<PAGE>
As filed with the Securities and Exchange Commission on September 6, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------
VITECH AMERICA, INC.
(Exact name of Company as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
65 041 9086 Florida 3571
(I.R.S. Employer (State or other jurisdiction (Primary Standard
Identification No.) of incorporation or organization) Industrial Classification Number)
</TABLE>
8807 Northwest 23rd Street
Miami, Florida 33172
(305) 477-1161
(Name, address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
William C. St. Laurent, President
Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
(305) 477-1161
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Jim Schneider, Esq. Robert Steven Brown, Esq.
Joel D. Mayersohn, Esq. Vincent Joseph Pasquariello, Esq.
Atlas, Pearlman, Trop & Borkson, P.A. Brock, Fensterstock, Silverstein,
200 East Las Olas Blvd., Suite 1900 McAuliffe & Wade, LLC
Fort Lauderdale, Florida 33301 One Citicorp Center, 56th Floor
(954) 766-7823 New York, New York 10022
Telecopier: (954)766-7800 (212) 371-2000
Telecopier: (212) 371-5500
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities 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]
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to
2,300,000 shares of Common Stock, no par value ("Common Stock"), including the
shares of Common Stock to cover over allotments of Vitech America, Inc. (the
"Company"), a Florida corporation, for sale by the Company in an underwritten
public offering, and (ii) an additional 40,944 shares of Common Stock (the
"Selling Shareholders' Stock") for the sale by the holders thereof (the "Selling
Shareholders") for resale from time to time by the Selling Shareholders, subject
to the contractual restrictions that the Selling Shareholders may not sell the
Selling Shareholders' Stock for a specified period after the closing of the
underwritten offering.
The complete Prospectus relating to the underwritten offering follows
immediately after this explanatory note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the Selling
Shareholders' Stock, including an alternative front and back cover pages and the
section entitled "Concurrent Public Offering," "Plan of Distribution," "Selling
Shareholders" and "Shares Eligible for Future Sale" to be used in lieu of
sections entitled "Concurrent Offering," "Shares Eligible for Future Sale" and
"Underwriting" in the Prospectus relating to the underwritten offering. Certain
sections of the Prospectus for the underwritten offering will not be used in the
Prospectus relating to the Selling Shareholders' Stock such as "Use of Proceeds"
and "Dilution."
i
<PAGE>
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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Title of each
class of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate offer- Amount of
registered registered per unit(1) ing price(1) registration fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 2,340,944
per share Shares(2) $10.00 $23,409,440 $8,072.28
- ---------------------------------------------------------------------------------------------------------------------
Representative's 200,000
Warrants Warrants(3) $0.000025 $ 5.00 $0.01
- ---------------------------------------------------------------------------------------------------------------------
Common Stock,
no par value 200,000
per share Shares(4) $12.00 $2,400,000 $827.59
- ---------------------------------------------------------------------------------------------------------------------
TOTAL --- --- $25,400,005 $8,899.88
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 300,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any and 40,944 shares
being registered by certain shareholders of the Company.
(3) To be acquired by the Representative.
(4) Issuable upon exercise of the Representative's Warrants.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
<PAGE>
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.
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 6, 1996
2,000,000 Shares
VITECH AMERICA, INC.
Common Stock
VITECH AMERICA, INC. (the "Company") is hereby offering 2,000,000
shares of common stock, no par value per share (the "Common Stock").
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that any such market will develop upon
completion of this offering. The Company has applied for quotation of the Common
Stock on the Nasdaq National Market(R) under the symbol "VTCH." It is currently
estimated that the initial public offering price will be between and
per share and will be determined by negotiation between the Company and
H.J. Meyers & Co., Inc., as the representative (the "Representative") of the
several underwriters (the "Underwriters"). For a description of the factors to
be considered in determining the initial public offering price, see
"Underwriting."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE _____.
THE SECURITIES OFFERED HEREBY 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.
================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Share $ __________ $_________ $__________
Total (3) $ __________ $_________ $__________
================================================================================
<PAGE>
- -------------
(1) Does not include additional compensation to be received by the
Representative in the form of: (i) a non-accountable expense allowance
equal to 2% of the gross proceeds of this offering ($_______, or
$_______ if the Underwriters' over-allotment option is exercised in
full); (ii) warrants to purchase up to 200,000 shares of Common Stock
at an exercise price equal to 120% of the initial public offering price
per share of Common Stock exercisable over a period of four years
commencing one year from the date of this Prospectus (the
"Representative's Warrants"); and (iii) a financial advisory agreement
which provides that the Representative shall act as an advisor to the
Company for a period of one year for a fee of $36,000, payable at the
closing of this offering. In addition, the Company has agreed to
indemnify the Underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company,
estimated to be $350,000, excluding the Representative's
non-accountable expense allowance.
(3) The Company has granted the Underwriters an option, exercisable within
45 days from the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock solely to cover over-allotments, if
any. If the over-allotment option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions, and Proceeds to
Company will be $__________, $_________, and $__________, respectively.
See "Underwriting."
The shares of Common Stock are offered on a "firm commitment" basis by
the Underwriters when, as, and if delivered to, and accepted by, the
Underwriters, and subject to prior sale, withdrawal, or cancellation of the
offer without notice and their right to reject orders in whole or in part. It is
expected that delivery of the certificates representing the shares of Common
Stock will be made at the offices of H.J. Meyers & Co., Inc., 180 Maiden Lane,
New York, New York 10038 on or about ______________, 1996.
H.J. MEYERS & CO., INC.
The date of this Prospectus is ___________, 1996
2
<PAGE>
The Company will furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may from time to time deem appropriate or as may be required by law.
--------------
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 IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Description of Pictures
Inside Front Cover:
The Vitech logo with a description of the Company as follows:
"A fully integrated manufacturer providing complete multimedia and
network computing solutions."
Picture #1: Picture of a father and his son playing a computer game on a
multimedia personal computer.
Picture #2: The Vitech Vision(TM) personal multimedia computer.
Picture #3: The Vitech MultiShow(TM) multimedia kit.
Picture #4: The Vitech Easynet(TM) networking kit.
Inside Rear Cover:
Picture #1: A picture from a Vitech advertisement showing two hands touching
with the caption: "Vitech Integrated Solutions."
Picture #2: Various networking components.
Picture #3: The Vitech Easynet(TM) networking kit.
Picture #4: An array of network servers and other high-end personal computers.
Picture #5: The Vitech MultiShow(TM) multimedia kit, speakers, and a computer CD
ROM.
Picture #6: The Vitech Vision(TM) line of personal computers.
Picture #7: The Vitech logo.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and the notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated herein, the
information in this Prospectus does not give effect to (i) the exercise of the
Underwriters' over-allotment option, (ii) the Representative's Warrants, (iii)
options to purchase up to 4,000,000 shares of Common Stock issued to members of
management exercisable at prices ranging from $15.00 per share to $25.00 per
share, or (iv) up to 200,000 shares of Common Stock reserved for issuance upon
the exercise of options which may be granted pursuant to the Company's 1996
Stock Option Plan (the "Plan"), none of which options have been granted prior to
the date of this Prospectus. The information in this Prospectus relating to the
Common Stock has been restated to reflect an 8,000-for-one stock split effected
on July 26, 1996. As used in this Prospectus, the term "Company" refers to
Vitech America, Inc., a Florida corporation, and its wholly-owned subsidiary
Bahia Tecnologia Ltda., a Brazil corporation ("Bahia").
The Company
Vitech America, Inc. (the "Company") is engaged in the manufacture and
distribution of computer equipment and related products, as well as the
financing of the purchase thereof, in the Federal Republic of Brazil. The
Company's products, which include personal computers and multimedia systems and
related peripheral products, networking and system integration equipment, and
cellular telephones and accessories, are marketed under Company-owned and other
brand names for distribution through a variety of channels in the Brazilian
marketplace. In addition, the Company maintains an engineering support service
dedicated to assisting the Company's customers in effecting networking and
system integration solutions.
The Company has experienced substantial growth since inception, with
consolidated revenues and consolidated net income increasing from $1,156,253 and
$44,288, respectively, for the period between June 24, 1993, the inception of
the Company, and December 31, 1993, to $17,407,363 and $149,570, respectively,
for the year ended December 31, 1994, and $48,488,996 and $6,904,834,
respectively, for the year ended December 31, 1995. Consolidated revenues and
consolidated net income were $26,080,299 and $2,704,140, respectively, for the
six months ended June 30, 1996 as compared to $20,457,048 and $397,721,
respectively, for the six months ended June 30, 1995.
As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news,
trade reports, and the Company's experience, the Company believes that the
market for computer equipment and related products in Brazil is expected to grow
at the rate of approximately 30% annually. The Company believes that it is
particularly well-positioned to capitalize upon such anticipated growth based
upon: (i) the Company's extensive knowledge of prevailing customs, importation
practices, technology and labor bases, marketing dynamics, and economic
conditions in Brazil, together with the Company's existing relationships with
U.S. and Asian suppliers and understanding of technology development; (ii) the
Company's integrated manufacturing, research and development, sales, and
warehousing facilities in Brazil; (iii) the Company's existing distribution
arrangements with retailers and others in Brazil; and (iv) the Company's ability
to provide flexible financing alternatives to potential purchasers of the
Company's products.
4
<PAGE>
As part of the Company's operating strategy, the Company intends to
utilize a significant portion of the proceeds of this offering as follows:
* to expand inventory;
* to expand consumer financing operations;
* to expand marketing activities;
* to repay indebtedness; and
* to increase manufacturing capacity.
The Company was incorporated on June 24, 1993 under the laws of the
State of Florida. Its principal executive offices are located at 8807 Northwest
23rd Street, Miami, Florida 33172, and its telephone number is (305) 477-1161.
Bahia was incorporated on May 8, 1995 under the laws of Brazil.
5
<PAGE>
The Offering
<TABLE>
<S> <C>
Common Stock Offered by the Company......................... 2,000,000 shares
Common Stock Outstanding
Prior to Offering........................................... 8,013,648 shares(1)
Common Stock Outstanding
After the Offering.......................................... 10,013,648 shares(1)
Risk Factors................................................ Investment in the shares of Common Stock offered
hereby involves a high degree of risk and
immediate and substantial dilution from the price
to the public. See "Risk Factors," "Dilution," and
"Certain Transactions."
Use of Proceeds............................................. To expand inventory, to expand consumer financing
operations, to expand marketing activities, to repay
indebtedness, to increase manufacturing capacity,
and for general working capital purposes.
Proposed National Market(R) Symbol............................ "VTCH"
</TABLE>
(1) Excludes 27,296 shares of Common Stock issuable upon exercise of
warrants issued in the Company's August 1996 Private Placement.
Summary Financial Data
The following tables set forth certain summary financial data of the
Company. The summary statement of operations data for the years ended December
31, 1995 and 1994 and the period from June 24, 1993 (inception) to December 31,
1993 are derived from the Consolidated Financial Statements of the Company,
which have been audited by Pannell Kerr Forster PC, independent certified public
accountants. The summary statement of operations data for the six months ended
June 30, 1996 and 1995 and the summary balance sheet data as of June 30, 1996
have been derived from the unaudited consolidated statements of the Company. The
Consolidated Financial Statements for the periods indicated above, and the
report thereon, appear elsewhere in this Prospectus. The data in such tables
should be read together with "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the notes thereto, appearing elsewhere
herein.
6
<PAGE>
Statement of Operations Data:
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
(unaudited)
Period June
24, 1993
(Inception)
to December
1996 1995 1995 1994 31, 1993
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Sales $26,080,299 $20,457,048 $48,488,996 $17,407,363 $1,156,253
Cost of sales 18,688,336 19,067,617 39,156,239 16,483,232 903,544
Gross profit 7,391,963 1,389,431 9,332,757 924,131 252,709
Selling, general and
administrative expenses 2,462,646 819,380 1,234,108 505,448 181,139
Income from operations 4,929,317 570,051 8,098,649 418,683 71,570
Interest and financing
expense 1,688,947 163,978 328,278 171,743 14,282
Net income $2,704,140 $397,721 $6,904,834 $149,570 $44,288
Net income per share
Common and Common
Stock equivalents $.31 $.05 $.82 $.02 ---
Weighted average
number of shares
of Common and
Common Stock
equivalents
outstanding 8,503,853 8,041,988 8,293,914 8,000,000 8,000,000
</TABLE>
Balance Sheet Data:
As of June 30, 1996
-------------------
(unaudited)
Actual As Adjusted (1)
------ ---------------
Current Assets $23,640,435 $38,025,292
Working capital $7,598,941 $25,183,798
Total assets $26,150,724 $40,425,120
Long-term debt $0 $0
Total liabilities $16,041,494 $12,841,494
Shareholders' equity $10,109,230 $27,583,626
(1) Adjusted to reflect (i) the sale of 13,648 shares of Common Stock and
$1,364,778 aggregate principal amount of debentures issued in the
Company's August 1996 Private Placement and (ii) the sale of the
2,000,000 shares of Common Stock offered hereby (after deducting
underwriting discounts and commissions and estimated offering expenses)
and the application of the net proceeds therefrom assuming an initial
public offering price of $10.00 per share. See "Use of Proceeds" and
"Capitalization."
7
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to the other information set forth in this
Prospectus, including the Consolidated Financial Statements and the notes
thereto, in evaluating an investment in the shares of Common Stock offered
hereby.
Limited Operating History
The Company was organized in June 1993. While the Company has been
profitable since its inception, investors in this offering will have only a
limited operating history to consider in evaluating the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
Management of Growth
The Company has experienced substantial growth since inception with
consolidated revenues and consolidated net income increasing from $ 1,156,253
and $ 44,288, respectively, for the period between June 24, 1993, the inception
of the Company, and December 31, 1993, to $17,407,363 and $149,570,
respectively, for the year ended December 31, 1994 and to $48,488,996 and
$6,904,834, respectively, for the year ended December 31, 1995. Consolidated
revenues and consolidated net income were $26,080,299 and $2,704,140,
respectively, for the six months ended June 30, 1996 compared to $20,457,048 and
$397,721, respectively for the six months ended June 30, 1995. There can be no
assurance that such growth will continue. While management has successfully
managed such growth to date and the Company's infrastructure has been sufficient
to support such growth, there can be no assurance that, if such growth
continues, the Company's infrastructure will continue to be sufficient to
support such larger enterprise. See "Risk Factors -- Dependence on Key
Personnel; Recruitment of Additional Personnel," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business --
Employees," and "Management."
Fluctuation of Quarterly Results
The Company's quarterly net sales and operating results may vary
significantly as a result of, among other things, historical seasonal purchasing
patterns in Brazil, the volume and timing of orders received during a quarter,
variations in sales mix, and delays in production schedules. Accordingly, the
Company's historical financial performance is not necessarily a meaningful
indicator of future results and, in general, management expects that the
Company's financial results may vary materially from period to period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Customer Concentration
During the year ended December 31, 1995, the Company was engaged as a
contract manufacturer of video cassette recorders by Casas Bahia, a leading
retailer of consumer electronic products in Brazil. Such sales accounted for
approximately 15% of the Company's sales during such period. Such sales
accounted for approximately 14% of the Company's sales during the six month
period ended June 30, 1996. In addition, the Company has a continuing
contractual relationship with Casas Bahia pursuant to which the Company will
manufacture televisions and video cassette recorders. Accordingly, the loss of
8
<PAGE>
Casas Bahia as a customer could have a material adverse effect on the Company.
Other than Casas Bahia and Vitoria Tecnologia S.A., an affiliate through common
ownership, no one customer of the Company accounted for more than 5% of the
Company's sales during such period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business -- Customers," and
"Business."
Dependence on Suppliers; Credit Arrangements
During the year ended December 31, 1995, the Company had only one
supplier which accounted for in excess of 10% of purchases. During the six month
period ended June 30, 1996, the Company had four suppliers which each accounted
for in excess of 10% of purchases. Substantially all of the Company's inventory
has, and will be, purchased from manufacturers and distributors with whom the
Company has entered into non-exclusive agreements, which are typically
cancelable upon 30 days written notice. There can be no assurance that such
agreements will not be canceled. While the Company does not believe that the
loss of any one supplier would have a material adverse effect upon the Company
since the components utilized in most products sold by the Company are available
from multiple sources, the Company's future success will depend in part on its
ability to maintain relationships with existing suppliers and to develop new
relationships with additional suppliers. The loss of, or significant disruptions
in relationships with, suppliers could have a material adverse effect on the
Company's business since there can be no assurance that the Company will be able
to replace lost suppliers on a timely basis. See "Business -- Procurement and
Materials Management."
To date, the Company has materially benefited from extended credit
terms that the Company has received from certain of its suppliers. Such terms
enable the Company to defer payment during a significant portion of the
Company's transport and manufacturing cycle thereby permitting the Company to
increase its volume of purchases for components, parts, and equipment. In the
event that the Company's suppliers were to impose more stringent credit terms
with respect to the Company, in the absence of sufficient alternative financing
on favorable terms, the Company could be materially adversely affected. In such
event, there can be no assurance that the Company will obtain alternative
financing on favorable terms, or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Procurement and Materials Management."
Competition
The manufacturing and distribution of computer equipment and related
products is highly competitive and requires substantial capital. The Company
competes with, and will compete with, numerous international, national, and
regional companies, many of which have significantly larger operations and
greater financial, marketing, human, and other resources than the Company, which
may give such competitors competitive advantages, including economies of scale
and scope. No assurance can be given that the Company will successfully compete
in any market in which it conducts or may conduct operations.
9
<PAGE>
Political and Economic Uncertainty
Notwithstanding the recent stability of the Brazilian economy and
Brazil's unrestricted foreign exchange market, the Brazilian economy has been
characterized by frequent and occasionally substantial intervention by the
Brazilian Government. The Brazilian Government has, in the past, substantially
influenced monetary, credit, tariff, and other policies, including exchange
rates, and has utilized price and wage controls, the restriction of bank
accounts, capital controls, and restrictions on exports to influence the
economy, including to reduce extremely high levels of inflation. In addition,
the Brazilian political environment has been characterized by high levels of
uncertainty since the country returned to civilian rule in 1985. Furthermore,
there have been periodic strikes among workers in Brazil's public sector, and
any such incidents in the future could have a material adverse effect on the
Company's operations during such periods. Future changes in, or the
implementation of, such policies, and increased Brazilian political uncertainty,
could also have a material adverse effect on the Company and its financial
results. See "Conditions in Brazil."
Foreign Exchange Risk
The relationship of Brazil's currency to the value of the U.S. dollar,
and the relative rate of devaluation of Brazil's currency, may affect the
Company's operating results. In particular, the Company's accounts receivable
are denominated in the Brazilian local currency, the Real, while the Company's
operating results are recorded in U.S. dollars. Accordingly, any significant
devaluation of the Real relative to the U.S. dollar could have a material
adverse effect on the Company's operating results. See "Conditions in Brazil."
Consequences of Technological Changes
The market for the Company's products is characterized by continuous
and rapid technological advances and evolving industry standards. Compatibility
with industry standards in areas such as operating systems and communications
protocols is material to the Company's marketing strategy and product
development efforts. In order to remain competitive, the Company must respond
effectively to technological changes by continuing to enhance and improve its
existing products to incorporate emerging or evolving standards and by
successfully developing and introducing new products that meet customer
requirements. There can be no assurance that the Company will successfully
develop, market, or support such products or that the Company will respond
effectively to technological changes or new product announcements or
introductions by others. In the event that the Company does not enhance and
improve its products, the Company's sales and financial results could be
materially adversely affected. In addition, there can be no assurance that, as a
result of technological changes, a portion of the inventory of the Company would
not be rendered obsolete. See "Business -- Products."
Possible Need for Additional Financing
Based on the Company's operating plan, the Company believes that the
net proceeds of this offering, together with projected cash flows from
continuing operations and existing and contemplated sources of credit, including
the financing of consumer debt portfolios generated from the sales of the
Company's products to end-users, will be sufficient to satisfy its capital
requirements and finance its plans for expansion for at least the next twelve
months. Such belief is based on certain assumptions, and there can be no
assurance that such assumptions are correct. Accordingly, there can be no
assurance that such
10
<PAGE>
resources will be sufficient to satisfy the Company's capital requirements for
such period. After such twelve-month period, the Company may require additional
financing in order to meet its current plans for expansion. There can be no
assurance that the Company will be able to obtain such additional capital on a
timely basis, on favorable terms, or at all. In any of such events, the Company
may be unable to implement its current plans for expansion. See "Use of
Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business -- Business Strategy."
Dependence on Key Personnel; Recruitment of Additional Personnel
The Company is dependent upon the efforts and abilities of Georges C.
St. Laurent, III, its Chairman of the Board and Chief Executive Officer, and
William C. St. Laurent, its President and Chief Operating Officer. Each of such
individuals is a substantial shareholder of the Company and has entered into an
employment agreement with the Company which terminates on December 31, 1998. The
loss or unavailability of the services of either of these individuals for any
significant period of time could have a material adverse effect on the Company's
business prospects. The Company has obtained, and is the sole beneficiary of,
key-person life insurance in the amount of $ 2 million on the life of each of
Messrs. Laurent and has agreed with the Representative that such insurance shall
be kept in effect until at least three years from the date hereof. There can be
no assurance that such insurance will continue to be available on reasonable
terms, or at all.
