiries to certain officers and other employees of the Company and its
Subsidiaries responsible for financial and accounting matters, and other
specified procedures and inquiries to a date not more than five (5) business
days prior to the date of such letter, nothing has come to their attention that
caused them to believe that: (A) the unaudited consolidated financial statements
of the Company and the Subsidiaries included in the Registration Statement and
Prospectus do not comply in form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations under the Act or the Exchange Act or are not
fairly presented in conformity with generally accepted accounting principles
(except to the extent that certain footnote disclosures regarding any stub
period may have been omitted in accordance with the applicable rules of the
Commission under the Exchange Act) applied on a basis consistent with that of
the audited financial statements appearing therein; (B) the unaudited pro forma
data included in the Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations or the pro forma adjustments have not been properly applied to the
historical amounts in the compilation and presentation of the data; (C) with
respect to the period subsequent to March 31, 1996, there were, as of the date
of the most recent available monthly consolidated financial statements of the
Company and its Subsidiaries, any changes in the capital stock or long-term debt
of the Company and its Subsidiaries or any decrease in the net current assets or
stockholders' equity of the Company and its Subsidiaries, and as of a specified
date not more than five (5) business days prior to the date of such letter, any
changes in the capital stock or long-term debt of the Company and its
Subsidiaries, in each case, as compared with the amounts shown in the most
recent balance sheet presented in the Registration Statement and the Prospectus,
or (D) that during the period from March 31, 1996 to the date of the most recent
available monthly consolidated financial statements of the Company and its
Subsidiaries, there was any decrease, as compared with the corresponding period
in the prior fiscal year, in net sales or any increase in net loss per share of
the Company, and during the period from the latest available monthly financial
statements of the Company through a specified date not more than five business
days prior to the date of such letter, and there was any decrease, as compared
with the corresponding period in the prior fiscal year, in total revenues or
increase in per share net loss, in each case except for any non-material
decrease or increase, as the case may be; and
(iv) stating that they have compared specific numerical data
and financial information pertaining to the Company and its Subsidiaries set
forth in the Registration Statement, which have been specified by you prior to
the date of this Agreement, to the extent that such data and information may be
derived from the general accounting records of the Company and its Subsidiaries,
and excluding any questions requiring an interpretation by legal counsel, with
the results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter, and found them to be in agreement.
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(j) The NASD, upon review of the terms of the public offering of
the Shares, shall not have objected to the Underwriters' participation in such
offering.
(k) Prior to or on the Closing Date, the Company shall have
executed the Representative's Warrant and the Representative's Warrant shall
have been issued and sold to you pursuant thereto.
(l) Prior to or on the Closing Date, the Company shall have
provided to you copies of the agreements referred to in Section 2(s).
Any certificate or other document signed by any officer of the
Company and delivered to the Representative or to counsel to the Underwriters
shall be deemed a representative and warranty by the Company hereunder to the
Underwriters as to the statements made therein. If any condition to the
Underwriters' obligations hereunder to be fulfilled by the Company prior to or
at the Closing Date or any Additional Closing Date, as the case may be, is not
so fulfilled, you may terminate this Agreement or, if you so elect, in writing
waive any such conditions which have not been fulfilled or extend the time for
their fulfillment.
8. Indemnification and Contribution.
(a) The Company and each Subsidiary, jointly and severally,
agrees to indemnify and hold harmless each Underwriter, its officers, directors,
partners, employees, agents and counsel, and each person, if any, who controls
any Underwriter within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, against any and all loss, liability, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 8, but not
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever whether or not in connection with any
litigation in which an indemnified party is a party and whether or not involving
a third party claim and any and all amounts paid in settlement of any claim or
litigation), joint or several, as to which they or any of them may be subject as
and when incurred arising out of, based upon, or in connection with (i) any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, contained in (A) the
Registration Statement, any Preliminary Prospectus, or the Prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto
or (B) any application or other document or communication (for purposes of this
Section 8, collectively called an "application") executed by, or on behalf of,
the Company or based upon written information furnished by, or on behalf of, the
Company filed in any jurisdiction in order to qualify the Shares under the "blue
sky" or securities laws thereof or filed with the Commission or any securities
exchange; unless such statement or omission was made in reliance upon, and in
conformity with, written information furnished to the Company as stated in
Section 8(b) by any Underwriter through you expressly for inclusion in the
Registration Statement, any Preliminary Prospectus, or the Prospectus, or any
amendment or supplement
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thereto, or in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement. The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Agreement.
If any action is brought against any Underwriter or any of its
officers, directors, partners, employees, agents or counsel, or any controlling
persons of any Underwriter (an "indemnified party") in respect of which
indemnity may be sought against the Company or any of the Subsidiaries pursuant
to the foregoing paragraph, such indemnified party or parties shall promptly
notify the Company and its Subsidiaries in writing of the institution of such
action (but the failure to so notify, shall not relieve the Company or any of
its Subsidiaries from any liability they may have other than pursuant to this
Section 8(a)) and the Company and its Subsidiaries shall promptly assume the
defense of such action, including, without limitation, the employment of counsel
satisfactory to such indemnified party or parties and payment of expenses.
Notwithstanding the foregoing, such indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties, unless (i) the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action, or (ii)
the Company shall not have promptly employed counsel satisfactory to such
indemnified party or parties to have charge of the defense of such action or
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from, or in addition to, those available to the
Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this paragraph
to the contrary notwithstanding, the Company and its Subsidiaries shall not be
liable for any settlement of any such claim or action effected without its
written consent, which consent shall not be unreasonably withheld. Neither the
Company nor any Subsidiary shall, without the prior written consent of each
indemnified party that is not released as described in this sentence, settle or
compromise any action, or permit a default or consent to the entry of judgment
or otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company and each Subsidiary agrees promptly to
notify the Representative of the commencement of any litigation or proceedings
against the Company or any Subsidiary or any of its officers or directors in
connection with the sale of the Shares, the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or any application or any of the Subsidiaries and each Subsidiary.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and any Subsidiary, each director of the Company,
each officer of the Company who shall have signed the Registration Statement,
and each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the
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Exchange Act, to the same extent as the foregoing indemnity from the Company and
each Subsidiary to the several Underwriters in Section 8(a), but only with
respect to statements made in the Registration Statement, any Preliminary
Prospectus, or the Prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, or in any application, in reliance upon,
and in conformity with, written information furnished to the Company as stated
in this Section 8(b) with respect to the Underwriters through you expressly for
inclusion in the Registration Statement, any Preliminary Prospectus, or the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be; provided, however, that any obligation of any Underwriter to
provide indemnity under the provisions of this Section 8(b) shall not be in
excess of the underwriting discount and commission applicable to the Shares
purchased by such Underwriter hereunder. For all purposes of this Agreement, the
Company and each Subsidiary acknowledges that the statements set forth in the
fourth and penultimate paragraphs under the caption "Underwriting", as they
relate to the selling concession and reallowance and the history of LT Lawrence,
constitute the only information furnished in writing by, or on behalf of, any
Underwriter expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be. If any action shall be
brought against the Company or any Subsidiary or any other person so indemnified
based on the Registration Statement, any Preliminary Prospectus, or the
Prospectus, or any amendment or supplement thereto, or any application, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this Section 8(b), any Underwriter shall have the rights and duties given to the
Company and its Subsidiaries, and the Company and its Subsidiaries and each
other person so indemnified shall have the rights and duties given to the
indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 8(a) or
8(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case or (ii) any indemnified or indemnifying party seeks
contribution under the Act, the Exchange Act, or otherwise, then the Company and
its Subsidiaries (including for this purpose any contribution made by, or on
behalf of, any director of the Company, any officer of the Company who signed
the Registration Statement, and any controlling person of the Company), as one
entity and the Underwriters (including for this purpose any contribution by, or
on behalf of, an indemnified party), as a second entity, shall contribute to the
losses, liabilities, claims, damages and expenses whatsoever to which any of
them may be subject, so that the Underwriters are responsible for the proportion
thereof equal to the percentage which the underwriting discount per Share set
forth on the cover of the Prospectus represents of the initial public offering
price per share set forth on the cover page of the Prospectus and the Company
and its Subsidiaries are responsible for the remaining portion; provided,
however, that if applicable law does not permit such allocation, then other
relevant equitable considerations, such as the relative fault of the Company and
its Subsidiaries, on the one hand, and the Underwriters, on the other, in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses shall also be considered. The relative
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fault, in the case of an untrue statement, alleged untrue statement, omission,
or alleged omission, shall be determined by, among other things, whether such
statement, alleged statement, omission, or alleged omission relates to
information supplied by the Company or any Subsidiary, on the one hand, or by
the Underwriters, on the other, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company, each Subsidiary
and the Underwriters agree that it would be unjust and inequitable if the
respective obligations of the Company and its Subsidiaries, on the one hand, and
the Underwriters, on the other, for contribution were determined by pro rata or
per capita allocation of the aggregate losses, liabilities, claims, damages and
expenses (even if the Underwriters and the other indemnified parties were
treated as one entity for such purpose) or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
8(c). No person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this Section
8(c), each person, if any, who controls an Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent, and counsel of any Underwriter shall have
the same rights to contribution as such Underwriter and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement, and each director of the Company shall have same rights
to contribution as the Company, subject in each case to the provisions of this
Section 8(c). Anything in this Section 8(c) to the contrary notwithstanding, no
party shall be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 8(c) is
intended to supersede any right to contribution under the Act, the Exchange Act,
or otherwise.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
does not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of shares of
Firm Shares or Additional Shares, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such shares of Firm Shares or Additional
Shares to which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to their respective proportions by which the number
of Firm Shares set forth opposite their respective names in Schedule I hereto
bear to the aggregate number of shares of Firm Shares set forth opposite the
names of all the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such
33
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<PAGE>
default relates on the terms contained herein. In the event that within two (2)
business days after such a default you do not arrange for the purchase of the
Firm Shares or Additional Shares, as the case may be, to which such default
relates as provided in this Section 9, this Agreement or, in the case of a
default with respect to the Additional Shares, the obligations of the
Underwriters to purchase Additional Shares, shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Sections 6, 8 and 11 hereof) or the several Underwriters (except
as provided in Sections 8 and 11 hereof), but nothing in this Agreement shall
relieve a defaulting Underwriter or Underwriters of its or their liability, if
any, to the other several Underwriters, and the Company for damages occasioned
by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which the
default relates are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or parties as aforesaid, you or the Company
shall have the right to postpone the Closing Date or Additional Closing Date, as
the case may be, for a period, not exceeding five (5) business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the opinion of Underwriters' counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used in this
Agreement shall include any party substituted under this Section 9 with like
effect as if it had originally been a party to this Agreement with respect to
such Firm Shares and the Additional Shares.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants and agreements of the Underwriters, the
Company and its Subsidiaries, including the agreements contained in Section 5,
the indemnity and contribution agreements contained in Section 8, shall remain
operative and in full force and effect regardless of any investigation made by,
or on behalf of, the Underwriters or any indemnified person, or by, or on behalf
of, the Company, each Subsidiary or any person or entity which is entitled to be
indemnified under Section 8(b), and shall survive delivery of the Firm Shares or
the Additional Shares. In addition, the provisions of Sections 6, 8, 10, 11, 13,
15 and 16 shall survive termination of this Agreement, whether such termination
occurs before or after the Closing Date or any Additional Closing Date.
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective upon the later of (i)
9:30 A.M., New York City local time, on the first full business day following
the day on which the Registration Statement becomes effective under the Act or
(ii) the execution of this Agreement (the "Effective Date").
34
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<PAGE>
(b) If the purchase price of the Firm Shares has not been
determined as provided for in Section 3 prior to 4:30 P.M., New York City local
time, on the third full business day after the date on which the Registration
Statement was declared effective under the Act, this Agreement may be terminated
at any time thereafter either by you or by the Company by giving notice to the
other unless before such termination the purchase price for the Firm Shares has
been so determined. If the purchase price of the Firm Shares has not been
determined prior to 4:30 P.M., New York City local time, on the tenth full
business day after the date on which the Registration Statement was declared
effective under the Act, this Agreement shall automatically terminate forthwith.
(c) In addition to the right to terminate this Agreement
pursuant to Section 7 hereof, you shall have the right to terminate this
Agreement at any time prior to the Closing Date or any Additional Closing Date,
as the case may be, by giving notice to the Company if (i) any domestic or
international event, act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, the securities markets;
or (ii) if there shall have been a general suspension of, or a general
limitation on prices for, trading in securities on the New York Stock Exchange,
the American Stock Exchange, the Nasdaq Stock Market or any regional stock
exchange or in the over-the-counter market; or (iii) if there shall have been an
outbreak or increase in the level of major hostilities or other national or
international calamity; or (iv) if a banking moratorium has been declared by a
state or federal authority; or (v) if a moratorium in foreign exchange trading
by major international banks or persons has been declared; or (vi) if there
shall have been a material interruption in the mail service or other means of
communications within the United States; or (vii) if the Company or any
Subsidiary shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
opinion, make it inadvisable to proceed with the offering, sale or delivery of
the Shares; or (viii) if any material governmental restrictions shall have been
imposed on trading in securities in general, which restrictions are not in
effect on the date hereof; or (ix) if there shall be passed by the Congress of
the United States or by any state legislature or any equivalent governmental
bodies in Switzerland or Germany any act or measure, or adopted by any
governmental body or authoritative accounting institute or board, or any
governmental executive orders, rules or regulations, which you believe are
likely to have a material adverse effect on the business, financial condition or
financial statements of the Company or any Subsidiary or the market for any of
the Company's securities; or (x) if there shall have been such change in the
market for Company's securities or securities in general or in political,
financial or economic conditions as in your judgment makes it inadvisable to
proceed with the offering, sale and delivery of the Firm Shares or the
Additional Shares, as the case may be, on the terms contemplated by the
Prospectus; or (xi) the Company or any Subsidiary shall have failed, refused or
been unable to perform in any material respect any agreement or its part to be
performed hereunder; or (xii) if in your judgment any material adverse change
shall have occurred since the respective dates as of which information is given
in the Registration Statement or the Prospectus in the condition (financial or
otherwise) of the Company or any Subsidiary, whether or not arising in the
ordinary course of business.
35
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<PAGE>
(d) If you elect to prevent this Agreement from becoming
effective, as provided in this Section 11, or to terminate this Agreement
pursuant to Section 7 or this Section 11, you shall notify the Company and its
Subsidiaries promptly by telephone, telex or telegram, confirmed by letter. If,
as so provided, the Company and its Subsidiaries elect to prevent this Agreement
from becoming effective or to terminate this Agreement, the Company and its
Subsidiaries shall notify you promptly by telephone, telex or telegram,
confirmed by letter.
(e) Anything in this Agreement to the contrary notwithstanding
other than Section 11(f), if this Agreement shall not become effective by reason
of an election pursuant to this Section 11 or if this Agreement shall terminate
or shall otherwise not be carried out within the time specified herein by reason
of any failure on the part of the Company or any Subsidiary to perform any
covenant or agreement or satisfy any condition of this Agreement by it to be
performed or satisfied, the sole liability of the Company and its Subsidiaries
to you, in addition to the obligations the Company and each Subsidiary assumed
pursuant to Section 6, will be to reimburse the Underwriters for such
out-of-pocket expenses (including the fees and disbursements of Underwriters'
counsel) as shall have been incurred by them in connection with this Agreement
or the proposed offer, sale and delivery of the Shares, and upon demand the
Company and each Subsidiary agrees to pay promptly the full amount thereof to
you.
(f) Notwithstanding any election hereunder or any termination of
this Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 6, 8, 10 and 13 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to LT Lawrence & Co., Inc., 3 New York Plaza, New York, New York
10004, Attention: Mr. Eric Chen, with a copy to Baer Marks & Upham LLP, 805
Third Avenue, New York, New York 10022, Attention: Samuel F. Ottensoser, Esq.;
or, if sent to the Company or its Subsidiaries, shall be mailed, delivered,
or telexed or telegraphed and confirmed by letter, to Bigmar, Inc., 6660
Doubletree Avenue, Columbus, Ohio 43229, Attention: John G. Tramontana, with a
copy to Rubin Baum Levin Constant & Friedman, 30 Rockefeller Plaza, 29th Floor,
New York, New York 10112, Attention: Edward Klimerman, Esq. All notices
hereunder shall be effective upon receipt by the party to which it is addressed.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company and its
Subsidiaries and the persons and entities referred to in Section 8 who are
entitled to indemnification or contribution, and their respective successors,
legal representatives and assigns (which shall not include any buyer, as such,
of the Shares), and no other person shall have or be construed to have, any
legal or equitable right,
36
<PAGE>
<PAGE>
remedy or claim under, or in respect of, or by virtue of this Agreement or any
provision herein contained. Notwithstanding anything contained in this Agreement
to the contrary, all of the obligations of the Underwriters are several and not
joint.
14. Partial Unenforceability. The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not effect the validity
or enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as is necessary to make it valid and
enforceable.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to be laws pertaining to conflicts of laws.
16. Submission to Jurisdiction. The Company and each Subsidiary hereby
irrevocably submits to the exclusive jurisdiction of any state or federal court
sitting in the County of New York, State of New York in connection with any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby or thereby. The Company and each Subsidiary
hereby irrevocably waives any objection that it may now or hereafter have to the
laying of the venue of any such action or proceeding brought in any court and
any claim that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
17. General. This Agreement may be executed in one or more
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which when taken together, shall constitute one and
the same document binding on all of the parties thereto. Transmission by
telecopier of an executed counterpart of this Agreement shall be deemed to
constitute due and sufficient delivery of such counterpart, provided that the
party so delivering such counterpart shall, promptly after such delivery,
deliver the original of such counterpart of this Agreement to the other party
thereto. All capitalized terms which are used in this Agreement that are
otherwise not defined shall have the meanings assigned to such terms in the
Registration Statement.
37
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<PAGE>
If the foregoing correctly sets forth the understanding between you and
the Company and its Subsidiaries, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
BIGMAR, INC.
