<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) August 29, 1997
...............................
Bigmar, Inc.
...............................................................................
(Exact name of registrant as specified in its charter)
Delaware 1-14416 31-1445779
...............................................................................
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
9711 Sportsman Club Road, Johnstown, Ohio 43031-9141
...............................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 966-5800
............................
...............................................................................
(Former name or former address, if changed since last report.)
<PAGE>
Item 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
In accordance with Item 701 of Regulation S-B, the following information
pertains to the sale of equity securities pursuant to Regulation S:
On August 28, 1997, Bigmar, Inc. (the "Registrant") entered into two
agreements with Banca del Gottardo, a bank organized under the laws of
Switzerland and located in Lugano, Switzerland (the "Bank"): (i) the Offshore
Securities Subscription Agreement (the "Subscription Agreement"); and (ii) the
Note Purchase, Paying and Conversion Agency Agreement (the "Note Agreement").
The closing of the subscription under the Subscription Agreement and the note
purchase under the Note Agreement each occurred on August 29, 1997. The net
proceeds of these transactions are to be used to finance current operations of
the Registrant.
Under the Subscription Agreement, the Bank has subscribed to 200,000 shares
of common stock of the Registrant (the "Shares"). The purchase price was five
dollars (US$5.00) per Share. The aggregate subscription price was one million
dollars (US$1,000,000). After paying the Bank a commission of seven percent
(7%) or seventy thousand dollars (US$70,000), the net proceeds of the
subscription to the Registrant was nine hundred thirty thousand dollars
(US$930,000).
Under the Note Agreement, the Bank purchased a global note in the principal
amount of four million dollars (US$4,000,000). After paying the Bank a
commission of seven percent (7%) or two hundred eighty thousand dollars
(US$280,000) and out of pocket expenses of fifty thousand dollars (US$50,000),
the net proceeds of the note purchase to the Registrant was three million six
hundred seventy thousand dollars (US$3,670,000). The Note Agreement
contemplates that, from this global note amount, the Bank will further sell
notes in denominations of five thousand dollars (US$5,000) (the "Notes"). The
term of the notes is five (5) years, and the interest rate on the Notes is eight
percent (8%) per year payable in February and August of each year. The Notes
will be convertible, as early as January 1, 1998, into shares of common stock of
the Registrant. Under the Note Agreement and the terms of the Notes, the
initial conversion price is five and twenty-five one-hundredths dollars
(US$5.25) of principal amount of the Notes for one share of common stock in the
Registrant. (The conversion price is variable based on events such as stock
splits and other specified events having an impact on the number of common
shares outstanding.) At least fifty thousand dollars in principal amount of the
Notes must be converted at a time. Attached hereto as Exhibit A and
incorporated herein by this reference are the "Conversion Provisions" for the
Notes. The Shares and the Notes are subject to Regulation S ("Regulation S")
promulgated by the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), and, as such, may not be
transferred to a U.S. person, as defined in Regulation S during the first forty
(40) days after closing. Thereafter, any such transfer is subject to the
registration requirements under the Act. Prior to January 1, 1998, the
Registrant is required, and expects, to effect a registration under the Act with
respect to shares necessary in the conversion of the Notes. The Registrant has
reserved authorized shares necessary for such conversion.
2
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Bigmar, Inc.
..................................
(Registrant)
September ___, 1997
By:
-------------------------------
Michael K. Medors
Chief Financial Officer and Treasurer
3
<PAGE>
Exhibit A
CONVERSION PROVISIONS
The following are the provisions for the conversion (the "Conversion
Provisions") of the USD 4'000'000.-- 8% Convertible Notes due August 29, 2002 of
Bigmar, Inc., Johnstown, USA, (the "Company") into freely transferable and
non-restricted shares of the common stock of the Company. Unless otherwise
defined herein, the terms used herein have the meanings ascribed to them in the
Note Purchase, Paying and Conversion Agency Agreement and the Conversion Agency
Agreement (the "Agency Agreement") dated as of August 28, 1997 and August 29,
1997 respectively, between the Company and Banca del Gottardo.