The ability of the Company to attract and retain highly skilled
personnel is critical to the operations of the Company. To date, the Company has
been able to attract and retain the personnel necessary for its operations.
However, there can be no assurance that the Company will be able to do so in the
future, particularly in light of the Company's expansion plans. If the Company
is unable to attract and retain personnel with necessary skills when needed, its
business and expansion plans could be materially adversely affected. See
"Management."
Expiration of Tax-Exempt Status
The government of the State of Bahia, Brazil has issued a decree that
exempts the Company, through and including the year 2003, from the payment of
state import duties, state sales tax, and state services tax. The Company is
exempted from the payment of Brazilian federal income tax through and including
the year 2004. The abatement will continue during the exemption period provided
that 20% of the budgeted production goals negotiated from time to time by the
Company and the federal government of Brazil in units are met in each year
during the Company's exemption period. Accordingly, upon the expiration of the
Company's tax-exempt status, or the inability of the Company and the federal
government of Brazil to renegotiate such budgeted production goals, the
Company's after-tax earnings may be expected to decline substantially. While the
Company and the federal government of Brazil have agreed to budgeted production
goals in the past, there can be no assurance that they will successfully do so
in future periods. Without the exemption, the Company would have been subject to
additional Brazilian federal income tax of approximately $2.8 million in 1995.
The Company is not exempted from the payment of a federal social contribution
tax of 9.09% of income. See "Conditions in Brazil."
11
<PAGE>
Assets Outside the U.S.; Enforceability of Civil Liabilities Against Foreign
Persons
While the Company is a U.S. corporation with executive offices in
Florida, it is a holding company for Bahia, which is domiciled in Brazil. For
the foreseeable future, a substantial portion of the Company's assets will be
held or used outside the U.S. (in Brazil). Enforcement by investors of civil
liabilities under the Federal securities laws may also be affected by the fact
that while the Company is located in the U.S., its principal subsidiary and
operations are located in Brazil. Although the Company's executive officers and
directors are residents of the U.S., all or a substantial portion of the assets
of the Company are located outside the U.S.
No Dividends
The Company has not paid any cash dividends on the Common Stock since
its inception and does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. For the foreseeable future, the Company intends to
reinvest earnings of the Company, if any, in the development and expansion of
its business. See "Dividend Policy."
Dilution
Upon the closing of this offering, investors in this offering will
incur immediate substantial dilution of approximately $7.25 in the per share net
tangible book value of their Common Stock assuming an initial public offering
price of $10.00 per share. At June 30, 1996, giving effect to the receipt by the
Company of the estimated net proceeds from the sale of the shares of Common
Stock offered hereby at an estimated initial public offering price of $10.00 per
share, and the Company's August 1996 Private Placement, the Company had a net
proforma tangible book value of approximately $2.75 per share. Net tangible book
value is the amount of the Company's total assets minus intangible assets and
liabilities. See "Dilution."
Arbitrary Offering Price
The initial public offering price of the shares of Common Stock offered
hereby will be determined by negotiations between the Company and the
Representative. Among the factors to be considered in determining this price
will be the Company's current financial condition and prospects, market prices
of similar securities of comparable publicly traded companies, and the general
condition of the securities market. However, the initial public offering price
of the shares of Common Stock offered hereby will not necessarily bear any
relationship to the Company's assets, book value, earnings, or other established
indicia of value. See "Underwriting."
Exercise of Warrants and Options
Upon completion of this offering, options and warrants to purchase an
aggregate of 4,227,296 shares of Common Stock will be outstanding, including the
27,296 shares underlying the warrants issued in the August 1996 Private
Placement, the 200,000 shares underlying the Representative's Warrants, and the
4,000,000 options issued to William and Georges St. Laurent. Holders of such
options and warrants have the opportunity to profit from a rise in the market
price of the Company's Common Stock, if any without assuming the risk of
ownership.
The existence of such options and warrants may adversely affect the
terms under which the
12
<PAGE>
Company could obtain additional equity capital. The exercise of these warrants
and options may materially adversely affect the market price of the Common
Stock. In addition, the Company has agreed it will register under federal and
state securities laws the Representative's Warrant and the securities issuable
thereunder, under certain circumstances.
Shares Eligible for Future Sale
The sale, or availability for sale, of a substantial number of shares
of Common Stock in the public market subsequent to this offering pursuant to
Rule 144 under the Securities Act ("Rule 144") or otherwise could materially
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities or debt financing. The availability of Rule 144 to the holders of
restricted securities of the Company would be conditioned on, among other
factors, the availability of certain public information concerning the Company.
All of the 8,013,648 shares of Common Stock currently outstanding are
"restricted securities" as that term is defined in Rule 144 and may, under
certain circumstances, be sold without registration under the Securities Act.
Ordinarily, any shares issuable upon exercise of options granted under the Plan,
pursuant to Rule 701 under the Securities Act, could be sold publicly commencing
90 days after the Company becomes a reporting company under the Exchange Act.
All of the Company's executive officers and directors have agreed not to sell
their shares of Common Stock for a period of 24 months from the date of this
Prospectus without the Representative's prior written consent. The 13,648 shares
of Common Stock issued in the Company's August 1996 Private Placement are
eligible for sale pursuant to the Selling Shareholders Prospectus commencing 30
days from the date of this Prospectus.
If the Representative should exercise its registration rights to effect
a distribution of the Representative's Warrants or the shares of Common Stock
issuable upon the exercise of such Warrants (the "Warrant Shares"), the
Representative, prior to and during such distribution, may be unable to make a
market in the Company's securities. If the Representative ceases making a market
in the Common Stock, the market and market prices for the Common Stock may be
materially adversely affected, and holders thereof may be unable to sell or
otherwise dispose of shares of Common Stock. The holders of the Representative's
Warrants will have certain demand and "piggyback" registration rights with
respect to such warrants and the Warrant Shares, commencing one year after the
date hereof. See "Shares Eligible for Future Sale" and "Underwriting --
Representative's Warrants."
No Prior Public Market; Possible Volatility of Securities Prices
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that any trading market therefor will
develop, or, if any such market develops, that it will be sustained.
Accordingly, purchasers of the shares of Common Stock offered hereby may
experience difficulty selling or otherwise disposing of their shares of Common
Stock. The market price of the Common Stock following this offering may be
highly volatile. Factors such as announcements by the Company or its competitors
concerning acquisitions or dispositions, new procedures, proposed governmental
regulations, and general market conditions may have a significant impact on the
market price of the Common Stock. See "Underwriting."
13
<PAGE>
Control of the Company by Management
Immediately following this offering, the management of the Company will
own 78.46% of the outstanding shares of Common Stock (76.18% if the
Underwriter's over-allotment option is exercised in full, but exclusive of
options granted to management). Accordingly, the management of the Company will
have the ability to elect the Company's entire Board of Directors and control
the outcome of all matters submitted to a vote of the shareholders of the
Company. Notwithstanding the foregoing, the Company has agreed, for the
three-year period following the closing of this offering, to permit an observer
designated by the Representative and acceptable to the Company to attend all
meetings of the Board of Directors. See "Principal Shareholders," "Description
of Securities," and "Underwriting."
Government Regulation
The manufacture of computer equipment and related products is subject
to various forms of government regulation in the United States and Brazil. The
Company and its operations are affected by technology transfer and licensing
regulations, tariff regulations, regulations governing currency conversion and
transfers of profits between jurisdictions, and labor regulations, among others.
While the Company does not believe that such regulations adversely effect the
Company or its business presently, there can be no assurance that such
regulations will not materially adversely affect the Company in the future. See
"Conditions in Brazil."
In addition, the government of Brazil has exercised, and continues to
exercise, substantial influence over many aspects of the private sector in
Brazil. See "Conditions in Brazil."
Authorization of Preferred Stock; Possible Anti-Takeover Effects
The Board of Directors is authorized to issue shares of preferred stock
and to determine the dividend, liquidation, conversion, redemption, and other
rights, preferences, and limitations of such shares without any further vote or
action of the shareholders. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging and delaying or preventing a change
in control of the Company. The Company has no present intention to issue any
shares of its preferred stock, although there can be no assurance that the
Company will not do so in the future. See "Description of Securities --
Preferred Stock."
14
<PAGE>
THE COMPANY
The Company is engaged in the manufacture and distribution of computer
equipment and related products, as well as the financing of the purchase
thereof, in the Federal Republic of Brazil. The Company's products, which
include personal computers and multimedia systems and related peripheral
products, networking and system integration equipment, and cellular telephones
and accessories, are marketed under Company-owned and other brand names for
distribution through a variety of channels in the Brazilian marketplace. In
addition, the Company maintains an engineering support service dedicated to
assisting the Company's customers in effecting networking and system integration
solutions.
The Company has experienced substantial growth since inception, with
consolidated revenues and consolidated net income increasing from $1,156,253 and
$44,288, respectively, for the period between June 24, 1993, the inception of
the Company, and December 31, 1993, to $17,407,363 and $149,570, respectively,
for the year ended December 31, 1994, and to $48,488,996 and $6,904,834,
respectively, for the year ended December 31, 1995. Consolidated revenue and
consolidated net income for the six months ended June 30, 1996 were $26,080,299
and $2,704,140, respectively, as compared to $20,457,048 and $397,721,
respectively, for the six months ended June 30, 1995.
As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news,
trade reports, and the Company's experience, the Company believes that the
market for computer equipment and related products in Brazil is expected to grow
at the rate of approximately 30% annually. The Company believes that it is
particularly well-positioned to capitalize upon such anticipated growth based
upon: (i) the Company's extensive knowledge of prevailing customs, importation
practices, technology and labor bases, marketing dynamics, and economic
conditions in Brazil, together with the Company's existing relationships with
U.S. and Asian suppliers and understanding of technology development; (ii) the
Company's integrated manufacturing, research and development, sales, and
warehousing facilities in Brazil; (iii) the Company's existing distribution
arrangements with retailers and others in Brazil; and (iv) the Company's ability
to provide flexible financing alternatives to potential purchasers of the
Company's products.
As part of the Company's operating strategy, the Company intends to
utilize a significant portion of the proceeds of this offering as follows:
* to expand inventory;
* to expand consumer financing operations;
* to expand marketing activities;
* to repay indebtedness; and
* to increase manufacturing capacity.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares
of Common Stock offered hereby, after deducting estimated offering expenses and
underwriting discounts payable by the Company, are estimated to be approximately
$17,650,000, assuming an initial public offering price of $10.00 per share. The
Company intends to utilize the net proceeds of this offering as follows:
Amount Percent
------ -------
Expansion of inventory $5,000,000 28.3%
Expansion of consumer financing
operations $5,000,000 28.3%
Expansion of marketing activities $ 500,000 2.8%
Repayment of Indebtedness $4,565,000 25.9%
Increase manufacturing capacity $2,150,000 12.2%
General corporate and working capital purposes $ 435,000 2.5%
The foregoing represents the Company's best estimate of its allocation
of the net proceeds of the sale of the shares of Common Stock offered hereby
based upon the Company's currently contemplated operations and existing and
contemplated sources of credit, the Company's business plan, and current
economic and industry conditions and is subject to reapportionment among the
categories listed above or to new categories in response to, among other things,
changes in its plans, regulations, industry conditions, and future revenues and
expenditures. The amount and timing of expenditures may vary depending on a
number of factors, including changes in the Company's contemplated operation or
business plan and changes in economic and industry conditions.
Based on the Company's business plan, the Company believes that the net
proceeds of this offering, together with revenues from continuing operations and
existing and contemplated sources of credit, including the financing of consumer
debt portfolios generated from the sales of the Company's products to end-users,
will be sufficient to permit the Company to conduct its operations as currently
contemplated for at least the next twelve months. Such belief is based upon
certain assumptions, and there can be no assurance that such resources will be
sufficient for such purpose. The Company may be required to raise substantial
additional capital in the future in order to expand operations. In addition,
contingencies may arise which may require the Company to obtain additional
capital. There can be no assurance that the Company will be able to obtain such
capital from any other sources on favorable terms or at all. See
"Capitalization," "Management's Discussion and Analysis of Financial Conditions
and Results of Operations," and "Business -- Business Strategy."
Pending use of the net proceeds of the sale of the shares of Common
Stock offered hereby, the Company intends to invest such funds in short-term,
interest-bearing, investment-grade obligations. Any additional proceeds received
upon the exercise of the Underwriters' over-allotment option or the
Representative's Warrants, as well as income from investments, if any, will be
added to working capital.
16
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid any dividends on the Common Stock
since inception and does not intend to pay any dividends to its shareholders in
the foreseeable future. The Company currently intends to reinvest earnings, if
any, in the development and expansion of its business. The declaration of
dividends in the future will be at the discretion of the Board of Directors and
will depend upon the earnings, capital requirements, and financial position of
the Company, general economic conditions, and other pertinent factors.
DILUTION
At June 30, 1996, the proforma net tangible book value of the Company
was $10,129,702, or approximately $1.26 per share of Common Stock based on
8,013,648 shares of Common Stock outstanding, after giving effect to the
issuance of 13,648 shares of Common Stock in the Company's August 1996 Private
Placement. The net tangible book value per share represents the amount of the
Company's total assets less the amount of its intangible assets and liabilities,
divided by the number of shares of Common Stock outstanding. After giving effect
to the receipt of net proceeds (estimated to be approximately $17,650,000) from
the sale of the shares of Common Stock offered hereby at an assumed initial
public offering price of $10.00 per share, the proforma net tangible book value
of the Company at June 30, 1996, would be $27,583,626, or approximately $2.75
per share of Common Stock. This would result in dilution to the public investors
(i.e., the difference between the estimated initial public offering price per
share of Common Stock and the net tangible book value thereof after giving
effect to this offering) of approximately $7.25 per share. The following table
illustrates the per share dilution:
<TABLE>
<CAPTION>
Per Share of
Common Stock
------------
<S> <C> <C>
Assumed initial public offering price.................................. $10.00
Proforma net tangible book value at June 30, 1996................... $ 1.26
Increase in proforma net tangible book
value attributable to new investors................................. $ 1.49
------
Proforma net tangible book value after this offering ............. $ 2.75
------
Dilution of net tangible book value to new investors.................. $ 7.25
======
</TABLE>
The following table sets forth as of the date of this Prospectus, the
number of shares of Common Stock purchased, the percentage of shares of Common
Stock purchased, the total consideration paid, the percentage of total
consideration paid, and the average price per share paid by the existing
shareholders and by the investors purchasing shares of Common Stock in this
offering:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
---------------- ------------------- -------------
Number Percent Number Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders 8,013,648 80.03% $326,870 1.6% $ .04
New investors 2,000,000 19.97% $20,000,000 98.4% $10.00
--------- ------ ----------- -----
Total 10,013,648 100.00% $20,326,870 100.0% $ 2.03
========== ======= =========== ======
</TABLE>
17
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company
at June 30, 1996, and as adjusted to give effect to (i) the sale of 13,648
shares of Common Stock and the issuance of $1,364,778 aggregate principal amount
of debentures in the Company's August 1996 Private Placement and (ii) the sale
of the 2,000,000 shares of Common Stock offered hereby and to the application of
the net proceeds therefrom, at an assumed initial public offering price of
$10.00 per share.
As of June 30, 1996
--------------------
Actual As Adjusted
------ -----------
Short-term debt $6,156,476 $2,956,476
Long-term debt $0 $0
Shareholders' equity
Preferred Stock, no par value
Authorized, 3,000,000 shares;
issued and outstanding, no
shares actual, no shares
as adjusted $0 $0
Common Stock: no par value
Authorized, 30,000,000 shares;
issued and outstanding,
8,000,000 shares actual,
10,013,648 shares, as adjusted $306,398 $17,780,794
Retained earnings $ 9,802,832 $ 9,802,832
---------- ----------
Total shareholder equity $10,109,230 $27,583,626
---------- ----------
Total Capitalization $16,265,706 $30,540,102
=========== ===========
SELECTED FINANCIAL DATA
The following selected statements of operations data for each of the
years in the two year period ended December 31, 1995 and the period from June
24, 1993 to December 31, 1993 and the balance sheet data at December 31, 1995
and 1994, are derived from, and are qualified by reference to, the consolidated
financial statements and the notes thereto included elsewhere herein audited by
Pannell Kerr Forster PC, independent certified public accountants, as indicated
in their report with respect thereto, also included elsewhere in this
Prospectus. The selected statement of operations data for the six month periods
ended June 30, 1996 and 1995 and the balance sheet data as of June 30, 1996 and
1995 have been derived from the unaudited consolidated statements of the
Company. The unaudited financial statements have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments necessary for a fair statement of the information set forth therein.
The results presented are not necessarily indicative of results expected for any
future period.
18
<PAGE>
Statement of Operations Data:
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
(unaudited)
Period June
24, 1993
(Inception)
to December
1996 1995 1995 1994 31, 1993
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Sales $26,080,299 $20,457,048 $48,488,996 $17,407,363 $1,156,253
Cost of sales 18,688,336 19,067,617 39,156,239 16,483,232 903,544
Gross profit 7,391,963 1,389,431 9,332,757 924,131 252,709
Selling, general and 2,462,646 819,380 1,234,108 505,448 181,139
administrative expenses
Income from operations 4,929,317 570,051 8,098,649 418,683 71,570
Interest and financing
expense 1,688,947 163,978 328,278 171,743 14,282
Net income $2,704,140 $397,721 $6,904,834 $149,570 $44,288
Net income per share of
Common and Common
Stock equivalents $.31 $.05 $.82 $.02 ---
Weighted average
number of shares of
Common and Common
Stock equivalents
outstanding 8,503,853 8,041,988 8,293,914 8,000,000 8,000,000
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
As of June 30, As of December 31,
-------------- -------------------
(unaudited)
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current Assets $23,640,435 $10,146,796 $21,267,881 $7,595,246 $1,320,967
Working capital $7,598,941 $755,080 $6,412,154 $403,181 $298,525
Total assets $26,150,724 $10,289,693 $22,260,817 $7,692,321 $1,373,128
Long-term debt 0 0 0 0 0
Total liabilities $16,041,494 $9,391,716 $14,855,727 $7,192,065 $1,022,442
Shareholders' equity $10,109,230 $897,977 $7,405,090 $500,256 $350,686
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
information contained in the Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this prospectus.
Overview
The Company is a manufacturer and distributor of computer equipment and
related products for markets in Brazil. Based on continuing efforts by
management to maximize long-term profit margins and increase penetration into
the marketplace directly to end-users, the Company has evolved from a
Miami-based distributor dedicated to sales of computer peripheral products for
large original equipment manufacturers ("OEM") in 1993 to a vertically
integrated manufacturer and integrator of complete computer systems and business
network systems selling directly to end-users in 1996. This evolution has left
the Company with a diversified customer base widely distributed throughout
Brazil. For the six month period ended June 30, 1996, the Company had over 2,600
customers as compared to one customer during the period ended December 31, 1993.
As the Company establishes and maintains relationships with end-users of its
products, the Company has developed a clearly defined channel for marketing
additional hardware products, such as updated peripheral products, new
computers, new network products, as well as services, such as internet access
services. The Company markets its products throughout Brazil under the
trademarks Easynet(TM), MultiShow(TM), and Vitech Vision(TM).
In June 1993, Vitech America, Inc. was incorporated for the purpose of
sourcing, purchasing, seeking supplier credit in order to distribute products to
its sole customer, Vitoria Tecnologia S.A., an affiliate of the Company through
common ownership. A 16,000 square foot warehouse with adjoining offices was
leased to receive, inspect, process incoming quality control, consolidate, ship,
and administer purchases and accounts payable. In 1993 and 1994, the Company
distributed electronic parts and finished peripheral products, such as small
capacity hard disk drives of 40 megabyte to 120 megabyte capacity, floppy disk
drives, and dot matrix printers, multimedia products, networking products, and
other related products. The products were ultimately destined to a few large-and
medium-sized Brazilian OEM computer manufacturers and distributors.
In order to take advantage of the large margins available with
in-country distribution of computer products in Brazil, on March 7, 1995, Bahia
was organized as a wholly-owned subsidiary of the Company to act as the
Company's manufacturing and distribution entity in Brazil. The creation of Bahia
marked the transformation of the Company from a low-margin U.S.-based
distributor to a high-margin vertically integrated manufacturer using the model
of other direct distribution computer companies. Management negotiated directly
with the Governor of the State of Bahia to create a High Technology Park in
Ilheus, Bahia, approximately 1,200 kilometers north of Rio de Janeiro on the
Brazilian coast. To create incentives to attract high technology companies, the
state government declared a total exemption from ICMS, the State of Bahia value
added tax, for those companies residing in the technology park. Bahia was the
pilot project and first company to receive this incentive. Additionally, since
the State of Bahia lies within the Northeast Regional Development Area (SUDENE),
the new facilities were eligible for, and received, an exemption from corporate
income tax. Ilheus has its own deep water port and is close to the major markets
in Brazil. In September 1995, the Company commenced leasing a 160,000 square
foot factory at such location.