By:
Name:
Title:
BIGMAR PHARMACEUTICALS SA
By:
Name:
Title:
BIOREN SA
By:
Name:
Title:
BIGMAR THERAPEUTICS, INC.
By:
Name:
Title:
38
<PAGE>
<PAGE>
Accepted as of the date first
above written.
LT LAWRENCE & CO., INC.
By:
Name:
Title:
On behalf of itself and the other several
Underwriters named in Schedule I hereto.
New York, New York
39
<PAGE>
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
NAME OF UNDERWRITER TO BE PURCHASED
<S> <C>
LT Lawrence & Co., Inc.
---------
1,250,000
---------
---------
</TABLE>
<PAGE>
<PAGE>
CERTIFICATE OF CORRECTION
OF THE
RESTATED AND AMENDED CERTIFICATE OF INCORPORATION
OF
BIGMAR, INC.
Bigmar, Inc., a Delaware corporation, pursuant to Section 103(f) of the
General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Restated and Amended Certificate of Incorporation which
was filed with the Secretary of State of Delaware on April 16, 1996 is an
inaccurate record in certain respects of the nature of dealing with disposition
of fractional shares and of the nature of the Stock Split.
SECOND: That said Restated and Amended Certificate of Incorporation was
inaccurate in that the second sentence of paragraph (d) of Article Fourth
states: "No fractional shares shall be issued in connection with the foregoing
reclassification and, in lieu thereof, the Company shall round all shares of
Common Stock to the nearest whole number." and that the third paragraph thereof
states "Effective at the close of business on such date, each certificate
representing shares of Outstanding Common shall be deemed to represent the
quotient of 1 divided by 2.105263 shares of Common Stock."
THIRD: That the second sentence of paragraph (d) of Article Fourth in
correct form should read as follows: "No fractional shares shall be issued, and
the Corporation shall pay to such holder an amount of cash equal to the product
of the fraction of a
<PAGE>
<PAGE>
share of New Common Stock to which such holder otherwise would be entitled
multiplied by the fair value of such share of New Common Stock as determined in
good faith by the Board of Directors of the Corporation."
FOURTH: That the third sentence of paragraph (d) of Article Fourth in
correct form should read as follows: "Effective at the close of business on such
date, each certificate representing shares of Outstanding Common shall be deemed
to represent the quotient of the number of shares of Common Stock previously
represented by such certificate divided by 2.105263."
IN WITNESS WHEREOF, Bigmar, Inc. has caused this Certificate of
Correction to be executed by John G. Tramontana, its President, and Chief
Executive Officer, under its corporate seal this 28th day of May, 1996.
BIGMAR, INC.
By:_____________________________
John G. Tramontana
President and Chief Executive
Officer
ATTEST:
- ----------------------------
Michael K. Medors
Secretary
[Corporate Seal]
<PAGE>
<PAGE>
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN
NOT EXERCISABLE PRIOR TO JUNE __, 1997
VOID AFTER 5:00 P.M. NEW YORK TIME, ON JUNE __, 2001
BIGMAR, INC.
Warrant to Purchase Shares of Common Stock
125,000 Shares
THIS CERTIFIES that, for receipt in hand of $125.00 and other value
received, [NAME AND ADDRESS OF HOLDER] (the "Holder"), is entitled to subscribe
for, and purchase from, BIGMAR, INC., a Delaware corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to time
after June __, 1997, and before 5:00 P.M. New York time on June __, 2001 (the
"Exercise Period"), 125,000 shares of the Company's common stock, par value
$0.001 per share (the "Common Stock"), subject to adjustment as provided herein
(the "Warrant Shares"), at a price of $_____ per share, subject to adjustment as
provided herein (the "Exercise Price"). This Warrant is not redeemable by the
Company. This warrant is the warrant or one of the warrants (collectively,
including any warrant issued upon the exercise or transfer of any such warrants,
in whole or in part, the "Warrants") issued pursuant to the Underwriting
Agreement, dated June __, 1996, between the Company and the Holder, as
representative of the several Underwriters named therein. This Warrant may not
be sold, transferred, assigned or hypothecated until June __, 1997, except that
it may be transferred, in whole or in part, at any time to (i) one or more
officers or partners of the Holder (or the officers or partners of any such
partner), (ii) any other underwriting firm or member of the selling group which
participated in the Company's initial public offering of Common Stock which
commenced on June __, 1996 (or the officers or partners of any such firm), (iii)
any successor to the Holder or the officers or partners of such successor, (iv)
any purchaser of substantially all of the assets of the Holder, or (v) by
operation of law. As used herein, the term "Holder" shall include any transferee
to whom this Warrant has been transferred in accordance with the immediately
preceding sentence.
1. Method of Exercise. This Warrant may be exercised during the
Exercise Period, as to the whole or any lesser number of Warrant Shares, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its offices at 6660 Doubletree Avenue, Columbus, Ohio 43229 or at
such other place as may be designated in writing by the Company, together with a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised. Notwithstanding the foregoing, in
lieu of any cash payment required hereunder, the Holder of this Warrant shall
have the right at any time during the Exercise Period to exercise the Warrant in
full or in part by surrender of this Warrant (with the
<PAGE>
<PAGE>
election at the end hereof duly executed) to the Company at its offices in
exchange for the number of Warrant Shares equal to the product of (a) the number
of Warrant Shares as to which the Warrant is being exercised multiplied by (b) a
fraction, the numerator of which is the Current Market Price (as defined in
Section 5(b) below) of the Common Stock less the Exercise Price and the
denominator of which is the Current Market Price.
2. Issuance of Certificates. Upon each exercise of the Holder's right
to purchase Warrant Shares, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding that
the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder.
3. Recording of Transfer. Any Warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his or its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the option of the
Holder hereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent.
4. Reservation of Common Stock. The Company shall at all times reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of the Warrants, such number of shares
of Common Stock as shall, from time to time, be sufficient therefor. The Company
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full payment therefor, shall be
validly issued, fully paid, nonassessable and free of preemptive rights.
-2-
<PAGE>
<PAGE>
5. Exercise Price Adjustments and Warrant Shares Issuable Upon
Exercise. Subject to the provisions of this Section 5, the Exercise Price in
effect from time to time and the number of Warrant Shares issuable upon exercise
of the Warrants shall be subject to adjustment, as follows:
(a) In case the Company shall at any time after the date
hereof (i) declare a dividend on the outstanding Common Stock payable in shares
of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with the consolidation or merger of the
Company with or into another corporation), then, in each case, the Exercise
Price in effect, and the number of shares of Common Stock issuable upon exercise
of the Warrants outstanding, at the time of the record date for such dividend or
at the effective date of such subdivision, combination or reclassification,
shall be proportionately adjusted so that the holder of the Warrants after such
time shall be entitled to receive the same number and kind of shares which, if
such Warrants had been exercised immediately prior to such time, such holders
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue rights, options or
warrants to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable for, Common Stock) at a price per share (or having a
conversion price per share, if a security is convertible into, or exchangeable
for, Common Stock) less than the Current Market Price per share of Common Stock
(as determined pursuant to Section 5(h) hereof) in effect immediately prior to
the earlier of the issuance thereof or the record date therefor, then, effective
immediately following the earlier of the issuance of such rights, options or
warrants or the record date therefor, as the case may be, in each case, the
Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to such issuance or record date, as the case may be, by a
fraction, the numerator of which shall be the sum of (i) the total number of
shares of Common Stock outstanding on such date, and (ii) the number of shares
of Common Stock which the aggregate exercise, conversion or exchange price of
the rights, options or warrants to be issued would purchase at such Current
Market Price, and the denominator of which shall be the total number of shares
of Common Stock outstanding on such date plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which the
convertible or exchangeable securities so to be offered are initially
convertible or exchangeable). In case any subscription price may be paid for a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive absent
manifest error. If any change shall occur in the price per share provided for in
any of the options, rights or warrants referred to in this Section 5(b), or in
the price per share or ratio at which the securities referred to in this Section
5(b) are convertible or exchangeable (in either case, other than changes in such
prices or ratios arising pursuant to anti-dilution adjustments in such options,
rights, warrants, convertible or exchangeable securities or the instruments
pursuant to which they
-3-
<PAGE>
<PAGE>
were issued, provided that such options, rights, warrants, convertible or
exchangeable securities or instruments pursuant to which they were issued do not
contain anti-dilution provisions any more favorable to the holder thereof than
those contained herein), such options, rights or warrants or convertible or
exchangeable securities, as the case may be, to the extent not theretofore
exercised, shall be deemed to have expired or terminated on the date when such
price change became effective in respect of shares not theretofore issued
pursuant to the exercise or conversion or exchange thereof, and the Company
shall be deemed to have issued upon such date new options, rights or warrants or
convertible or exchangeable securities.
(c) In case the Company shall sell or otherwise issue any
shares of Common Stock for a consideration per share less than the Current
Market Price (as determined pursuant to Section 5(h) hereof), then, in each
case, the Exercise Price in effect immediately prior to such sale shall be
adjusted to a price determined by multiplying the Exercise Price in effect
immediately prior to such sale by a fraction the numerator of which shall be the
sum of (i) the total number of shares of Common Stock outstanding immediately
prior to such sale, and (ii) the number of shares of Common Stock that could be
purchased at the Current Market Price in effect immediately prior to such sale
or other issuance for the consideration received by the Company upon the sale or
other issuance, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such sale; provided, however, that
in no event shall the Exercise Price be adjusted pursuant to this computation to
an amount in excess of the Exercise Price in effect immediately prior to such
computation. For the purposes of any adjustment to be made in accordance with
this Section 5(c), in case of the sale or other issuance of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash portion
of the consideration therefor deemed to have been received by the Company shall
be (i) the subscription price, if shares of Common Stock are offered by the
Company for subscription, or (ii) the public offering price (before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing similar
services), if such securities are sold to underwriters or dealers for public
offering without a subscription offering, or (iii) the gross amount of cash
actually received by the Company for such securities in any other case, in each
case, without deduction for any expenses incurred by the Company in connection
with such transaction. In case of the sale of shares of Common Stock for a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive absent
manifest error.
(d) In case the Company shall distribute to all holders of
Common Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness, cash or assets (other
than distributions and dividends payable in shares of Common Stock), then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Current Market Price (as determined pursuant to Section
5(h) hereof) per share of Common Stock on such record date,
-4-
<PAGE>
<PAGE>
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed, or the amount of such cash, applicable to one share of Common
Stock, and the denominator of which shall be such Current Market Price per share
of Common Stock. Such adjustment shall become effective at the close of business
on such record date.
(e) In any case in which this Section 5 shall require that an
adjustment in the number of Warrant Shares be made effective as of a record date
for a specified event (an "Event"), the Company may elect to defer, until the
occurrence of such Event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the shares of Common Stock, if any, issuable
upon such exercise over and above the number of Warrant Shares, if any, issuable
upon such exercise on the basis of the number of Warrant Shares in effect prior
to such adjustment; provided, however, that the Company shall deliver to the
Holder an appropriate instrument evidencing the Holder's right to receive such
additional shares upon the occurrence of the Event requiring such adjustment.
(f) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall, within five (5) business days thereafter, cause
written notice thereof to be sent by registered mail, postage prepaid, to the
Holder, at his or its address as it shall appear in the Warrant Register, which
notice shall be accompanied by an officer's certificate setting forth the number
of Warrant Shares issuable hereunder and the exercise price thereof after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
(g) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of this Warrant. If any fraction of a share would be issuable upon the exercise
of this Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price of such share of Common Stock on the date of exercise of this Warrant.
(h) The "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities exchange
(including, for purposes hereof, the Nasdaq National Market(TM)) on which the
Common Stock is listed or admitted to trading, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the highest
reported bid price for the Common Stock as furnished by the National Association
of Securities Dealers, Inc. (the "NASD") or a similar organization if the NASD
is no longer reporting such information (including for purposes hereof Nasdaq).
If on any such date the Common Stock is not listed or admitted to trading on any
national
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securities exchange and is not quoted by The Nasdaq Stock Market, Inc. or any
similar organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(i) No adjustment in the Exercise Price shall be required if
such adjustment is less than $0.05; provided, however, that any adjustments
which by reason of this Section 5 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent. For purposes of any
calculation pursuant to this Section 5, shares of Common Stock owned by, or held
for the account of, the Company shall not be deemed outstanding for the purpose
of any such computation.
(j) Upon each adjustment of the Exercise Price as a result of
the calculations made in this Section 5, the Warrants shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares of
Common Stock (calculated to the nearest hundredth) obtained by dividing (i) the
product obtained by multiplying the number of shares of Common Stock purchasable
upon exercise of the Warrants prior to any adjustment of the number of shares of
Common Stock by the Exercise Price in effect prior to adjustment of the Exercise
Price by (ii) the Exercise Price in effect after such adjustment of the Exercise
Price.
(k) Notwithstanding anything to the contrary contained herein,
no adjustment of the Exercise Price or in the number of shares of Common Stock
issuable upon exercise of the Warrants shall be made as a result of, or in
connection with, (i) the issuance of stock options pursuant to the stock option
plans described in the Company's Registration Statement on Form S-1,
Registration Number 333-3830, as being in existence as of the date hereof so
long as the aggregate amount of Common Stock covered by all of such options does
not exceed 350,000 shares; (ii) the issuance or sale of shares of Common Stock
upon the exercise of options referred to in clause (i) above, and (iii) the
issuance of any shares of Common Stock upon exercise of the Warrants pursuant to
this Agreement.
6. (a) Consolidations and Mergers. In case of any consolidation with,
or merger of the Company with or into, another corporation, or in case of any
sale, lease or conveyance to another corporation of all or substantially all of
the property and assets of the Company (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of shares of
Common Stock theretofore deliverable) the kind and amount of shares of stock or
other securities, cash or other property which would otherwise have been
deliverable to a holder of the number of shares of Common Stock upon the
exercise of this Warrant upon such Reorganization if this Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise
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of this Warrant. Any such adjustment shall be made by, and set forth in, a
supplemental agreement between the Company, or any successor thereto, and the
Holder and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Reorganization
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer shall assume by written instrument the obligation
to deliver to the Holder such shares of stock, securities, cash or other
property as the Holder shall be entitled to purchase in accordance with the
foregoing provisions.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant, or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) of
the shares of Common Stock, the Holder shall have the right thereafter to
receive upon exercise of this Warrant solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such reclassification, change, consolidation or merger by a holder of the
number of shares of Common Stock for which this Warrant might have been
exercised immediately prior to such reclassification, change, consolidation or
merger. Thereafter, appropriate provision shall be made for adjustments which
shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time the Company shall
propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or to make any other distribution to all
holders of Common Stock; or
(b) to issue any rights, warrants or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants or other securities; or
(c) to effect any reclassification or change of outstanding
shares of Common Stock or any consolidation, merger, sale, lease or conveyance
of property, described in Section 6; or
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(d) to effect any liquidation, dissolution or winding-up of
the Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) business days prior to (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined or, (ii)
the date on which any such reclassification, change of outstanding shares of
Common Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution or winding-up is expected to become effective and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange their shares for securities or other property, if
any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up.
8. Taxes. The issuance of any shares or other securities upon the
exercise of this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to the
Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder.
9. Registration Rights. (a) If at any time during the period commencing
on June __, 1997 and ending on June __, 2003, the Company shall file a
registration statement (other than on Form S-4, Form S-8, or any successor form)
with the Securities and Exchange Commission (the "Commission"), the Company
shall give all the then holders of any Warrants or Warrant Shares (the "Eligible
Holders") at least thirty (30) days prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within
thirty (30) days after receipt of any such notice, the Company shall, at the
Company's sole expense (other than the fees and disbursements of counsel for the
Eligible Holders and any underwriting discounts), register or qualify all or, at
each Eligible Holder's option, any portion of the Warrant Shares of any Eligible
Holder who shall have made such request, concurrently with the registration of
such other securities, all to the extent requisite to permit the public offering
and sale of the Warrant Shares through the facilities of all appropriate
securities exchanges and the over-the-counter market, and will use its best
efforts through its officers, directors, auditors and counsel to cause such
registration statement to become effective as promptly as practicable.
(b) If, on any two occasions during the period commencing on
October 12, 1996 and ending on October 12, 2000, the Company shall receive a
written request from Eligible Holders who in the aggregate own (or upon exercise
of all Warrants then outstanding would own) a majority of the total number of
shares of Common Stock then included (or upon such exercises would be included)
in the Warrant Shares (the "Majority Holders"), to register the sale of all or
part of such Warrant Shares, the Company shall, as promptly as practicable, but
in no event later than 60 days following the date of such request, prepare and
file with the Commission a registration statement sufficient to permit the
public offering and sale of the
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Warrant Shares through the facilities of all appropriate securities exchanges
and the over-the-counter market, and will use its best efforts through its
officers, directors, auditors and counsel to cause such registration statement
to become effective as promptly as practicable; provided, that the Company shall
only be obligated for all expenses (other than underwriting discounts) incurred
by the Holders in connection with the first filing of the registration statement
under this Section 9(b). Within five (5) business days after receiving any
request contemplated by this Section 9(b), the Company shall give written notice
to all the other Eligible Holders, advising each of them that the Company is
proceeding with such registration and offering to include therein all or any
portion of any such other Eligible Holders' Warrant Shares, provided that the
Company receives a written request to do so from such Eligible Holders within
thirty (30) days after receipt by them of the Company's notice.
(c) In the event of a registration pursuant to the provisions
of this Section 9, the Company shall use its best efforts to cause the Warrant
Shares so registered to be registered or qualified for sale under the securities
or blue sky laws of such jurisdictions as the Holder or such holders may
reasonably request.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 9 and shall, from time to time, amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Warrant Shares covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine (9) months from the date on which the Eligible Holders are
first free to sell such Warrant Shares; provided, however, that, if the Company
is required to keep any such registration or qualification in effect with
respect to securities other than the Warrant Shares beyond such period, the
Company shall keep such registration or qualification in effect as it relates to
the Warrant Shares for so long as such registration or qualification remains or
is required to remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions
of this Section 9, the Company shall furnish to each Eligible Holder such number
of copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Securities Act and the rules and regulations
thereunder, and such other documents, as any Eligible Holder may reasonably
request to facilitate the disposition of the Warrant Shares included in such
registration.
