Note Purchase, Paying And Conversion Agency Agreement

NOTE PURCHASE, PAYING AND CONVERSION AGENCY AGREEMENT


BIGMAR, INC.
JOHNSTOWN, OHIO, U.S.A.


CHF 3'000'000.--
4% Convertible Notes of 1999 due October 29, 2003


October 26, 1999


TABLE OF CONTENTS


DEFINITIONS I. SUBJECT 3 II. ANNEXES 3 III. SALES RESTRICTIONS 4 IV. COMMISSION AND EXPENSES 8 V. WARRANTIES 9 VI. PAYMENT TO THE COMPANY 11 VII. CONDITIONS TO THE OBLIGATIONS
OF BANCA DEL GOTTARDO 12 VIII. INFORMATION MEMORANDUM 13 IX. PRINTING OF THE NOTES 13 X. SERVICING OF THE NOTES 14 XI. CANCELLATION OF NOTES AND COUPONS 16 XII. COVENANTS 16 XIII. RIGHT OF TERMINATION 18 XIV. COMMUNICATIONS 19 XV. APPLICABLE LAW AND JURISDICTION 19 XVI. EFFECTIVENESS 20 XVII. CURRENCY INDEMNITY 20 XVIII. ENTIRE AGREEMENT 21 XIX. AMENDMENT, CANCELLATION AND WAIVER 21


ANNEX A TERMS OF THE NOTES 22 ANNEX B DEFINITIVE NOTE (FACE) 34 ANNEX C INTEREST COUPONS 36 ANNEX D PERMANENT GLOBAL NOTE 37 ANNEX E CONVERSION AGENCY AGREEMENT 39 ANNEX F CERTIFICATE OF NO MATERIAL ADVERSE CHANGE 55 ANNEX G SPECIMEN SIGNATURE FORM 56 ANNEX H CERTIFICATE OF COMPLETION OF DISTRIBUTION 57 ANNEX I CERTIFICATE OF NONAVAILABILITY TO UNITED STATES PERSONS
OR PERSONS WITHIN THE UNITED STATES 58 ANNEX K CERTIFICATION OF NON-U.S. BENEFICIAL OWNERSHIP AND
FILING REQUIREMENTS 59 ANNEX L CERTIFICATION OF NON-U.S. BENEFICIAL OWNERSHIP AND
FILING REQUIREMENTS 60


NOTE PURCHASE, PAYING AND CONVERSION AGENCY AGREEMENT


entered into effective as of October 26, 1999


between


BIGMAR, INC. being a corporation existing under the laws of the State of Delaware, whose head office is situated at 9711 Sportsman Club Road, Johnstown, Ohio 43031, U.S.A.,


(hereinafter called the "Company")


on the one part
and


BANCA DEL GOTTARDO being a corporation duly organized with limited liability and existing under the laws of Switzerland, whose registered office is situated at Viale Stefano Franscini 8, 6901 Lugano, Switzerland,


on the other part


SOME DEFINITIONS


The Company's 4% Convertible Notes of 1999 due October 29, 2003, are referred to herein as the "Notes".


Until the Notes have been printed in definitive form, if printed, pursuant to Article IX hereof, the expression "Notes" herein shall include entitlements under the Permanent Global Note, and the expressions "Noteholder(s)" and "Couponholder(s)", mutatis mutandis, shall mean and include persons and entities entitled to the benefits under the Permanent Global Note. Each Noteholder possesses a co-ownership in the Permanent Global Note in relation to the principal amount of Notes of which he is an owner. "Permanent Global Note" means a global note for the total principal amount of Swiss Francs ("CHF") 3'000'000.-- issued in bearer form and representing 60 single Notes each in the amount of CHF 50'000.-- and representing the aforementioned total principal amount. The Permanent Global Note will be destroyed by Banca del Gottardo when the Notes are printed, if printed. Banca del Gottardo shall promptly after destruction provide to the Company a written certificate that the Permanent Global Note has been destroyed.


I. SUBJECT


Subject to the terms and conditions hereof


- the Company, pursuant to authorization by its Board of Directors,
agrees to issue and sell to Banca del Gottardo CHF 3'000'000.--
Notes at a price of 100% of their principal amount and


- Banca del Gottardo agrees not later than October 29, 1999


(1) to purchase (i.e. underwrite) on a firm basis for CHF 3'000'000.--
Notes at a price of 100% of their principal amount, and


(2) to offer the Notes in a placement exclusively to its clients and
other financial institutions at a price of 100% of their principal
amount,


with a total principal amount of CHF 3'000'000.--
(Swiss Francs three million)


maturing on October 29, 2003


bearing interest at the rate of 4% per annum, payable
semi-annually in arrear each
on October 29 and April 29,
commencing April 29, 2000
until maturity


The aggregate amount for which Notes are sold are hereinafter referred
to as the "Proceeds".