20
<PAGE>
In 1995, with the creation of Bahia and its manufacturing facilities,
the Company introduced its own brand of computers and also began to sell
integrated business network solutions through its own reseller network. In
1996, the Company launched its "10X Promotion" of the Vitech Vision(TM) brand
PCs direct to end-users, paying a commission to the reseller, but ultimately
retaining the client for itself. The strategy of attaining the end-user adds to
the long-term viability of the distribution network created by the Company to
bring new technology products to market in the future. Those potential products
include hardware upgrades, software, internet access services, data network
services, and integrated business systems. In addition to its branded computer,
Vitech also sells the MultiShow(TM) brand of Brazilian Portuguese multimedia
kits and the Easynet(TM) brand of networking kits.
Results of Operations
The following table sets forth for the periods indicated certain line
items from the Company's statement of operations as a percentage of the
Company's consolidated revenues:
<TABLE>
<CAPTION>
Period June
24, 1993
Six Months Ended Year Ended (Inception)
June 30 December 31 to December
1996 1995 1995 1994 31, 1993
----- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Sales 100% 100% 100% 100% 100%
Cost of sales 71.7 93.2 80.8 94.7 78.1
Gross profit 28.3 6.8 19.2 5.3 21.9
Selling, general and
administrative expenses 9.4 4.0 2.5 2.9 15.7
Income from operations 18.9 2.8 16.7 2.4 6.2
Interest and financing
expense 6.5 .8 .7 1.0 1.2
Net income 10.4 1.9 14.2 .9 3.8
</TABLE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Sales increased by $5,623,251, or approximately 27.5% to $26,080,299
for the six months ended June 30, 1996 as compared to $20,457,048 for the six
months ended June 30, 1995. Such increase in sales was primarily attributable to
increased demand by the Company's customers, the broadening of the Company's
customer base, and the further establishment of the Company's brands in the
Brazilian marketplace. During the six months ended June 30, 1996, the Company
had sales to approximately 2,650 different customers as compared to less than 20
different customers during the six months ended June 30, 1995.
Cost of sales during the six months ended June 30, 1996 were
$18,688,336, representing 71.7% of the sales during the period, as compared to
$19,067,617 for the six months ended June 30, 1995, representing 93.2% of sales
for the period. The decrease in cost of sales as a percentage of sales during
the six months ended June 30, 1996, when compared to the six months ended June
30, 1995, was attributable
21
<PAGE>
to the Company's continuing business strategy of the transformation from being
solely a Miami-based distributor to being a vertically integrated manufacturing
and distribution company attaining a broad spectrum of clients throughout
Brazil. As a result of this transformation, the Company has been able to achieve
higher margins through vertical integration. The decrease was also attributable
to the Company's migration from peripheral products and related products to a
full line of branded computer systems and network solutions with greater
aggregated value and greater control over pricing to the customer.
Selling, general, and administrative expenses increased by $1,643,266,
or approximately 200% to $2,462,646 for the six months ended June 30, 1996 as
compared to $819,380 for the six months ended June 30, 1995. Such increase was
primarily related to the increased costs associated with the creation of Bahia
and its manufacturing facility being brought on line as well as the increased
selling activity in Brazil associated with marketing directly to end-users.
Selling, general, and administrative expense as a percentage of sales was 9.4%
for the six months ended June 30, 1996, compared to 4% for the six months ended
June 30, 1995. This increase in the selling, general, and administrative expense
as a percentage of sales was primarily attributable to the creation of Bahia as
well as the broadening of the Company's customer base.
Income from operations increased by $4,359,266 to $4,929,317 for the
six months ended June 30, 1996 as compared to $570,051 for the six months ended
June 30, 1995. Such increase was primarily attributable to the aforementioned
increase in sales, the decrease in cost of sales, and the decrease in cost of
sales as a percentage of sales which more than offset the increase in selling,
general, and administrative expenses. Income from operations as a percentage of
sales increased to 18.9% for the six months ended June 30, 1996 from 2.8% for
the six months ended June 30, 1995. This increase was primarily attributable to
the aforementioned decrease in cost of sales as a percentage of sales which more
than offset the increase in selling, general, and administrative expenses as a
percentage of sales.
Interest and financing expense increased by $1,524,969, or 930%, to
$1,688,947 for the six months ended June 30, 1996 as compared to $163,978 for
the six months ended June 30, 1995. This increase was primarily attributable to
the Company's increased use of debt financing to support its working capital
needs and to support its sales to end-users.
Net income increased by $2,306,419, or approximately 580%, to
$2,704,140 for the six months ended June 30, 1996 as compared to $397,721 for
the six months ended June 30, 1995. The increase in net income was primarily
attributable to the aforementioned increase in income from operations more than
offsetting the increase in interest and financing expense. Net income as a
percentage of sales increased to 10.4% for the six months ended June 30, 1996
from 1.9% for the six months ended June 30, 1995. This increase was primarily
attributable to the aforementioned decrease in the cost of sales as a percentage
of sales more than offsetting the increases in selling, general, and
administrative expenses as a percentage of sales.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Sales increased by $31,081,633, or approximately 178.6% to $48,488,996
for the year ended December 31, 1995 as compared to $17,407,363 for the year
ended December 31, 1994. Such increase in sales was primarily attributable to
increased demand by the Company's affiliated customer Vitoria Tecnologia S.A., a
greater variety of products, and acceptance of the Company as a supplier of
quality value-oriented products with post-sale support.
22
<PAGE>
Cost of sales during the year ended December 31, 1995 were $39,156,239,
representing 80.8% of sales during the year, as compared to $16,483,232 for the
year ended December 31, 1994, representing 94.7% of sales for the year. The
increase was attributable to increases in sales during the year ended December
31, 1995 compared to the year ended December 31, 1994. The decrease in cost of
sales as a percentage of sales during the year ended December 31, 1995, when
compared to the year ended December 31, 1994, was primarily attributable to the
Company's changing business strategy from being solely a Miami-based distributor
to being a vertically integrated manufacturing and distribution company to take
advantage of the higher margins available by selling to Brazilian customers and
the Company's migration from peripherals and related products to finished
computers and network solutions.
Selling, general, and administrative expenses increased by $728,660, or
approximately 144.2% to $1,234,108 for the year ended December 31, 1995 as
compared to $505,448 for the year ended December 31, 1994. Such increase was
primarily attributable to an increase in sales associated activities related to
an increase in sales, as well as the increased costs associated with the
creation and operation of Bahia. Selling, general, and administrative expense as
a percentage of sales was reduced to 2.5% of sales for the year ended December
31, 1995 from 2.9% of sales for the year ended December 31, 1994, reflecting
greater sales efficiency in relation to overhead.
Income from operations increased by $7,679,966, or 1,834.3% to
$8,098,649 for the year ended December 31, 1995 as compared to $418,683 for the
year ended December 31, 1994. Such increase was attributable to the
aforementioned increases in sales, which more than offset the increases in cost
of sales and selling, general, and administrative expenses. Income from
operations as a percentage of sales increased to 16.7% for the year ended
December 31, 1995, from 2.4% for the year ended December 31, 1994. This increase
was primarily attributable to the aforementioned increase in sales, reduction in
cost of sales as a percentage of sales, and reduction in selling, general, and
administrative costs as a percentage of sales.
Interest expense increased by $156,535, or by 91.1%, to $328,278 for
the year ended December 31, 1995 as compared to $171,743 for the year ended
December 31, 1994. This increase was primarily attributable to the Company's
increased use of debt financing to support its working capital requirements
during the year ended December 31, 1995.
Net income increased by $6,755,264, or 4,516.5%, to $6,904,834 for the
year ended December 31, 1995 as compared to $149,570 for the year ended December
31, 1994. The increase in net income was attributable to the aforementioned
increases in income from operations, which more than offset the increase in
interest expense. Net income as a percentage of sales increased to 14.2% for the
year ended December 31, 1995 from 0.9% for the year ended December 31, 1994.
This increase was attributable to the aforementioned increase in income from
operations as a percentage of sales and the reduction of interest expense as a
percentage of sales for the year ended December 31, 1995 as compared to the year
ended December 31, 1994.
23
<PAGE>
Year Ended December 31, 1994 Compared to Period Ended December 31, 1993
Sales increased by $16,251,110, or approximately 1,405.5% to
$17,407,363 for the year ended December 31, 1994 as compared to $1,156,253 for
the period June 24, 1993, the inception of the Company, to December 31, 1993.
Such increase in sales was primarily attributable to increased demand by the
Company's customer, Vitoria Tecnologia S.A., an affiliate of the Company.
Cost of sales during the year ended December 31, 1994 were $16,483,232,
representing 94.7% of sales during the year, as compared to $903,544 for the
period ended December 31, 1993, representing 78.1% of sales for the year. The
increase was attributable to increases in sales during the year ended December
31, 1994 over the period ended December 31, 1993, while the increase in cost of
sales as a percentage of sales during the period ended December 31, 1994, when
compared to the year ended December 31, 1993 was primarily attributable to
increased competition and lower margins in the distributive environment.
Selling, general, and administrative expenses increased by $324,309, or
approximately 179% to $505,448 for the year ended December 31, 1994, as compared
to $181,139 for the period ended December 31, 1993. Such increase was primarily
attributable to the fact that 1994 was the first full calendar year of
operations compared to 1993 the organizational period of the Company, as well as
increases in marketing activities and the increase in management personnel and
related expenses to support the Company's increased sales activities. Selling,
general and administrative expense as a percentage of sales decreased to 2.9% of
sales for the year ended December 31, 1994 from 15.7% of sales for the period
ended December 31, 1993, reflecting increased efficiency of the organization per
sales dollar.
Income from operations increased by $347,113, or 485% to $418,683 for
the year ended December 31, 1994 as compared to $71,570 for the period ended
December 31, 1993. Such increase was primarily attributable to the
aforementioned increases in sales offset by increases in cost of sales and
selling, general, and administrative expenses. Income from operations as a
percentage of sales decreased to 2.4% for the year ended December 31, 1994 from
6.2% for the period ended December 31, 1993. This decrease was primarily
attributable to the aforementioned increase in cost of sales as a percentage of
sales, resulting in a smaller gross profit and smaller resulting operating
profit.
Interest expense increased by $157,461, or 1,102.5%, to $171,743 for
the year ended December 31, 1994 as compared to $14,282 for the period ended
December 31, 1993. This increase was attributable to the Company's increased use
of debt financing to support its working capital requirements during the year
ended December 31, 1994.
Net income increased by $105,282, or 237.7%, to $149,570 for the year
ended December 31, 1994 as compared to $44,288 for the period ended December 31,
1993. The increase in net income was attributable to the aforementioned
increases in sales offset by increases in cost of sales, selling, general, and
administrative expense, and interest expense. Net income as a percentage of
sales decreased to 0.9% for the year ended December 31, 1994 from 3.8% for the
period ended December 31, 1993. This decrease was attributable to the
aforementioned decrease in income from operations as a percentage of sales as
well as increases in both interest expense and provision for income tax as
percentages of sales for the year ended December 31, 1994, as compared to the
period ended December 31, 1993.
24
<PAGE>
Liquidity and Capital Resources
The Company used $2,455,581 of cash in operations during the period
ended December 31, 1995 and had a working capital surplus of $6,412,154 at
December 31, 1995. During the six month period ended June 30, 1996, the Company
provided $1,999,856 of cash from operations and had a working capital surplus of
$7,598,941 at June 30, 1996.
The Company has an overdraft facility of $200,000 with Eastern National
Bank in Miami, Florida, with which the Company maintains its primary banking
relationship. As of June 30, 1996, there was $100,000 drawn on the overdraft
facility.
On June 28, 1996, the Company secured a line of credit in the amount of
$1 million with Deutsch-Sudamerikanische Bank expiring June 30, 1997 to support
letter of credits which the Company may issue to secure purchase obligations. As
of June 30, 1996 there were no funds drawn on such line of credit. Such lines
require the Company to provide a cash deposit equal to 30% of each letter of
credit. The credit agreement is secured by a lien of all personal property owned
by the Company.
The Company had borrowings under lines of credit for placing product at
its distributors and resellers in the amount of $792,210 as of June 30, 1996.
The rates of interest on these lines varies by contract and client and averages
from 3% to 4% per month.
The Company had open invoices receivable from its clients factored at
various banks in the amount of $602,349 at June 30, 1996. The Company bears full
recourse of these receivables. The rates of interest on these receivables varies
by contract and client and averages 3% per month.
The Company borrowed $2,000,000 at 9% interest per year from Georges C.
St. Laurent, Jr., a related party, on May 26, 1995. This note is convertible
into 5.925% of the Common Stock. At December 31, 1995 the Company also had a
note in the amount of $1,911,917 bearing 6% interest per year. As of June 30,
1996, the balance on such note was $661,917. See "Certain Transactions."
The Company borrowed $2,000,000 at 12% per year interest from Meris
Financial Corporation on October 28, 1995. The Company currently intends to
repay this loan in full by November 1, 1996. This loan is secured by the assets
of the Company, exclusive of inventory and receivables.
The Company has had success in creating good relations with suppliers
which are interested in entering into the Brazilian market. The Company has
provided an opportunity to enter the Brazilian technology sales channel to these
suppliers who have willingly offered favorable terms to the Company. The
increase in supplier credit has allowed the Company to diversify its product
line as well as increase sales. Average days outstanding on accounts payable
balances to suppliers was in excess of 50 days when compared to industry
averages of 30 days or less. The Company has continued to develop these key
strategic relationships as a means to fortify its product offering and support
growth without incurring additional interest-bearing debt.
25
<PAGE>
Impact of Inflation on Results of Operations, Liabilities and Assets
For many years prior to July 1994, the Brazilian economy was
characterized by high rates of inflation and devaluation of the Brazilian
currency against the U.S. Dollar and other currencies. However, since the
implementation in July of 1994 of the Brazilian government's latest
stabilization plan, the "Real Plan," (See "Conditions in Brazil") inflation,
while continuing, has been significantly reduced and the rate of devaluation has
substantially diminished. The Company has assessed the movement of the Brazilian
currency based upon the trading ranges stated by the policy of the Central Bank
of Brazil and has been able to offset any material effects of inflation. The
Company uses Brazilian Real futures and options contracts from the Chicago
Mercantile Exchange in order partially to offset Brazilian currency exposure.
There can be no assurance that the Real Plan will continue to be effective in
combating inflation and devaluation of Brazil's currency or that the Company's
assessment of the movement of Brazilian currency will be correct in the future.
See "Conditions in Brazil."
26
<PAGE>
BUSINESS
Introduction
The Company is engaged in the manufacture and distribution of computer
equipment and related products, as well as the financing of the purchase
thereof, in the Federal Republic of Brazil. The Company's products, which
include personal computers and multimedia systems and related peripheral
products, networking and system integration equipment, and cellular telephones
and accessories, are marketed under Company-owned and other brand names for
distribution through a variety of channels in the Brazilian marketplace. In
addition, the Company maintains an engineering support service dedicated to
assisting the Company's customers in effective networking and systems
integration solutions.
The Company has experienced substantial growth since inception, with
consolidated revenues and consolidated net income increasing from $1,156,253 and
$44,288, respectively, for the period between June 24, 1993, the inception of
the company, and December 31, 1993 to $17,407,363 and $149,570, respectively,
for the year ended December 31, 1994 and to $48,488,996 and $6,904,834,
respectively, for the year ended December 31, 1995. Consolidated revenues and
net income for the six months ended June 30, 1996 were $26,080,299 and
$2,704,140, respectively, as compared to $20,457,048 and $397,721, respectively,
for the six months ended June 30, 1995.
As a result of the increasing stability of the economy and the growth
of a middle class in Brazil, demand for computer equipment and related products
in Brazil has increased significantly over the last five years. Based upon news,
trade reports and the Company's experience, the Company believes that the market
for computer equipment and related products in Brazil is expected to grow at the
rate of approximately 30% annually. The Company believes that it is particularly
well-positioned to capitalize upon such anticipated growth based upon: (i) the
Company's extensive knowledge of prevailing customs, importation practices,
technology and labor bases, marketing dynamics, and economic conditions in
Brazil, together with the Company's existing relationships with U.S. and Asian
suppliers and understanding of technology development; (ii) the Company's
integrated manufacturing, research and development, sales, and warehousing
facilities in Brazil; (iii) the Company's existing distribution arrangements
with retailers and others in Brazil; and (iv) the Company's ability to provide
flexible financing alternatives to potential purchasers of the Company's
products.
As part of the Company's operating strategy, the Company intends to
utilize a significant portion of the proceeds of this offering as follows:
* to expand inventory;
* to expand consumer financing operations;
* to expand marketing activities;
* to repay indebtedness; and
* to increase manufacturing capacity.
27
<PAGE>
Business Strategy
The Company's strategy has been to utilize: (i) the Company's extensive
knowledge of prevailing customs, importation practices, technology and labor
bases, marketing dynamics, and economic conditions in Brazil, together with the
Company's existing relationships with U.S. and Asian suppliers and understanding
of technology development; (ii) the Company's integrated manufacturing, research
and development, sales, and warehousing facilities in Brazil; (iii) the
Company's existing distribution arrangements with retailers and others in
Brazil; and (iv) the Company's ability to provide flexible financing
alternatives to potential purchasers of the Company's products to gain market
share and satisfy the increasing demand for consumer electronic products in
Brazil.
As part of the Company's operating strategy, the Company will endeavor
the following:
Expansion of Inventory. The Company intends to expand its inventory in an amount
sufficient to keep pace with its expected sales volume. The Company
believes that increased purchases of certain products will permit it to
realize economies of scale as a result of more favorable pricing.
Expansion of Direct Marketing Program and Consumer Financing for Retail Consumer
Market. The Company has historically focused its marketing for computer
equipment and related products on value added resellers ("VARs"),
system integrators, and distributors. With the expansion of
manufacturing and credit facilities, and the further development of its
distribution system, the Company has targeted the retail consumer
market by offering computer equipment and related equipment products
with innovative and flexible credit arrangements in order to satisfy
consumer demand in Brazil for such products. The Company intends to
utilize the consumer relationships formed in connection with such
financing activities to create ongoing sales of technology products and
services directly to end users, such as internet access services.
Expansion of Distribution Channels. The Company will continue to develop its
distribution channels by providing enhanced customer services and
post-sale support and expanding credit arrangements. The Company has
developed its internal sales force to assist VARs, system integrators,
distributors, and resellers relative to the Company's existing and new
product lines.
Identification of Products. The Company will continue to identify high
technology products for which substantial demand exists or can be
created, with particular emphasis on products which the Company can
manufacture, import, or assemble in Brazil.
Training.The Company will continue to provide training and skill enhancement of
the indigenous work force in Brazil to manufacture and assemble the
Company's products. The Company believes that its deployment of a
trained work force in facilities geographically separated from major
urban areas enables the Company to obtain favorable profit margins by
sustaining low cost manufacturing.
Fortification of the Company's Brands and Trade Names. The Company intends to
further establish its Vitech Vision(TM) and other brand and trade names
as recognized and reliable brands in Brazil for computer equipment
products. The Company continuously evaluates new products, the demand
for its current products, and its overall product mix, and seeks to
develop distribution relationships with vendors of products that
enhance the Company's product offerings.
28
<PAGE>
Products
Computer Systems
The computer products distribution industry is significant and growing
in Brazil, reflecting increasing demand in the country for computer products and
systems. The Company believes that Brazilians are highly nationalistic in their
attitudes and exhibit a strong preference for indigenous products. "Vitech" is
perceived as a Brazil-based manufacturer and distributor, and has established a
national identity through the marketing of its Vitech Vision(TM),
MultiShow(TM),and EasyNet(TM) product lines.
The Company offers a complete line of multimedia computer systems under
the Company's Vitech Vision(TM) brand name, including Pentium(TM) and Pentium
Pro(TM) based systems.
The Company also designs, develops, manufactures, and markets under its
MultiShow(TM) brand name a family of multimedia computer products. The Company
offers sound cards, speakers, multimedia titles, microphones, and multimedia
kits complete with user-friendly manuals written in Portuguese. The demand for
multimedia personal computers is increasing as personal computers evolve from a
task-oriented device primarily utilized for word processing and spreadsheets to
a more user-friendly multipurpose device for increasingly diverse multimedia
applications.
The Company's engineering staff is constantly evaluating components and
product sources from many manufacturers for purposes of incorporating quality
components into its computer products lines. Most of the components purchased by
the Company for computer manufacture are readily available from a large number
of vendors worldwide. However, the loss by the Company of its relationship with
a significant vendor may have a material adverse effect in the short term on the
Company's operations until a new source of reliable components can be
identified.
Business Systems Integration; Client-Server Applications
The Company has created a family of products and services in response
to the need for client-server distributed computing solutions in Brazil. The
Company manufactures a range of powerful symmetrical multi-processor
super-servers. The Company markets a full line of local area network and wide
area network parts, including bridges, multiplexors, DSU/CSU, buffers, modems,
bridges, and routers.