(f) In the event of a registration pursuant to the provisions
of this Section 9, the Company shall furnish each Eligible Holder of any Warrant
Shares so registered with an opinion of its counsel (reasonably acceptable to
the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Securities Act of 1933, as amended (the "Securities
Act"), and no order suspending the effectiveness of the registration statement,
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preventing or suspending the use of the registration statement, any preliminary
prospectus, any final prospectus or any amendment or supplement thereto has been
issued, nor has the Commission or any securities or blue sky authority of any
jurisdiction instituted or threatened to institute any proceedings with respect
to such an order, (ii) the registration statement and each prospectus forming a
part thereof (including each preliminary prospectus), and any amendment or
supplement thereto, complies as to form with the Securities Act, and (iii) such
counsel has no knowledge of any material misstatement or omission in such
registration statement or any prospectus, as amended or supplemented. Such
opinion shall also state the jurisdictions in which the Warrant Shares have been
registered or qualified for sale pursuant to the provisions of Section 9(c).
(g) In the event of a registration pursuant to the provisions
of this Section 9, the Company shall enter into a cross-indemnity agreement and
a contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses and customary closing
conditions, including, without limitation, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Warrant Shares.
(h) The Company agrees that until the later of (i) the period
when all of the Warrants Shares have been sold under a registration statement or
pursuant to Rule 144 under the Securities Act or (ii) June __, 2003, it shall
keep current in filing all reports, statements and other materials required to
be filed with the Commission to permit holders of the Warrant Shares to sell
such securities under Rule 144.
(i) The Company will not, without the prior written consent of
the Majority Holders, grant to any person the right to request the Company to
register any securities of the Company.
(j) Notwithstanding the forgoing, if the Company shall not
have filed a registration statement for the Warrant Shares within the time
period specified in Section 9(b) hereof or the Company shall be in material
breach of any other provision specified in this Section 9 or Section 5 hereof,
the Company shall, upon written notice of the Holder, repurchase the Warrant at
a price equal to the Current Market Price less the Exercise Price. Such
repurchase shall be in immediately available funds and shall close within three
(3) business days after the Holder has provided the Company with a notice of
election provided pursuant hereto.
10. (a) Indemnification and Contribution. Subject to the conditions set
forth below, the Company agrees to indemnify and hold harmless each Eligible
Holder, its officers, directors, partners, employees, agents and counsel, and
each person, if any, who controls any such person within the meaning of Section
15 of the Securities Act or Section 20(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), from and against any and all loss,
liability, charge, claim, damage and expense whatsoever (which shall include,
for all purposes of this Section 10, without limitation, attorneys' fees and any
and all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced
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or threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading contained in (A) any registration statement, preliminary
prospectus or final prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, relating to the sale of any of the
Warrant Shares, or (B) any application or other document or communication (in
this Section 10 collectively called an "application") executed by or on behalf
of the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to register or qualify any of the
Warrant Shares under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange, unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to such Eligible Holder by or on behalf of such person
expressly for inclusion in any registration statement, preliminary prospectus,
or final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 10(a)) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and the payment of expenses. Such indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (I) the employment of such counsel shall have been authorized
in writing by the Company in connection with the defense of such action, (II)
the Company shall not have promptly employed counsel reasonably satisfactory to
such indemnified party or (III) the parties to have charge of the defense of
such action or such indemnified party or parties shall have reasonably concluded
that there may be one or more legal defenses available to it or them or to other
indemnified parties which are different from or additional to those available to
the Company, in any of which events such fees and expenses shall be borne by the
Company, and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. The Company shall not,
without the prior written consent of each indemnified party that is not released
as described in this sentence, settle or compromise any action, or permit a
default or consent to the entry of judgment in or otherwise seek to terminate
any pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each indemnified party from all liability in respect of such action.
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The Company agrees promptly to notify the Eligible Holders of the commencement
of any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of any Warrant Shares or any preliminary
prospectus, prospectus, registration statement or amendment or supplement
thereto, or any application relating to any sale of any Warrant Shares.
(b) The Holder agrees to indemnify and hold harmless the
Company, each director and officer of the Company who signs any registration
statement covering Warrant Shares held by the Holder, each other person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, and its or their respective counsel, to
the same extent as the foregoing indemnity from the Company to the Holder in
Section 10(a), but only with respect to statements or omissions, if any, made in
any registration statement, preliminary prospectus or final prospectus, or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Holder by or on behalf of the Holder expressly for inclusion in any such
registration statement, preliminary prospectus or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant to
this Section 10(b), the Holder shall have the rights and duties given to the
Company and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 10(a) or
10(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company (including for this purpose any contribution made by or on behalf of
any director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Warrant
Shares included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Holder agree
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that it would be unjust and inequitable if the respective obligations of the
Company and the Eligible Holders for contribution were determined by pro rata or
per capita allocation of the aggregate losses, liabilities, claims, damages and
expenses (even if the Holder and the other indemnified parties were treated as
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 10(c). In no
case shall any Eligible Holder be responsible for a portion of the contribution
obligation imposed on all Eligible Holders in excess of its pro rata share based
on the number of shares of Common Stock owned (or which would be owned upon
exercise of all Warrant Shares) by it and included in such registration as
compared to the number of shares of Common Stock owned (or which would be owned
upon exercise of all Warrant Shares) by all Eligible Holders and included in
such registration. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 10(c), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent and counsel of each such Eligible Holder or control person shall
have the same rights to contribution as such Eligible Holder or control person
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of
the Company who shall have signed any such registration statement, each director
of the Company and its or their respective counsel shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 10(c). Anything in this Section 10(c) to the contrary notwithstanding,
no party shall be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 10(c) is
intended to supersede any right to contribution under the Securities Act, the
Exchange Act or otherwise.
11. Legend. Unless a current registration statement covering the
Warrant Shares is in effect under the Securities Act, the Warrant Shares issued
upon exercise of the Warrant shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). SUCH SHARES MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT."
12. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant (and upon surrender of any Warrant if mutilated), the Company shall
promptly execute and deliver to the Holder thereof a new Warrant of like date,
tenor and denomination.
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13. No Rights as Shareholder. The Holder of any Warrant shall not have,
solely on account of such status, any rights of a shareholder of the Company,
either at law or in equity, or to any notice of meetings of stockholders or of
any other proceedings of the Company, except as provided in this Warrant.
14. Governing Law. This Warrant shall be construed in accordance with
the laws of the State of New York applicable to contracts made and performed
within such State, without regard to principles of conflicts of law.
15. Modification of Agreement. This Warrant shall not otherwise be
modified, supplemented or amended in any respect unless such modification,
supplement or amendment is in writing and signed by the party against which
enforcement of the same is sought.
16. Consent to Jurisdiction. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any Federal court
located in such state in connection with any action or proceeding arising out of
or relating to this Warrant, any document or instrument delivered pursuant to,
in connection with or simultaneously with this Warrant, or a breach of this
Warrant or any such document or instrument. In any such action or proceeding,
the Company waives personal service of any summons, complaint or other process
and agrees that service thereof may be made in accordance with Section 12 of the
Underwriting Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the date set forth below.
Dated: June __, 1996 BIGMAR, INC.
[Seal] By: ________________________________
Name:
Title:
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells,
assigns, and transfers unto ________________________ a warrant (the "Warrant")
to purchase __________ shares of common stock, par value $0.001 per share, of
Bigmar, Inc. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint ________ as attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Dated:___________________
Signature ________________________
NOTICE
The signature on the foregoing Assignment must correspond to
the name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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To: Bigmar, Inc.
6660 Doubletree Avenue
Columbus, Ohio 43229
The undersigned hereby exercises his or its rights to purchase
____ Warrant Shares covered by the within Warrant and (i) tenders payment
herewith in the amount of $_____________ or (ii) surrender the Warrant in the
amount of _________, in each case in accordance with the terms thereof, and
requests that certificates for such securities be issued in the name of, and
delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares be registered in the name of, and delivered to, the undersigned at the
address stated below.
Dated:__________________
___________________________
(Signature)
Name: ___________________________
(Print)
Address: _________________________
_________________________
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SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is made and entered into as of the 1st day of
March, 1996, among Cernitin America, Inc. ("Sublessor"), Bigmar, Inc.
("Sublessee").
RECITALS
A. Sublessor is the "Tenant" under that certain Lease Agreement dated
the 14th day of January, 1992 and extended September 7, 1994 pertaining to 1440
rentable square feet of office space in the Suite 20 (the "Leased Premises"),
located at 6660 Doubletree Ave., Columbus, Ohio, 43229 (the "Lease"), a copy of
which is attached hereto as "Exhibit A," which is incorporated herein by
reference.
B. Sublessor desires to sublet to Sublessee 1440 rentable square feet
of the Leased Premises, as shown on "Exhibit B," attached hereto (the "Sublet
Premises").
C. Pursuant to Paragraph 6.4 of the Lease, the Leased Premises may
not be sublet without the prior written consent of Landlord.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
1. Sublet Premises. The Sublet Premises consist of approximately 1440
rentable square feet of space known as Suite 20 in the Leased Premises.
2. Term. The term of this Sublease Agreement shall commence on the lst
day of March l996, and terminate on the 28th day of February 1998.
3. Rent and Security Deposit. Sublessee agrees to pay to Sublessor as
Rent hereunder for the Sublet Premises the total sum of $44,629.92 payable in
advance in monthly installments of $1,859.58.
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4. Sublessee to Pay Rent. The parties to this Sublease Agreement
acknowledge that in order to protect this Sublease Agreement, Sublessee must
pay the Rent due and owing under the Sublease. Sublessee hereby covenants that
it shall pay the Rent under the Sublease for the term of the Sublease and
satisfy and perform all other obligations thereunder. In the event Sublessee
defaults on any term of the Sublease (including, without limitation, the payment
of Rent), Sublessor shall immediately correct such default and remain fully
liable under the Sublease during the remaining term.
5. Terms and Conditions of the Lease. Unless otherwise specifically
provided for in this Sublease Agreement, Sublessee shall comply with all
provisions of the Lease which are to be observed or performed during the term of
this Sublease Agreement as such provisions relate to the Sublet Premises.
6. No Obligations of Landlord. Landlord shall not be obligated to
Sublessee in any respect under this Sublease Agreement.
7. Sublessor's Indemnification. Sublessor shall indemnify and hold
Landlord harmless from and against all losses, costs, damages and expenses of
every kind and nature whatsoever (including attorneys' fees) arising out of or
in any way connected with this Sublease Agreement.
8. Miscellaneous Provisions.
(a) Sublessor and Sublessee acknowledge that no future transfer of the
Lease or this Sublease Agreement shall be made without Landlord's prior written
consent, as provided in Paragraph 6.4 Of the Lease.
(b) Except as provided in this Sublease Agreement, all other terms and
provisions contained in the Lease remain in full force and effect.
(c) This Sublease Agreement shall be binding upon the parties hereto
and their respective successors, legal representatives and assigns.
(d) This Sublease Agreement shall be of no legal effect unless and
until Landlord shall give its written consent thereto.
2
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IN WlTNESS WHEREOF, the parties hereto have caused this Sublease
Agreement to be executed the day and year first above written.
SUBLESSOR:
Cernitin America, Inc.
--------------------------------------
a Ohio corporation
ATTEST:
RICHARD E. EVANCHICK
- ----------------------------------- BY: DEBORAH K. RUYAN
RICHARD E. EVANCHICK -----------------------------------
Its Secretary of the Corporation
Deborah K. Ruyan
SUBLESSEE:
Bigmar, Inc.
--------------------------------------
a Delaware corporation
ATTEST:
RICHARD E. EVANCHICK BY: MICHAEL K. MEDORS
- ----------------------------------- -----------------------------------
RICHARD E. EVANCHICK Its Treasurer
Michael K. Medors
3
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INDEMNIFICATION AGREEMENT
This agreement, made and entered into this ____ day of _______,
1996 ("Agreement"), by and between Bigmar, Inc., a Delaware corporation (the
"Corporation"), and ______________ ("Indemnitee"):
RECITALS
WHEREAS, highly competent persons are becoming more reluctant to
serve as directors, officers or in other capacities unless they are provided
with adequate protection through insurance or adequate indemnification against
inordinate risks of claims and actions against them arising out of their service
to and activities on behalf of the Corporation; and
WHEREAS, the current difficulty of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the difficulty
of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation has determined
that the inability to attract and retain such persons is detrimental to the best
interests of the Corporation's stockholders and that the Corporation should act
to assure such persons that there will be increased certainty of such
protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the
Corporation contractually to obligate itself to indemnify such persons to the
fullest extent permitted by applicable law so that they will serve or continue
to serve the Corporation free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Corporation on the condition
that Indemnitee be so indemnified;
NOW, THEREFORE, in consideration of the premises and
the covenants contained herein, the Corporation and Indemnitee
do
hereby covenant and agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, the following terms shall have
the meaning given here:
1.01 "Board" means the Board of Directors of the Corporation.
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1.02 "Change in Control" means a change in control of the
Corporation occurring after the Effective Date (as defined herein) of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A (or in response to any similar item on any similar schedule or
form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether
or not the Corporation is then subject to such reporting requirement; provided,
however, that, without limitation, such a Change in Control shall be deemed to
have occurred if after the Effective Date (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at
least two-thirds of the members of the Board in office immediately prior to
such person attaining such percentage interest; (ii) the Corporation is a party
to a merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the Board
thereafter; or (iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
1.03 "Corporate Status" describes the status of a person who is
or was a director, officer, employee, agent of the Corporation or of any other
corporation, partnership, joint venture, trustee, employee benefit plan or
enterprise for which such person is or was serving at the express written
request of the Corporation.
1.04 "Disinterested Director" means a director of the Corporation
who is not and was not a party to the Proceeding (as defined herein) in respect
of which indemnification is sought by the Indemnitee.
1.05 "Effective Date" means _________ ___, 1996.
1.06 "Enterprise" shall mean the Corporation and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is or was serving at the express written request
of the Corporation as a director, officer, employee or agent.
1.07 "Expenses" shall include but not be limited to all
reasonable attorneys' fees, retainers, court costs, transcript
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costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types actually and reasonably
incurred by him in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
1.08 "Good Faith" shall mean Indemnitee having acted in good
faith and in a manner Indemnitee reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
Proceeding, having had no reasonable cause to believe Indemnitee's conduct was
unlawful.
1.09 "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the
Corporation or Indemnitee in any matter material to either such party, or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Corporation or Indemnitee in an action to determine Indemnitee's
rights under this Agreement.
1.10 "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing or
any other pending, threatened, or completed proceeding whether civil, criminal,
administrative or investigative, other than one initiated by Indemnitee. For
purposes of the foregoing sentence, a "Proceeding" shall not be deemed to have
been initiated by Indemnitee where Indemnitee seeks pursuant to Article VIII of
this Agreement to enforce Indemnitee's rights under this Agreement.
ARTICLE II
Term of Agreement
This Agreement shall continue until and terminate upon the later
of: (i) 10 years after the date that Indemnitee shall have ceased to serve as a
director, officer, employee and/or agent of the Enterprise; or (ii) the final
termination of all pending Proceedings in respect of which Indemnitee is granted
rights of indemnification or advancement of Expenses hereunder and of any
Proceeding commenced by Indemnitee pursuant to Article VIII of this Agreement
relating thereto.
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ARTICLE III
Services by Indemnitee, Notice of Proceedings
3.01 Services. Indemnitee agrees to serve as a [director,
officer, employee and/or agent] of the Corporation. Indemnitee may at any time
and for any reason resign from such position (subject to any other contractual
obligation or any obligation imposed by operation of law).
3.02 Notice of Proceeding. Indemnitee agrees promptly to notify
the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
ARTICLE IV
Indemnification
4.01 In General. In connection with any Proceeding, the
Corporation shall indemnify, and advance Expenses to, Indemnitee as provided in
this Agreement and to the fullest extent permitted by applicable law in effect
on the date hereof and to such greater extent as applicable law may thereafter
from time to time permit.
4.02 Proceedings Other Than Proceedings by or in the Right of the
Corporation. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 4.02 if, by reason of Indemnitee's Corporate Status,
Indemnitee is, or is threatened to be made, a party to any Proceeding, other
than a Proceeding by or in the right of the Corporation. Indemnitee shall be
indemnified against fees, Expenses, judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by Indemnitee or on Indemnitee's
behalf in connection with such Proceeding or any claim, issue or matter therein,
if Indemnitee acted in Good Faith.
4.03 Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 4.03 if, by reason of Indemnitee's Corporate Status, Indemnitee is, or
is threatened to be made, a party to any Proceeding brought by or in the right
of the Corporation to procure a judgment in its favor. Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonably incurred by Indemnitee or on Indemnitee's
behalf in connection with such Proceeding or any claim, issue or matter therein,
if Indemnitee acted in Good Faith. Notwithstanding the foregoing, no such
indemnification shall be made in respect of any claim, issue or
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matter in such Proceeding as to which Indemnitee shall have been adjudged to be
liable to the Corporation, unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such Proceeding shall
have been brought or, if no action was brought, any court of competent
jurisdiction determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such portion of the settled
amount and Expenses as such court deems proper.
4.04 Indemnification of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a party
to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee
shall be indemnified to the maximum extent permitted by law, against all
Expenses, judgments, penalties, fines, and amounts paid in settlement, actually
and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Corporation shall indemnify
Indemnitee to the maximum extent permitted by law, against all Expenses actually
and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section 4.04 and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
4.05 Indemnification for Expenses of a Witness. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of Indemnitee's Corporate Status, a witness in any Proceeding, Indemnitee
shall be indemnified against all Expenses actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection therewith.