The net Proceeds of the Notes will be utilized by the Company for the
financing of working capital and general corporate purposes.


Banca del Gottardo shall not have any responsibility for or be obliged
to concern itself with the application of the net Proceeds of the
Notes.


II. ANNEXES


The contents of each of the Annexes attached hereto, i.e.


Annex A: Terms of the Notes
Annex B: Form of Definitive Note (face)


Annex C: Form of Interest Coupons
Annex D: Form of Permanent Global Note
Annex E: Conversion Agency Agreement
Exhibit 1
to Annex E: Conversion Provisions
Annex F: Form of Certificate of No Material Adverse Change
Annex G: Specimen signature form
Annex H: Certificate of completion of distribution
Annex I: Certificate of nonavailability to United States persons
or persons within the United States
Annex K Certification of non-U.S. Beneficial Ownership and
Filing Requirements
Annex L Certification of non-U.S. Beneficial Ownership and
Filing Requirements


shall constitute an integral part of this Agreement.


III. SALES RESTRICTIONS


a) The Notes to be issued pursuant to this Agreement have not been
registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), and may not be offered, sold or
delivered, directly or indirectly, in the United States or to, or
for the account of, any U.S. person except in transactions exempt
from the registration requirements of the Securities Act.


b) As to the Company, the Notes are intended to be obligations that
are not required to be in registered form for purposes of United
States federal tax laws and the principal (to the extent
characterized as original issue discount) and interest payable on
the Notes are intended to be "portfolio interest" under Sections
871(h) and 881(c) of the United States Internal Revenue Code of
1986 as amended (the "Code"). Accordingly, the Notes may not, as
part of any part of the initial distribution, be offered for sale
or resale, sold or delivered, directly or indirectly, to a person
in the United States or to a United States person. Banca del
Gottardo (i) agrees and represents that no Notes will be offered,
sold or delivered to or on behalf of a person within the United
States or to a United States person, (ii) represents and agrees
that (a) during the period beginning on the earlier of the first
date that the Notes are offered or the date on which the Notes are
issued and ending on the date one (1) year after the later of the
date upon which the Notes were first offered or the date of
closing of this offering (the "Restricted Period"), it will not
offer or sell, Notes to a person who is within the United States
or to a United States person, (b) it has not delivered and will
not deliver within the United States the Permanent Global Note,
the Notes or any definitive Notes or coupons, if printed, that are
sold during the Restricted Period, (c) it has and throughout the
Restricted Period will have in effect procedures reasonably
designed to ensure that its employees or agents who are directly
engaged in selling Notes are aware that such Notes may not be


offered or sold during the Restricted Period to a person who is
within the United States or to a United States person and (d) it
has not entered and will not enter into any contractual
arrangement with respect to the distribution and delivery of the
Notes, except with its affiliates or with the prior written
consent of the Company, (iii) represents and agrees with respect
to each affiliate that acquires from it Notes for the purpose of
offering or selling such Notes during the Restricted Period,
repeating and confirming the representations and agreements
contained in clauses (ii) (a), (b), (c) and (d) on each such
affiliate's behalf, (iv) represents and agrees that it will not
sell or deliver Notes to a holder which is (a) immediately after
the sale or delivery, a "10-percent. shareholder" of the Company
within the meaning of Section 871 (h) (3) of the Code, (b) a bank
on an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of its trade or business, (c)
a controlled foreign corporation which is related to the Company
under section 864 (d) (4) of the Code, or (d) within a foreign
country which the United States Secretary of the Treasury has
determined under section 871 (h) (6) of the Code that the exchange
of information with the foreign country is inadequate to prevent
evasion of United States tax by United States persons, (v)
represents and agrees that (a) on or before the delivery of the
Permanent Global Note by the Company, Banca del Gottardo will
deliver to the Company the certificate in the form attached hereto
as Annex I, and (b) Banca del Gottardo will deliver to the Company
the certificate in the form attached hereto as Annex H within ten
business days of the commencement of the Restricted Period and,
(vi) represents and agrees that the sale of the Notes shall be
made upon certification, in the form attached hereto as Annex K,
that the beneficial owners of the Notes either (i) will not be
United States persons or U.S. persons or (ii) are financial
institutions (within the meaning of United States Treasury
Regulation Section 1.165.12(c)(1)(v)) located outside the United
States that are not United States persons and are purchasing such
Notes for resale during the Restricted Period and certify they are
not acquiring the Notes for purposes of resale directly to a
United States person or to a person within the United States. Any
certificates provided by a clearing organization must be based on
statements provided to it by its members. Banca del Gottardo
agrees to furnish to the Company a properly completed certificate
with respect to each Note, in the form attached hereto as Annex K
(and, in the case of clearing organizations, require statements of
members of the clearing organization), on the earlier of the date
of the first actual payment of interest on the Note or the date of
delivery of any instrument or document transferring an interest in
or entitlement under the Permanent Global Note. For purposes of
this Agreement, whether an offer, sale or delivery is made to a
person within the United States or to a United States person will
be determined under the rules set out in the Code, and United
States Treasury Regulation Section 1.163-5(c)(2)(i)(D). Banca del
Gottardo agrees that it will comply fully with the selling
restrictions set out in this Sub-