The Company maintains engineering support services for the design of
local and wide area networks for system integrators and their customers. As a
developing country, Brazil has a large demand for distributed computing
solutions through the establishment of client-server networks. Many of the
Company's system integrator customers do not yet have the expertise to design
complex systems. In response, the Company established its own support team that
supplies technical expertise to design complex local area network or wide area
network systems for the system integrators as well as to the end user. The
Company holds several seminars each year in order to educate the marketplace on
the advantages of distributed computing and to train VARs and system integrators
in the latest techniques in this discipline.
29
<PAGE>
Cellular Phones
The Company offers a variety of mobile cellular telephones and
accessories as well as rural cellular base stations (a single line which can
accommodate multiple telephone users) and related accessories. For the year
ended December 31, 1995, virtually all of the Company's cellular telephones were
Motorola products, and all of the base station equipment was acquired from
Tellular Corporation, although the Company believes that alternative equipment
is readily available in the market.
In an interview with the Estado de Sao Newspaper on July 19, 1996,
Cesar Michels, director of Planning for Cellcenter, a large Brazilian cellular
retailer, said that the total number of cellular subscribers in Brazil has the
potential to be as great as 20.0 million. With the number of today's total
subscribers at less than 1.0 million, the Company expects that the growth will
occur over the next four years. In Brazil, demand has been driven by high
population density, economic growth, and lack of adequate landline service. Due
to the limited availability and quality of landline service, the Company
believes that telephone users in Brazil will increasingly utilize cellular
systems, despite the fact that cellular phone service may be more expensive to
the consumer than conventional landline communications.
Contract Manufacturing
In order to utilize reserve manufacturing and purchasing capacity, the
Company manufactures two and four head video cassette recorders and 14-inch and
20-inch color television sets. The video cassette recorders and television sets
are assembled under house brand names for exclusive distribution by Casas Bahia,
which is one of Brazil's largest electronic retailers with over 200 outlets.
Casas Bahia has contracted for 52,500 video cassette recorders and has a
standing order for 72,000 television sets to be delivered during the eight month
period which commenced in July 1996.
Freight Forwarding and Importation Procedures
Virtually all of the products that the Company purchases are received
and consolidated in containers for sea or air freight to the Company's
facilities in Ilheus or Salvador, Brazil. These destinations contain good
deep-water ports with modern handling and storage facilities. The Company is
highly-sophisticated in Brazilian customs matters and is knowledgeable in
producing appropriate documentation to expedite customs clearance and
importation of components. Upon receipt in Brazil, the goods are expedited
through customs by Company personnel so that goods spend a minimum amount of
time at the port facility.
Engineering and Manufacturing
The Company has an experienced engineering department comprised of
eight engineers and 54 other technically trained personnel at its facilities.
The engineering department is responsible for designing products, producing the
technical specifications for components required for manufacture, training
personnel, line engineering, and quality control/quality assurance programs. The
engineering group constructs the bill of materials of components that are
required for manufacture and designs the manufacturing line so that the tasks
can be undertaken reliably within the capabilities of the Company's specially
trained labor force. The group also supports the sales force and is responsible
for the design of local area network or wide area network systems for the
Company's customers and their end users.
30
<PAGE>
The Company's manufacturing facilities consist of a modern, 160,000
square foot leased facility in Ilheus. See "Business -- Facilities." The Company
intends to build a plant and administration center in Ilheus, Brazil with the
cooperation and financial participation of the government of Bahia.
Procurement and Materials Management
The Company, through its Miami, Florida facility, purchases components,
parts, and equipment worldwide for consolidation and shipment to destinations in
Brazil. The Company maintains a warehouse and containerization operation in
Miami, Florida where goods are booked into the Company's materials handling
system at the point of receipt. Certain testing is undertaken at the Miami,
Florida facility prior to shipment to Brazil as part of the Company's quality
assurance program. See "Business -- Quality Assurance and Service." Virtually
all of the products that the Company purchases are received and consolidated in
containers for sea or air freight to the Company's facilities in Ilheus or
Salvador, Brazil.
The Company's ability to source competitively priced computer
components, cellular telephones, and electronic products internationally is
critical to its success. The Company generally purchases components from
manufacturers and distributors pursuant to non-exclusive agreements. Since
inception, the Company has expanded its vendor base significantly. At present,
the Company has purchase contracts and orders with over 60 different vendors.
The Company does not regard any one supplier as essential to its operations
since most of the components the Company purchases are available from other
sources at competitive prices. During the year ended December 31, 1995, the
Company had only one supplier which accounted for in excess of 10% of its
purchases. During the six month period ended June 30, 1996, the Company had four
suppliers which each accounted for in excess of 10% of purchases. The Company
does not believe the loss of any supplier would have a material adverse effect
on its business as components and products required by the Company are readily
available in the marketplace.
The Company procures most of its products on extended credit terms. In
the ordinary course, the Company is not required to post security or provide
special documents in support of its purchases. The Company believes that
favorable credit terms have been obtained as a result of the credibility that
the Company has established with such vendors, as well as the desire of these
vendors to obtain access for their components and products in Brazil.
Work Force and Training Program
The Company has elected to locate its facilities in remote regions of
Brazil in order to capitalize on lower costs. As such regions lack sufficient
technical educational facilities, the Company has created its own technical
training program to create a technically adept labor force by training workers
in various technical phases of assembly line manufacturing. The Company believes
that many of Brazil's cities and states do not have sufficient technical
educational facilities and, where such facilities do exist, they are located in
areas with higher labor costs. The Company believes that this training will
often confront and mitigate cultural differences that may interfere with an
employee's motivation and productivity.
The Company has designed internal training programs that build
technical skills for entry level employees. Entry level employees engage in
assembly work, packing, shipping, and cleaning and require a great deal of
training and supervision. The Brazilian national minimum wage is currently $114
per month. All of the Company's entry level employees are compensated at a level
in excess of the minimum wage. Technical personnel have had training in a
technical school or at a university level. These workers are
31
<PAGE>
usually upwardly mobile and are recruited either from other companies or
technical schools. While they must be taught specific work related details, they
are usually well-trained. Engineers are university trained and are paid
generally from between 5 to 10 times the minimum wage. See
"Business--Employees."
Quality Assurance and Service
The Company addresses quality assurance at all stages of the production
process. First, components considered for use in standard systems are tested for
compatibility by the research staff. Second, incoming components receive a
physical damage inspection on receipt and again at the start of the production
process. A statistical sampling of components in every category is
electronically tested prior to assembly. Each complete unit is then functionally
tested at the end of the production process to demonstrate that all components
are engaged and fully operational.
Thereafter, each complete unit is "burned-in" for three hours. This
process involves running a test program which sequentially tests each component
to verify prescribed operation.
In addition, the Company provides support after the production process
by providing engineers and technicians who perform in-house and local on-site
servicing. The Company offers toll-free telephone support service to its
customers.
Distribution and Marketing
The Company's marketing strategy is designed to eliminate as many
levels of distribution as possible in order to offer competitive pricing to the
customer. In the future, the possibility of Company owned retail stores in some
regions will be explored to further add to the control over margins and to
attain access to the end-user. The Company, operating through its sales and
marketing teams, has built an extensive distribution network consisting of VARs,
systems integrators, distributors, and retailers. This distribution network
includes access to large markets in Brazil for computer systems, business
systems integration, cellular telephones, and consumer electronic products.
Customers include small and medium-sized businesses, government agencies, major
retailers, and consumers. The Company's sales teams are in regular contact with
customers at each distribution level as well as with the end-user. In this
manner, the Company's sales, marketing, and engineering personnel react to
changing demands within the Company's customer base in Brazil.
In 1996, the Company introduced the "10X Program", a financing program
which enables the consumer to pay for Company products purchased in equal
monthly installments. During the term of such financing, a first and exclusive
security interest in the product is retained by the Company and the credit
extended is guaranteed by the ultimate consumer as well as the reseller.
Management believes that the 10X Program utilizes the distribution strengths of
the distributor and the reseller, to which the Company pays a commission, and
benefits the Company by providing a database to be utilized in future direct
technology product sales.
The Company presently utilizes four sales teams comprising 13 persons
in its Sao Paulo facility. The teams work to market new product lines, to
receive input on existing product lines, and to make personal sales calls, as
well as accept, process, and administer sales orders, and coordinate advertising
and the logistics of product shipment.
32
<PAGE>
In accordance with its policy to diversify its customer base, the
Company has successfully expanded and diversified its customer base from one
customer during 1993 to in excess of 2,650 customers at June 30, 1996. During
the year ended December 31, 1995, Casas Bahia and Vitoria Tecnologia S.A., an
affiliate of the Company, accounted for 15% and 76% respectively of the
Company's sales. For the six months period ending June 30, 1996, Casas Bahia and
Vitoria Tecnologia S.A. accounted for 14% and 30%, respectively, of the Company
sales.
Backlog; Unfulfilled Contract Manufacturing Obligations
The Company's backlog as of June 30, 1996, exclusive of unfulfilled
contract manufacturing backlog, was approximately $18,000,000. Backlog consists
of contracts or purchase orders with delivery dates scheduled within the next 12
months. The Company currently expects to ship its entire current backlog within
the Company's current fiscal year. Variations in the magnitude and duration of
contracts received by the Company and customer delivery requirements may result
in substantial fluctuations in backlog from period to period. Since customers
may cancel or reschedule deliveries, backlog may not be a meaningful indicator
of future financial results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
At December 31, 1995, the Company had no unfulfilled contract
manufacturing obligation. However, as a result of the agreement between the
Company and Casas Bahia, at June 30, 1996, the Company had an unfulfilled
contract manufacturing obligation of approximately $29,000,000.
Regulation and Environmental Matters
The Company believes that its facilities and practices for controlling
and disposing of the limited amount of wastes it produces are in compliance with
applicable environmental laws and regulations in Brazil.
Employees
As of June 30, 1996, the Company employed approximately 240 persons,
including three executive officers, 12 executive personnel, eight engineering
personnel, and 50 administrative personnel. The Company believes its employee
relations both in Brazil and the United States are satisfactory. None of the
Company's employees are subject to collective bargaining or union agreements.
Facilities
The Company leases, from an unaffiliated landlord, approximately 16,000
square feet of office and warehouse space in Miami, Florida. The office space
lease expires in August 1998. The Company pays annual rent of approximately
$102,000 plus its allocable share of real estate taxes, insurance, and other
assessments.
The Company's Brazilian operations are located in Sao Paulo and Bahia.
The Company leases approximately 7,500 square feet of office space in Sao Paulo.
The Company pays an annual rent of $48,000 on a lease which expires in February
1997. In addition, the Company leases an additional 12,000 square feet of
warehouse space in Sao Paulo pursuant to a lease which expires in June 1997 for
an annual rent of $36,000. Such lease has an option to extend the lease through
June 1999.
33
<PAGE>
The Company leases approximately 160,000 square feet of manufacturing
and administrative space in Ilheus for approximately $13,500 per month. Such
lease expires in December 1996, with an option for extension through December
1998.
The Company believes that in the event that the lease with respect to
any of such facilities should not be renewed, alternative space will be
available at comparable rates.
Legal Proceedings
The Company knows of no material litigation or claims pending,
threatened, or contemplated to which the Company is or may become a party.
34
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company and their ages are
as follows:
Name Age Position
---- --- --------
Georges C. St. Laurent, III 35 Chairman of the Board of
Directors and Chief
Executive Officer
William C. St. Laurent 31 President, Chief Operating
Officer, and Director
Mitchell Asher 40 Chief Financial Officer, Treasurer,
Secretary, and Director
- -------------
Georges C. St. Laurent, III has served as Chairman of the Board and
Chief Executive Officer of the Company since 1993. Between 1986 and January
1993, Mr. St. Laurent operated a proprietary firm, GSL Trading Co., Miami,
Florida, which was engaged in the re-manufacturing of computer hardware for sale
to Latin America. Between 1983 and 1986, Mr. St. Laurent was a member of the
Chicago Mercantile Exchange and was engaged in trading activities for his
proprietary account specializing in currency options and futures market making.
Mr. St. Laurent graduated from Yale University in 1982 and received a B.S. in
Molecular Biology.
William C. St. Laurent has served as President and Chief Operating
Officer of the Company and a Director since 1993. Mr. St. Laurent has also
served as Vice Chairman of the Board of Directors of the Western Bank of Oregon
from January 1989 through January 1996. Mr. St. Laurent previously owned several
private foods processing companies located in Oregon from 1988 to 1992. Mr. St.
Laurent graduated from Cornell University with a B.S. in Hotel Administration.
Mr. St. Laurent also owns 100% of the voting shares of Vitoria Tecnologia S.A.,
the primary customer of Vitech America, Inc. since inception until Vitoria
Tecnologia S.A. ceased manufacturing and selling activities in March of 1996.
Mitchell Asher has been the Company's Chief Financial Officer,
Treasurer, and Secretary since June 1993. Between 1991 and 1992, Mr. Asher was
Controller and Chief Financial Officer for U.S. Computer of North America, Inc.,
Miami, Florida. Between July 1989 and March 1991, Mr. Asher conducted a
proprietary business, Lahaina Licks, Ltd., Lahaina, Maui, Hawaii which was
engaged in the manufacture and distribution of specialty ice cream. Prior
thereto, between 1984 and 1990, Mr. Asher was employed by Seiko Instruments USA,
Inc., Torrence, California, serving at various times as Controller of its
Consumer Products Division and for its Corporate Division as Corporate
Operations Manager and Accounting Manager. Between 1981 and 1984, Mr. Asher was
employed by Code-A-Phone Corporation, Portland, Oregon, a telephone answering
equipment manufacturer, where he served as Accounting Manager and then Assistant
Controller. Between 1978 and 1981, Mr. Asher was Assistant Controller of
California Mini Computer Systems, Inc., Los Angeles, California. Prior thereto,
between 1976 and 1978, Mr. Asher was an auditor with Gulliver's, Inc., Marino
Del Rey, California, which was an investment chain. Mr.
35
<PAGE>
Asher graduated from the University of Southern California with a B.S. in
Business Administration and is a graduate of Pepperdine University where he
received an MBA.
Directors are elected at the Company's annual meeting of shareholders
and serve a term of one year or until their successors are elected and
qualified. Officers are appointed by the Board of Directors and serve at the
discretion of the Board of Directors, subject to the By-laws of the Company. The
Company intends to add directors who are unaffiliated with the Company in the
near future.
Upon the closing of this offering, the Company will establish a
Compensation Committee and an Audit Committee.
The Compensation Committee will administer the Company's stock option
plan and make recommendations to the full Board of Directors concerning
compensation, including incentive arrangements, of the Company's officers and
key employees. The Compensation Committee will be comprised of a majority of
independent directors upon establishment.
The Audit Committee will review the engagement of the independent
accountants and review the independence of the accounting firm. The Audit
Committee will also review the audit and non-audit fees of the independent
accountants and the adequacy of the Company's internal accounting controls. The
Audit Committee will consist of a majority of independent directors upon
establishment.
The Company has agreed with the Representative that, for a period of 36
months from the date of closing of this offering, the Company will allow an
observer designated by the Representative and acceptable to the Company to
attend all meetings of the Board of Directors. Such observer will have no voting
rights. He or she will be reimbursed for out-of-pocket expense incurred in
attending such meetings, and will be indemnified against any claims arising out
of participation at Board meetings, including claims based on liabilities
arising under the securities laws.
Indemnification of Directors and Officers
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporations. The Company's
Amended and Restated Articles of Incorporation indemnify its directors and
officers to the fullest extent permitted by law.
At present, there is no pending litigation or proceeding involving a
director, officer, employee, or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee, or other agent.
Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
36
<PAGE>
Employment Agreements
Messrs. Georges C. St. Laurent, III and William C. St. Laurent are
parties to separate three-year employment agreements which terminate on December
31, 1998. Under the terms of each employment agreement, Messrs. St. Laurent and
St. Laurent will each receive annual compensation of $240,000. In the event that
either Georges C. St. Laurent, III or William C. St. Laurent were to die or
become disabled of anywhere outside Brazil, that individual, or his estate,
would receive his annual compensation for twelve months. In the event that
either were to become disabled in Brazil, that individual would receive his
annual compensation for twenty-four months. In the event that either were to die
in Brazil, that individual's estate would receive that individual's compensation
for the greater of twenty-four months or the remaining term of the employment
agreement. Both such employment agreements include non-competition agreements
with the Company which preclude engagement in competitive activities in Latin
America or in the South Florida area as well as solicitation of customers and
employees for a period of twelve months following termination of employment.
Both agreements also require Messrs. St. Laurent and St. Laurent to maintain the
confidentiality of information and proprietary data relating to the Company and
its activities.
Executive Compensation
Summary Compensation Table
The following table sets forth information relating to the compensation
paid by the Company for the past three fiscal years to: (i) the Company's
Chairman and Chief Executive Officer; and (ii) each of the Company's executive
officers who earned more than $100,000 during the fiscal year ended December 31,
1995 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Stock All Other
Name and Principal Position Year Salary Bonus Options Compensation
- --------------------------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Georges C. St. Laurent III, 1995 $120,000 $0 0 $0
Chairman of the Board and 1994 $96,000 $0 0 $0
Chief Executive Officer 1993 $0 $0 0 $0
William C. St. Laurent, 1995 $120,000 $0 0 $4,500*
President and 1994 $96,000 $0 0 $0
Chief Operating Officer 1993 $0 $0 0 $0
Mitchell E. Asher, 1995 $71,190 $15,000 0 $9,000*
Chief Financial Officer 1994 $63,432 $10,000 0 $3,750*
1993 $23,000 $0 0 $0
</TABLE>
- ------------------
* Mr. William C. St. Laurent and Mr. Mitchell Asher received a car
allowance of $750.00 each per month for all or a portion of the year.
The Company maintains keyman life insurance on the life of each of
Georges C. St. Laurent, III and William C. St. Laurent in the amount of
$2,000,000 payable to the Company. These policies were acquired by the Company
pursuant to its undertaking to Meris Financial Incorporated in connection with a
loan provided to the Company on October 28, 1995. In addition, the Company
obtained keyman insurance
37
<PAGE>
on the life of William C. St. Laurent pursuant to its agreement with Georges C.
St. Laurent, Jr. in connection with his loan to the Company made on May 26,
1995. The premium for this policy is $9,000 per year and Georges C. St. Laurent,
Jr. is the beneficiary of this policy. See "Certain Transactions."
Option Grants in Last Fiscal Year
No options were granted to, or exercised by, any of the Named Executive
Officers during the fiscal year ended December 31, 1995.
Grants of Stock Options
On September 3, 1996, the Company authorized the issuance of options to
purchase up to 4,000,000 shares of Common Stock. Of such options, 2,040,000
options were issued to Georges C. St. Laurent, III, the Company's Chairman of
the Board and Chief Executive Officer and 1,960,000 options were issued to
William C. St. Laurent, the Company's President and Chief Operating Officer. Of
such options, 490,000 options are exercisable at $15.00 per share, another
490,000 options are exercisable at $20.00 per share and 980,000 options are
exercisable at $25.00 per share by William C. St. Laurent and 510,000 options
are exercisable at $15.00 per share, another 510,000 options are exercisable at
$20.00 per share and 1,020,000 options are exercisable at $25.00 per share by
Georges C. St. Laurent III. The options are exercisable for a four year period
beginning on the closing of the Company's initial public offering.
1996 Stock Option Plan
The 1996 Stock Option Plan provides for the grant of options to
purchase up to 200,000 shares of Common Stock to employees, officers, directors,
and consultants of the Company. Options may be either "incentive stock options"
within the meaning of Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"), or non-qualified options. Incentive stock options
may be granted only to employees of the Company, while non-qualified options may
be issued to non-employee directors, consultants, and others, as well as to
employees of the Company.
The Plan will be administered by the Board of Directors or a committee
thereof, who determine, among other things, those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock issuable upon the exercise of
each option, and the option exercise price.
The exercise price of an incentive stock option may not be less than
the fair market value per share of Common Stock on the date the option is
granted. The exercise price of a non-qualified option may be established by the
Board of Directors. The aggregate fair market value (determined as of the date
the option is granted) of Common Stock for which any person may be granted
incentive stock options which first become exercisable in any calendar year may
not exceed $100,000. No person who owns, directly or indirectly, at the time of
the granting of an incentive stock option to such person, 10% or more of the
total combined voting power of all classes of stock of the Company (a "10%
Shareholder") shall be eligible to receive any incentive stock options under the
Plan unless the exercise price is at least 110% of the fair market value of the
shares of Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to such limitation.
38
<PAGE>
Incentive stock options may not be transferred by an optionee other
than by will or the laws of descent and distribution, and, during the lifetime
of an optionee, the option will be exercisable only by the optionee. In the
event of termination of employment other than by death or disability, the
optionee will have no more than three months after such termination during which
the optionee shall be entitled to exercise the option, unless otherwise
determined by the Board of Directors. Upon termination of employment of an
optionee by reason of death or permanent and total disability, such optionee's
options remain exercisable for one year thereafter to the extent such options
were exercisable on the date of such termination. No similar limitation applies
to non-qualified options.
Options under the Plan must be issued within ten years from the
effective date of the Plan. The effective date of the Plan is August 20, 1996.