ARTICLE V
Advancement of Expenses
Notwithstanding any provision to the contrary in Article VI, the
Corporation shall advance all reasonable Expenses which, by reason of
Indemnitee's Corporate Status, were charged to or incurred by or on behalf of
Indemnitee in connection with any Proceeding, within twenty days after the
receipt by the Corporation of a statement or statements from Indemnitee
requesting such advance or advances whether prior to or after final disposition
of such Proceeding. Such statement or statements shall reasonably evidence
the Expenses incurred by Indemnitee and
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shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified against such Expenses.
ARTICLE VI
Procedures for Determination of
Entitlement to Indemnification
6.01 Initial Request. To obtain indemnification under this
Agreement, Indemnitee shall submit to the Corporation a written request,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The
Secretary of the Corporation shall promptly advise the Board in writing that
Indemnitee has requested indemnification.
6.02 Method of Determination. A determination (if required by
applicable law) with respect to Indemnitee's entitlement to indemnification
shall be made by the Board by a majority vote of a quorum consisting of
Disinterested Directors. In the event that a quorum of the Board consisting of
Disinterested Directors is not obtainable or, even if obtainable, such quorum of
Disinterested Directors so directs, the determination shall be made by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee, or by the stockholders of the Corporation, as
determined by such quorum of Disinterested Directors or by a quorum of the
Board, as the case may be. If a Change in Control has occurred and Indemnitee so
requests, the determination shall be made by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee.
6.03 Selection, Payment, Discharge of Independent Counsel. In the
event the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 6.02 of this Agreement, the Independent
Counsel shall be selected, paid, and discharged in the following manner:
(a) The Independent counsel shall be selected by the
Board, and the Corporation shall give written
notice to Indemnitee advising Indemnitee of the
identity of the Independent Counsel so selected.
(b) Following the initial selection described in clause
(a) of this Section 6.03, Indemnitee may, within
seven days after such written notice of selection
has been given, deliver to the Corporation a
written objection to
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such selection. Such objection may be asserted
only on the ground that the Independent Counsel so
selected does not meet the requirements of
"Independent Counsel" as defined in Section 1.09 of
this Agreement, and the objection shall set forth
with particularity the factual basis of such
assertion. Absent a proper and timely objection,
the person so selected shall act as Independent
Counsel. If such written objection is made, the
Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has
determined that such objection is without merit or
Indemnitee has delivered a written withdrawal of
such objection to the Corporation.
(c) Either the Corporation or Indemnitee may petition
the Court of Chancery of the State of Delaware or
other court of competent jurisdiction if the
parties have been unable to agree on the selection
of Independent Counsel (if applicable) within 20
days after submission by Indemnitee of a written
request for indemnification pursuant to Section
6.01 of this Agreement. Such petition may request a
determination whether an objection to the party's
selection is without merit and/or seek the
appointment as Independent Counsel of a person
selected by the Court or by such other person as
the Court shall designate. A person so appointed
shall act as Independent Counsel under Section 6.02
of this Agreement.
(d) The Corporation shall pay any and all reasonable
fees and expenses of Independent Counsel incurred
by such Independent Counsel acting pursuant to this
Agreement, and the Corporation shall pay all
reasonable fees and expenses incident to the
procedures of this Section 6.03, regardless of the
manner in which such Independent Counsel was
selected or appointed.
(e) Upon the due commencement of any judicial
proceeding or arbitration pursuant to Section
8.01(c) of this Agreement, Independent Counsel
shall be discharged and relieved of any further
responsibility in such capacity (subject to the
applicable standards of professional conduct then
prevailing).
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6.04 Cooperation. Indemnitee shall cooperate with the person,
persons or entity making the determination with respect to Indemnitee's
entitlement to indemnification under this Agreement, including providing to
such person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from disclosure
and which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
6.05 Payment. If it is determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination.
ARTICLE VII
Presumptions and Effect of Certain Proceedings
7.01 Burden of Proof. In making a determination with respect to
entitlement to indemnification hereunder, the person or persons or entity making
such determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for indemnification
in accordance with Section 6.01 of this Agreement, and the Corporation shall
have the burden of proof to overcome that presumption in connection with the
making by any person, persons or entity of any determination contrary to that
presumption.
7.02 Effect of Other Proceedings. The termination of any
Proceeding or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this Agreement) of itself
adversely affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not act in Good Faith.
7.03 Reliance as Safe Harbor. For purposes of any determination
of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. The provisions of this Section 7.03 shall not be deemed to be
exclu-
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sive or to limit in any way the other circumstances in which the Indemnitee may
be deemed to have met the applicable standard of conduct set forth in this
Agreement.
7.04 Actions of Others. The knowledge and/or actions, or failure
to act, of any director, officer, agent or employee of the Enterprise shall not
be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.
ARTICLE VIII
Remedies of Indemnitee
8.01 Application. This Article VIII shall apply in the event of a
Dispute. For purposes of this Article, "Dispute", shall mean any of the
following events:
(a) a determination is made pursuant to Article VI of
this Agreement that Indemnitee is not entitled to
indemnification under this Agreement;
(b) advancement of Expenses is not timely made
pursuant to Article V of this Agreement;
(c) the determination of entitlement to be made
pursuant to Section 6.02 of this Agreement had not
been made within 90 days after receipt by the
Corporation of the request for indemnification;
(d) payment of indemnification is not made pursuant to
Section 4.05 of this Agreement within ten (10) days
after receipt by the Corporation of written
request therefor; or
(e) payment of indemnification is not made within ten
(10) days after a determination has been made that
Indemnitee is entitled to indemnification pursuant
to Article VI of this
Agreement.
8.02 Adjudication. In the event of a Dispute, Indemnitee shall
be entitled to an adjudication in the Court of Chancery of the State of Delaware
or in any other court of competent jurisdiction, of Indemnitee's entitlement to
such indemnification and advancement of Expenses. Alternatively, Indemnitee, at
Indemnitee's option, may seek an award in arbitration to be conducted by a
single arbitrator, pursuant to the rules of the American Arbitration
Association. Indemnitee shall commence such proceeding seeking an adjudication
or an award in arbitration within 180 days following the date on which
Indemnitee first has
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the right to commence such proceeding pursuant to this Section 8.02. The
Corporation shall not oppose Indemnitee's right to seek any such adjudication or
award in arbitration.
8.03 De Novo Review. In the event that a determination shall have
been made pursuant to Article VI of this Agreement that Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration commenced
pursuant to this Article VIII shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of that adverse determination. In any such proceeding or arbitration, the
Corporation shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
8.04 Corporation Bound. If a determination shall have been made
pursuant to Article VI of this Agreement that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law.
8.05 Procedures Valid. The Corporation shall be precluded from
asserting in any judicial proceeding or arbitration commenced pursuant to this
Article VIII that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Corporation is bound by all the provisions of this
Agreement.
8.06. Expenses of Adjudication. In the event that Indemnitee,
pursuant to this Article VIII, seeks a judicial adjudication of or an award in
arbitration to enforce Indemnitee's rights under, or to recover damages for
breach of, this Agreement, Indemnitee shall be entitled to recover from the
Corporation and shall be indemnified by the Corporation against, any and all
expenses (of the types described in the definition of Expenses in Section 1.07
of this Agreement) actually and reasonably incurred by Indemnitee in such
adjudication or arbitration, but only if Indemnitee prevails therein. If it
shall be determined in such adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification of advancement or
expenses sought, the expenses incurred by Indemnitee in connection with such
adjudication or arbitration shall be appropriately prorated.
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ARTICLE IX
Non-Exclusivity, Insurance, Subrogation
9.01 Non-Exclusivity. The rights of indemnification and to
receive advancement of Expenses as provided by this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Restated Certificate of Incorporation, as
amended, the By-Laws, any agreement, a vote of stockholders or a resolution of
directors, or otherwise. No amendment, alteration, rescission or replacement of
this Agreement or any provision hereof shall be effective as to Indemnitee with
respect to any action taken or omitted by such Indemnitee in Indemnitee's
Corporate Status prior to such amendment, alteration, rescission or replacement.
9.02 Insurance. The Corporation may maintain an insurance policy
or policies against liability arising out of this Agreement or otherwise.
9.03 Subrogation. In the event of any payment under this
Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute all papers
required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Corporation to bring
suit to enforce such rights.
9.04 No Duplicative Payment. The Corporation shall not be liable
under this Agreement to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that Indemnitee has otherwise actually received
such payment under any insurance policy, contract, agreement or otherwise.
ARTICLE X
General Provisions
10.01 Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's heirs, executors and administrators.
10.02 Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever:
(a) the validity, legality and enforceability of
the remaining provisions of this Agreement
(including, without limitation, each portion
of any Section of this Agreement containing any
such provision held to be invalid, ille-
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gal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall not in any way be
affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of
this Agreement (including, without limitation, each
portion of any Section of this Agreement containing
any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal
or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
10.03 No Adequate Remedy. The parties declare that it is
impossible to measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this Agreement.
Therefore, if either party shall institute any action or proceeding to enforce
the provisions hereof, such party against whom such action or proceeding is
brought hereby waives the claim or defense that such party has an adequate
remedy at law, and such party shall not urge in any such action or proceeding
the claim or defense that the other party has an adequate remedy at law.
10.04 Identical Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
10.05 Headings. The headings of the sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
10.06 Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
10.07 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or
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registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
If to Indemnitee, to:
As shown with Indemnitee's signature below.
If to the Corporation, to:
Bigmar, Inc.
6660 Doubletree
Columbus, Ohio 43229
Attn: President
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Irwin M. Rosenthal, Esq.
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
10.08 Governing Law. The parties agree that this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
10.09 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto in reference to all the
matters herein agreed upon. This Agreement replaces in full all prior
indemnification agreements or understandings of the parties hereto, and any and
all such prior agreements or understandings are hereby rescinded by mutual
agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
BIGMAR, INC.
By______________________________
Its_____________________________
INDEMNITEE
________________________________
Print name:
Address: _______________________
________________________
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EMPLOYMENT AGREEMENT
This AGREEMENT made as of the 15th day of April, 1996, by and between
Bigmar, Inc., a Delaware corporation (hereinafter, "the Employer" or
"Employer"), and John G. Tramontana (hereinafter, "the Executive" or
"Executive").
1. Commencing on the Effective Date, as hereinafter defined, of this
Agreement, Employer shall employ Executive as President and Chief Executive
Officer to perform the duties normally incident to such positions.
2. Executive agrees to devote all of Executive's business time, efforts,
skills and attention to fulfill Executive's duties and responsibilities
hereunder faithfully, diligently and competently.
3. The term of this Agreement shall commence upon the consummation of
the presently contemplated initial public offering of common stock of Employer
(the "Effective Date") and shall terminate five years thereafter, unless sooner
terminated as hereinafter provided, and shall be subject to automatic annual
renewal thereafter unless at least sixty days prior to the end of the term of
this Agreement or any annual renewal period Executive or Employer shall give
written notice to the other that this Agreement shall not be renewed.
4. Employer will pay to Executive as compensation for all services to be
rendered by Executive hereunder a salary at the rate of Two Hundred Thousand and
00/100 ($200,000.00) Dollars ("Base Salary") for the twelve-month period
commencing on the Effective Date and for each twelve-month period thereafter
(each a "Twelve-Month Period") subject to annual cost of living increases as may
be approved by and in the discretion of the Board of Directors of Employer. The
Base Salary shall be payable twice monthly.
5. Employer may pay to Executive bonuses (in cash or stock options) as
may be approved by and in the discretion of the Board of Directors of Employer;
provided, however, that, such bonus shall be equal to at least 25% of the Base
Salary annually. The performance of Executive shall be reviewed by the Board of
Directors on or about each anniversary of the Effective Date.
6. Employer will reimburse Executive for all reasonable travel and
business expenses incurred by Executive in connection with performance of
Executive's services hereunder in accordance with the usual practices and
policies of Employer in effect from time to time, upon presentation of vouchers.
7. Executive will be eligible for and will be afforded an opportunity to
participate in all benefit plans and programs
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which are currently afforded or which may be afforded during the term of this
Agreement to other executive officers of Employer, including, without
limitation, group insurance, health, hospital, dental, major medical, life and
disability insurance and stock option plans or other similar fringe benefits.
8. Executive will be entitled to four weeks vacation during each
Twelve-Month Period. To the extent not taken in any Twelve-Month Period,
Executive, at his option, shall be entitled to receive payment for any unused
vacation or accrue such vacation time.
9. Employer will provide either directly to Executive or on Executive's
behalf, an automobile allowance in the amount of $6,000 for each Twelve-Month
Period.
10. (a) Employer will obtain life insurance coverage, (assuming
Executive is insurable) on the life of and for the benefit of Executive in an
amount equal to $500,000.
(b) Executive agrees that Employer in Employer's discretion, may
apply for and procure in the name of Executive and for its own benefit life
insurance in any amount or amounts considered advisable but not less than Two
Million 00/100 ($2,000,000) Dollars and that Executive shall have no right,
title or interest therein.
(c) Executive represents and warrants that, to the best of
Executive's knowledge, Executive is in good health and that, to the best of
Executive's knowledge, Executive will qualify and be acceptable for life
insurance coverage in an amount of at least Two Million 00/100 ($2,000,000)
Dollars.
(d) Executive agrees to submit to any medical or other examination
and to execute and deliver any application or other instrument necessary to
effectuate such life insurance.
11. In the event of Executive's death during the term of this Agreement,
this Agreement shall terminate immediately, provided, however, that Executive's
legal representatives shall be entitled to receive the Base Salary which would
otherwise have been due Executive had Executive worked through the end of the
month of Executive's death plus three additional months of the Base Salary for
the Twelve-Month Period in which Executive died.
12. If during the term of this Agreement, Executive is unable to perform
Executive's duties hereunder on account of illness or other incapacity, and such
illness or other incapacity shall continue for a period of more than three
consecutive months during any Twelve Month Period, Employer shall have the
right, on thirty days' notice to Executive, given after such three month period,
to terminate this Agreement. In the event of any such
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termination Employer shall be obligated to pay to Executive the Base Salary
which would otherwise be due Executive until the end of the month during which
the termination occurred plus six additional months of the Base Salary for the
Twelve-Month Period in which such termination occurred. If, prior to the date
specified on such notice, Executive's illness or incapacity shall have ceased
and Executive shall have resumed the performance of Executive's duties
hereunder, Executive shall be entitled to resume Executive's employment
hereunder as though such notice had not been given. Employer's Board of
Directors shall determine in good faith, upon consideration of medical evidence
satisfactory to it, whether Executive by reason of physical or mental disability
shall be unable to perform the services required of Executive hereunder.
13. If Employer shall terminate Executive's employment hereunder for
Cause, as hereinafter defined, or if Executive shall voluntarily leave
Executive's employment hereunder, Employer will pay to Executive within ten days
after the termination of such Agreement an amount equal to the amount which
Executive would have earned as the Base Salary hereunder through the end of the
then current month in which such termination or departure occurred. Cause shall
mean any gross malfeasance directly and materially affecting Employer or
conviction of a felony directly and materially affecting Employer, each of
determined in the sole discretion of Employer.
14. If Executive's employment is terminated by Employer without Cause,
this Agreement shall terminate immediately, provided, however, that Employer
shall be obligated to pay Executive the Base Salary had Executive worked through
the last day of the month in which Executive was terminated and four months of
the Base Salary for the Twelve-Month Period in which Executive was terminated.
15. Executive covenants and agrees that any work or research, or the
result thereof, including without limitation, inventions, processes or formulae
made, conceived or developed by Executive, alone or in connection with others,
during Executive's employment with Employer, whether within or without the usual
hours of employment, which are directly related to the business, research,
development work or field of operation of Employer, or any of its subsidiaries
or affiliates, shall, at the option of Employer, to the extent of Executive's
interest therein, be the sole and exclusive property of Employer. Executive
further agrees to disclose all such inventions, processes and formulae
completely and in writing to the Board of Directors of Employer and to no other
persons unless so directed in writing by the Board of Directors of Employer. To
the extent of Executive's interest therein, at the option of Employer, all
papers and records of every kind, relating to any invention,
process, formula, improvement or patent included within the terms of this
Agreement, which shall at any time come into the possession of Executive shall
be the
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sole and exclusive property of Employer and shall be surrendered to Employer
upon termination of Executive's employment by Employer or upon Employer's
request at any other time either during or after the termination of such
employment.
16. Executive covenants and agrees with Employer that Executive has
not, and will not, during Executive's employment with Employer and thereafter,
directly or indirectly, use, communicate, disclose or disseminate to anyone
(except to the extent reasonably necessary for Executive to perform his duties
hereunder, except as required by law or except if generally available to the
public otherwise than through use, communication, disclosure or dissemination
by the Executive) any materials, documents or records containing confidential
information concerning the businesses or affairs of Employer or of any of its
affiliates or subsidiaries which Executive may have acquired in the course of or
as incident to Executive's employment or prior dealings with Employer or with
any of its affiliates or subsidiaries, including, without limitation, customer
lists, business or trade secrets of, or methods or techniques used by Employer
of any of its affiliates or subsidiaries in or about their respective busi-
nesses, or any information whatsoever concerning the customers or suppliers of
any of them.
17. Executive acknowledges that Executive's services and
responsibilities are of particular significance to Employer and that Executive's
position with Employer has given and will give Executive a close knowledge of
its policies and trade secrets.
Executive covenants and agrees with Employer that Executive
will not during Executive's employment with Employer and for a period
of two years after the termination of Executive's employment with Employer, in
any manner, directly or indirectly, (i) induce or attempt to influence any
present or future officer, employee, lessor, lessee, licensor, licensee or agent
of Employers or its subsidiaries or its affiliates to leave its respective
employ or solicit or divert or service any customers or clients of Employer or
its subsidiaries or its affiliates or (ii) alone or as a partner, officer,
director, employee, consultant or stockholder (except for ownership of no more
than 5% of the capital stock) of any corporation, partnership or other entity be
directly competitive with the business of Employer or its subsidiaries or
affiliates. For purposes of subdivision (ii) above of this paragraph 17, (a) a
business shall be presumed to be directly competitive if it conducts in whole or
in part anywhere in Switzerland, Germany and the United States any business in
which Employer, its subsidiaries or affiliates engages in during the term of
Executive's employment with Employer,
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and the burden of proving otherwise shall be on Executive, and (b) the
business activities of a subsidiary or division of a publicly held corporation
shall not be deemed to include the business activities of other subsidiaries
or divisions of such publicly held corporation.