- --------------------------------------------------------------------------------
ARTICLE 1
Conversion Right
1.1. Subject to and upon compliance with these Conversion Provisions, the
holder of any Note (a "Noteholder") will have the right at any time on
and after January 1, 1998 up to the close of business of banks in
Lugano on August 29, 2002, or, in case the Notes are called for
redemption in accordance with Section 4 of the Terms of the Notes,
then prior to the close of business of banks in Lugano on the earlier
of August 29, 2002 and the fifth business day preceding the date fixed
for redemption, but in no event thereafter, to convert ten Notes or
more Notes into freely transferable and non-restricted (such
non-restriction being subject to the effectiveness of a registration
statement under the U.S. securities laws covering such common stock)
shares of common stock which are duly registered under the 1933
Securities Act, with par value USD 0.01 per share (such presently
authorized capital stock and any other stock into which such presently
authorized common stock may hereafter be changed, the "Common Stock"),
of the Company, calculated as to each conversion to the greatest
number of full Shares, disregarding fractions, at the price of
initially as determined pursuant to Section 3 of the terms of the
Notes for each Share, such price being subject to adjustment in
<PAGE>
certain instances as provided in Article 2 hereafter (as so adjusted
from time to time, the "Conversion Price"). Fractions of a share will
not be issued on conversion; provided, however, that if a Noteholder
at any one time delivers more than one Note for conversion, the number
of Shares issued shall be calculated on the basis of the aggregate
principal amount of the Notes so delivered. A cash adjustment shall be
paid in respect of any fractional Share which would otherwise be
issuable upon conversion of any Note in an amount in U.S. Dollars
based upon the market price of the Common Stock on the last trading
day prior to the date of conversion. Cash adjustments for fractional
shares will not be made for amounts less than one U.S. Dollar.
1.2. In order to exercise the right of conversion, a Noteholder shall (a)
deliver the Note or Notes to be converted during normal business
hours, accompanied by the conversion notice in the form obtainable
from the Conversion Agent (the "Conversion Notice") to any Conversion
Agent and (b) pay to the Conversion Agent any stamp or other taxes
that may be payable in Switzerland on such conversion. Each Note
delivered for conversion must be delivered with all unmatured coupons
attached and/or with an amount equal to the face value of any missing,
unmatured coupons. Such missing, unmatured coupons shall be paid by
Banca del Gottardo upon subsequent presentation thereof, provided they
shall not have become barred pursuant to Section 11 of the Terms of
the Notes.
1.3. The Conversion Agent undertakes to:
(a) make available to Noteholders the Conversion Notice in such form
as may from time to time be agreed by the Company and the
Conversion Agent:
(b) upon receipt of a Conversion Notice from a Noteholder:
(i) verify that (A) the Conversion Notice has been duly
completed and signed by or on behalf of the Noteholder named
therein, (B) the Conversion Notice is accompanied by all
Notes to which it relates
2
<PAGE>
and all unmatured coupons appertaining to such Notes and/or
an amount equal to the face value of any missing unmatured
coupons and (C) the amount of any stamp or other taxes
payable by the Noteholder has been paid; and
(ii) endorse the Conversion Notice;
(c) imprint or stamp all Notes submitted to it for conversion, and
all unmatured coupons attached thereto, in accordance with
Article 4 of the Agency Agreement promptly upon satisfaction
by the Noteholder of all conditions precedent to the
conversion; and
(d) dispatch within two business days after satisfaction by the
Noteholder of all conditions precedent to the conversion to the
relevant tax authorities, payment in respect of any stamp or
other taxes payable on the conversion, in accordance with the
laws of Switzerland.
1.4. The Conversion Agent shall promptly, upon the later of the date of
receipt of the Conversion Notice and the satisfaction of all other
conditions precedent to the conversion stated above, endorse the
Conversion Notice and notify the Company and the Stock Transfer Agent
of the Company (at present American Stock Transfer & Trust Company, 40
Wall Street, New York, NY 10005, USA), by facsimile, telex or cable of
(a) the principal amount and serial numbers of the Notes deposited for
conversion, (b) the number of Shares issuable upon conversion of such
Notes and (c) the name and address of each person (the "Shareholder")
to whom such Shares are to be issued. Such conversion shall become
effective at the close of business on the date (the "Conversion Date")
on which the Company shall have received at its principal executive
offices, during normal business hours, from the Conversion Agent a
telex or cable notification. If such facsimile, telex or cable
notification is received after the close of business on such date, the
Conversion Date will be the immediately following business day. At
such Conversion Date the rights of the holder (other than the Company)
of a
3
<PAGE>
Note shall cease and the Shareholder shall be deemed to have become
the holder of such Shares.