Incentive stock options granted under the Plan cannot be exercised more than ten
years from the date of grant. Incentive stock options issued to a 10%
Shareholder are limited to five year terms. Options granted under the Plan
generally provide for the payment of the exercise price in cash and may provide
for the payment of the exercise price by delivery to the Company of shares of
Common Stock already owned by the optionee having a fair market value equal to
the exercise price of the options being exercised, or by a combination of such
methods. Therefore, if so provided in an optionee's options, such optionee may
be able to tender shares of Common Stock to purchase additional shares of Common
Stock and may theoretically exercise all of his stock options with no additional
investment other than the purchase of his original shares.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the Plan.
The Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the Plan may not be
increased without the consent of the shareholders of the Company.
To date, no options have been granted under the Plan.
39
<PAGE>
CERTAIN TRANSACTIONS
During the period from June 24, 1993 to December 31, 1993, the years
1994 and 1995, and the first six months of 1996, Vitech America, Inc. had as its
primary customer in Brazil, Vitoria Tecnologia S. A., an affiliate controlled by
William C. St. Laurent, the President and Chief Operating Officer of the
Company, to whom it sold products during those years on open terms. Also, Bahia,
the Company's wholly owned subsidiary, bought and sold products to and from
Vitoria Tecnologia S.A. during 1995 and 1996 on a purely commercial basis at
market prices no less favorable than if the Company or its subsidiary bought or
sold products to or from others. In 1996, management of Vitoria Tecnologia S.A.
disclosed to the Company that based on lack of competitive tax and fiscal
incentives in the State of Espirito Santo, it had ceased all manufacturing and
selling operations. Since that time, Vitoria Tecnologia S.A. has paid all
outstanding amounts owed to the Company.
In 1993, Georges C. St. Laurent, Jr., the father of Georges C. St.
Laurent, III, the Company's Chairman of the Board and Chief Executive Officer,
and William C. St. Laurent, the President and Chief Operating Officer of the
Company, loaned to Vitoria Tecnologia S.A., an affiliate and primary customer of
the Company, the principal amount of $2,127,440. Such loan was evidenced by a
note bearing interest at 12% per annum. In 1994, as an accommodation for Georges
C. St. Laurent, Jr., for consideration received by the Company in the amount of
the note, the original note was transferred from Vitoria Tecnologia S.A. to the
Company and the rate of interest thereon was reduced to 6% per annum. As of June
30, 1996, the amount of the note was $661,917. In June 1995, Mr. Georges C. St.
Laurent Jr. loaned the Company an additional $2,000,000 pursuant to the terms of
a secured note which bears interest at the rate of 9% per annum. At June 30,
1996, the amount due on such note was $2,000,000. Such note is convertible into
5.925% shares of Common Stock at any time during the term thereof.
In June 1993, Georges C. St. Laurent, III, the Company's Chairman of
the Board of Directors and Chief Executive Officer, contributed in exchange for
his shares of common stock, assets valued at approximately $306,000 (including
$250,000 of inventory). This amount represented the cost of the items
contributed, which approximated fair market value as agreed to by the
shareholders.
In connection with the Company's recently introduced 10-X consumer
finance program designed to encourage consumer purchases in Brazil through
installment sales, Mr. Georges C. St. Laurent, Jr. agreed to purchase consumer
debt portfolios from the Company at discount rates established at periodic
intervals (currently at a discount allowing for annual return of 30%) but at no
less favorable rates than would be charged in ordinary market transactions in
Brazil for comparable financing programs. Such debt portfolios were acquired
with recourse against the Company. At June 30, 1996, consumer debt portfolios in
the face amount of approximately $10,400,000 were acquired by Mr. St. Laurent
from the Company.
For a description of employment agreements between the Company and its
officers, see "Management - Employment Agreements."
On October 28, 1995, Meris Financial Incorporated ("Meris") entered
into a Loan Agreement with the Company pursuant to which Meris made available a
loan to the Company in the principal amount of $2,000,000. The loan was to
mature on October 28, 1997 and bears interest at the rate of 12% per annum
payable monthly. The loan is secured by the assets of the Company exclusive of
inventory and receivables. In connection with the loan, Meris received a
guarantee by Georges C. St. Laurent, III and William C. St. Laurent, the
President and Chief Operating Officer of the Company, and his wife Wendy St.
Laurent, a stock pledge agreement by such parties, a collateral assignment of
various rights of the St. Laurents as well
40
<PAGE>
as assignments of life insurance policies on the lives of Messrs. St. Laurent
and St. Laurent. The note was convertible into up to 379,200 shares of Common
Stock. In addition, certain options were provided to Meris which afforded them
the right to purchase up to an aggregate of 5% capital stock interest in the
Company. On July 20, 1996, the Company and Meris entered into an Amendment to
such Loan Agreement pursuant to which the Company is obligated to pay Meris
$445,000 in installments between July 20, 1996 and November 1, 1996. In
connection with the Amendment, the conversion rights provided by the Note and
the options were canceled provided all payments of principal and interest under
the Note are made as set forth above. As of the date of this prospectus, the
Company has made all payments in accordance with such Amendment. The Company
intends to repay such obligation with a portion of the net proceeds of this
offering.
41
<PAGE>
CONCURRENT OFFERING
The registration statement of which this Prospectus forms a part also
includes a Prospectus with respect to an offering by the Selling Shareholders of
40,944 shares of the Selling Shareholders' Stock issued in connection with the
August 1996 Private Placement, which may be sold in the open market, in
privately negotiated transactions, or otherwise directly by the holders thereof,
subject to the following contractual restrictions. Each Selling Shareholder has
agreed not to sell, transfer, or otherwise publicly dispose of the Selling
Shareholders' Stock for up to 30 days from the date of this Prospectus without
the prior written consent of the Representative.
The Company will not receive any proceeds from the sale of any of the
Selling Shareholders' Stock. Sales of the Selling Shareholders' Stock or the
potential of such sales may have an adverse effect on the market price of the
shares of Common Stock offered hereby.
42
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the date of this Prospectus, and
after the sale of shares of Common Stock offered hereby, by (i) each person who
is known by the Company to own beneficially more than 5% of the Common Stock and
(ii) all directors and executive officers of the Company as a group.
Percentage Beneficially
Owned(1)(2)
Name and Address -------------
of Beneficial Owner Number of Shares Before Offering After Offering
- ------------------- ---------------- --------------- --------------
Georges St. Laurent, III 3,980,550 49.67% 39.75%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(3) (5)
William C. St. Laurent 3,824,450 47.72% 38.19%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(4)(5)
Mitchell Asher 52,000 .65% .52%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(6)
All directors and executive 7,857,000 98.05% 78.46%
officers as a group (3 persons)
- --------------------------
(1) All shares are beneficially owned, and sole voting and dispositive
power is held, by the persons named, except as otherwise noted.
(2) Percentage of ownership is based on 8,013,648 shares of Common Stock
outstanding before the offering of shares hereby and 10,013,648 shares
of Common Stock outstanding immediately after the offering.
(3) Does not include options to purchase 2,040,000 shares of Common Stock.
(4) Includes 2,544,430 shares of Common Stock held by Wolf Partners, a
family Limited Partnership whose limited partners include a trust for
the benefit of Nicolas St. Laurent and Alexander St. Laurent, Mr. St.
Laurent's minor children, of which Mr. St. Laurent is the general
partner as well as a limited partner. Does not include options to
purchase 1,960,000 shares of Common Stock.
(5) Excludes options to purchase 26,520 shares and 25,480 granted by
Georges and William St. Laurent, respectively, to Mitchell Asher.
(6) Represents options to purchase 52,000 shares of Common Stock from
Georges and William St. Laurent proportional to their holdings.
43
<PAGE>
DESCRIPTION OF SECURITIES
General
The following description of the material terms of the Common Stock is
subject to the Florida Business Corporation Act (the "FBCA") and to the
provisions contained in the Company's Articles of Incorporation, as amended (the
"Articles of Incorporation"), and By-laws, as amended, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part. See "Available Information."
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, no par value, and 3,000,000 shares of preferred stock, no par
value (the "Preferred Stock"). Immediately prior to this offering, there were
outstanding 8,013,648 shares of Common Stock and no shares of Preferred Stock.
Common Stock
The Company is authorized to issue 30,000,000 shares of Common Stock,
no par value per share, of which as of the date of this Prospectus, 8,013,648
shares of Common Stock are outstanding. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, validly authorized and issued, fully paid, and non-assessable.
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. In the event
of a liquidation, dissolution, or winding up of the Company, holders of Common
Stock are entitled to share ratably all assets remaining after payment of
liabilities. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities.
For a period of 12 months from the date of this Prospectus, without the
prior written consent of the Representative, which consent shall not be
unreasonably withheld, the Company may not issue any securities, except debt
securities and shares issued pursuant to the exercise or conversion of (i)
options, warrants or other convertible securities outstanding as of the date of
this Prospectus or (ii) options granted in the future pursuant to the Plan.
Also, for a period of 24 months from the date of this Prospectus, the Company
may not issue any shares of Common Stock pursuant to Regulation S without the
Representative's prior written consent.
Preferred Stock
The Company is authorized to issue up to 3,000,000 shares of Preferred
Stock, no par value per share, of which no shares are outstanding as of the date
hereof. The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by shareholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion rights, redemption rights, and sinking
fund provisions. The issuance of any such preferred stock could adversely affect
the rights of the holders of Common Stock and, therefore, reduce the value of
the Common Stock. The ability of the Board of Directors to issue preferred stock
could discourage, delay, or prevent a takeover of the Company. See "Risk
Factors--Preferred Stock; Possible Anti-Takeover Effects."
44
<PAGE>
NASDAQ National Market(R)
The Company has applied for listing of its shares of Common Stock on
the National Market(R) under the symbol "VTCH."
Anti-Takeover Provisions of Florida Law
The Company may be subject to the affiliated transaction ("Affiliated")
and the control-share acquisition provisions of Sections 607.0901 and 607.0902
of the FBCA.
The Affiliated provisions of the FBCA are designed to restrict the
occurrence of highly coercive takeovers. It also limits certain related party
transactions otherwise permissible under the FBCA. The law specifically provides
that certain transactions between a Florida corporation and an interested
shareholder or affiliate or associate of the interested shareholder (the
"Interested Shareholder"), defined as any person who beneficially owns more than
10% of the outstanding voting shares of the corporation, must be approved by the
affirmative vote of at least two-thirds of the holders of the other voting
shares (the "Disinterested Shareholders").
Transactions that require the approval of two-thirds of the voting
shares beneficially owned by Disinterested Shareholders include: (1) mergers or
consolidations with the Interested Shareholder; (2) the sale, lease, exchange,
mortgage, pledge, transfer, or other disposition to the Interested Shareholder
of five percent or more of either the corporation's total assets or total
outstanding shares, or representing five percent or more of the earning power or
net income of the corporation; (3) issuance or transfers of shares to the
Interested Shareholder having a market value of five percent or more of the
total market value of the corporation's outstanding shares (except pursuant to
the exercise of stock warrants or rights, or a dividend or distribution pro rata
to all shareholders); (4) a liquidation or dissolution of the corporation
proposed by or pursuant to a written or unwritten agreement or understanding
with the Interested Shareholder; (5) a reclassification of securities or other
corporate reorganization with the Interested Shareholder that has the effect of
increasing the percentage voting ownership of the Interested Shareholder by more
than five percent; and (6) any receipt by the Interested Shareholder of a
benefit, directly or indirectly, of any loans, advances, guarantees, pledges,
other financial assistance, or tax credits or advantages provided by or through
the corporation.
Transactions that are approved by majority of disinterested directors
are exempted from the above shareholder approval requirement. A "Disinterested
Director" is defined to mean any person who was a member of the corporation's
Board of Directors before the date the Interested Shareholder became the
beneficial owner of more than 10% of the outstanding voting shares of the
corporation, or anyone who subsequently becomes a member of the Board of
Directors with the approval of the majority of the Disinterested Directors.
There are currently no Disinterested Directors on the Company's Board and
therefore an affiliated transaction may be approved only by the majority of the
Company's Disinterested Shareholders, unless at any time during the three years
preceding the transaction, the corporation has had 300 or fewer shareholders of
record.
The control share acquisition provisions generally provide that control
shares of an issuing public corporation acquired in a control share acquisition
have no voting rights until voting rights are granted by a resolution approved
by a majority of shares entitled to vote excluding control shares.
45
<PAGE>
Control share acquisition provisions apply to "Issuing Public
Corporations" which are defined to include corporations with: (i) 100 or more
shareholders, excluding all nominees or brokers; (ii) principal offices in
Florida; and (iii) more than 10% of its shares owned by Florida residents.
"Control Shares" are defined as shares that, when acquired and added to
other shares owned by a person, enable that person to exercise voting power with
respect to shares of an Issuing Public Corporation within the ranges of
one-fifth to one-third, one-third to one-half, and one-half or more of the
outstanding voting power. This term does not include all shares owned by the
person but only those shares acquired to put the shareholder "over the top" with
respect to that particular range. The FBCA provides that shares acquired within
any 90-day period either before or after purchase are considered to be one
acquisition.
Approval of voting rights requires: (i) approval by each class entitled
to vote separately, by majority vote and (ii) approval by each class or series
entitled to vote separately, by a majority of all votes entitled to be cast by
that group excluding all Control Shares.
If an acquiring person proposes to make or has made a control share
acquisition, he may deliver to the Issuing Public Corporation an acquiring
person's statement ("APS"). The acquiring person may then request that the
Issuing Public Corporation call a special meeting of the shareholders at the
acquiring person's expense to consider granting rights to the Control Shares.
If no APS has been filed, any Control Shares acquired in a Control
Share acquisition by such person may, after 60 days has passed since the last
acquisition of Control Shares, be redeemed at their fair market value. If an APS
is filed, the shares are not subject to redemption unless the shares are not
accorded full voting rights by shareholders.
The effect and intent of the control share acquisition provision is to
deter corporate takeovers. Therefore, it is more likely than not that control of
the Company will remain in the hands of the existing principal shareholders. See
"Principal Shareholders."
Transfer and Warrant Agent and Registrar
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 10,013,648
shares of Common Stock outstanding (10,313,648 shares of Common Stock
outstanding if the Underwriters' over-allotment option is exercised in full). Of
these shares, the 2,000,000 shares of Common Stock offered hereby (2,300,000
shares if the Representative's over-allotment option is exercised in full) will
be freely tradable without further registration under the Securities Act. All
officers and directors of the Company have agreed not to sell or otherwise
dispose of 7,857,000 shares for a period of 24 months from the date of this
offering without the Representative's prior written consent. The 13,648 shares
of Common Stock and the 27,296 warrants for shares of Common Stock issued in the
Company's August 1996 Private Placement are eligible for sale pursuant to the
Selling Shareholders Prospectus commencing thirty (30) days from the date of
this Prospectus.
All of the presently outstanding 8,013,648 shares of Common Stock are
"restricted securities" within the meaning of Rule 144 of the Securities Act
and, if held for at least two years, would be eligible for sale in the public
market in reliance upon, and in accordance with, the provisions of Rule 144
following the expiration of such two-year period. In general, under Rule 144 as
currently in effect, a person or persons whose shares are aggregated, including
a person who may be deemed to be an "affiliate" of the Company as that term is
defined under the Securities Act, would be entitled to sell within any three
month period a number of shares beneficially owned for at least two years that
does not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock, or (ii) the average weekly trading volume in the Common Stock during the
four calendar weeks preceding such sale. Sales under Rule 144 are also subject
to certain requirements as to the manner of sale, notice, and the availability
of current public information about the Company. However, a person who is not
deemed to have been an affiliate of the Company during the 90 days preceding a
sale by such person and who has beneficially owned shares of Common Stock for at
least three years may sell such shares without regard to the volume, manner of
sale, or notice requirements of Rule 144.
Prior to this offering, there has been no public market for the
Company's securities. Following this offering, the Company cannot predict the
effect, if any, that sales of shares of Common Stock pursuant to Rule 144 or
otherwise, or the availability of such shares for sale, will have on the market
price prevailing from time to time. Nevertheless, sales by the current
shareholders of a substantial number of shares of Common Stock in the public
market could materially adversely affect prevailing market prices for the Common
Stock. In addition, the availability for sale of a substantial number of shares
of Common Stock acquired through the exercise of the Representative's Warrants
or the currently outstanding options under the Plan could materially adversely
affect prevailing market prices for the Common Stock. See "Risk Factors -Shares
Eligible for Future Sale."
Up to an aggregate of 200,000 additional shares of Common Stock may be
purchased upon the exercise of options which may be granted under the Plan and
up to an additional 4,227,296 shares of Common Stock may be purchased upon the
exercise of certain other options and warrants.
Up to 200,000 additional shares of Common Stock may be purchased by the
Representative during the period commencing on the first anniversary of the date
of this Prospectus and terminating on the fifth anniversary of the date of this
Prospectus through the exercise of the Representative's Warrants. Any and all
shares of Common Stock purchased upon the exercise of the Representative's
Warrants may be freely tradable, provided that the Company satisfies certain
securities registration and qualification requirements
47
<PAGE>
in accordance with the terms of the Representative's Warrants. See
"Underwriting."
CONDITIONS IN BRAZIL
Economic Conditions
In 1995, for the third consecutive year, the economy of Brazil
experienced significant expansion. During the years ended December 31, 1993,
1994, and 1995, Brazil's gross domestic product ("GDP") increased by 4.1%, 9.4%,
and 4.0%, respectively, and inflation receded from 1,149% during the year ended
December 31, 1992, 2,244% for the year ended December 31, 1993, and 1,294% for
the year ended December 31, 1994, to 22.0% for the year ended December 31, 1995.
Such growth in GDP and decrease in inflation is attributable to, among other
things, significant reform initiatives which have been implemented in Brazil's
economy, including: (i) monetary stabilization; (ii) public sector reforms
designed to achieve more economic stability and increased efficiency; (iii)
privatization of activities which could be efficiently undertaken by the private
sector; (iv) increased public health and basic education services; (v) trade
reforms designed to provide incentives to export-oriented and import-competitive
industries; and (vi) social security reforms. Together with such initiatives,
Brazil has granted to foreigners increased access to all sectors of the economy,
thereby resulting in significant increases in foreign investment in comparison
to prior periods. There can be no assurance that the Brazilian government will
be successful in its attempts to stabilize prices and the rate of inflation.
Price instability may have a material adverse effect on the Company.
Brazil's economy has been subject to numerous destabilizing factors,
including recent hyper-inflation, low foreign exchange reserves, and
fluctuations in world commodity prices. In response to these problems, among
others, the Brazilian government has frequently intervened in the Brazilian
economy. Such intervention has taken the form of monetary, credit, tariff, and
other policies, wage and price controls, restriction of bank accounts, and
capital and export controls. The Brazilian government has frequently changed its
policies with respect to the foregoing. There can be no assurance that such
changes in policy will not, directly or indirectly, have a material adverse
effect on the Company.
Currency Exchange Fluctuations
Since its introduction in July 1994, the Brazilian currency, the Real,
initially appreciated against the U.S. dollar, although, since such time, the
Real has experienced limited devaluation in relation to the U.S. dollar within
the forecasted range of the Brazilian government. On January 1, 1996, the Real -
U.S. dollar exchange rate (sell side) in the economical exchange market, as
published by the Central Bank of Brazil was R$0.976 per US$1.00 compared to
R$1.0036 as of June 30, 1996. There is free convertibility of the Real into U.S.
dollars. The Central Bank of Brazil, consistent with most central banks,
intervenes in the currencies markets by buying and selling foreign exchange on
the formal exchange market in order to keep the average exchange rate within
prescribed limits. In the course of conducting its operations, the Company has
experienced no difficulties in Brazil in purchasing foreign currencies at market
rates.
48
<PAGE>
Political Environment
The Brazilian political environment has been characterized by high
levels of uncertainty since the country returned to civilian rule in 1985 after
20 years of military government. The death of the President-elect in 1985 and
the resignation of another President in 1992, as well as frequent turnovers in
senior government officials, have resulted in the perceived absence of a
coherent and sustained policy to resolve Brazil's economic problems.
In December 1993, the Brazilian government commenced the implementation
of the country's latest stabilization plan, the Real Plan. The Real Plan has
sought to limit inflation by reducing certain public expenditures, collecting
liabilities owed to the Brazilian government, increasing taxes, continuing a
privatization program, and introducing a new currency, the Real, into
circulation. In October 1994, Fernando Henrique Cardoso, the former Minister of
Finance and the principal architect of the Real Plan, was elected President.
Since taking office in January 1995, Mr. Cardoso has continued the
implementation of the Real Plan. Although the rate of inflation has decreased
substantially and the value of the Real has stabilized as a result of the Real
Plan, there can be no assurance that the Real Plan will continue to reduce
inflation or stabilize the value of the Real or that the Brazilian government
will continue to implement the Real Plan in the future. The future success of
the Real Plan is dependent on the ability of the Brazilian government to
maintain fiscal restraint and tight monetary policy and effect long-term
structural reforms, including reform of the tax and social security systems and
continued privatization. Certain of such reforms may require the amendment of
the Brazilian constitution. The Company is not able to predict with any degree
of certainty the long-term effects of the Real Plan.