Nothing herein shall restrict or otherwise limit Executive from managing
Executive's private investments which are not directly competitive with the
businesses of Employer. Executive shall be permitted to serve as a director of
companies which are not directly competitive with the businesses of Employer,
so long as such services do not interfere with the performance of Executive's
duties under this Agreement.
18. Executive acknowledges that the remedy at law for any breach or
threatened breach by Executive of the covenants contained in paragraphs 15, 16,
and 17 would be wholly inadequate, and therefore Employer or its subsidiaries
or its affiliates shall be entitled to preliminary and permanent injunctive
relief and specific performance thereof. Paragraphs 15, 16, and 17 constitute
independent and separable covenants that shall be enforceable notwithstanding
rights or remedies that Employer or its subsidiaries or it affiliates may have
under any other provision of this Agreement, or otherwise. If any or all of the
foregoing provisions of paragraphs 15, 16, and 17 are held to be unenforceable
for any reason whatsoever, it shall not in any way invalidate or affect the
remainder or this Agreement which shall remain in full force and effect. If the
period of time or geographical areas specified in paragraphs 15, 16, or 17 are
determined to be unreasonable in any judicial proceeding, the period of time or
areas of restriction shall be reduced so that this Agreement may be enforced in
such areas and during such period of time as shall be determined to be
reasonable.
19. Executive represents and warrants to Employer that since
commencement of Executive's employment with Employer, Executive was not, is not
now and, in the future will not without the approval of the Board of Directors
of Employer become, under any obligation of a contractual or other nature to any
person, firm or corporation which is inconsistent or in conflict with this
Agreement, or which would prevent, limit or impair in any way the execution of
this Agreement or the performance by Executive of Executive's obligations
hereunder and Executive will indemnify and hold harmless Employer, its
Directors, officers and employees against and in respect of all liability, loss,
damage, expense or deficiency resulting from any misrepresentation, or breach of
any warranty or agreement made by Executive in connection with
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Executive's employment hereunder or under Executive's Original Employment
Agreement.
20. The waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent
breach thereof.
21. Any and all notices referred to herein shall be sufficient if
furnished in writing and sent by certified mail, return receipt requested, to
the respective parties at the addresses set forth below, or such other address
as either party may from time to time designate in writing.
To Executive: To Employer:
John G. Tramontana Bigmar, Inc.
10890 Camp Ohio Road 6660 Doubletree Avenue
Utica, OH 43080 Columbus, OH 43229
With copies in each case to: Rubin Baum Levin Constant
& Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Edward Klimerman, Esq.
22. This Agreement shall be binding upon, and shall inure to the benefit
of, Employer and its successors and assigns, and Executive and Executive's legal
representatives, heirs, legatees and distributees, but neither this Agreement
nor any rights hereunder shall be assignable, encumbered or pledged by
Executive.
23. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes any and all
prior written or oral agreements between Employer and Executive with respect to
the subject matter hereof. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing and signed by
both parties hereto.
24. This Agreement shall be construed and enforced in accordance with
the laws and decisions of the State of Delaware.
25. This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same Agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
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26. If any provision or part of any provision of this Agreement is held
for any reason to be unenforceable, the remainder of this Agreement shall
nevertheless remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the 15th day of April, 1996.
BIGMAR, INC.
By:_________________________________
Name:
Title:
____________________________________
John G. Tramontana
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Medical Advisory
Agreement
This agreement (the "Agreement") is entered into as of the
____ day of ________, 1996 between _____________________,
________________________________________________________ (the "Advisor") and
Bigmar, Inc., a Delaware corporation (the "Company").
In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall be in effect for a
period of three (3) years from the date hereof and shall be renewable for an
additional period to be determined upon the prior written consent of the
parties.
2. ADVISORY BOARD. The Advisor agrees to serve under the terms
of this Agreement as a medical advisor of the Company as more fully described in
Section 4 below.
3. CONFIDENTIALITY. The Advisor recognizes and acknowledges
the technology possessed by the Company to be a valuable property right and that
information received by him from the Company about said property right is to be
kept confidential and secret, and further agrees to keep confidential all
information provided to him by the Company related to its business and
technology and further agrees to keep secret all disclosures furnished to him by
the Company and not to disclose the aforementioned information and disclosures
under any circumstances for a period of five (5) years from receipt thereof,
without the express written authorization of the Company, except however, that
nothing in this Agreement shall in any way restrict the right of the Advisor to
use, disclose, or otherwise deal with any information, which,
(a) On the date hereof shall be available to the
public or thereafter shall become so
available through no breach of this Agreement
by the Advisor;
(b) Shall have been in the possession of the
Advisor at the time of disclosure to Advisor
by Company;
(c) Shall not have been acquired by the Advisor
directly or indirectly from Company, pursuant
or incidentally to this Agreement;
(d) Shall have been acquired by the Advisor from
any person entitled to make disclosure to
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Advisor unless such person has been directed
by Company to reveal such information on a
confidential basis; or
(e) Shall have been developed by the Advisor or
on the Advisor's behalf independent of
information received from Company, as shown
by written records.
4. ADVISORY FUNCTION. The Advisor agrees to (i) advise the
Company of advances in the Field as that term is described in Schedule A to this
Agreement (the "Field"), (ii) to consult with the Company, (iii) to assess the
feasibility of research and development programs in the Field under
consideration by the Company, and (iv) offer guidance for future research and
clinical applications of the Company's technology in the Field. The Advisor
further agrees (a) to meet individually and in groups as called upon from time
to time to review and advise the Company on its research, development,
operations and commercialization of its technology and to consult at mutually
convenient times and upon reasonable prior notice with the Company and the
Company's management, agents, employees and other Medical Advisory Board members
on the Company's projects in the Field, and (b) to attend meetings of the
Medical Advisory Board of the Company, but in no event will such activities take
more than four (4) additional full days per year in aggregate time. Any further
activities, if requested, shall be on an "as available" basis and at an agreed
upon fee.
Nothing herein shall:
(a) Be construed to permit or require the Advisor
to disclose, and the Advisor shall not
disclose, to the Company any information,
including without limitation any advice or
suggestions regarding any product, product
development, formula, or technological or
manufacturing process, which the Advisor
shall be under any duty, express or implied,
to [name of hospital or entity by which
Advisor is employed] or any other person or
persons, including any sponsor of research at
same, to keep secret, develop or otherwise to
deal with;
(b) Be construed to grant to the Company any
license under any patent or patent
application not expressly assigned or
assignable to Company in accordance
herewith.
5. COMPENSATION AND REIMBURSEMENTS. The Company shall
compensate the Advisor $1,000 per annum for consulting
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services or Medical Advisory Board meetings attended, payable semi-annually
commencing on the earlier to occur of (i) the date which is three days
subsequent to the date on which the Company consummates any initial public
offering of its securities (the "IPO") and (ii) the date which is 180 days
subsequent to the date hereof. The Company shall reimburse the Advisor for all
authorized expenses incurred in performing services under this Agreement. The
Company also will reimburse the Advisor for other travel expenses for
consultation meetings with the executives of the Company or meetings with the
members of the Company's Medical Advisory Board or with other medical or
scientific individuals involved in the development of projects of the Company.
6. STOCK OPTION. In consideration hereof, the Company agrees
to grant to the Advisor a non-qualified stock option (the "Option") under the
Company's 1996 Stock Option Plan (the "1996 Plan") to acquire an aggregate of
3,000 unregistered shares of Common Stock of the Company, $.001 par value per
share, substantially in accordance with the terms and conditions of the 1996
Plan. The Option shall vest in three (3) equal installments of 1,000 shares
each, the first, second and third commencing upon the first, second and third
anniversary dates of the IPO, each of which will be exercisable for a period
of three (3) years following the date of vesting. The Option will be subject
in all respects to the 1996 Plan and to any agreements, rules or policies
with respect to which the Advisor is subject.
The exercise price per share (the "Exercise Price") of the
Option shall be determined in accordance with the provisions of the 1996 Plan.
The Exercise Price shall be equal to the price per share of the Common Stock in
the IPO as provided in the Registration Statement filed with the Securities and
Exchange Commission (the "Commission") in connection with the IPO.
Adjustments may be made in the number or kind of shares of
securities for which the option may be exercised and in the Exercise Price in
accordance with the 1996 Plan.
The Advisor agrees that the Advisor will acquire the Option
and, upon exercise of the Option will acquire the shares of Common Stock so
issued, for the Advisor's own account, for investment purposes only, and not for
public resale or distribution of the same. The Advisor will not sell or
otherwise dispose of, directly or indirectly, the Option, or any shares of
Common Stock issuable upon exercise of the Option except in compliance with the
applicable provisions of this Agreement, the 1996 Plan, the Securities Act of
1933, as amended (the "Securities Act"), and the Rules and Regulations of the
Commission promulgated thereunder and the securities laws of any state. The
Advisor understands and acknowledges that neither the Option nor the shares of
Common Stock issuable upon exercise of
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the Option have been registered under the Securities Act, or the securities laws
of any state, and that they are being granted and/or sold in reliance upon an
exemption from registration thereunder and that the Advisor's right to sell,
transfer, pledge or otherwise dispose of the Option or the shares of Common
Stock issuable upon exercise of the Option will be limited by the Securities Act
and state securities laws. Each certificate representing shares of Common Stock
acquired upon exercise of the Option will bear a legend reflecting the
foregoing.
In the event of the Advisor's death during the term of this
Agreement, this Agreement shall terminate immediately, provided, however, that
the full amount of the Option shall inure to the benefit of and be exercisable
by the Advisor's legal representatives in accordance with the 1996 Plan at any
time within one year following the date of such death or prior to the date on
which the option expires by its terms, whichever occurs first. If this Agreement
is terminated on account of permanent disability of the Advisor, the Advisor may
exercise the full amount of the Option in accordance with the 1996 Plan at any
time within one year from such termination or prior to the date on which the
Option expires by its terms, whichever occurs first. If this Agreement
terminates for any reason other than death or disability, the Option may
generally be exercised by the Advisor, at any time, in accordance with the terms
of the 1996 Plan, within three months after the date of such termination or
prior to the date on which the Option expires by its terms, whichever occurs
first, as to any shares of Common Stock subject to the Option which the Advisor
was entitled to exercise at the date of such termination. The right of the
Advisor to exercise the Option shall not be assignable or transferable by the
Advisor otherwise than as permitted by the 1996 Plan.
Subject to the provisions of this Agreement, the Option may be
exercised by delivery to the Company, at its principal office, directed to the
attention of the Secretary, of a written notice of exercise surrendering for
cancellation the Option, specifying the number of shares being purchased,
accompanied by payment of the Option price in full for shares being purchased.
7. RESTRICTIVE COVENANT. The Advisor recognizes that the
Advisor's services and responsibilities are of particular significance to the
Company and agrees, for the term of this Agreement to inform the Company prior
to serving as an employee, consultant, officer, director, partner or owner
(other than the passive ownership of up to 5% of the outstanding securities of
any public company) of any for-profit entity which the Advisor knows or has
reason to believe is competitive with the business or affairs of the Company,
provided the Advisor shall be under no obligation to disclose to the Company the
identity of such entity, and the Company shall, upon being so informed by the
Advisor, have the right to terminate this Agreement pursuant to
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Section 13 hereunder. Nothing in this Section or in this Agreement, however,
shall be construed to restrict or limit the duties the Advisor is performing or
may perform in the course of, or incidental to, the Advisor's appointment or
employment at [name of hospital or entity by which Advisor is employed] ,
including but not limited to research sponsored by a third party commercial
entity, nor shall anything herein be construed to restrict or limit his right to
practice medicine, nor his duties as an employee, consultant or advisor to, any
hospital, academic institution or other not for profit government or scientific
research organization.
8. INVENTIONS. (a) Except as may be determined otherwise in
accordance with Section 8(b) below, the Advisor agrees to assign to the Company
or any person or organization designated in writing by the Company, at no
additional consideration other than the consideration for this Agreement all of
the Advisor's rights, title and interest in any invention in the Field that is
made solely or jointly with others in the sole performance of the services of
the Advisor to the Company under this Agreement. The Advisor shall execute,
acknowledge and deliver to the Company all such further papers including
applications for patents that may be necessary to enable the Company to publish
or protect said inventions, which are the property of the Company by patent or
otherwise, in any and all countries, and to vest title to said inventions in the
Company, and shall render, at the Company's expense including reasonable
compensation for the Advisor's time involved, such assistance as the Company may
reasonably require in any Patent and Trademark office proceeding or litigation
involving said inventions.
(b) In the event that an invention is made by the
Advisor in the sole performance of the services of the Advisor to the Company
under this Agreement, which invention relates to the Advisor's research at
[hospital], the Advisor agrees to report such invention to both [hospital]'s
Office of Technology Affairs and Company. [hospital] and the Company will
thereupon exert their best effort in cooperation in with each other to determine
whether such invention is subject to the Advisor's participation agreement and,
if so, the disposition of rights in the invention.
9. RELATIONSHIP TO THE COMPANY. The relationship created by
this Agreement shall be that of an independent contractor and the Advisor shall
not be deemed an employee of the Company for any purpose whatsoever.
10. NO CONFLICTS. The Advisor represents to the Company that
the Advisor is not now under any obligation of a contractual or other nature to
any person, firm, corporation or other entity which is inconsistent or in
conflict with this Agreement, or which would prevent, limit or impair in any way
the
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execution of this Agreement or the performance by the Advisor of the Advisor's
obligations hereunder.
11. INDEMNIFICATION. The Company agrees to indemnify, defend
and hold harmless the Advisor and the Advisor's successors, heirs, and assigns
("Indemnitees") against any liability, damage, loss or expense (including
reasonable attorney's fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any one of them in connection with any claims, suits,
actions, demands or judgments arising from the good faith performance of the
services hereunder by the Advisor.
12. PUBLICITY. The Advisor will not originate any publicity,
news release or other public announcement, written or oral, relating to this
Agreement without the Company's prior written consent. Neither the Advisor's
name nor that of [hospital] will be used in any advertising, promotional or
sales literature, or other publicity without the prior written approval of the
party whose name is to be used, provided, however, that the Advisor hereby
consents to the use in any Registration Statement or pre- or post-effective
amendment thereto, filed by the Company, with the Commission, the National
Association of Securities Dealers, Inc. and The Nasdaq Stock Market, Inc., or in
any document related thereto, of the Advisor's name and to any other disclosure
relating to the Advisor's relationship with the Company or any of the
subsidiaries or of any agreements between the undersigned and the Company or any
of its subsidiaries. The Advisor hereby further agrees to keep all information
regarding the Company's Registration Statement and any securities offerings
related thereto confidential and hereby further consents to the filing of any
agreements between the Company or any of its subsidiaries and the Advisor as
exhibits to the Company's Registration Statement.
13. TERMINATION. Either party shall have the right to
terminate the Agreement by 120 days' prior written notice. In the event of
termination by the Company, the Company shall owe the Advisor for performance of
the Advisor's services hereunder prior to termination.
14. SURVIVAL. The obligations of the parties under Sections 3,
7, 8, 11 and 12 hereof shall survive the termination or expiration of this
Agreement.
15. ENTIRE UNDERSTANDING. This Agreement constitutes the
entire understanding of the parties hereto and supersedes any and all prior
written or oral agreements between the parties hereto with respect to the
subject matter hereof.
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16. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Delaware.
ADVISOR
Sign Name:_____________________________
Print Name:____________________________
BIGMAR, INC.
By:____________________________________
Title:_________________________________
Reviewed by [name of hospital or entity by which Advisor is employed] in
accordance with Paragraphs __________ of [name of hospital or entity by which
Advisor is employed]'s Statement of Policy on Consulting Agreements.
By__________________________________
______________________, Director
Office of Technology Affairs
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Schedule A
The Field of this Agreement is ______________________
_______________________________________________________________________________.
The Advisor shall advise the Company about the
________________________________________________________________________________
________, involving the Company's technologies and products in
the Field.
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Scientific Advisory
Agreement
This agreement (the "Agreement") is entered into as of the
____ day of ________, 1996 between _____________________,
________________________________________________________ (the "Advisor") and
Bigmar, Inc., a Delaware corporation (the "Company").
In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall be in effect for a
period of three (3) years from the date hereof and shall be renewable for an
additional period to be determined upon the prior written consent of the
parties.
2. ADVISORY BOARD. The Advisor agrees to serve under the terms
of this Agreement as a scientific advisor of the Company as more fully described
in Section 4 below.
3. CONFIDENTIALITY. The Advisor recognizes and acknowledges
the technology possessed by the Company to be a valuable property right and that
information received by him from the Company about said property right is to be
kept confidential and secret, and further agrees to keep confidential all
information provided to him by the Company related to its business and
technology and further agrees to keep secret all disclosures furnished to him by
the Company and not to disclose the aforementioned information and disclosures
under any circumstances for a period of five (5) years from receipt thereof,
without the express written authorization of the Company, except however, that
nothing in this Agreement shall in any way restrict the right of the Advisor to
use, disclose, or otherwise deal with any information, which,
(a) On the date hereof shall be available to the
public or thereafter shall become so
available through no breach of this Agreement
by the Advisor;
(b) Shall have been in the possession of the
Advisor at the time of disclosure to Advisor
by Company;
(c) Shall not have been acquired by the Advisor
directly or indirectly from Company, pursuant
or incidentally to this Agreement;
(d) Shall have been acquired by the Advisor from
any person entitled to make disclosure to
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Advisor unless such person has been directed
by Company to reveal such information on a
confidential basis; or
(e) Shall have been developed by the Advisor or
on the Advisor's behalf independent of
information received from Company, as shown
by written records.