1.5. As soon as practicable on or after the Conversion Date, but in no
event later than seven business days thereafter, the Company shall (a)
cause the Shareholder to be registered as the owner of the Shares
issued upon conversion of such Shareholder's Notes in the register of
Shareholders of the Company, (b) make available, or cause the Stock
Transfer Agent to issue, a certificate or certificates for such Shares
registered in the name of the Shareholder (together with any other
securities, properties or cash deliverable at the Conversion Date) and
(c) at the request of the Shareholder, cause the Stock Transfer Agent
to forward, at the risk and expense and for account of such
Shareholder, such certificate or certificates (together with any other
securities, properties or cash deliverable upon conversion) to such
person or persons at the address specified in the Conversion Notice,
together with such assignments and other documents, if any, as may be
required by law to effect the transfer thereof with full benefits
under the laws of the applicable jurisdiction of the United States of
America.
1.6. The Company covenants that:
(a) so long as any Notes are outstanding, it shall keep available
authorized shares of Common Stock sufficient to permit all Notes
outstanding and unconverted to be converted in accordance with
these Conversion Provisions;
(b) all shares of Common Stock delivered upon conversion of Notes as
provided herein will be validly issued, fully-paid and
non-assessable;
(c) it shall file, on or before January 1, 1998, if required, any
registration under the United States securities laws that may be
required before the Shares can be delivered upon conversion of
the Notes and freely marketed in the United States.
4
<PAGE>
1.7. Shares issued upon conversion and registered in the name of the
Shareholder shall be freely transferable and non-restricted and shall
be entitled to receive all dividends paid on such Common Stock on or
after the Conversion Date, except for dividends payable to
Shareholders registered as such as of a record date occurring prior to
the Conversion Date. No payments shall be made upon conversion for
interest accrued since the Coupon Due Date next preceding the
Conversion Date.
1.8. Notes may be presented for conversion only to an office of the
Conversion Agent outside the United States. The Company and the
Conversion Agent will deliver Common Stock or other consideration
received upon conversion only to an account or address outside the
United States.
ARTICLE 2
The Conversion Price shall be subject to adjustments in the following
circumstances occurring after August 29, 1997:
2.1. In case the Company shall hereafter (i) pay a dividend on its Common
Stock in shares of its Common Stock or make a distribution in shares
of its Common Stock with respect to its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number
of shares of Common Stock or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, the
Conversion Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision or combination
shall be determined by multiplying the Conversion Price in effect
immediately prior to such record date or effective date by a fraction,
the numerator of which shall be the total number of outstanding shares
of Common Stock immediately prior to such record date or effective
date, and the denominator of which shall be the total number of
outstanding Common Stock immediately following such record date or
effective date. Such adjustments made pursuant to this Section 2.1
shall be made successively whenever any event listed above shall
occur.
5
<PAGE>
2.2. In case the Company shall fix a record date for the issuance of
rights, options to all (but not less than all) holders of its
outstanding Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into shares of
Common Stock) at a price per share (or having a Conversion Price per
share, if a security convertible into Common Stock) less than the
Current Market Price per share of Common Stock (as defined in Section
2.4) on such record date, the Conversion Price to be in effect after
such record date shall be determined by multiplying the Conversion
Price in effect immediately prior to such record date by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares
of Common Stock so to be offered (or the aggregate initial Conversion
Price of the convertible securities so to be offered) would purchase
at such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding on such record date plus
the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible security so to
be offered are initially convertible). In case such subscription or
exercise price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration
shall be as determined by the Board of Directors of the Company.
Shares of Common Stock owned by or held for the account of the Company
or any majority-owned subsidiary shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event
that such rights are not so issued, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect
if such record date had not been fixed.
2.3. In case the Company shall fix a record date for the making of a
distribution to all (but not less than all) holders of shares of
Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out
6
<PAGE>
of surplus legally available for dividends under the laws of the
jurisdiction of incorporation of the Company, dividends or
distributions payable in shares of Common Stock as described in
Section 2.1, or rights, options or convertible securities containing
the right to subscribe for or purchase shares of Common Stock
(excluding those referred to in Section 2.2)), the Conversion Price to
be in effect after such record date shall be determined by multiplying
the Conversion Price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the Current Market
Price per share of Common Stock (as defined in Section 2.4) on such
record date, less the fair market value per share (as determined by
the Board of Directors of the Company, whose determination shall be
conclusive, and described in a statement filed with Banca del
Gottardo) of the portion of the assets or evidences of indebtedness so
to be distributed, or of such rights, options, or convertible
securities, applicable to one share of Common Stock, and of which the
denominator shall be such Current Market Price per share of Common
Stock. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not
so made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such record date had
not been fixed. If any such rights, options, or convertible securities
shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration per share
of Common Stock payable to the Company upon the exercise or conversion
thereof, the Conversion Price then in effect shall, forthwith upon any
such increase becoming effective, be readjusted to reflect such
increase.