Demographics
The Federal Republic of Brazil is a country of approximately 160
million people in a land mass of 8.5 million square miles. The official language
of Brazil is Portuguese. More than one-half the population are under 24 years of
age. The country has a federal form of government comprising 23 states, three
territories and one federal district (Brasilia). Total GDP at December 31, 1995
was approximately $522 billion and foreign debt existing at that time was
approximately $169 billion. Primary exports of Brazil are machinery, cars, soy
beans, coffee, and citrus concentrates. Brazil is a full member of Mercosur, an
alliance with Argentina, Paraguay, and Uruguay that seeks to eliminate tariffs
in order to create free trade among its member nations.
49
<PAGE>
UNDERWRITING
The Underwriters named below have agreed, subject to the terms and
conditions of the Underwriting Agreement, between the Company and H.J. Meyers &
Co., Inc., as Representative of the Underwriters, to purchase from the Company
on a firm commitment basis the number of shares of Common Stock set forth
opposite their respective names. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters shall be obligated to purchase all of the shares of Common
Stock offered hereby if any of such securities are purchased. The 8%
underwriting discount set forth on the cover page of this Prospectus will be
allowed to the Underwriters at the time of delivery to the Underwriters of the
shares of Common Stock so purchased.
Name of Underwriter Number of Shares
------------------- ----------------
H.J. Meyers & Co., Inc. ........................ _________
Total ....................................... 2,000,000
=========
The Underwriters have advised the Company that they propose to offer
the shares of Common Stock to the public at an initial price of $10.00 per share
and that the Underwriters may allow certain dealers who are members of the
National Association of Securities Dealers, Inc. (the "NASD") a concession not
in excess of $.__ per share of Common Stock, no portion of which may be
reallowed to certain dealers. After this offering, the public offering price and
concession may change.
The Company has granted to the Underwriters an option exercisable
during the 45-day period from the date of this Prospectus, to purchase up to a
maximum of 300,000 additional shares of Common Stock on the same terms set forth
above. The Underwriters may exercise such right only to satisfy over-allotments
in the sale of the shares of Common Stock.
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to two percent (2%) of the total proceeds of the
offering, or $400,000 ($460,000 if the Underwriters' the over-allotment option
is exercised in full), of which $25,000 has already been paid. In addition to
the Underwriters' commissions and Representative's expense allowance, the
Company is required to pay the costs of qualifying the shares of Common Stock
under federal and state securities laws, together with legal and accounting
fees, printing, and other costs in connection with this offering, estimated to
total approximately $350,000.
Upon completion of this offering, the Company will issue to the
Representative for nominal consideration, warrants (collectively, the
"Representative's Warrant") to purchase 200,000 shares of Common Stock. The
shares subject to the Representative's Warrant shall be identical to the shares
of Common Stock sold to the public, except for the purchase price as provided
below. The Representative's Warrant will be exercisable over a period of four
years commencing one year from the date of this Prospectus. The per share
exercise price will be $12.00 (120% of the initial public offering price per
share). During the one-year period commencing on the date of this Prospectus,
the Representative's Warrant and the securities issuable upon the exercise
thereof will not be transferable, except to officers of the Underwriters and
members of the selling group and officers and partners thereof.
The Representative's Warrants will contain anti-dilution provisions
providing adjustment in the
50
<PAGE>
event of any recapitalization, reclassification, stock dividend, stock split, or
similar transaction, including certain issuances of securities by the Company at
prices less than the Current Market Price (as defined therein). The
Representative's Warrants do not entitle the Representative to any rights as a
shareholder of the Company until such Warrants are exercised and shares are
purchased thereunder.
The Representative's Warrants and the securities issuable thereunder
may not be offered for sale, except in compliance with the applicable provisions
of the Securities Act. The Company has agreed that, if it shall cause a
Registration Statement to be filed with the Securities and Exchange Commission,
the Representative shall have the right during the five-year period commencing
on the date of this Prospectus to include in such Registration Statement the
securities issuable upon its exercise at no expense to the Representative.
Additionally, the Company has agreed that upon written request by the holder(s)
of 50% or more of the shares issuable upon exercise of the Representative's
Warrant which is made during the exercise period of the Representative's
Warrant, the Company will, on up to two separate occasions, register the
securities issuable upon exercise thereof. The initial registration will be at
the Company's expense and the second registration will be at the expense of the
holder(s) of the Representative's Warrants.
For the period during which the Representative's Warrants are
exercisable, the holder or holders thereof will have the opportunity to profit
from a rise in the market value of the Common Stock, with a resulting dilution
in the interests of the other shareholders of the Company. The holder or holders
of the Representative's Warrants can be expected to exercise it at a time when
the Company would, in all likelihood, be able to obtain any needed capital from
an offering of its unissued Common Stock on terms more favorable to the Company
than those provided for in the Representative's Warrants. Such facts may
adversely affect the terms on which the Company can obtain additional financing.
To the extent that the Representative realizes any gain from the resale of the
Representative's Warrants or the securities issuable thereunder, such gain may
be deemed additional underwriting compensation under the Securities Act.
The Company has also agreed that, for a period of 24 months after the
closing date of this offering, if it participates in any merger, consolidation
or other transaction which the Representative has brought to the Company, or for
which the Company retains the Representative for consultation or other services
in connection therewith (including an acquisition of assets or stock in which it
pays for the acquisition, in whole or in part, with shares of the Common Stock
or other securities), then it will pay for the Representative's services an
amount that is equal to 0.875% of the value of the purchase price of the
transaction.
Each officer and director, and holders of all restricted stock of the
Company, have agreed that they will not sell any other shares of Common Stock
owned by them prior to this offering (or subsequently acquired under any option,
warrant, or convertible security owned prior to this offering) for 24 months
following the closing date of this offering, without the Representative's prior
written consent. See "Shares Eligible for Future Sale."
The Company has agreed that for a period of 12 months from the date of
this Prospectus, it will not sell any securities (with the exception of debt
securities and shares of Common Stock issued upon exercise of currently
outstanding options and warrants, and options granted under the Plan) without
the Representative's prior written consent, which shall not be unreasonably
withheld. The Company has also agreed that for a period of 24 months from the
date of this Prospectus, it will not sell or issue any securities pursuant to
Regulation S under the Securities Act without the Representative's prior written
consent.
51
<PAGE>
In connection with this offering, the Company has agreed that, for the
36 month period commencing on the date of the Prospectus, the Representative has
the right to appoint a designee as an observer at all meetings of the Company's
Board of Directors. This designee has the right to attend all meetings of the
Board of Directors and shall be entitled to receive reimbursement for all
out-of-pocket expenses of attendance at such meetings, as well as any fees paid
to outside directors solely for their attendance at such meetings. In addition,
such designee shall be indemnified to the same extent as the Company's
directors.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain liabilities in
connection with the Registration Statement, including liabilities under the
Securities Act.
The foregoing is a brief summary of certain provisions of the
Underwriting Agreement and does not purport to be a complete statement of its
terms and conditions. A copy of the Underwriting Agreement is on file with the
Securities and Exchange Commission as an exhibit to the Registration Statement
of which this Prospectus forms a part. See "Additional Information."
Prior to this offering, there has been no public market for the shares
of Common Stock. Accordingly, the initial public offering price of the shares of
Common Stock offered hereby has been determined by negotiations between the
Company and the Representative. Factors considered in determining such price, in
addition to prevailing market conditions, including the history of, and the
prospects for, the industries in which the Company competes, the prospects of
the Company, and such other factors as were deemed relevant, including an
evaluation of management and the general economic climate.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for the Company by Atlas, Pearlman, Trop & Borkson, Fort Lauderdale,
Florida. Atlas, Pearlman, Trop & Borkson own 26,500 shares of Common Stock.
Certain matters will be passed upon for the Underwriters by Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, New York, New York.
EXPERTS
The audited consolidated financial statements of Vitech America, Inc.,
as of December 31, 1995 and for each of the three fiscal years in the period
ended December 31, 1995, included in this Prospectus, have been audited by
Pannell Kerr Forster PC, independent certified public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
52
<PAGE>
ADDITIONAL INFORMATION
The Company intends to furnish to its shareholders annual reports, which
will include financial statements audited by independent accountants, and such
other periodic reports as it may determine to furnish or as may be required by
law, including Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington D.C. 20549, a registration
statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits
thereto, as permitted by the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement and to the
exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed as an exhibit to
the Registration Statement are qualified in their entirety by reference to such
exhibits for a complete statement of their terms and conditions. The
Registration Statement and the exhibits thereto may be inspected without charge
at the offices of the Commission and copies of all or any part thereof may be
obtained from the Commission's principal office at 450 Fifth Street, N.W.,
Washington D.C. 20549 or at certain of the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, upon payment of the
fees prescribed by the Commission. Electronic reports and other information
filed through the Electronic Data Gathering, Analysis, and Retrieval System are
publicly available through the Commission's website (http://www.sec.gov.) In
addition, following approval of the Common Stock for quotation on the NASDAQ
National Market, reports and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington D.C. 20006.
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
VITECH AMERICA INC.
<TABLE>
<CAPTION>
Page
Number
------------
<S> <C>
Independent Auditor's Report F-2
Balance Sheet as of December 31, 1995 and 1994 F-3
Statement of Income for the Years Ended December 31, 1995 and 1994,
and for the Period June 24, 1993 (Inception) to December 31, 1993 F-4
Statement of Changes in Shareholders' Equity for the Years Ended December 31,
1995 and 1994, and for the Period June 24, 1993
(Inception) to December 31, 1993 F-5
Statement of Cash Flows for the Years Ended December 31, 1995 and 1994, and
for the Period June 24, 1993 (Inception) to
December 31, 1993 F-6
Notes to Financial Statements F-7
Balance Sheet as of June 30, 1996 (Unaudited) F-17
Statement of Income for the Six Months Ended June 30, 1996
and 1995 (Unaudited) F-18
Statement of Changes in Shareholders' Equity for the Six Months
Ended June 30, 1996 (Unaudited) F-19
Statement of Cash Flows for the Six Months Ended June 30, 1996
and 1995 (Unaudited) F-20
Notes to Financial Statements (Unaudited) F-21
</TABLE>
F-1
<PAGE>
Independent Auditor's Report
Board of Directors and Shareholders
Vitech America, Inc.
We have audited the accompanying balance sheet of Vitech America, Inc. and
Subsidiary as of December 31, 1995 and December 31, 1994, and the related
statements of income, changes in shareholders' equity, and cash flows for the
two years ended December 31, 1995 and 1994 and for the period June 24, 1993
(Inception) through December 31, 1993. 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 audit 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 referred to above present fairly, in
all material respects, the financial position of Vitech America, Inc. as of
December 31, 1995 and 1994 and the related statements of income, shareholders'
equity, and cash flows for the two years ended December 31, 1995 and 1994 and
for the period from June 24, 1993 (Inception) to December 31, 1993 in conformity
with generally accepted accounting principles.
PANNELL KERR FORSTER PC
New York, New York
July 19, 1996, except for note 15 as to
which the date is September 3, 1996
F-2
<PAGE>
VITECH AMERICA, INC.
Balance Sheet
<TABLE>
<CAPTION>
Assets
December 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 115,925 $ 45,906
Accounts receivable, net (including $11,031,023 and $4,196,731
in 1995 and 1994, respectively, from an affiliate) 15,346,651 4,196,731
Inventories 5,578,974 3,297,979
Deferred tax assets, net 102,530 54,630
Other current assets 123,801 -
---------- ----------
Total current assets 21,267,881 7,595,246
Property and equipment, net 295,646 85,275
Land held for development 592,000 -
Other assets 105,290 11,800
---------- ----------
Total assets $22,260,817 $7,692,321
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 7,030,201 $3,861,972
Borrowings under lines of credit - 896,919
Accrued expenses 161,948 95,088
Due to shareholder 124,433 45,646
Income taxes payable 1,060,391 165,000
Notes payable - related party 3,911,917 2,127,440
Short-term debt 2,566,837 -
---------- ----------
Total current liabilities 14,855,727 7,192,065
---------- ----------
Commitments and contingencies
Shareholders' equity
Common stock, no par value, 30,000,000 shares
authorized, 8,000,000 shares issued and outstanding 306,398 306,398
Retained earnings 7,098,692 193,858
---------- ----------
Total shareholders' equity 7,405,090 500,256
---------- ----------
Total liabilities and shareholders' equity $22,260,817 $7,692,321
---------- ----------
</TABLE>
See notes to financial statements
F-3
<PAGE>
VITECH AMERICA, INC.
Statement of Income
<TABLE>
<CAPTION>
Year Ended Period June
December 31, 24, 1993
----------------------------------- (Inception)
to December
1995 1994 31, 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales (including $36,677,077 in 1995, $17,407,363
in 1994, and $1,156,253 in 1993 to an affiliate) $48,488,996 $17,407,363 $1,156,253
Cost of sales 39,156,239 16,483,232 903,544
---------- ---------- ---------
Gross profit 9,332,757 924,131 252,709
Selling, general and administrative expenses 1,234,108 505,448 181,139
---------- ---------- ---------
Income from operations 8,098,649 418,683 71,570
Other expenses
Interest expense 328,278 171,743 14,282
Foreign currency exchange losses 16,229 - -
Other 1,817 - -
---------- ---------- ---------
Total other expenses 346,324 171,743 14,282
---------- ---------- ---------
Income before provision for income taxes 7,752,325 246,940 57,288
Provision for income taxes 847,491 97,370 13,000
---------- ---------- ---------
Net income $ 6,904,834 $ 149,570 $ 44,288
---------- ---------- ---------
Net income per common and common share equivalent $ 0.82 $ 0.02 $ -
---------- ---------- ---------
Weighted average common and common share equivalents
outstanding 8,293,914 8,000,000 8,000,000
---------- ---------- ---------
</TABLE>
See notes to financial statements
F-4
<PAGE>
VITECH AMERICA, INC.
Statement of Changes in Shareholders' Equity
For the Years Ended December 31, 1995 and
1994 and for the Period June 24, 1993 (Inception)
to December 31, 1993
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
-------------- --------------- ---------------
<S> <C> <C> <C>
Issuance of 8,000,000 shares of common stock, June 24, 1993
including 4,080,000 shares issued for assets $ 306,398 $ - $ 306,398
Net income for the period from
June 24, 1993 (inception) to
December 31, 1993 - 44,288 44,288
-------- --------- ----------
Balance at December 31, 1993 306,398 44,288 350,686
Net income - 149,570 149,570
-------- --------- ----------
Balance at December 31, 1994 306,398 193,858 500,256
Net income - 6,904,834 6,904,834
-------- --------- ----------
Balance at December 31, 1995 $ 306,398 $7,098,692 $7,405,090
-------- --------- ----------
</TABLE>
See notes to financial statements
F-5
<PAGE>
VITECH AMERICA, INC.
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended Period June
December 31, 24, 1993
--------------------------------- (Inception)
to December 31,
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 6,904,834 $ 149,570 $ 44,288
--------------- --------------- ---------------
Adjustments to reconcile net income to net cash used in
operating activities
Depreciation 32,934 12,752 3,891
Loss on disposal of assets - 4,200 -
Reserve for inventory obsolescence - 103,980 -
Changes in assets and liabilities
Increase in accounts receivable (11,149,920) (1,780,116) (288,685)
Increase in inventories (2,280,995) (2,458,416) (693,687)
Increase in deferred tax asset (47,900) (54,630) -
Increase in other assets (123,801) (4,800) -
Increase in trade accounts payable 3,168,229 3,706,536 155,436
Increase in accrued expenses 66,860 85,332 9,756
Increase in due to shareholder 78,787 45,646 -
Increase in income taxes payable 895,391 152,000 13,000
--------------- --------------- ---------------
Total adjustments (9,360,415) (187,516) (800,289)
--------------- --------------- ---------------
Net cash used in operating activities (2,455,581) (37,946) (756,001)
--------------- --------------- ---------------
Cash flows from investing activities
Purchases of property and equipment (249,295) (57,066) -
Investments in land held for development (68,799) - -
--------------- --------------- ---------------
Net cash used in investing activities (318,094) (57,066) -
--------------- --------------- ---------------
Cash flows from financing activities
Deferred offering costs (87,500) - -
Proceeds under lines of credit - 52,669 844,250
Payments under lines of credit (896,919) - -
Proceeds from notes payable - related party 2,006,887 - -
Repayment of notes payable - related party (222,410) - -
Proceeds from note payable 2,000,000 - -
Proceeds from short-term borrowing - bank 217,994 - -
Repayment of short-term borrowing - bank (174,358) - -
--------------- --------------- ---------------
Net cash provided by financing activities 2,843,694 52,669 844,250
--------------- --------------- ---------------
Net increase (decrease) in cash and cash
equivalents 70,019 (42,343) 88,249
Cash and cash equivalents - beginning of period 45,906 88,249 -
--------------- --------------- ---------------
Cash and cash equivalents - end of period $ 115,925 $ 45,906 $ 88,249
--------------- --------------- ---------------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 373,680 $ 154,506 $ 14,282
--------------- --------------- ---------------
Supplemental schedule of non-cash investing and financing activities
Investment in land held for development
acquired through seller financing agreements $ 523,201 $ - $ -
--------------- --------------- ---------------
Assumption of a note payable to a related party from Vitech
Vitoria Technologia S.A. $ - $ 2,127,440 $ -
--------------- --------------- ---------------
Assets contributed by shareholder in exchange for issuance
of 4,080,000 shares of common stock $ - $ - $ 306,398
--------------- --------------- ---------------
</TABLE>
See notes to financial statements
F-6
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements
December 31, 1995
Note 1 - Organization and principal industry
Vitech America, Inc. (the "Company"), a Florida corporation, was incorporated in
June 1993. The Company is engaged in the manufacture and distribution of
computer equipment and related products. On March 7, 1995, the majority
shareholders of the company formed Bahiatech Tecnologia Ltd. (the "Subsidiary")
and on October 12, 1995, the Company acquired a 99.999% interest in the
Subsidiary. The Subsidiary, located in Ilheus, Bahia, Brazil, is engaged in the
assembly and sale of electric and electronic equipment and their components. The
Company sells its products to Vitech Vitoria Tecnoligia S.A. (Vitoria), an
affiliate located in Brazil, South America, and to its subsidiary.
All of the Company's sales are concentrated in Brazil, with approximately 15% to
one unrelated customer and 76% to Vitech Vitoria Tecnologia S.A. (an
affiliate through common ownership) in 1995.
Note 2 - Summary of significant accounting policies
Change in reporting entity
The financial statements for 1995 include the accounts of the Company and its
subsidiary. The 1994 and 1993 financial statements include the accounts of
Vitech America, Inc., individually, since the subsidiary was not formed until
1995.
Principles of consolidation
The consolidated financial statements for 1995 include the accounts of the
Company and its subsidiary. All significant intercompany transactions and
balances have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during reporting periods. Actual
results could differ from these estimates.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less at the time of acquisition to be a cash equivalent. The
Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk
on cash and cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Deferred offering costs
Costs incurred directly related to the proposed public offering are capitalized.
Such costs will be offset against the proceeds received from the proposed public
offering.
F-7
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Property and equipment
Property and equipment are stated at cost. The cost of maintenance and repairs
is charged against results of operations as incurred. Depreciation is computed
over the estimated service lives of the related assets using the straight-line
method. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the respective accounts and any gain
or loss is recognized.
Revenue recognition
The Company's policy is to record revenues upon transfer of title to the
customer. Title transfers to the customer upon receipt of the merchandise by the
customer.
Land held for development
Land held for development is carried at cost and comprises of undeveloped
parcels near Ilheus, Bahia, Brazil.
Income taxes
The Company applies the asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial statement and
tax bases of assets and liabilities is determined annually. Deferred income tax
assets and liabilities are computed for those differences that have future tax
consequences using the currently enacted tax laws and rates that apply to the
period in which they are expected to affect taxable income. Valuation allowances
are established, if necessary, to reduce the deferred tax asset to the amount
that will more likely than not be realized. Income tax expense is the current
tax payable or refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
The Subsidiary operates in the North-east region of Brazil and enjoys an
exemption from income taxes through and including the year 2004. The subsidiary
is entitled to an exemption from income taxes on the Brazilian operating profit
("Lucro da Exploracao") once twenty percent of the budgeted production goals in
units are met in each year during the exemption period. This benefit is reported
as a reduction of income tax expense for the period in which earned.
Per share information
Per share information is based on the weighted average number of common shares
outstanding during each period and, the weighted average number of common
equivalent shares resulting from the assumed conversion of the $2,000,000
promissory note (see note 6). Fully diluted earnings per common and common
equivalent shares are not presented as such amounts are the same as primary
earnings per share.
F-8
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Translation to U.S. dollars
The Subsidiary's assets and liabilities are translated into U.S. dollars at
exchange rates in effect at the balance sheet date for monetary items and at
historical rates for nonmonetary items. Revenue and expense accounts are
translated at the average exchange rate in effect during each month, except for
those accounts that relate to nonmonetary assets and liabilities which are
translated at historical rates.
Exemption of value added tax (ICMS)
The Subsidiary is exempt from ICMS (Value Added Tax) on imported materials and
components, and on the sales of the finished products arising from such raw
materials through and including the year 2003. The benefits are reflected in
sales and cost of sales.