4. ADVISORY FUNCTION. The Advisor agrees to (i) advise the
Company of advances in the Field as that term is described in Schedule A to this
Agreement (the "Field"), (ii) to consult with the Company, (iii) to assess the
feasibility of research and development programs in the Field under
consideration by the Company, (iv) offer guidance for future research and
clinical applications of the Company's technology in the Field. The Advisor
further agrees (a) to meet individually and in groups as called upon from time
to time to review and advise the Company on its research, development,
operations and commercialization of its technology and to consult at mutually
convenient times and upon reasonable prior notice with the Company and the
Company's management, agents, employees and other Scientific Advisory Board
members on the Company's projects in the Field, and (b) to attend meetings of
the Scientific Advisory Board of the Company, but in no event will such
activities take more than four (4) additional full days per year in aggregate
time. Any further activities, if requested, shall be on an "as available" basis
and at an agreed upon fee.
Nothing herein shall:
(a) Be construed to permit or require the Advisor
to disclose, and the Advisor shall not
disclose, to the Company any information,
including without limitation any advice or
suggestions regarding any product, product
development, formula, or technological or
manufacturing process, which the Advisor
shall be under any duty, express or implied,
to [name of hospital or entity by which
Advisor is employed] or any other person or
persons, including any sponsor of research at
same, to keep secret, develop or otherwise to
deal with;
(b) Be construed to grant to the Company any
license under any patent or patent
application not expressly assigned or
assignable to Company in accordance
herewith.
5. COMPENSATION AND REIMBURSEMENTS. The Company shall
compensate the Advisor $1,000 per annum for consulting
-2-
<PAGE>
<PAGE>
services or Scientific Advisory Board meetings attended, payable semi-annually
commencing on the earlier to occur of (i) the date which is three days
subsequent to the date on which the Company consummates any initial public
offering of its securities (the "IPO") and (ii) the date which is 180 days
subsequent to the date hereof. The Company shall reimburse the Advisor for all
authorized expenses incurred in performing services under this Agreement. The
Company also will reimburse the Advisor for other travel expenses for
consultation meetings with the executives of the Company or meetings with the
members of the Company's Scientific Advisory Board or with other medical or
scientific individuals involved in the development of projects of the Company.
6. STOCK OPTION. In consideration hereof, the Company agrees
to grant to the Advisor a non-qualified stock option (the "Option") under the
Company's 1996 Stock Option Plan (the "1996 Plan") to acquire an aggregate of
3,000 unregistered shares of Common Stock of the Company, $.001 par value per
share, substantially in accordance with the terms and conditions of the 1996
Plan. The Option shall vest in three (3) equal installments of 1,000 shares
each, the first, second and third commencing upon the first, second and third
anniversary dates of the IPO, each of which will be exercisable for a period
of three (3) years following the date of vesting. The Option will be subject
in all respects to the 1996 Plan and to any agreements, rules or policies
with respect to which the Advisor is subject.
The exercise price per share (the "Exercise Price") of the
Option shall be determined in accordance with the provisions of the 1996 Plan.
The Exercise Price shall be equal to the price per share of the Common Stock in
the IPO as provided in the Registration Statement filed with the Securities and
Exchange Commission (the "Commission") in connection with the IPO.
Adjustments may be made in the number or kind of shares of
securities for which the option may be exercised and in the Exercise Price in
accordance with the 1996 Plan.
The Advisor agrees that the Advisor will acquire the Option
and, upon exercise of the Option will acquire the shares of Common Stock so
issued, for the Advisor's own account, for investment purposes only, and not for
public resale or distribution of the same. The Advisor will not sell or
otherwise dispose of, directly or indirectly, the Option, or any shares of
Common Stock issuable upon exercise of the Option except in compliance with the
applicable provisions of this Agreement, the 1996 Plan, the Securities Act of
1933, as amended (the "Securities Act"), and the Rules and Regulations of the
Commission promulgated thereunder and the securities laws of any state. The
Advisor understands and acknowledges that neither the
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<PAGE>
<PAGE>
Option nor the shares of Common Stock issuable upon exercise of the Option have
been registered under the Securities Act, or the securities laws of any state,
and that they are being granted and/or sold in reliance upon an exemption from
registration thereunder and that the Advisor's right to sell, transfer, pledge
or otherwise dispose of the Option or the shares of Common Stock issuable upon
exercise of the Option will be limited by the Securities Act and state
securities laws. Each certificate representing shares of Common Stock acquired
upon exercise of the Option will bear a legend reflecting the foregoing.
In the event of the Advisor's death during the term of this
Agreement, this Agreement shall terminate immediately, provided, however, that
the full amount of the Option shall inure to the benefit of and be exercisable
by the Advisor's legal representatives in accordance with the 1996 Plan at any
time within one year following the date of such death or prior to the date on
which the option expires by its terms, whichever occurs first. If this Agreement
is terminated on account of permanent disability of the Advisor, the Advisor may
exercise the full amount of the Option in accordance with the 1996 Plan at any
time within one year from such termination or prior to the date on which the
Option expires by its terms, whichever occurs first. If this Agreement
terminates for any reason other than death or disability, the Option may
generally be exercised by the Advisor, at any time, in accordance with the terms
of the 1996 Plan, within three months after the date of such termination or
prior to the date on which the Option expires by its terms, whichever occurs
first, as to any shares of Common Stock subject to the Option which the Advisor
was entitled to exercise at the date of such termination. The right of the
Advisor to exercise the Option shall not be assignable or transferable by the
Advisor otherwise than as permitted by the 1996 Plan.
Subject to the provisions of this Agreement, the Option may be
exercised by delivery to the Company, at its principal office, directed to the
attention of the Secretary, of a written notice of exercise surrendering for
cancellation the Option, specifying the number of shares being purchased,
accompanied by payment of the Option price in full for shares being purchased.
7. RESTRICTIVE COVENANT. The Advisor recognizes that the
Advisor's services and responsibilities are of particular significance to the
Company and agrees, for the term of this Agreement to inform the Company prior
to serving as an employee, consultant, officer, director, partner or owner
(other than the passive ownership of up to 5% of the outstanding securities of
any public company) of any for-profit entity which the Advisor knows or has
reason to believe is competitive with the business or affairs of the Company,
provided the Advisor shall be under no obligation to disclose to the Company the
identity of such entity, and the Company shall, upon being so informed by the
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<PAGE>
<PAGE>
Advisor, have the right to terminate this Agreement pursuant to Section 13
hereunder. Nothing in this Section or in this Agreement, however, shall be
construed to restrict or limit the duties the Advisor is performing or may
perform in the course of, or incidental to, the Advisor's appointment or
employment at [name of hospital or entity by which Advisor is employed] ,
including but not limited to research sponsored by a third party commercial
entity, nor shall anything herein be construed to restrict or limit his right to
practice medicine, nor his duties as an employee, consultant or advisor to, any
hospital, academic institution or other not for profit government or scientific
research organization.
8. INVENTIONS. (a) Except as may be determined otherwise in
accordance with Section 8(b) below, the Advisor agrees to assign to the Company
or any person or organization designated in writing by the Company, at no
additional consideration other than the consideration for this Agreement all of
the Advisor's rights, title and interest in any invention in the Field that is
made solely or jointly with others in the sole performance of the services of
the Advisor to the Company under this Agreement. The Advisor shall execute,
acknowledge and deliver to the Company all such further papers including
applications for patents that may be necessary to enable the Company to publish
or protect said inventions, which are the property of the Company by patent or
otherwise, in any and all countries, and to vest title to said inventions in the
Company, and shall render, at the Company's expense including reasonable
compensation for the Advisor's time involved, such assistance as the Company may
reasonably require in any Patent and Trademark office proceeding or litigation
involving said inventions.
(b) In the event that an invention is made by the
Advisor in the sole performance of the services of the Advisor to the Company
under this Agreement, which invention relates to the Advisor's research at
[hospital], the Advisor agrees to report such invention to both [hospital]'s
Office of Technology Affairs and Company. [hospital] and the Company will
thereupon exert their best effort in cooperation in with each other to determine
whether such invention is subject to the Advisor's participation agreement and,
if so, the disposition of rights in the invention.
9. RELATIONSHIP TO THE COMPANY. The relationship created by
this Agreement shall be that of an independent contractor and the Advisor shall
not be deemed an employee of the Company for any purpose whatsoever.
10. NO CONFLICTS. The Advisor represents to the Company that
the Advisor is not now under any obligation of a contractual or other nature to
any person, firm, corporation or other entity which is inconsistent or in
conflict with this
-5-
<PAGE>
<PAGE>
Agreement, or which would prevent, limit or impair in any way the execution of
this Agreement or the performance by the Advisor of the Advisor's obligations
hereunder.
11. INDEMNIFICATION. The Company agrees to indemnify, defend
and hold harmless the Advisor and the Advisor's successors, heirs, and assigns
("Indemnitees") against any liability, damage, loss or expense (including
reasonable attorney's fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any one of them in connection with any claims, suits,
actions, demands or judgments arising from the good faith performance of the
services hereunder by the Advisor.
12. PUBLICITY. The Advisor will not originate any publicity,
news release or other public announcement, written or oral, relating to this
Agreement without the Company's prior written consent. Neither the Advisor's
name nor that of [hospital] will be used in any advertising, promotional or
sales literature, or other publicity without the prior written approval of the
party whose name is to be used, provided, however, that the Advisor hereby
consents to the use in any Registration Statement or pre- or post-effective
amendment thereto, filed by the Company, with the Commission, the National
Association of Securities Dealers, Inc. and The Nasdaq Stock Market, Inc., or in
any document related thereto, of the Advisor's name and to any other disclosure
relating to the Advisor's relationship with the Company or any of the
subsidiaries or of any agreements between the undersigned and the Company or any
of its subsidiaries. The Advisor hereby further agrees to keep all information
regarding the Company's Registration Statement and any securities offerings
related thereto confidential and hereby further consents to the filing of any
agreements between the Company or any of its subsidiaries and the Advisor as
exhibits to the Company's Registration Statement.
13. TERMINATION. Either party shall have the right to
terminate the Agreement by 120 days' prior written notice. In the event of
termination by the Company, the Company shall owe the Advisor for performance of
the Advisor's services hereunder prior to termination.
14. SURVIVAL. The obligations of the parties under Sections 3,
7, 8, 11 and 12 hereof shall survive the termination or expiration of this
Agreement.
15. ENTIRE UNDERSTANDING. This Agreement constitutes the
entire understanding of the parties hereto and supersedes any and all prior
written or oral agreements between the parties hereto with respect to the
subject matter hereof.
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<PAGE>
<PAGE>
16. GOVERNING LAW. This Agreement shall be governed
by the laws of the State of Delaware.
ADVISOR
Sign Name:_____________________________
Print Name:____________________________
BIGMAR, INC.
By:____________________________________
Title:_________________________________
Reviewed by [name of hospital or entity by which Advisor is employed] in
accordance with Paragraphs __________ of [name of hospital or entity by which
Advisor is employed]'s Statement of Policy on Consulting Agreements.
By
---------------------------------
______________________, Director
Office of Technology Affairs
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<PAGE>
<PAGE>
Schedule A
The Field of this Agreement is ______________________
_______________________________________________________________________________.
The Advisor shall advise the Company about the
________________________________________________________________________________
________, involving the Company's technologies and products in
the Field.
-8-
<PAGE>
<PAGE>
BIGMAR, INC.
1996 STOCK OPTION PLAN
<PAGE>
<PAGE>
BIGMAR, INC.
1996 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<S> <C> <C>
1. Purpose of the Plan.................................................................................. 1
-------------------
2. Stock Subject to the Plan............................................................................ 1
-------------------------
3. Administration of the Plan........................................................................... 1
--------------------------
4. Type of Options...................................................................................... 2
---------------
5. Eligibility.......................................................................................... 2
-----------
6. Restrictions on Incentive Stock Options.............................................................. 2
---------------------------------------
7. Option Agreements.................................................................................... 3
-----------------
8. Option Price......................................................................................... 4
------------
9. Manner of Payment; Manner of Exercise................................................................ 4
-------------------------------------
10. Exercise of Options.................................................................................. 5
-------------------
11. Term of Options; Exercisability...................................................................... 5
-------------------------------
12. Options Not Transferable............................................................................. 7
------------------------
13. Recapitalization, Reorganizations and the Like....................................................... 7
----------------------------------------------
14. No Special Employment Rights......................................................................... 9
----------------------------
15. Withholding.......................................................................................... 9
-----------
16. Restrictions on Issuance of Shares................................................................... 9
----------------------------------
17. Purchase for Investment; Rights of Holder on Subsequent Registration................................. 10
--------------------------------------------------------------------
18. Loans................................................................................................ 10
-----
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
19. Modification of Outstanding Options ................................................................. 10
-----------------------------------
20. Approval of Stockholders............................................................................. 11
------------------------
21. Termination and Amendment of Plan.................................................................... 11
---------------------------------
22. Limitation of Rights in the Option Shares............................................................ 11
-----------------------------------------
23. Notices.............................................................................................. 11
-------
</TABLE>
<PAGE>
<PAGE>
BIGMAR, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Bigmar, Inc., 1996 Stock Option Plan (the "Plan")
is to advance the interests of Bigmar, Inc., a Delaware corporation (the
"Company"), by providing an opportunity for ownership of the stock of the
Company by employees, agents and directors of, and consultants to, the Company
and its subsidiaries. By providing such opportunity, the Company seeks to
attract and retain such qualified personnel, and otherwise to provide additional
incentive for grantees to promote the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
treasury shares of the common stock, $.001 par value per share, of the Company
(the "Common Stock") for which options (the "Options") may be granted under the
Plan shall be 300,000, subject to adjustment as provided in Section 14 hereof.
(b) If an Option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for subsequent Option grants
under the Plan.
(c) Stock issuable upon exercise of an Option may be subject to such
restrictions on transfer, repurchase rights or other restrictions as shall be
determined by the Board of Directors of the Company (the "Board").
3. Administration of the Plan.
(a) The Plan shall be administered by the Board. No member of the
Board shall act upon any matter exclusively affecting any Option granted or to
be granted to himself or herself under the Plan. A majority of the members of
the Board shall constitute a quorum, and any action may be taken by a majority
of those present and voting at any meeting. The decision of the Board as to all
questions of interpretation and application of the Plan shall be final, binding
and conclusive on all persons. The Board, in its sole discretion, may grant
Options to purchase shares of Common Stock, as provided in the Plan. The Board
shall have authority, subject to the express provisions of the Plan, to construe
the respective Option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Option agreements, which may but need not be
identical, and to make all other determinations in the judgment of the Board
necessary or desirable for the administration of the Plan. The Board may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any Option agreement in the manner and to the extent it shall deem expedient
to implement the Plan and shall be the sole and final judge of such expediency.
No director shall be liable for any action or determination made in good faith.
The Board, in its discretion, may delegate its power, duties and
responsibilities to a committee, consisting of two
<PAGE>
<PAGE>
or more members of the Board, all of whom are "disinterested persons" (as
hereinafter defined). If a committee is so appointed, all references to the
Board herein shall mean and relate to such committee, unless the context
otherwise requires. For the purposes of the Plan, a director or member of such
committee shall be deemed to be "disinterested" only if such person qualified as
a "disinterested person" within the meaning of paragraph (c)(2) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as such term is interpreted from time to time.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Board and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Board. Options designated as incentive stock options that fail
to continue to meet the requirements of Section 422 of the Code shall be
redesignated as non-qualified options automatically without further action by
the Board on the date of such failure to continue to meet the requirements of
Section 422 of the Code.
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424(f) of
the Code and the Income Tax Regulations (the "Regulations") promulgated
thereunder. Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock options pursuant
to the Plan. Options designated as non-qualified options may be granted to (i)
officers and key employees of the Company or of any of its subsidiaries, or (ii)
agents, directors of and consultants to the Company, whether or not otherwise
employees of the Company.
In determining the eligibility of an individual to be granted an
Option, as well as in determining the number of shares to be subject to any such
Option, the Board shall take into account the position and responsibilities of
the individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Board may deem relevant.
6. Restrictions on Incentive Stock Options.
Incentive stock options (but not non-qualified options) granted under
the Plan shall be subject to the following restrictions:
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<PAGE>
<PAGE>
(a) Limitation on Number of Shares. Ordinarily, the aggregate fair
market value of the shares of Common Stock with respect to which
incentive stock options are granted (determined as of the date the
incentive stock options are granted), exercisable for the first time
by an individual during any calendar year shall not exceed $100,000.
If an incentive stock option is granted pursuant to which the
aggregate fair market value of shares with respect to which it first
becomes exercisable in any calendar year by an individual exceeds
such $100,000 limitation, the portion of such option which is in
excess of the $100,000 limitation shall be treated as a non-qualified
option pursuant to Section 422(d)(1) of the Code. In the event that
an individual is eligible to participate in any other stock option
plan of the Company or any subsidiary of the Company which is also
intended to comply with the provisions of Section 422 of the Code,
such $100,000 limitation shall apply to the aggregate number of
shares for which incentive stock options may be granted under the
Plan and all such other plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom an
incentive stock option is granted pursuant to the provisions of the
Plan is on the date of grant the owner of stock (as determined under
Section 424(d) of the Code) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the
Company or any subsidiary of the Company, then the following special
provisions shall be applicable to the incentive stock options granted
to such individual:
(i) The Option price per share subject to such
incentive stock options shall be not less than 110%
of the fair market value of the stock determined at
the time such Option was granted. In determining
the fair market value under this clause (i), the
provisions of Section 8 hereof shall apply.
(ii) The incentive stock option by its terms shall not
be exercisable after the expiration of five (5)
years from the date such Option is granted.
7. Option Agreements.
Each Option shall be evidenced by an agreement (the "Agreement") duly
executed on behalf of the Company and by the grantee to whom such Option is
granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board; provided that Options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the Code. No Option shall be granted within the meaning of the Plan and no
purported grant of any Option shall be effective until the Agreement shall have
been duly executed on behalf of the Company and the grantee. More than one
Option may be granted to an individual, subject, if applicable, to the
limitations of Section 6 hereof.
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<PAGE>
<PAGE>
8. Option Price.
(a) Subject to the conditions set forth in Section 8(d) hereof, the
option price or prices of shares of the Common Stock for Options designated as
non-qualified stock options shall be as determined by the Board; provided,
however, that such option price shall be not less than the fair market value of
the shares subject to such Option, determined as of the date of grant of such
Option.