2.4. For the purpose of any computation under Sections 2.2 and 2.3, the
"Current Market Price" means with respect to any Trading Day the last
sale price (regular way) of the Common on such day as reported on the
New York Stock Exchange Consolidated Tape (as published in the Wall
Street Journal), or, if such Common Stock is not listed on the New
York Stock Exchange, Inc. or reported on such Consolidated Tape, then
the last sale price on such day on the principal domestic
7
<PAGE>
stock exchange on which such stock is then listed or admitted to
trading, or, if no sale takes place on such day on such exchange, the
average of the closing bid and asked prices on such day as officially
quoted on such exchange, or, if such Common Stock is not then listed
or admitted to trading on any domestic stock exchange but is quoted in
the National Market System ("NMS/NASDAQ") of the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"),
then the Current Market Price for each such Trading Day shall be the
last sale price on such day as quoted by NMS/NASDAQ, or, if no sale
takes place on such day or if such Common Stock is neither listed or
admitted to trading on any domestic stock exchange nor quoted on such
National Market System, then the Current Market Price for each such
Trading Day shall be the average of the reported closing bid and asked
price quotations on such day in the over-the-counter market, as
reported by NASDAQ, or, if not so reported, as furnished by the
National Quotation Bureau, Inc., or, if such firm at the time is not
engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business as selected by the Company,
or if there is no such firm, as furnished by any member of the
National Association of Securities Dealers, Inc. selected by the
Company with the written approval of the Holders of the Notes
convertible for a majority of the shares of Common Stock issuable
under then outstanding Notes. If at any time such Common Stock is not
listed on any domestic exchange or quoted in the domestic
over-the-counter market, the Current Market Price shall be deemed to
be an amount mutually agreed upon in writing between the Company and
the Holder of this Note within fifteen days immediately following the
date on which the Current Market Price is to be determined. If no
agreement as to Current Market Price is determined as stated herein,
(i) the Holder of this Note shall select an independent appraiser who
shall determine the fair market value per share of the Common Stock
which shall be the Current Market Price, provided the Company shall
agree to such Current Market Price. If the Company shall not agree to
the Current Market Price as determined in the preceding sentence then
(ii) the Company and Banca del Gottardo shall each
8
<PAGE>
select an independent appraiser who shall, independently of the other
appraiser, determine the fair market value of the Common Stock of the
Company. If the value determined by the appraiser whose determination
is the higher of the two appraisals does not exceed by more than ten
percent (10%) the average of the values determined by each appraiser,
then the Current Market Price shall be the average of the values
determined by the two appraisers. If the value determined by the
appraiser whose determination is the higher of the two appraisals does
exceed by more than ten percent (10%) the average of the value
determined by each appraiser, then the two appraisers shall select a
third independent appraiser who shall, independently of the other
appraisals, determine the fair market value of the Common Stock. The
value determined by the appraiser whose determination is the most
discrepant from the average of the three appraisals shall be
discarded, and the Current Market Price shall equal the average of the
remaining two appraisals; except that in the event that the highest
and lowest appraisals are equally discrepant from the average of the
three appraisals, the Current Market Price shall be such average. The
Company shall bear the expenses of all appraisals.
For the purpose of this Section 2.4, "trading day" shall mean a day on
which the securities exchange or on NASDAQ specified for purposes of
this Section 2.4 shall be open for business or, if the shares of
Common Stock shall not be listed on such exchange for such period, a
day with respect to which quotations of the character referred to in
the next preceding sentence shall be reported.
2.5. In computing an adjustment in the Conversion Price pursuant to
Sections 2.1 to 2.3 above, shares of Common Stock not outstanding at
the time of such computation shall be deemed outstanding to the extent
that the Conversion Price has been previously adjusted to reflect the
issuance of such shares of Common Stock or rights, options to
subscribe for or purchase such shares of Common Stock.