Note 3 - Related party transactions
The Company made sales to Vitech Vitoria Tecnologia S.A., an entity related
through common ownership, during 1995, 1994 and 1993 in the amounts of
$36,677,077, $17,407,363 and $1,156,253, respectively. Amounts due from Vitoria,
at December 31, 1995 and 1994, amounted to $11,031,023 and $4,196,731,
respectively. Additionally, during 1995, the Company purchased $2,800,000 of
inventory from Vitoria. In 1996, the Company received payment on all outstanding
amounts due from Vitoria.
As discussed in note 6, the Company has outstanding debt obligations to a
related party.
The Company has an employment agreement with its president dated January 1, 1995
and expiring one year from that date providing for payments of $10,000 per
month. At December 31, 1995, $146,667 was owed to the president which amount
includes compensation under the above agreement and unreimbursed travel
expenses. In addition, the Company has a management agreement with its majority
shareholder dated January 1, 1995, and expiring one year from that date
providing for payments of $10,000 per month. At December 31, 1995, the
shareholder owed the Company $22,234 for advances made on his behalf net of
amounts due under the above agreement. In January 1996, these two individuals
signed three year employment agreements which terminate on December 31, 1998.
Under the terms of the agreements each individual will receive annual
compensation of $240,000 subject to annual increases, as defined.
Note 4 - Inventories
Inventories are summarized as follows:
1995 1994
------------------ ------------------
Finished goods $1,753,970 $3,297,979
Components 3,814,762 -
Packaging 10,242 -
--------- ----------
$5,578,974 $3,297,979
--------- ----------
F-9
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Included in inventories at December 31, 1995 and 1994 are items aggregating
$925,336 and $2,233,987, respectively, which were in transit to Vitoria. The
shipments were made under terms which require title to pass when the in-transit
items are received by Vitoria.
Note 5 - Property and equipment
Property and equipment at December 31, 1995 and 1994, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
<S> <C> <C>
Furniture and office equipment $ 252,863 $ 44,804
Warehouse equipment 56,186 20,940
Transportation equipment 34,373 34,373
--------- ---------
343,422 100,117
Less accumulated depreciation 47,776 14,842
--------- ---------
$ 295,646 $ 85,275
--------- ---------
</TABLE>
Note 6 - Note payable - related party
The Company had the following notes payable to an affiliate of the shareholders'
at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
<S> <C> <C>
6% promissory note payable on demand (assumed from
Vitech Vitoria Tecnologia, S.A.) $ 1,911,917 $2,127,440
Promissory note payable, due on demand, bearing
interest at 9% 2,000,000 -
--------- ----------
$ 3,911,917 $2,127,440
--------- ----------
</TABLE>
During 1995 and 1994, the Company incurred interest expense of $233,810 and
$106,680, respectively, in connection with these obligations.
In connection with the 9% note payable, the Company granted the lender the right
to convert the note into 5.925% of the outstanding common stock of the Company.
F-10
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Note 7 - Short-term debt
Short-term debt consists of the following at December 31, 1995:
Short-term debt due banks (resulting from discounted
accounts receivable) bearing interest at 5.5% per
month and maturing on April 12, 1996 $ 217,494
Short-term debt (US dollar denominated) due on the
purchase of land, noninterest-bearing, and payable
in monthly installments through September 1996 349,343
Note payable - Meris Financial Incorporated (a) 2,000,000
----------
$ 2,566,837
----------
(a) On October 28, 1995, the Company entered into a loan agreement with Meris
Financial Incorporated. Pursuant to the agreement, the Company executed a
note payable in the amount of $2,000,000 with interest at 12% payable
monthly. Principal was due on October 28, 1997. The note is guaranteed by
the shareholders and collateralized by certain fixed assets of the Company,
real property of its affiliates, beneficial rights under certain agreements
held by the shareholders for options to purchase interests in certain
affiliates, all of the currently outstanding stock of the Company and the
shareholders' ownership interests in the Company's Brazilian affiliates.
The note was convertible, at any time up to maturity, into approximately
4.7% of the issued or issuable common stock of the Company. The Company
incurred interest expense of $40,000 in connection with this obligation
during 1995.
Concurrent with the execution of the loan agreement, the lender and its
affiliate were granted options to purchase common stock in the Company. The
stock option agreements provide for options to purchase 4% of the
outstanding common stock of the Company, issued or issuable at the exercise
date, at an exercise price of $2,000,000 and an additional 1% at an
exercise price of $2,000,000. The options expire eighteen months from
October 28, 1995. No value has been assigned to the options.
In July 1996, the Company entered into a modification agreement whereby the
Company agreed to make payments of $20,000 during July 1996, $200,000
during August 1996, $125,000 during September 1996, $100,000 during October
1996, each payment applied first to accrued unpaid interest and the balance
to principal outstanding. Remaining unpaid accrued interest and principal
is due November 1, 1996.
In addition, as long as the Company makes payments as set forth above,
Meris Financial Incorporated agreed not to exercise the conversion rights
and stock option agreements.
F-11
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Note 8 - Revolving lines-of-credit
The Company had the following lines-of-credit borrowings with one bank at
December 31, 1994:
$450,000 line-of-credit, due June 30, 1995, bearing
interest at the prime rate (8.5% at December 31, 1994)
plus 1% $ 450,000
$400,000 line-of-credit, due June 30, 1995, bearing
interest at the prime rate (8.5% at December 31,1994)
plus 2% 400,000
$50,000 line-of-credit, due June 30, 1995, bearing
interest at the prime rate (8.5% at December 31, 1994)
plus 1% 46,919
--------
$ 896,919
--------
The above lines-of-credit are collateralized by the Company's certificate of
deposit aggregating $10,094, plus certain personal assets provided by a
shareholder of the Company and a related party.
The Company repaid all borrowing under lines-of-credit during 1995. A new
revolving line-of-credit was established which allows for borrowings of up to
$100,000 at the prime rate plus 2%. The prime rate was 8.5% at December 31,
1995. The line-of-credit is collateralized by various Company assets and is
personally guaranteed by the Company's shareholders. At December 31, 1995, no
amounts were outstanding under this line-of-credit.
Note 9 - Fair value of financial instruments
The Company's significant financial instruments are cash and cash equivalents,
account receivables, trade accounts payable, accrued expenses and short-term
debt, all of which are classified as either current assets or current
liabilities. Their carrying amounts approximate their fair values because of the
short-term maturities of these instruments.
Note 10 - Income taxes
The components of the provision for income taxes are as follows:
1995 1994 1993
--------------- --------------- --------------
Current
Federal $ 172,000 $ 130,000 $ 9,500
State 30,000 22,000 3,500
Foreign 699,991 - -
-------------- -------------- --------------
901,991 152,000 13,000
-------------- -------------- --------------
Deferred
Federal (46,500) (49,000) -
State (8,000) (5,630) -
-------------- -------------- --------------
(54,500) (54,630) -
-------------- -------------- --------------
$ 847,491 $ 97,370 $ 13,000
-------------- -------------- --------------
F-12
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
There were no material reconciling items between the U.S. Federal Statutory tax
rate and the effective tax rate on U.S. based income.
Included in the accompanying balance sheet at December 31, 1995 and 1994, are
net deferred tax assets of $102,530 and $54,630, primarily relating to inventory
reserves for obsolescence and certain accrued expenses. No deferred tax asset
valuation allowance is required at December 31, 1995 and 1994. Deferred tax
liabilities primarily relate to depreciation on property and equipment.
The Brazilian federal statutory income tax rate varies according to the level of
income and to the taxes and levies applicable to any one year. The federal
statutory income tax rate applicable to the subsidiary is a composite rate
approximating 48% for 1995. This rate includes a 9% federal levy on net income,
sometimes referred to as Social Contribution. The difference from the effective
tax rate and the composite rate relates to the income tax exemption described in
note 2.
In December 1995, changes were introduced in the Brazilian income tax
regulations effective January 1, 1996 which included a reduction of the
composite rate to 31%.
As of December 31, 1995, the Company has not provided for withholding or U.S.
federal income taxes on accumulated undistributed earnings of its foreign
subsidiary as they are restricted from distribution under Brazilian law (see
note 11) and they are considered by management to be permanently reinvested.
Note 11 - Shareholders' equity and dividends
All references to the number of shares of the Company's common stock and per
share amounts have been retroactively restated in the accompanying financial
statements to give effect to the eight thousand-for-one stock split as discussed
in note 15.
As of December 31, 1995, shareholders' equity consisted of $6,787,374 in
retained earnings generated from subsidiary operations. The retained earnings
generated by subsidiary operations and its capital as of December 31, 1995 is
considered national capital and is not eligible for distribution in U.S. dollars
to its foreign shareholder through the Central Bank of Brazil.
Cash dividends credited or paid to shareholders outside of Brazil are subject to
a withholding tax of 15%. In addition, tax exemption benefits amounting to
$2,832,000 ($0.34 per share) cannot be distributed as dividends and are
segregated for capital reserves and offsetting accumulated losses in accordance
with Brazilian law.
On June 24, 1993, the Company issued 4,080,000 shares of common stock to an
individual whereby the individual became the majority shareholder of the
Company. In exchange for the common stock, the shareholder contributed the
following assets:
Inventories $ 250,346
Property and equipment 49,052
Other assets 7,000
----------
$ 306,398
----------
F-13
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
The Company recorded the above assets and a corresponding capital contribution
at their cost which approximated fair market value as agreed to by management
and the shareholders.
Note 12 - Major suppliers
The Company purchased merchandise principally from suppliers located in the
United States. In 1995, purchases from one unrelated supplier accounted for
approximately 12% of total purchases. In 1994, purchases from three unrelated
suppliers accounted for approximately 39% of total purchases. In 1993, purchases
from two related parties through common ownership accounted for approximately
22% of total purchases.
Note 13 - Commitments and contingencies
In August 1995, the Company entered into a three-year noncancelable lease
agreement for an office and warehouse building in Miami, Florida, at an annual
rental of approximately $102,000, increasing annually for changes in the
consumer price index. The lease requires the Company to pay for its
proportionate share of real estate taxes, insurance and other taxes and
assessments.
The Company leases warehouse and office space in Sao Paulo, Brazil at an annual
rental of $36,000 and $48,000 respectively. These leases expire June 30, 1997
and February 28, 1997, respectively.
The Company leases manufacturing and administrative space in Ilheus, Brazil at a
monthly rental of $13,500. This lease expires December 31, 1996.
In addition, the Company has various other operating lease agreements primarily
involving automobiles and office equipment. These leases are noncancelable and
expire at various dates through 1998.
Minimum lease commitments under the above operating leases (inclusive of the
warehouse and office lease) as of December 31, 1995 are as follows:
1996 $ 340,500
1997 148,850
1998 67,300
---------
$ 556,650
---------
Rent expense under all operating leases in 1995, 1994 and 1993, was
approximately $185,300, $113,000 and $11,000, respectively.
Pursuant to an amendment of the articles of incorporation of the Subsidiary, the
Company is obligated to contribute $1,100,000 in exchange for common shares on
or before December 18, 1996.
The Company has executed a subordination agreement with one of its vendors and
the shareholders of the Company, in exchange for lines-of-credit aggregating
$1,500,000 for product purchases. As required by the agreements, the note
payable to a related party aggregating $1,911,917, is subordinate to all
obligations to the vendor by the Company. Additionally, a shareholder of the
Company is a guarantor for the payment of product purchases up to a maximum
amount of $1,500,000. Included in trade accounts payable at December 31, 1995,
are amounts payable to the vendor aggregating $815,000 for product purchases.
F-14
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Vitech is subject to inspections and potential claims arising out of the conduct
of its business, principally in connection with tax, labor and government
regulatory matters. While the ultimate results of inspections, claims,
administrative processes and lawsuits cannot be determined, management does not
expect that the resolution of such matters will have a material effect on the
financial position or future results of operations of the Company.
On June 28, 1996, the Company secured a line-of-credit in the amount of $1
million expiring June 30, 1997 to support letters-of-credit which the Company
may issue to secure purchase obligations. The agreement requires the Company to
provide a cash deposit equivalent to 30% of each letter-of-credit. The credit
agreement is secured by a lien on all personal property (as defined) owned by
the Company.
Note 14 - Public offering
The Company is in negotiations with a certain underwriter relating to a
contemplated public offering.
Note 15 - Subsequent events
Common stock
On July 26, 1996, the Company's Board of Directors approved the following
resolutions: (i) an increase in the number of authorized common shares to
30,000,000 and a split to effect the issuance of 8,000 shares of common stock in
exchange for each share of common stock then outstanding and (ii) the
authorization of 3,000,000 shares of no par value preferred stock. The effect of
the stock split has been presented retroactively to the date of inception in the
accompanying financial statements.
Private placement
On July 26, 1996 the Company issued a private placement memorandum offering a
minimum of twenty and a maximum of sixty units (the "Units") for $50,750 per
unit. Each unit consists of $50,000 principal amount of 9% senior debentures,
1,000 common stock purchase warrants, and 500 shares, no par value per share, of
the company's common stock. The principal amount of, and the accrued and unpaid
interest on, the debentures will be payable on the date which is the earlier of
(i) fifteen months from the date of the initial closing of the offering and (ii)
the date of the closing of a public offering of securities of the Company.
Interest on the Debentures will accrue at the rate of 9% per annum payable
semi-annually on July 31, and January 31, beginning on January 31, 1997. The
debentures are not otherwise redeemable prior to maturity. Each warrant entitles
the registered holder thereof to acquire from the Company one share of common
stock, no par value per share of the Company at an exercise price per share of
$10.00, subject to adjustment as provided therein, for the period commencing on
the date of the initial closing and terminating on the third anniversary of such
date.
On August 30, 1996, the Company completed this offering to eleven accredited
investors providing for the sale of 27.3 units for $50,750 per unit.
F-15
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
December 31, 1995
Stock options
On August 20, 1996 the Board of Directors and the shareholders of the Company
adopted a stock option plan (the Plan). The Plan provides for the grant of
options to purchase up to 200,000 shares of common stock to employees, officers,
directors, and consultants of the Company at a price to be determined by the
board of directors (as defined). Options may be either incentive stock options
or non-qualified options. Incentive stock options may be granted only to
employees of the Company, while non-qualified options may be issued to
non-employee directors, consultants, and others, as well as to employees of the
Company.
On September 3, 1996, the Company authorized the issuance of options to purchase
up to 4,000,000 shares of Common Stock. 2,040,000 options were issued to Georges
C. St. Laurent, III, the Company's Chairman of the Board and Chief Executive
Officer and 1,960,000 options were issued to William C. St. Laurent, the
Company's President and Chief Operating Officer. 1,000,000 options are
exercisable at $15.00 per share, another 1,000,000 options are exercisable at
$20.00 per share and the remaining 2,000,000 options are exercisable at $25.00
per share. The options are exercisable for a four year period beginning on the
closing of the Company's proposed initial public offering.
F-16
<PAGE>
VITECH AMERICA, INC.
Balance Sheet
June 30, 1996
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 204,085
Accounts receivable, net 12,921,998
Inventories 10,247,584
Deferred tax assets, net 92,530
Other current assets 174,238
----------
Total current assets 23,640,435
Property and equipment, net 1,795,399
Land held for development 586,640
Other assets 128,250
----------
$ 26,150,724
----------
Total assets
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 7,474,165
Borrowings under lines-of-credit 892,210
Accrued expenses 138,850
Due to shareholder 3,429
Sales tax payable 1,027,439
Income taxes payable 1,241,135
Notes payable - related party 2,661,917
Short-term debt 2,602,349
----------
Total current liabilities 16,041,494
----------
Commitments and contingencies
Shareholders' equity
Common stock, no par value, 30,000,000 shares
authorized, 8,000,000 shares issued and outstanding 306,398
Retained earnings 9,802,832
----------
Total shareholders' equity 10,109,230
----------
Total liabilities and shareholders' equity $ 26,150,724
----------
See notes to financial statements
F-17
<PAGE>
VITECH AMERICA, INC.
Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1995 1996
----------------- ----------------
<S> <C> <C>
Net sales (including $19,588,155 and $8,066,878
to an affiliate in 1995 and 1996, respectively) $ 20,457,048 $ 26,080,299
Cost of sales 19,067,617 18,688,336
----------------- ----------------
Gross profit 1,389,431 7,391,963
Selling, general and administrative expenses 819,380 2,462,646
----------------- ----------------
Income from operations 570,051 4,929,317
----------------- ----------------
Other expenses
Discount on sale of receivables - 1,166,342
Interest expense 163,978 522,605
Foreign currency exchange losses - 373,627
----------------- ----------------
Total other expenses 163,978 2,062,574
----------------- ----------------
Income before provision for income taxes 406,073 2,866,743
Provision for income taxes 8,352 162,603
----------------- ----------------
Net income $ 397,721 $ 2,704,140
----------------- ----------------
Net Income per common and common share equivalent $ 0.05 $ 0.31
----------------- ----------------
Weighted average common and common share
equivalents outstanding 8,041,988 8,503,853
----------------- ----------------
</TABLE>
See notes to financial statements
F-18
<PAGE>
VITECH AMERICA, INC.
Statement of Changes in Shareholders' Equity
For the Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
-------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1995 $ 306,398 $ 7,098,692 $ 7,405,090
Net income for the six months ended June 30, 1996 - 2,704,140 2,704,140
-------------- --------------- ---------------
Balance at June 30, 1996 $ 306,398 $ 9,802,832 $ 10,109,230
-------------- --------------- ---------------
</TABLE>
See notes to financial statements
F-19
<PAGE>
VITECH AMERICA, INC.
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------------
1995 1996
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 397,721 2,704,140
----------------- ------------------
Adjustments to reconcile net income to net cash provided
(used) by operating activities
Depreciation 9,936 72,065
Changes in assets and liabilities
Accounts receivable (3,834,757) 2,424,653
Inventories 1,589,021 (4,668,610)
Deferred tax asset - 10,000
Other assets (8,472) (50,437)
Trade accounts payable 820,120 443,964
Accrued expenses 18,633 (23,098)
Due to shareholder 71,874 (121,004)
Income and other taxes payable 8,352 1,208,183
----------------- ------------------
Total adjustments (1,325,293) (704,284)
----------------- ------------------
Net cash provided (used) by operating activities (927,572) 1,999,856
----------------- ------------------
Cash flows (used) by investing activities
Purchases of property and equipment (47,286) (1,566,457)
----------------- ------------------
Cash flows from financing activities
Deferred offering costs - (22,961)
Proceeds under lines of credit and other borrowings - 927,722
Repayment of notes payable - related party - (1,250,000)
Repayment of short term debt (496,919) -
Proceeds from notes payables 1,777,591 -
----------------- ------------------
Net cash provided (used) by financing activities 1,280,672 (345,239)
----------------- ------------------
Net increase in cash and cash equivalents 305,814 88,160
Cash and cash equivalents - beginning of period 45,906 115,925
----------------- ------------------
Cash and cash equivalents - end of period $ 351,720 204,085
----------------- ------------------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 154,226 388,627
----------------- ------------------
Income taxes $ - 189,826
----------------- ------------------
Supplemental disclosure of non-cash investing activity
During the period ended June 30, 1996, the Company's
subsidiary received property valued at $417,258 as
settlement of an outstanding accounts receivable
</TABLE>
See notes to financial statements
F-20
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements
(unaudited)
Note 1 - Basis of presentation
The accompanying unaudited financial statements of Vitech America, Inc. (the
Company) have been prepared in accordance with generally accepted accounting
principles for interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the interim financial
statements have been included, and all adjustments are of a normal and recurring
nature. The financial statements as of and for the interim period ended June 30,
1996 should be read in conjunction with the Company's financial statements as of
and for the year ended December 31, 1995. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
The financial statements for 1996 include the accounts of the Company and its
subsidiary, Bahiatech Technologia, Ltd. The 1995 financial statements include
only the accounts of the company individually, since the subsidiary was not
operational until the second half of 1995.
Note 2 - Inventories
Inventories as of June 30, 1996 consisted of the following:
Finished goods $ 3,716,634
Components 4,630,724
Packaging 41,557
Consigned inventories 1,858,669
-----------
$ 10,247,584
-----------
Note 3 - Property and equipment
Property and equipment at June 30, 1996, are summarized as follows:
Property $ 417,258
Furniture and office equipment 872,084
Warehouse equipment 591,524
Transportation equipment 34,373
----------
1,915,239
Less accumulated depreciation 119,840
----------
$ 1,795,399
----------
Note 4 - Note payable - related party
The Company had the following notes payable to an affiliate of the shareholders'
at June 30, 1996:
6% promissory note payable on demand (assumed
from Vitech Vitoria Tecnologia, S.A.) $ 661,917
Promissory note payable, due on demand, bearing
interest at 9% 2,000,000
-----------
$ 2,661,917
-----------
F-21
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
(Unaudited)
During 1996, the Company incurred interest expense of $134,214, in connection
with these obligations.
In connection with the 9% note payable, the Company granted the lender the right
to convert the note into 5.925% of the outstanding common stock of the Company.