(b) Subject to the conditions set forth in Sections 6(b) and 8(d)
hereof, the option price or prices of shares of the Company's Common Stock for
incentive stock options shall be at least the fair market value of such Common
Stock at the time the Option is granted as determined by the Board in accordance
with the Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national securities
exchange, the fair market value shall be the mean between the high and low sales
prices, if any, on the largest such exchange on the date of the grant of the
Option or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales prices on the nearest date before and
the nearest date after the date of grant in accordance with Section 25.2512-2 of
the Regulations. If the shares are not then listed on any such exchange, the
fair market value of such shares shall be the mean between the closing "Bid" and
the closing "Ask" prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of the
grant of the Option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales prices on the nearest
date before and the nearest date after the date of grant in accordance with
Section 25.2512-2 of the Regulations. If the shares are not then either listed
on any such exchange or quoted in NASDAQ, the fair market value shall be the
mean between the average of the "Bid" and "Ask" prices on the National Daily
Quotation Service for the date of the grant of the Option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Section 25.2512-2 of the Regulations. If the
fair market value cannot be determined under the preceding three sentences, it
shall be determined in good faith by the Board.
(d) Prior to the effective date of the Company's contemplated initial
public offering, any options granted by the Company must be granted at an
exercise price per share of not less than the per share initial public offering
price of the Common Stock.
9. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
option price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the option price of such Options, (ii) shares of
Common Stock owned by the grantee having a fair market value equal in amount to
the option price of the Options being
-4-
<PAGE>
<PAGE>
exercised, or (iii) any combination of (i) and (ii); provided, however, that
payment of the option price by delivery of shares of Common Stock owned by such
grantee may be made only upon the condition that such payment does not result in
a charge to earnings for financial accounting purposes as determined by the
Board, unless such condition is waived by the Board. The fair market value of
any shares of Common Stock which may be delivered as payment upon exercise of an
Option shall be determined by the Board in accordance with Section 8 hereof.
(b) To the extent that the right to purchase shares under an Option
has accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in Section 9(a) hereof. Upon such exercise, delivery
of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option.
10. Exercise of Options.
Each Option granted under the Plan shall, subject to Section 11(b)
and Section 14 hereof, be exercisable at such time or times and during such
period as shall be set forth in the Agreement; provided, however, that no Option
granted under the Plan shall have a term in excess of ten (10) years from the
date of grant. To the extent that an Option is not exercised by a grantee when
it becomes initially exercisable, it shall not expire but shall be carried
forward and shall be exercisable, on a cumulative basis, until the expiration of
the exercise period. No partial exercise may be made for less than one hundred
(100) full shares of Common Stock.
11. Term of Options; Exercisability.
(a) Term.
(i) Each Option shall expire on a date determined by
the Board which is not more than ten (10) years
from the date of the granting thereof, except
(a) as otherwise provided pursuant to the
provisions of Section 6(b) hereof, and (b) for
earlier termination as herein provided.
(ii) Except as otherwise provided in this Section 11,
an Option granted to any grantee whose
employment, by the Company or any of its
subsidiaries, is terminated, shall terminate on
the earlier of
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<PAGE>
<PAGE>
(i) ninety (90) days after the date such
grantee's employment, for the Company or any
such subsidiary, is terminated, or (ii) the date
on which the Option expires by its terms.
(iii) If the employment of a grantee is terminated by
the Company or any of its subsidiaries for
cause or because the grantee is in breach of
any employment agreement or because the grantee
voluntarily terminates such employment, such
Option will terminate on the date the grantee's
employment is terminated by the Company or any
such subsidiary, unless the Board determines,
at the time of such option, to extend such
option for a specified period (but not beyond
the period described in Section 11(a)(ii)).
(iv) If the employment of a grantee is terminated by
the Company or any of its subsidiaries because
the grantee has become permanently disabled
(within the meaning of Section 22(e)(3) of the
Code), such Option shall terminate on the
earlier of (i) one (1) year after the date such
grantee's employment, by the Company or any such
subsidiary, is terminated, or (ii) the date on
which the Option expires by its terms.
(v) In the event of the death of any grantee, any
Option granted to such grantee shall terminate
one (1) year after the date of death, or on the
date on which the Option expires by its terms,
whichever occurs first.
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<PAGE>
<PAGE>
(b) Exercisability.
(i) An Option granted to a grantee whose employment,
by the Company or any of its subsidiaries, is
terminated, for whatever reason, including,
without limitation, death or disability, shall
be exercisable only to the extent that such
Option has accrued and is in effect on the date
such grantee's employment, by the Company or any
such subsidiary, is terminated.
12. Options Not Transferable.
The right of any grantee to exercise any Option granted to him or
her shall not be assignable or transferable by such grantee other than by will
or the laws of descent and distribution, or the rules thereunder, and any such
Option shall be exercisable during the lifetime of such grantee only by him
or her. Any Option granted under the Plan shall be null and void and without
effect upon the bankruptcy of the grantee to whom the Option is granted, or
upon any attempted assignment or transfer, except as herein provided, including
without limitation, any purported assignment, whether voluntary or by operation
of law, pledge, hypothecation or other disposition, attachment, trustee process
or similar process, whether legal or equitable, upon such Option.
13. Recapitalization, Reorganizations and the Like.
In the event that the outstanding shares of the Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which Options may be granted under the Plan and as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the
end that the proportionate interest of the grantee shall be maintained as before
the occurrence of such event; such adjustment in outstanding Options shall
be made without change in the total price applicable to the unexercised portion
of such Options and with a corresponding adjustment in the option price
per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any (i) sale or conveyance to another entity of all
or substantially all of the property and assets of the Company or (ii) Change in
Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock, in his, her or its sole discretion, may deliver to
the grantee the same kind of consideration that is delivered to the shareholders
of the Company as a result of such sale, conveyance or Change in Control, or the
Board may cancel all outstanding Options in exchange for consideration in cash
or in kind, which consideration in both cases shall be equal in value to the
value of those shares of stock or
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<PAGE>
other securities the grantee would have received had the Option been exercised
(but only to the extent then exercisable) and had no disposition of the shares
acquired upon such exercise been made prior to such sale, conveyance or Change
in Control, less the option price therefor. Upon receipt of such consideration,
all Options (whether or not then exercisable) shall immediately terminate and be
of no further force or effect. The value of the stock or other securities the
grantee would have received if the Option had been exercised shall be determined
in good faith by the Board, and in the case of shares of Common Stock, in
accordance with the provisions of Section 8 hereof.
The Board shall also have the power and right to accelerate the
exercisability of any Option, notwithstanding any limitations in this Plan or in
the Agreement upon such a sale, conveyance or Change in Control. Upon such
acceleration, any Option or portion thereof originally designated as an
incentive stock option that no longer qualifies as an incentive stock option
under Section 422 of the Code as a result of such acceleration shall be
redesignated as a non-qualified stock option without the necessity of further
Board action.
A "Change in Control" shall be deemed to have occurred if any person,
or any two (2) or more persons acting as a group, and all affiliates of such
person or persons, who prior to such time owned less than fifty percent (50%) of
the then outstanding Common Stock, shall acquire such additional shares of
Common Stock in one (1) or more transactions, or series of transactions, such
that following such transaction or transactions, such person or group and
affiliates beneficially own fifty percent (50%) or more of the Common Stock
outstanding.
Upon dissolution or liquidation of the Company, all Options
granted under this Plan shall terminate, but each grantee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries as a director, agent or consultant) shall have the right,
immediately prior to such dissolution or liquidation, to exercise his or her
Option or to the extent then exercisable.
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board may grant an option or options upon
such terms and conditions as it may deem appropriate for the purpose of
assumption of the old Option, or substitution of a new option for the old
Option, in conformity with the provisions of such Section 424(a) of the Code and
the Regulations thereunder, and any such option grant shall not reduce the
number of shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any Option, but in the event any adjustment hereunder in the number
of shares covered by the Option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
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<PAGE>
14. No Special Employment Rights.
Nothing contained in the Plan or in any Option granted under the
Plan shall confer upon any grantee any right with respect to the continuation of
his or her employment by the Company or any subsidiary or interfere in any way
with the right of the Company or any subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Option holder
from the rate in existence at the time of the grant of an Option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board at the
time of such occurrence pursuant to uniform nondiscriminatory criteria.
15. Withholding.
The Company's obligation to deliver shares upon the exercise of any
non-qualified Option granted under the Plan, or cash upon the exercise of an
Option granted under the Plan, shall be subject to the grantee's satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements. The Company and grantee may agree to withhold shares of Common
Stock purchased upon exercise of an Option to satisfy the above-mentioned
withholding requirements; provided, however, that no such agreement may be made
by a grantee who is an "officer" or "director" within the meaning of Section 16
of the Exchange Act, except pursuant to a standing election to so withhold
shares of Common Stock purchased upon exercise of an Option, such election to be
made not less than six (6) months prior to such exercise and which election may
be revoked only upon six (6) months prior written notice.
16. Restrictions on Issuance of Shares.
(a) Notwithstanding the provisions of Section 9 hereof, the Company
may delay the issuance of shares covered by the exercise of an Option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such Option has
been exercised are at the time of the issue of
such shares effectively registered or qualified
under applicable Federal and state securities
acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an
opinion, which opinion shall not be unreasonably
conditioned or withheld, that such shares are
exempt from registration and qualification under
applicable Federal and state securities acts now
in force or as hereafter amended.
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<PAGE>
(b) It is intended that all exercises of Options shall be effective,
and the Company shall use its reasonable efforts to bring about compliance with
the above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any Option may be
exercised, except as otherwise agreed to by the Company in writing in its sole
discretion.
17. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless and until the shares to be issued upon exercise of an Option
granted under the Plan have been effectively registered under the Securities Act
of 1933, as amended ("1933 Act"), as now in force or hereafter amended, the
Company shall be under no obligation to issue any shares covered by any Option
or unless the person who exercises such Option, in whole or in part, shall
give a written representation and undertaking to the Company which is
satisfactory in form and scope to counsel for the Company and upon which, in the
opinion of such counsel, the Company may reasonably rely, that he or she is
acquiring the shares issued pursuant to such exercise of the Option for his
or her own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares, and that he or she will
make no transfer of the same except in compliance with any rules and regulations
in force at the time of such transfer under the 1933 Act, or any other
applicable law, and that if shares are issued without such registration, a
legend to this effect may be endorsed upon the securities so issued.
In the event that the Company shall, nevertheless, deem it necessary
or desirable to register under the 1933 Act or other applicable statutes any
shares with respect to which an Option shall have been exercised, or to qualify
any such shares for exemption from the 1933 Act or other applicable statutes,
then the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
18. Loans.
At the discretion of the Board, the Company may loan to the grantee
some or all of the option price of the shares acquired upon exercise of an
Option.
19. Modification of Outstanding Options.
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<PAGE>
Subject to any applicable limitations contained herein, the Board may
authorize the amendment of any outstanding Option with the consent of the
grantee when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
20. Approval of Stockholders.
The Plan shall become effective upon adoption by the Board; provided,
however, that the Plan shall be submitted for approval by the stockholders of
the Company no later than twelve (12) months after the date of adoption of the
Plan by the Board. Should the stockholders of the Company fail to approve the
Plan within such twelve-month period, all Options granted thereunder shall be
and become null and void.
21. Termination and Amendment of Plan.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that (i) the Board
may not, without the approval of the stockholders of the Company obtained in the
manner stated in Section 21 hereof, increase the maximum number of shares for
which Options may be granted or change the designation of the class of
persons eligible to receive Options under the Plan, and (ii) any such
modification or amendment of the Plan shall be approved by a majority of the
stockholders of the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act (if applicable), applicable state
law, or applicable NASD or exchange listing requirements. Termination or any
modification or amendment of the Plan shall not, without the consent of a
grantee, affect his or her rights under an Option theretofore granted to him
or her.
22. Limitation of Rights in the Option Shares.
A grantee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the Options except to the extent that the
Option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the grantee.
23. Notices.
Any communication or notice required or permitted to be given under
the Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to the attention of the Chief Executive
Officer at the Company's principal place of business; and, if to a grantee, to
his or her address as it appears on the records of the Company.
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<PAGE>
BIGMAR, INC.
STOCK OPTION AGREEMENT
UNDER 1996 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
__, 1996
AGREEMENT entered into by and between Bigmar, Inc., a Delaware
corporation with its place of business at ________________________, and the
undersigned officer and director of the Company (the "Optionee").
1. The Company desires to grant the Optionee a non-qualified stock
option under the Company's 1996 Stock Option Plan (the "Plan") to acquire shares
of the Company's Common Stock, $.001 par value per share (the "Shares").
2. The Plan provides that each option is to be evidenced by an option
agreement, setting forth the terms and conditions of the option.
ACCORDINGLY, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Optionee hereby
agree as follows:
1. Grant of Option.
The Company hereby grants to the Optionee a non-qualified stock
option (the "Option") to purchase all or any part of an aggregate of the number
of Shares shown at the end of this Agreement on the terms and conditions
hereinafter set forth. This option shall not be treated as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Purchase Price.
The purchase price ("Purchase Price") for the Shares covered by the
Option shall be $___ per Share.
3. Time of Exercise of Option.
The Option shall vest in [five] equal installments of ______ shares
each, the first commencing upon the consummation of the Company's initial public
offering of the Company's securities pursuant to a certain Registration
Statement on Form S-1, file No. 333-3830 (the "Offering") and the second, third,
[fourth and fifth] commencing on the first, second [third and fourth]
anniversary dates of the Offering. To the extent the Option is not exercised by
the Optionee when it becomes exercisable, it shall not expire, but shall be
carried forward and shall be exercisable for a period of
<PAGE>
<PAGE>
five (5) years following the date of vesting, provided, however, that no partial
exercise of an Option shall be for less than one hundred (100) full Shares.
4. Term of Option; Exercisability.
(a) Term of Option.
(i) Each Option shall expire five (5) years from the
date of vesting, except (a) as otherwise provided
pursuant to the provisions of Section 11(d)(i),
and (b) for earlier termination as herein
provided.
(ii) Except as otherwise provided in this Section 4,
an Option granted to any grantee whose employ-
ment, by the Company or any of its subsidiaries,
is terminated, shall terminate on the earlier of
(i) ninety (90) days after the date such
grantee's employment, for the Company or any such
subsidiary, is terminated, or (ii) the date on
which the Option expires by its terms.
(iii) If the employment of a grantee is terminated by
the Company or any of its subsidiaries for cause
or because the grantee is in breach of any
employment agreement or because the grantee vol-
untarily terminates such employment, such Option
will terminate on the date the grantee's employ-
ment is terminated by the Company or any such
subsidiary, unless the Board determines, at the
time of such option, to extend such option for a
specified period (but not beyond the period
described in Section 4(a)(ii)).
(iv) If the employment of a grantee is terminated by
the Company or any of its subsidiaries because
the grantee has become permanently disabled
(within the meaning of Section 22(e)(3) of the
Code), such Option shall terminate on the earlier
of (i) one (1) year after the date such grantee's
employment, by the Company or any such subsid-
iary, is terminated, or (ii) the date on which
the Option expires by its terms.
(v) In the event of the death of any grantee, any
Option granted to such grantee shall terminate one
(1) year after the date of death, or on the date
on which the Option expires by its terms,
whichever occurs first.
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<PAGE>
(b) Exercisability.
(vi) An Option granted to a grantee whose employment,
by the Company or any of its subsidiaries, is
terminated, for whatever reason, including, with-
out limitation, death or disability, shall be
exercisable only to the extent that such Option
has accrued and is in effect on the date such
grantee's employment, by the Company or any such
subsidiary, is terminated.
5. Manner of Exercise of Option.
(a) To the extent that the right to purchase shares under an Option
has accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in Section 9(a) of the Plan. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option unless otherwise required by Section 17 of the Plan.
(b) The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
6. Non-Transferability.
The right of any Optionee to exercise any Option granted to him or
her shall not be assignable or transferable by such grantee other than by will
or the laws of descent and distribution, or the rules thereunder, and any such
Option shall be exercisable during the lifetime of such grantee only by him or
her. Any Option granted under the Plan shall be null and void and without effect
upon the bankruptcy of the grantee to whom the Option is granted, or upon any
attempted assignment or transfer, except as herein provided, including without
limitation, any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition, attachment, trustee process or
similar process, whether legal or equitable, upon such Option.
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<PAGE>
<PAGE>
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the Securities
Act of 1933, as amended (the "1933 Act"), upon any date on which the Option is
exercised in whole or in part, the person exercising the Option shall give a
written representation to the Company in the form attached hereto as Exhibit 1
and the Company shall place an "investment legend", so-called, as described in
Exhibit 1, upon any certificate for the Shares issued by reason of such
exercise.
(b) The Company shall be under no obligation to qualify the Shares or
to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purposes of covering the issue of
the Shares.
8. Adjustments on Changes in Capitalization.
Adjustments on changes in capitalization and the like shall be made
in accordance with the Plan, as in effect on the date of this Agreement.
9. No Special Employment Rights.
Nothing contained in the Plan or this Agreement shall be construed or
deemed by any person under any circumstances to bind the Company to continue the
employment of the Optionee for the period within which this Option may be
exercised. However, during the period of the Optionee's employment, the Optionee
shall render diligently and faithfully the services which are assigned to the
Optionee from time to time by the Board or by the executive officers of the
Company and shall at no time take any action which directly or indirectly would
be inconsistent with the best interests of the Company.
10. Rights as a Stockholder.
The Optionee shall have no rights as a stockholder with respect to
any Shares which may be purchased by exercise of this Option unless and until a
certificate or certificates representing such Shares are duly issued and
delivered to the Optionee.