Section (b) and, in particular, Banca del Gottardo hereby
covenants and agrees to the effect set out in clauses (ii) and
(iii) of the second preceding sentence.


c) The Notes will be represented by a permanent Global Convertible
Note (the "Permanent Global Note"), without interest coupons, the
Permanent Global Note to be deposited by the Company with Banca
del Gottardo, on the Payment Date. The Permanent Global Note may
be exchanged, as a whole or in part, for appropriate definitive
Notes, if printed, in bearer form in the denominations of CHF
50'000.-- with interest coupons (the "Coupons") attached, in
bearer form not earlier than 1 year after the later of the date on
which the Notes are first offered or the Payment Date, before
which time no Notes represented by the Permanent Global Note or
interest therein may be offered, sold or transferred into the
United States or to a U.S. person. Such exchange shall be made
upon certification, in the form attached hereto as Annex L, that
the beneficial owners of the Notes either (i) are not United
States persons or U.S. persons or (ii) are financial institutions
(within the meaning of United States Treasury Regulation Section
1.165-12(c)(1)(v)) located outside the United States that are not
United States persons and have purchased such Notes for resale
during the Restricted Period and certify they have not acquired
the Notes for purposes of resale directly or indirectly to a
United States person or to a person within the United States. Any
certificates provided by a clearing organization must be based on
statements provided to it by its members. Banca del Gottardo
agrees to furnish to the Company a properly completed certificate
with respect to each Note, in the form attached hereto as Annex L
(and, in the case of clearing organizations, required statements
of members of the clearing organization), on the earlier of the
date of the first actual payment of interest on the Note or the
date of delivery by the Company of the Note in definitive form.


d) In this Agreement, references to "dollars" and "USD" are to United
States dollars, the term "United States" means the United States
of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its
jurisdiction, and the term "United States person" means a citizen
or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate
or trust the income of which is subject to United States federal
income taxation regardless of its source, "U.S. person" shall have
the meaning set forth in Sections 230.901 through 904 of Title 17
of the United States Code of Federal Regulations ("Regulation S").


e) The following legends will appear on the Permanent Global Note and
all Notes and Coupons, if printed, issued pursuant to the Offer:
(i) "Any United States person who


holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations
provided in sections 165(j) and 1287(a) of the Internal Revenue
Code", and (ii) "This Note has not been and will not be
registered under the United Stated Securities Act of 1933, as
amended (the "Securities Act"), and may not be offered, sold or
delivered, directly or indirectly, in the United States or to,
or for the benefit of, any U.S. person (as such terms are
defined in Regulation S under the Securities Act) unless this
Note is registered under the Securities Act or an exemption
from the registration requirements of the Securities Act is
available." The sections referred to in the legend provide
that, with certain exceptions, a United States person will not
be permitted to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a
sale, exchange or redemption of such Notes or Coupons.


f) The Company represents, warrants and covenants that the Notes have
not been and shall not be offered or sold except in accordance
with Rule 903 of Regulation S promulgated under the Securities Act
or in a transaction exempt from the registration requirements of
the Securities Act. Each of the Company and Banca del Gottardo
represents, warrants and covenants that (i) none of it, its
affiliates or any person acting on its behalf has engaged or will
engage in any directed selling efforts (as defined in Rule 902 of
Regulation S promulgated under the Securities Act) in the United
States and it has complied and will comply with the offering
restrictions of Regulation S under the Securities Act in
connection with the offer of the Notes, (ii) none of it, its
affiliates or any person acting on its behalf has utilized or will
utilize any form of general solicitation or general advertising
(as such terms are used in Regulation D promulgated under the
Securities Act) in connection with the offer of the Notes in the
United States, (iii) none of it, its affiliates or any person
acting on its behalf has made or will make an offer of the Notes
in circumstances that would require the registration of the Notes
under the Securities Act and (iv) requests to purchase Notes shall
be accepted only from persons who are not within the United
States.