9
<PAGE>
2.6. Except as stated in Sections 2.1, 2.2 and 2.3 above, the Conversion
Price (except at the Company's option) shall not be adjusted for the
issuance of shares of Common Stock of the Company whether or not at
less than the Current Market Price or the current Conversion Price,
whether for cash or property.
2.7. No adjustment shall be made to the Conversion Price unless such
adjustment would result in any increase or decrease of at least USD
0.05 in the Conversion Price then in effect; provided, however, that
any adjustments which by reason of this Section 2.7 are not required
to be made will be carried forward and taken into account in any
subsequent adjustment.
2.8. All calculations under these Conversion Provisions shall be made to
the nearest one U.S. cent, with 0.5 U.S. cent or more to be considered
a full U.S. cent, or to the nearest one-hundredth of a share, as the
case may be.
2.9. Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly send to Banca del Gottardo a certificate of the
Company setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment
and the date on which it becomes effective. The contents of any
certificate required by this Section 2.9 may he transmitted by telex
or cable, but shall be confirmed in writing as hereinbefore provided.
Banca del Gottardo may rely upon such certificate (or such
transmission buy cable or telex, whether or not so confirmed) as
conclusive evidence of the correctness of the adjustment referred to
therein.
2.10. Notwithstanding the foregoing, no adjustment shall be made to the
extent that it would reduce the Conversion Price to less than the par
value of the shares of Common Stock (USD .01 at the date hereof).
2.11. Anything in this Article 2 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such
reductions in the Conversion
10
<PAGE>
Price in addition to those required by this Article as it, in its
discretion, shall determine to be advisable.
2.12. In any case in which this Article shall require that an adjustment be
made retroactively immediately following a record date, the Company
shall as promptly as practicable issue to the holder of any Note
converted after such record date the shares of Common Stock and other
common stock of the Company issuable on such conversion in excess of
the shares of Common Stock and other common stock of the Company
issuable on such conversion on the basis of the Conversion Price prior
to such adjustment.
ARTICLE 3
3.1. In the event that:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options to subscribe for or purchase
any shares of Common Stock or any securities convertible into
shares of Common Stock, or of any other subscription rights;
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in
Common Stock);
(c) there shall be any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the
Company is required, or there shall be the conveyance or transfer
of all or substantially all of the properties and assets of the
Company, or there shall be any reorganization or reclassification
or change of outstanding Common Stock issuable upon the exercise
of conversion rights hereunder (other than a change in par value,
or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
11
<PAGE>
(d) there shall be voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
(e) the Company proposes to take any action (other than the actions
of the type described in Section 2.1) which would require an
adjustment of the Conversion Price pursuant to Article 2;
then the Company shall, at least 10 days prior to the applicable
record date, provide written notice of such event to Banca del
Gottardo stating (x) the record date in the United States of
America as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, warrants, or
distributions are to be determined, or (y) the date in the United
States of America on which such reorganization, consolidation,
merger, conveyance, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of
which it is expected that holders of record of the shares of
Common Stock shall be entitled to vote upon, and, if approved, to
exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding-up.
3.2. If the event described in the notice given pursuant to Section 3.1.
will result in an adjustment of the Conversion Price pursuant to
Article 2, such notice shall also state the new Conversion Price
unless the Conversion Price cannot be calculated at the time such
notice is given.
3.3. The failure to give or publish the notice required by this Article 3
or any defect therein shall not affect the legality or validity of the
proceedings referred to in Section 3.1.
12
<PAGE>
ARTICLE 4
So long as any of the Convertible Notes remain convertible, the Company shall
not take any action which would result in an adjustment of the Conversion Price
pursuant to Article 2 if, after giving effect thereto, the Conversion Price
would be decreased to such an extent that the Shares could not be legally
issued, under applicable law of the jurisdiction of incorporation of the Company
then in effect, at such decreased Conversion Price as fully-paid and
non-assessable Shares.
ARTICLE 5
The Conversion Agent shall not at any time be responsible to any Noteholder for
determining whether any facts exist (a) which may require any adjustment of the
Conversion Price, (b) with respect to the nature or extent of any such
adjustment when made, (c) with respect to the method employed, or herein or in
any supplemental agreement (if any) provided to be employed in making any such
adjustment. The Conversion Agent makes no representation as to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities, property or cash, which may at any tune be issued or delivered upon
the conversion of any Convertible Note. The Conversion Agent shall not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any shares of stock or stock certificates or other
securities or property upon the surrender of any Note for the purpose of
conversion or to comply with any of the covenants of the Company contained in
these Conversion Provisions.