11. Withholding Taxes.
Whenever Shares are to be issued upon exercise of this Option, the
Company shall have the right to require the Optionee to remit to the Company an
amount sufficient to satisfy all Federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. The Company may agree to permit the Optionee to withhold Shares
purchased upon exercise of this Option to satisfy the above-mentioned
withholding requirement; provided, however, no such agreement may be made by an
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<PAGE>
Optionee who is an officer or director within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, except pursuant to a standing
election to so withhold Shares purchased upon exercise of an Option, such
election to be made in the form set forth in Exhibit 2 hereto and to be made not
less than six (6) months prior to the date of such exercise. Such election may
be revoked by the Optionee only upon six (6) months prior written notice to the
Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed, and the Optionee has hereunto set his or her hand, all as of the day
and year first above written.
BIGMAR, INC.
By:____________________________________
Title:
OPTIONEE
By:____________________________________
Title:
_______________________________________
Signature
Name:__________________________________
__________________________________
__________________________________
Address
__________________________________
Social Security Number
__________________________________
Number of Shares
$
__________________________________
Purchase Price Per Share
__________________________________
Expiration Date
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<PAGE>
<PAGE>
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the exercise by me as to _____ shares of Common
Stock, no par value per share, of Bigmar, Inc. (the "Company"), under the
non-qualified stock option agreement dated ______ __, 1996, granted to me under
the 1996 Stock Option Plan, I hereby acknowledge that I have been informed
as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and accordingly, must be
held indefinitely unless such shares are subsequently registered under the 1933
Act, or an exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under
the 1933 Act can be made only after the holding period and in limited amounts in
accordance with the terms and conditions provided by that Rule, and in any sale
to which that Rule is not applicable, registration or compliance with some other
exemption under the 1933 Act will be required.
3. The Company is under no obligation to me to register the
shares or to comply with any such exemptions under the 1933 Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
that I may desire to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such requirement.
In consideration of the issuance of certificates for the shares to
me, I hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such shares
in the absence of an effective registration statement covering the same, except
as permitted by the provisions of Rule 144, if applicable, or some other
applicable exemption under the 1933 Act. In view of this representation and
warranty, I agree that there may be affixed to the certificates for the shares
to be issued to me, and to all certificates issued hereafter representing such
shares (until in the opinion of counsel, which opinion must be reasonably
satisfactory in form and substance to counsel for the Company, it is no longer
necessary or required) a legend as follows:
"The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933,
as amended (the "Act"), and were acquired by the registered
holder, pursuant to a representation and warranty that such
holder was acquiring such shares for his own account and for
investment, with no intention to transfer or dispose of the
same, in violation of the registration requirements of the
Act. These shares may not be sold, pledged, or transferred
in the absence of
<PAGE>
<PAGE>
an effective registration statement under the Act, or an
opinion of counsel, which opinion is reasonably satisfactory
to counsel to the Company, to the effect that registration
is not required under the Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
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EXHIBIT 2
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that, whenever the
undersigned exercises a stock option (including any options which now or may
hereafter be granted), the Company shall withhold from the shares issuable upon
such exercise, such number of shares as is equal in value to the federal and
state withholding taxes due upon such exercise. The undersigned further
acknowledges and agrees that this election may not be revoked without six (6)
months prior written notice to the Company.
OPTIONEE
__________________________________
Signature
Name:_____________________________
__________________________________
Social Security Number
<PAGE>
<PAGE>
BIGMAR, INC.
STOCK OPTION AGREEMENT
UNDER 1996 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
__, 1996
AGREEMENT entered into by and between Bigmar, Inc., a Delaware
corporation with its principal place of business at _________________________
(the "Company"), and the undersigned officer of the Company (the "Optionee").
A. The Company desires to grant the Optionee an incentive stock option
under the Company's 1996 Stock Option Plan (the "Plan") to acquire shares of the
Company's Common Stock, $.001 par value per share (the "Shares").
B. The Plan provides that each option is to be evidenced by an option
agreement, setting forth the terms and conditions of the option.
ACCORDINGLY, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Optionee hereby
agree as follows:
1. Grant of Option.
The Company hereby grants to the Optionee an incentive stock option
(the "Option") to purchase all or any part of an aggregate of the number of
Shares shown at the end of this Agreement on the terms and conditions
hereinafter set forth. This option is intended to be treated as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Purchase Price.
The purchase price ("Purchase Price") for the Shares covered by the
Option shall be $____ per Share.
3. Time of Exercise of Option.
The Option shall vest in [five] equal installments of _____ shares
each, the first commencing upon the consummation of the initial public offering
of the Company's securities pursuant to a certain Registration Statement on Form
S-1 file No. 333-3830 (the "Offering") and the second, third, [fourth and
fifth] commencing on the first, second, [third and fourth] anniversary dates of
the Offering. To the extent the Option is not exercised by the Optionee when it
becomes exercisable, it shall not expire, but shall be carried forward and shall
be exercisable for a period of
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<PAGE>
five (5) years following the date of vesting, provided, however,that no partial
exercise of an Option shall be for less than one hundred (100) full Shares.
4. Term of Option; Exercisability.
(a) Term of Option.
(i) Each Option shall expire five (5) years from the
date of vesting, except (a) as otherwise provided
pursuant to the provisions of Section 11(d)(i) of
the Plan, and (b) for earlier termination as
herein provided.
(ii) Except as otherwise provided in this Section 4,
an Option granted to any grantee whose employ-
ment, by the Company or any of its subsidiaries,
is terminated, shall terminate on the earlier of
(i) ninety (90) days after the date such
grantee's employment, for the Company or any
such subsidiary, is terminated, or (ii) the date
on which the Option expires by its terms.
(iii) If the employment of a grantee is terminated by
the Company or any of its subsidiaries for cause
or because the grantee is in breach of any
employment agreement or because the grantee
voluntarily terminates such employment, such
Option will terminate on the date the grantee's
employment is terminated by the Company or any
such subsidiary, unless the Board determines, at
the time of such option, to extend such option
for a specified period (but not beyond the
period described in Section 4(a)(ii)).
(iv) If the employment of a grantee is terminated by
the Company or any of its subsidiaries because
the grantee has become permanently disabled
(within the meaning of Section 22(e)(3) of the
Code), such Option shall terminate on the ear-
lier of (i) one (1) year after the date such
grantee's employment, by the Company or any such
subsidiary, is terminated, or (ii) the date on
which the Option expires by its terms.
(v) In the event of the death of any grantee, any
Option granted to such grantee shall terminate one
(1) year after the date of death, or on the date
on which the Option expires by its terms,
whichever occurs first.
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(b) Exercisability.
(vi) An Option granted to a grantee whose employment,
by the Company or any of its subsidiaries, is
terminated, for whatever reason, including,
without limitation, death or disability, shall
be exercisable only to the extent that such
Option has accrued and is in effect on the date
such grantee's employment, by the Company or any
such subsidiary, is terminated.
5. Manner of Exercise of Option.
(a) To the extent that the right to purchase shares under an Option has
accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in Section 9(a) of the Plan. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option unless otherwise required by Section 17 of the Plan.
(b) The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
6. Non-Transferability.
The right of any Optionee to exercise any Option granted to him or her
shall not be assignable or transferable by such grantee other than by will or
the laws of descent and distribution, or the rules thereunder, and any such
Option shall be exercisable during the lifetime of such grantee only by him or
her. Any Option granted under the Plan shall be null and void and without effect
upon the bankruptcy of the grantee to whom the Option is granted, or upon any
attempted assignment or transfer, except as herein provided, including without
limitation, any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition, attachment, trustee process or
similar process, whether legal or equitable, upon such Option.
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<PAGE>
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the Securities
Act of 1933, as amended (the "1933 Act"), upon any date on which the Option is
exercised in whole or in part, the person exercising the Option shall give a
written representation to the Company in the form attached hereto as Exhibit 1
and the Company shall place an "investment legend", so-called, as described in
Exhibit 1, upon any certificate for the Shares issued by reason of such
exercise.
(b) The Company shall be under no obligation to qualify the Shares or
to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purposes of covering the issue of
the Shares.
8. Adjustments on Changes in Capitalization.
Adjustments on changes in capitalization and the like shall be made in
accordance with the Plan, as in effect on the date of this Agreement.
9. No Special Employment Rights.
Nothing contained in the Plan or this Agreement shall be construed or
deemed by any person under any circumstances to bind the Company to continue the
employment of the Optionee for the period within which this Option may be
exercised. However, during the period of the Optionee's employment, the Optionee
shall render diligently and faithfully the services which are assigned to the
Optionee from time to time by the Board or by the executive officers of the
Company and shall at no time take any action which directly or indirectly would
be inconsistent with the best interests of the Company.
10. Rights as a Stockholder.
The Optionee shall have no rights as a stockholder with respect to any
Shares which may be purchased by exercise of this Option unless and until a
certificate or certificates representing such Shares are duly issued and
delivered to the Optionee.
11. Withholding Taxes.
Whenever Shares are to be issued upon exercise of this Option, the
Company shall have the right to require the Optionee to remit to the Company an
amount sufficient to satisfy all Federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. The Company may agree to permit the Optionee to withhold Shares
purchased upon exercise of this Option to satisfy the above-men-
-4-
<PAGE>
<PAGE>
tioned withholding requirement; provided, however, no such agreement may be made
by an Optionee who is an officer or director within the meaning of Section 16 of
the Securities Exchange Act of 1934, as amended, except pursuant to a standing
election to so withhold Shares purchased upon exercise of an Option, such
election to be made in the form set forth in Exhibit 2 hereto and to be made not
less than six (6) months prior to the date of such exercise. Such election may
be revoked by the Optionee only upon six (6) months prior written notice to the
Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed, and the Optionee has hereunto set his or her hand, all as of the day
and year first above written.
BIGMAR, INC.
By:____________________________________
Title:
OPTIONEE
_______________________________________
Name:
_______________________________________
_______________________________________
Address
_______________________________________
Social Security Number
_______________________________________
Number of Shares
$
_______________________________________
Purchase Price Per Share
_______________________________________
Expiration Date
-5-
<PAGE>
<PAGE>
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the exercise by me as to shares of Common
Stock, no par value per share (the "Common Stock" or the "shares"), of Bigmar,
Inc. (the "Company") under the incentive stock option agreement dated _____ __,
1996, granted to me under the 1996 Stock Option Plan, I hereby acknowledge that
I have been informed as follows:
1. The Common Stock of the Company to be issued to me pursuant to the
exercise of said option have not been registered under the Securities Act of
1933, as amended (the "1933 Act"), and accordingly, must be held indefinitely
unless such shares are subsequently registered under the 1933 Act, or an
exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under the
1933 Act can be made only after the holding period and in limited amounts in
accordance with the terms and conditions provided by that Rule, and in any sale
to which that Rule is not applicable, registration or compliance with some other
exemption under the 1933 Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the 1933 Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
that I may desire to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such requirement.
In consideration of the issuance of certificates for the shares to me,
I hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such shares
in the absence of an effective registration statement covering the same, except
as permitted by the provisions of Rule 144, if applicable, or some other
applicable exemption under the 1933 Act. In view of this representation and
warranty, I agree that there may be affixed to the certificates for the shares
to be issued to me, and to all certificates issued hereafter representing such
shares (until in the opinion of counsel, which opinion must be reasonably
satisfactory in form and substance to counsel for the Company, it is no longer
necessary or required) a legend as follows:
"The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended (the "Act"), and were acquired by the registered
holder, pursuant to a representation and warranty that such
holder was acquiring such shares for his own account and for
investment, with no intention
<PAGE>
<PAGE>
to transfer or dispose of the same, in violation of the
registration requirements of the Act. These shares may not be
sold, pledged, or transferred in the absence of an effective
registration statement under the Act, or an opinion of
counsel, which opinion is reasonably satisfactory to counsel
to the Company, to the effect that registration is not
required under the Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
-2-
<PAGE>
<PAGE>
EXHIBIT 2
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that, whenever the
undersigned exercises a stock option (including any options which now or may
hereafter be granted), the Company shall withhold from the shares issuable upon
such exercise, such number of shares as is equal in value to the federal and
state withholding taxes due upon such exercise. The undersigned further
acknowledges and agrees that this election may not be revoked without six (6)
months prior written notice to the Company.
OPTIONEE:
_______________________________________
Signature
Name:__________________________________
(Printed)
_______________________________________
Social Security Number
<PAGE>
<PAGE>
EXTENSION OF LICENSING AGREEMENT
This Agreement is entered upon by:
Dr. F. Messi Cell Culture Technologies, Buhmrain 14, CH-8052 Zurich, Switzerland
(hereinafter MESSI) and Bigmar Pharmaceuticals SA, via Pian Scairolo 6, CH-6917
Barbengo, Switzerland (hereinafter BIGMAR) on the day of November 1, 1995.
1) Premise
MESSI has selected a particular CHO cell line (hereinafter CHOMESSI) and
developed protein-free culture media for growing CHOMESSI.
MESSI licensed CHOMESSI to Bioferment SA, Barbengo, Switzerland, on June 24,
1993.
BIGMAR develops and manufactures industrial derivatives from pure cultures of
biologics.
2) Purpose
MESSI is interested in: extending the CHOMESSI licence to BIGMAR.
BIGMAR is interested in: developing and commercialising pure culture
derivatives produced with CHOMESSI.
3) Obligations
MESSI extends the licence of CHOMESSI to BIGMAR and guarantees that:
- use of CHOMESSI don't cause infringement of any patent and is not bound to
obligations with third parts;
- CHOMESSI is deposited and preserved by a recognised international
depository authority.
BIGMAR agrees to only maintain and use CHOMESSI for the purpose described
above and not to sublicensing CHOMESSI to third parts.
BIGMAR will compensate MESSI with a yearly amount of CHF 25,000,--to be
disbursed half-yearly, the first one being due May 30, 1996.
<PAGE>
<PAGE>
Any additional request to MESSI from BIGMAR part over and above the before
said licensing, such as requests for scientific advice to be provided to
MESSI, will be compensated in addition to the above mentioned licensing fee
with yearly USD 15,000.-excl. travel expenses.
4) Confidentiality
MESSI and BIGMAR agree not to disclose the content of this agreement or any
of its parts to third parties. MESSI and BIGMAR agree to maintain
confidentiality on any technical or financial information reciprocally
exchanged, except:
- Information which is or becomes part of the public knowledge through no
fault of recipient;
- Information required by the Health Authorities for the Registration and
Marketing Approval of products or which disclosure is needed for the
fulfillment of this Agreement;
- Information which the recipient can show was already in its possession at
the time of disclosure.
This confidentiality will be maintained also after the termination of present
Agreement.
5) Territory and exclusivity, Governing law and arbitration
This license extension will not be restricted by territory or exclusivity
clauses. This Agreement and the legal relationship of the parties hereto
shall be construed in accordance with the laws of Switzerland.
6) Modifications and additions
Modifications of any paragraph of the present Agreement can only be made by
mutual written Agreement between MESSI and BIGMAR.
Dr. F. Messi Cell Culture Technologies Bigmar Pharmaceuticals SA
Signature /s/ Ferruccio Messi Signature /s/ John Tramontana
___________________ _____________________
Name: Ferruccio Messi Name: John Tramontana
Title: Director Title: Chief Operating Officer
Date: Oct 27, 1995 Date: November 6, 1995
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 25, 1996 (with respect to Note
1 April 16, 1996 and with respect to Note 11D March 29, 1996) relating to the
consolidated financial statements of Bigmar, Inc. and Subsidiaries and our
report dated March 25, 1996 relating to the financial statements of Bioren SA,
which are contained in that Prospectus.
We also consent to the references to us under the caption 'Experts' in the
Prospectus and in the paragraph above the selected financial and operating data.
RICHARD A. EISNER & COMPANY, LLP
New York, New York
May 30, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-1-1995 JAN-1-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 1,325,603 1,007,555
<SECURITIES> 0 0
<RECEIVABLES> 1,640,293 2,022,161
<ALLOWANCES> 51,948 50,378
<INVENTORY> 1,051,948 1,132,620
<CURRENT-ASSETS> 4,249,212 4,227,523
<PP&E> 10,848,507 12,600,077
<DEPRECIATION> 130,673 174,138
<TOTAL-ASSETS> 15,393,126 19,050,275
<CURRENT-LIABILITIES> 3,196,699 4,665,334
<BONDS> 8,285,023 10,539,064
<COMMON> 2,375 2,375
0 0
0 0
<OTHER-SE> 3,909,029 3,843,502
<TOTAL-LIABILITY-AND-EQUITY> 15,393,126 19,050,275
<SALES> 5,600,362 1,898,002
<TOTAL-REVENUES> 5,600,362 1,898,002
<CGS> 4,001,891 1,151,099
<TOTAL-COSTS> 4,001,891 1,151,099
<OTHER-EXPENSES> 1,516,199 635,857
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 182,476 83,460
<INCOME-PRETAX> (100,204) 51,681
<INCOME-TAX> (3,000) 0
<INCOME-CONTINUING> (97,204) 51,681
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (97,204) 51,681
<EPS-PRIMARY> (.07) .02
<EPS-DILUTED> (.07) .02
<PAGE>
<PAGE>
Consent
The undersigned hereby consents to the use of the undersigned's name
and to any other disclosure relating to the undersigned's relationship with
Bigmar, Inc., a Delaware corporation (the "Company") or any of Bigmar
Pharmaceuticals SA, Bioren SA and Bigmar Therapeutics SA (collectively, the
"Subsidiaries") in any Registration Statement or pre- or post-effective
amendment thereto, filed by the Company, with the United States Securities and
Exchange Commission, the National Association of Securities Dealers Inc. and the
Nasdaq Stock Market, Inc., or in any document related thereto. The foregoing
includes, without limitation, the reference to the undersigned under the
headings "Management", "Executive Compensation" and "Principal Stockholders" in
the Registration Statement on Form S-1.
The undersigned hereby represents that all biographical information
about the undersigned contained on page 47 of the Registration Statement on Form
S-1 is true and correct as of the date hereof, and further, the undersigned
hereby undertakes and agrees to promptly disclose to the Company any and all
changes of such information.
The undersigned hereby further agrees to keep all information regarding
the Company's Registration Statement and any securities offerings related
thereto confidential.
Dated: 5/17/96
---------------------
JAMES M. McCORMICK
------------------------------
Name: James McCormick
<PAGE>