g) Banca del Gottardo has been advised by the Company and
acknowledges and confirms that it is aware (a) that a violation or
breach of any of the terms and conditions of Article III of this
Agreement could directly cause the Company to become subject to
damages and liabilities (including, but not limited to, excise
taxes, a loss of the interest deduction and assumption of
withholding taxes) under various United States securities and tax
laws, and (b) that, as a consequence, Banca del Gottardo shall
defend, indemnify and save harmless the Company, its officers,
directors, agents and employees from any and all third party
claims, demands, suits or proceedings (including reasonable legal
fees and expenses) arising out of any breach or alleged breach of
any


of the terms or conditions of Article III of this Agreement,
except to the extent the claim, demand, suit or proceeding arises
out of the negligence or willful misconduct of the Company. In
seeking indemnification, the Company shall give prompt notice of
the claim, demand, suit or proceeding to Banca del Gottardo,
cooperate with Banca del Gottardo, and allow Banca del Gottardo to
control the defense.


IV. COMMISSION AND EXPENSES


a) The Company will pay on October 29, 1999 Lugano time (the "Closing
Date") to Banca del Gottardo


(1) a managing and underwriting commission of 5% calculated
on the principal amount of the Notes


(2) out of pocket expenses of CHF 10'000.--


The payment by the Company of (1) and (2) above will be made by
deduction from the payment by Banca del Gottardo to the Company of
the Proceeds, resulting in the Net Proceeds as per Article VI.


b) The Company shall further bear when ascertainable and due


- all present or future taxes, duties or other charges levied by
or within the United States of America in connection with the
execution and delivery of this Agreement, the Permanent Global
Note (excluding tax on interest or principal on the Notes
which is addressed in Annex A); and


- the commissions and expenses for the servicing and the
conversion of the Notes as per Article X;


c) The Company will reimburse Banca del Gottardo on first demand for
all reasonable bank charges, reasonable legal fees and other
reasonable costs and expenses incurred or to be incurred by Banca
del Gottardo in case of or in connection with reorganization,
merger, restructuring or default, actual or threatened, of the
Company as well as in connection with the convening of a
Noteholders' meeting and the preservation and enforcement of any
of the rights under this Agreement, the Permanent Global Note or
the Notes.


d) Banca del Gottardo shall bear


- all costs and expenses in connection with the initial offering
and placement of the Notes incurred by it.


Banca del Gottardo shall further bear


- the cost for the printing and delivery to the holders of the
definitive Notes, if printed, incurred by Banca del Gottardo
on behalf of the Company.


- all costs incurred by it in connection with the offering,
including the printing in Switzerland of the Information
Memorandum relating to the Notes.


V. WARRANTIES


A) The Company warrants to and for the benefit of Banca del
Gottardo that:


1. STATUS: it is a corporation duly incorporated and
existing in good standing under the laws of the State of
Delaware capable of suing and being sued and has the
power and authority to own its assets and to conduct the
business which it presently conducts;


2. POWERS: it has the power to enter into, exercise its
rights and perform and comply with its obligations under
this Agreement;


3. AUTHORIZATION AND CONSENTS: except as to the registration
requirements provided for herein, all actions, conditions
and things required by the laws of the State of Delaware
and the United States of America have been taken,
fulfilled and done (including the obtaining of any
necessary consents) in order


a) to enable it lawfully to enter into, exercise its
rights and perform and comply with its obligations
under this Agreement; and


b) to ensure that those obligations are legally binding
and enforceable in accordance with their terms subject
to general equity principles, to applicable
bankruptcy, insolvency, conservatorship,
reorganization and other similar debtor relief laws,
and to other laws establishing liens and priorities or
otherwise relating to or affecting creditors-rights;


4. NON-VIOLATION OF LAWS, ETC: its entry into, and exercise
of its rights and/or performance of or compliance with
its obligations under this Agreement, the terms of the
Permanent Global Note and the Notes do not and will not
violate in any material way


a) any law to which it is subject; or


b) its Certificate of Incorporation; or


c) except for matters for which the Compan ...