ARTICLE 6
6.1. In case of any consolidation of the Company with, or merger of the
Company into, any other corporation (other than a consolidation or
merger in which the Company is the continuing corporation), or in the
case of any sale or transfer of all of the assets of the Company as an
entirety or substantially as an entirety, the corporation formed by
such consolidation or the corporation into which the Company shall
have been merged or the corporation which shall have acquired such
assets, as the case may be, shall execute with Banca del Gottardo a
supplemental agreement which shall (a) provide that the holder of each
13
<PAGE>
Convertible Note then outstanding shall have the right to receive
thereafter, during the period such Convertible Note shall be
convertible as specified in Article 2, upon conversion of such
Convertible Note, in lieu of each share of Common Stock deliverable on
such conversion immediately prior to such event, only the kind and
amount of shares and/or other securities and/or property and/or cash
which are receivable, or which, but for the failure to distribute to
holders of Common Stock all or substantially all of the consideration
receivable on such sale or transfer of assets, would be receivable
upon such consolidation, merger, sale or transfer by a holder of one
share of Common Stock of the Company and (b) set forth the Conversion
Price for the shares and/or other securities and/or property and/or
cash so issuable, which shall be an amount equal to the Conversion
Price per share of Common Stock of the Company immediately prior to
such event.
6.2. In case of any reclassification or change of the shares of Common
Stock issuable upon conversion of the Notes (other than a change in
par value, or from par value to no par value, or as a result of a
subdivision or combination) 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 the holders of the shares of
Common Stock thereafter receive shares, other securities, property,
cash or any combination thereof for such shares of Common Stock
(including for this purpose shares reflecting a change in par value or
from par value to no par value or as a result of a subdivision or
combination of the shares of Common Stock), the Company shall execute
with Banca del Gottardo a supplemental agreement which shall (a)
provide that the holder of each Convertible Note then outstanding
shall receive, upon conversion thereof, in lieu of each share of
Common Stock of the Company deliverable upon such conversion
immediately prior to such event, the kind and amount of shares and/or
other securities and/or property and/or cash receivable upon such
reclassification, change, consolidation or merger by a holder of one
share of Common Stock, and (b) set forth the Conversion Price for the
shares and/or other securities and/or property and/or cash so
issuable, which shall
14
<PAGE>
be an amount equal to the Conversion Price per share of Common Stock
immediately prior to such event.
6.3. If, as a result of Section 6.1 or Section 6.2, the holder of any
Convertible Note thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes of common stock of
the Company, the Board of Directors (whose determination shall be
conclusive) shall determine the allocation of the Conversion Price
between or among shares of such classes of capital stock. Any
supplemental agreement executed pursuant to Sections 6.1 and 6.2 shall
provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments provided for herein, and, where
appropriate, state the Conversion Price in terms of one full share of
Common Stock or one full share of common stock of any successor or
purchasing corporation. The terms of this Article 6 also shall apply
to successive consolidations, merger, sales or transfers. In the event
that at any time as a result of an adjustment made pursuant to this
Article 6 the holder of any Note thereafter surrendered for conversion
shall become entitled to receive any shares or securities other than
shares of Common Stock, thereafter the prices or price of such other
shares or other securities so receivable on conversion of any
Convertible Note shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in Article 2, and
the provisions of Article 2 with respect to the Common Stock shall
apply on like terms to any such other shares.
6.4. The Conversion Agent shall have no responsibility for any
consolidation, merger, sale or transfer, the form or substance or any
plan relating thereto or the consequences thereof to any Noteholder.
The Conversion Agent shall have no responsibility to determine the
correctness of any provision contained in any supplemental agreement
relating either to the kind or amount of shares of stock or securities
or property receivable by Noteholders
15
<PAGE>
upon the conversion of their Convertible Notes after any such
consolidation, merger, sale or transfer, or to any adjustment made
with respect thereto. The Conversion Agent may, at its option, receive
an opinion of counsel for the Company as conclusive evidence that any
such supplemental agreement complies with the provisions of this
Article.
ARTICLE 7
CONVERSION AGENT:
BANCA DEL GOTTARDO
Viale Stefano Franscini 8, 6901 Lugano
16