Note 5 - Short-term debt
Short-term debt consists of the following at June 30, 1996:
Bank loans payable (resulting from discounted
accounts receivable) due banks bearing an
average interest rate of 3% per month $ 602,349
Note payable - Meris Financial Incorporated 2,000,000
---------
$2,602,349
---------
Note 6 - Revolving lines-of-credit
The Company had the following lines-of-credit borrowings with various banks at
June 30, 1996:
$200,000 line-of-credit, due June 1997, bearing
interest at the prime rate plus 2% $ 100,000
Various bank borrowings expiring through September 792,210
1996 at interest rates ranging from 3% to 4% per month --------
$ 892,210
--------
The prime rate was 8.25% at June 30, 1996. The line-of-credit is collateralized
by various Company assets and is personally guaranteed by the Company's
shareholders.
Note 7 - Shareholders' equity and dividends
All references to the number of shares of the Company's common stock have been
retroactively restated in the accompanying financial statements to give effect
to an eight thousand-for-one stock split.
As of June 30, 1996, shareholders' equity consisted of $9,391,471 in retained
earnings generated from subsidiary operations. The retained earnings generated
by subsidiary operations and its capital as of June 30, 1996 is considered
national capital and is not eligible for distribution in U.S. dollars to its
foreign shareholder through the Central Bank of Brazil.
Through December 31, 1995, cash dividends credited or paid to shareholders
outside of Brazil were subject to a withholding tax of 15%. Effective January 1,
1996 the 15% withholding tax was repealed. In addition, tax exemption benefits
amounting to $3,441,932 cannot be distributed as dividends and are segregated
for capital reserves and offsetting accumulated losses in accordance with
Brazilian law.
F-22
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements (continued)
(Unaudited)
Note 8 - Sale of receivables
During the period January 1, 1996 through June 30, 1996, the Company's
subsidiary sold to an affiliate $10,410,394 of its trade accounts receivable for
$9,244,052 and, accordingly, recognized a discount on the sale in the amount of
$1,166,342, which is reflected in the accompanying statement of income. At June
30, 1996, the affiliate has collected $2,171,665 of the $10,410,394 of purchased
receivables.
F-23
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offer contained herein, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
of any securities other than those to which it relates or an offer to sell, or a
solicitation, in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. The delivery of this Prospectus, under any
circumstances, at any time, does not imply that the information contained herein
is correct as of any time subsequent to its date.
------------
TABLE OF CONTENTS
Page
Prospectus Summary.......................... 4
Risk Factors................................ 8
Use of Proceeds............................. 16
Dividend Policy............................. 17
Dilution.................................... 17
Capitalization.............................. 18
Selected Financial Data..................... 18
Management's Discussion and
Analysis of Financial Condi-
tion and Results of Operation............. 20
Business.................................... 27
Management.................................. 35
Certain Transactions........................ 40
Concurrent Offering......................... 42
Principal Shareholders...................... 43
Description of Securities................... 44
Shares Eligible for Future
Sale....................................... 47
Underwriting................................ 50
Legal Matters............................... 52
Experts..................................... 52
Additional Information...................... 53
Index to Financial Statements............... F-1
Until _________, 1996 (25 days after the commencement of this offering), dealers
effecting transactions in registered securities, whether or not participating in
the 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 subscriptions.
2,000,000 Shares
VITECH AMERICA, INC.
Common Stock
-----------
PROSPECTUS
H.J. MEYERS & CO., INC.
<PAGE>
[ALTERNATE PAGE]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED September ___, 1996
Prospectus
40,944 Shares of Common Stock
VITECH AMERICA, INC.
This Prospectus relates to 40,944 shares of common stock, no par value
(the "Common Stock") of Vitech America, Inc., a Florida corporation (the
"Company"), held by eleven (11) holders (the "Selling Shareholders"). As to
40,944 shares of Common Stock offered hereby (i) 13,648 shares of Common Stock
held by the Selling Shareholders and (ii) up to an aggregate of 27,296 shares of
Common Stock are issuable upon the exercise of certain warrants ("Warrants")
which entitles the holder to purchase one share of Common Stock at $10.00 per
share. The Selling Shareholders' Common Stock and Warrants were issued to the
Selling Shareholders in a private placement by the Company in August 1996 (the
"Private Placement"). See "Selling Shareholders" and "Plan of Distribution."
The Common Stock offered by the Selling Shareholders pursuant to this
Prospectus may be sold from time to time by the Selling Shareholders or by their
transferees. The distribution of the Common Stock offered hereby by the Selling
Shareholders may be effected in one or more transactions that may take place on
the over-the-counter market, including ordinary brokers' transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
such securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Shareholders.
The Selling Shareholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Shareholders. See "Selling Shareholders" and "Plan
of Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company of
2,000,000 shares of
1
<PAGE>
Common Stock was declared effective by the Securities and Exchange Commission
(the "Commission"). The Company will receive approximately $___________ in net
proceeds from such offering (assuming no exercise of the Underwriter's
over-allotment option) after payment of underwriting discounts and commissions
and estimated expenses of Such offering.
----------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS."
----------------------------------
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.
----------------------------------
The date of this Prospectus is, _____________, 1996
2
<PAGE>
[ALTERNATE PAGE]
SELLING SHAREHOLDERS
An aggregate of up to 40,944 shares of Selling Shareholders' Common
Stock may be offered for resale by the investors listed below.
The following table sets forth certain information with respect to each
Selling Shareholder for whom the Company has registered Selling Shareholders'
Common Stock for resale to the public. The Company will not receive any of the
proceeds from the sale of such Common Stock. There are no material relationships
between any of the Selling Shareholders and the Company or any of its
predecessors or affiliates, nor have any such material relationships existed
within the past three years except as footnoted below. Except as described
below, no Selling Shareholder will beneficially own any Common Stock of the
Company if the Selling Shareholders' Common Stock is sold.
<TABLE>
<CAPTION>
Number of Shares of Number of Shares Number of Shares of
Common Stock Owned of Common Stock Common Stock Owned
Selling Shareholder Prior to Offering to be Sold After Offering
- ------------------- ----------------- ---------- --------------
<S> <C> <C> <C>
Dennis and B. Elaine Brubaker 3,000 3,000 -0-
Curry Family Trust 3,000 3,000 -0-
Troy D. Wiseman 1,500 1,500 -0-
Arab International Trust 3,000 3,000 -0-
CNCA SCT Brunoy 1,500 1,500 -0-
BIKUBEN GIROBANK A/S 3,000 3,000 -0-
Tresley, David and Cindy 12,000 12,000 -0-
Robert P. Bain 3,000 3,000 -0-
Geoffrey del Marmol 1,944 1,944 -0-
Swedbank (Luxembourg) S.A. 7,500 7,500 -0-
Daniel Phelan 1,500 1,500 -0-
------ ------
Total 40,944 40,944
</TABLE>
3
<PAGE>
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
The sale of the Common Stock by the Selling Shareholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Shareholders) in the over-the-counter
market or in negotiated transactions, through the writing of options on the
securities, a combination or such methods of sale or otherwise. Sales may be
made at fixed prices which may be changed, at market prices prevailing at the
time of sale, or at negotiated prices.
The Selling Shareholders may effect such transactions by selling their
Common Stock directly to purchasers, through broker-dealers acting as agents for
the Selling Shareholders or to broker-dealers who may purchase Common Stock as
principals and thereafter sell the Common Stock from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers for
whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Each Selling Shareholder has agreed not to sell, transfer, or otherwise
dispose publicly the Selling Shareholders' Common Stock for a period of 30 days
after the date of this Prospectus.
Under applicable rules and regulations under the Securities Exchange
Act of 1934 ("Exchange Act"), any person engaged in the distribution of the
Selling Shareholders' Common Stock may not simultaneously engage in market
making activities with respect to any securities of the Company for a period of
at least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event that H.J. Meyers & Co., Inc., the
Underwriter of the Company's initial public offering, is engaged in a
distribution of the Selling Shareholders' Common Stock it will not be able to
make a market in the Company's Common Stock during the applicable restrictive
period. However, the Underwriter has not agreed to nor is it obliged to act as
broker-dealer in the sale of the Selling Shareholders' Common Stock. The Selling
Shareholders may be required, and in the event the Underwriter is a market
maker, will likely be required to sell such Common Stock through another
broker-dealer. In addition, each Selling Shareholder desiring to sell Common
Stock will be subject to the applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules l0b-6 and
l0b-7, which provisions may limit the timing of the purchases and sales of the
Company's Common Stock by such Selling Shareholders.
4
<PAGE>
The Selling Shareholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
[ALTERNATE PAGE]
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 2,000,000 shares of Common Stock by the Company and up to 300,000
additional shares of common stock to cover over-allotments, if any.
5
<PAGE>
[ALTERNATE PAGE]
- -------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations 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 Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this Prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by any person
in any jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, imply that the information in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
--------------------------
TABLE OF CONTENTS
Page
Prospectus Summary ..................... __
Risk Factors ........................... __
Use of Proceeds ........................ __
Dividend Policy ........................ __
Dilution................................ __
Capitalization . . . . . . . . . ...... __
Selected Financial Data . . . ......... __
Management's Discussion and Analysis
of Results of Operations and Financial
Condition . . . . . . . . . . ....... __
Business . . . . . . . . . . . . ....... __
Management . . . . . . . . . . . ....... __
Certain Transactions . . . . . . ....... __
Principal Shareholders . . . . . ....... __
Selling Shareholders . . . . . .........
Concurrent Public Offering . . . ....... __
Description of Securities . . . ....... __
Shares of Eligible for Future Sale...... __
Plan of Distribution . . . . . . ....... __
Legal Matters . . . . . . . . . ....... __
Experts. . . . . . . . . . . . . ....... __
Additional Information . . . . . ....... __
Index to Financial Statements . ........ __
- ------------------------------
Until ___, 1996, (25 days after the date of this Prospectus, dealers effecting
transactions in registered securities, whether or no participating in the
distribution, may be required to deliver a Prospectus when acting as
underwriters and with respect to their unsold subscriptions.
VITECH AMERICA, INC.
40,944 of Common Stock
--------------------------------
PROSPECTUS
---------------------------------
_________________, 1996
6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.*
Registration Fees - Securities and
Exchange Commission $8,899.88
Filing Fee - National Association
Securities Dealers $ _______
Transfer Agent Fees $ 3,500
Cost of Printing and Engraving $ 80,000*
Legal Fees and Expenses $ 100,000*
Accounting Fees and Expenses $ 90,000*
Blue Sky Fees and Expenses $ 35,000*
Miscellaneous $ _______
Total $ 350,000*
*Estimated
Item 14. Indemnification of Directors and Officers.
The Articles of Incorporation of the Company provide that every
director and every officer of the corporation, every former director and former
officer of the corporation, and every person who may have served at the request
of the corporation as a director or officer of another corporation in which the
corporation owns shares of capital stock or of which it is a creditor, and the
heirs, executors, administrators, and assignors of all of the above persons
shall be indemnified by the corporation for expenses actually and necessarily
incurred by him in connection with the defense of any action, suit, or
proceeding to which he may be a party by reason of his being or having been a
director or officer of the corporation or of such other corporation regardless
of whether or not he continues to be a director or officer at the time of
incurring such expenses, except with respect to matters as to which he shall be
finally adjudged in such action, suit, or proceeding to be liable for negligence
or misconduct in the performance of his duty. The rights of indemnification set
forth in the Articles of Incorporation shall not be exclusive of any other
rights to which such person may be entitled by law or otherwise.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of the director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for: (a) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for, or
assenting to, an unlawful distribution; and (d) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by, or in the
right of, the Company to procure a judgment in its favor or in a proceeding by,
or in the right of, a shareholder. The statute does not effect the director's
responsibilities under any other law.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
On June 24, 1993, the Company issued 4,080,000 shares of its Common
Stock to Georges St. Laurent, III in exchange for inventory, property, equipment
and other assets having a value of approximately $306,000. On June 24, 1993, the
Company issued 1,312,000 shares, 1,304,000 shares , and an additional 1,304,000
shares, respectively, to William St. Laurent, and Dr. Jose Roberto Rodrigues,
Attorney for Trustee of Nicolas St. Laurent, Dr. Jose Roberto Rodrigues,
Attorney for Trustee of Alexander St. Laurent, respectively.
In August 1996, the Company completed a Private Placement to 11
accredited investors providing for the sale of 27.3 units for $50,750 per unit.
Each unit consisted of $50,000 principal amount of senior debentures, 1,000
Common Stock purchase warrants and 500 shares of the Company's Common Stock.
Registration under the Securities Act of 1933 as amended (the
"Securities Act") of the securities issued in the above transaction was not
required because such securities were issued in transactions not involving any
"public offering" within the meaning of Section 4(2) of said Act.
Item 16. Exhibits and Financial Statement Schedules.
a. The exhibits constituting part of the Registration Statement are as
follows:
(1.1) Form of Underwriting Agreement.
(1.2) Form of Representative's Warrant Agreement.
(3.1) Articles of Incorporation dated June 24, 1993.
(3.2) Amendments to the Company Articles of Incorporation dated November 13,
1995 and July 26, 1996.
(3.3) By-Laws of the Company.
(4.1) Form of Common Stock Certificate*
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning legality of
shares being registered pursuant to this Registration Statement.*
(10.1) Stock Option Plan.
(10.2) Employment Agreement between the Company and William St. Laurent, dated
as of January 1, 1996.
(10.3) Employment Agreement between the Company and Georges C. St. Laurent,
III, dated as of January 1, 1996.
(10.5) Option Agreements for William and Georges St. Laurent.
II-2
<PAGE>
(10.6) Promissory Note as amended from the Company to Georges St. Laurent, Jr.
(21) Subsidiaries of the Company.
(23.1) Consent of Pannell Kerr Forster PC.
(23.2) The consent of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the
Company, is included in an opinion filed in Exhibit 5.1.*
------------------
* To be filed by amendment.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officer, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange 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.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement which:
(i) includes any prospectus required by section 10(a)(3) of
the Securities Act of 1993;
(ii) reflects 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, represent a fundamental change in the information set forth
in the registration statement.
(iii) includes 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.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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.
II-3
<PAGE>
(d) To provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(e) (i) that 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.
(ii) that 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 therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Miami, State
of Florida on the 5th day of September, 1996.
VITECH AMERICA, INC.
By: /s/ William C. St. Laurent
----------------------------------
WILLIAM C. ST. LAURENT, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William C. St. Laurent President and Director September 5, 1996
- --------------------------------------- (Principal Executive
WILLIAM C. ST. LAURENT Officer)
/s/ Mitchell Asher Vice President and
- --------------------------------------- Director September 5, 1996
MITCHELL ASHER Chief Financial Officer
(Principal Accounting
Officer)
/s/ Georges C. St. Laurent III Chief Executive Officer September 5, 1996
- --------------------------------------- and Director
GEORGES C. ST. LAURENT, III
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(1.1) Form of Underwriting Agreement.
(1.2) Form of Representative's Warrant Agreement.
(3.1) Articles of Incorporation dated June 24, 1993.
(3.2) Amendments to the Company Articles of Incorporation dated November 13,
1995 and July 26, 1996.
(3.3) By-Laws of the Company.
(4.1) Form of Common Stock Certificate*
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning legality of
shares being registered pursuant to this Registration Statement.*
(10.1) Stock Option Plan.
(10.2) Employment Agreement between the Company and William St. Laurent, dated
as of January 1, 1996.
(10.3) Employment Agreement between the Company and Georges C. St. Laurent,
III, dated as of January 1, 1996.
(10.5) Option Agreements for William and Georges St. Laurent.
(10.6) Promissory Note as amended from the Company to Georges St. Laurent, Jr.
(21) Subsidiaries of the Company.
(23.1) Consent of Pannell Kerr Forster PC.
(23.2) The consent of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the
Company, is included in an opinion filed in Exhibit 5.1.*
------------------
* To be filed by amendment.
<PAGE>
Exhibit 1
2,000,000 Shares
VITECH AMERICA, INC.
UNDERWRITING AGREEMENT
__________, 1996
H.J. Meyers & Co., Inc.
As Representative of the several
Underwriters named in Schedule I
attached hereto
180 Maiden Lane
New York, New York 10038
Gentlemen:
The undersigned, Vitech America, Inc., a Florida corporation (the
"Company"), hereby confirms its agreement with H.J. Meyers & Co., Inc.
(individually, "H.J. Meyers"), as representative (the "Representative") of the
several underwriters named in Schedule I hereto (the "Underwriters"), as
follows:
1. Introduction.
(a) The Company proposes to issue and sell to the Underwriters an
aggregate of 2,000,000 shares of common stock, par value US$1.00 per share, of
the Company (the "Common Stock"). Such shares of Common Stock are hereinafter
referred to as the "Firm Stock".
(b) Solely for the purpose of covering over-allotments, if any, the
Company proposes to grant to the Underwriters an option (the "Over-allotment
Option") to purchase from the Company, in the aggregate, up to an additional
300,000 shares of Common Stock. Such shares of Common Stock are hereinafter
referred to as the "Additional Stock." The Firm Stock and the Additional Stock
are hereinafter referred to as the "Stock."
(c) The Company proposes to sell to H.J. Meyers, individually and
not as Representative, 200,000 warrants (the "Representative's Warrants") to
purchase up to an aggregate of 200,000 shares of Common Stock (the "Warrant
Shares") for an aggregate purchase price of US$5.00. The Representative's
Warrants shall be substantially in the form filed as an exhibit to the
Registration Statement (as hereinafter defined). The Representative's Warrants
and the Warrant Shares are hereinafter referred to collectively as the
"Representative's Securities." The Stock and the Representative's Securities are
hereinafter referred to collectively as the "Securities."
2. Representations and Warranties. The Company 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. 33-_______), including
in such registration statement and each such amendment a related preliminary
prospectus, for the registration of the Securities under the Securities Act of
1933, as amended (the "Securities Act"). As used in this Agreement, the term
"Registration Statement" shall refer to the registration statement referred to
in the first sentence of this Section 2(a), as amended, on file with the
Commission at the time such registration statement is declared by the Commission
to be effective under the Securities Act (including the prospectus, financial
statements, and exhibits filed as a part thereof, provided, however, that such
registration statement, at the time it is declared by the Commission to be
effective under the Securities Act, may omit such information as is permitted to
<PAGE>
be omitted from such registration statement when it becomes effective under the
Securities Act pursuant to Rule 430A of the General Rules and Regulations of the
Commission under the Securities 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" shall refer to each prospectus included in the Registration
Statement, or any amendments thereto, before the Registration Statement is
declared by the Commission to be effective under the Securities Act, the form of
prospectus omitting Rule 430A Information included in the Registration Statement
when the Registration Statement becomes effective under the Securities Act, if
applicable (the "Rule 430A Prospectus"), and any prospectus filed by the Company
with the consent of the Representative pursuant to Rule 424(a) of the
Regulations; and the term "Prospectus" shall refer to the final prospectus
forming a 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 form of final prospectus forming a part of the
Registration Statement.
(b) When the Registration Statement becomes effective under
the Securities Act, and at all times subsequent thereto up to and including the
Closing Date (as defined in Section 3(a)) and each Additional Closing Date (as
defined in Section 3(b)), 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 Securities 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 Securities Act and the Regulations, will comply with the Securities Act
and the Regulations, 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, and no event will have
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 an amendment or supplement; if a Rule 430A Prospectus is included in the
Registration Statement at the time it is declared by the Commission to be
effective under the Securities 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 Securities Act or the Regulations, will comply with the Securities Act and
the Regulations, 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; and each Preliminary Prospectus, as
of the date filed with the Commission, contained all statements required to be
stated therein in accordance with the Securities Act and the Regulations,
complied with the Securities Act and the Regulations, and did 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;
except that no representation or warranty is made in this Section 2(b) with
respect to statements or omissions 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 by, or on behalf of, such Underwriter through
the Representative expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto.
<PAGE>
(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, or preventing or suspending the use of, the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, refusing to permit the effectiveness of the Registration
Statement, or suspending the registration or qualification of the Securities nor
has any of such authorities instituted or threatened to institute any
proceedings with respect to a Stop Order.
(d) Any contract, agreement, instrument, lease, or license required
to be described in the Registration Statement or the Prospectus has been
described therein in all material respects. Any contract, agreement, instrument,
lease, or license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to the Registration
Statement.
(e) The following corporation is the only subsidiary (as defined in
the Regulations) of the Company: Bahia Technologia Ltda., a Brazil corporation
(the "Subsidiary"). Each of the Company and the Subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of its
respective jurisdiction of 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, 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
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing as such in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its respective
business makes such qualification necessary, except where the failure to so
qualify will not have a material adverse effect on the Company's business,
properties, or financial condition on a consolidated basis.
(f) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, of which 6,000,000 shares are outstanding,
and ____________ shares of preferred stock, par value US$_____ per share, of
which none are outstanding. Each outstanding share of Common Stock is validly
authorized and issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, has not been issued and is not
owned or held in violation of any preemptive or similar rights of stockholders.
Each share of capital stock of the Subsidiary is owned of record and
beneficially by the Company. 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 Subsidiary or any
security or other instrument which by its terms is convertible into, or
exercisable or exchangeable for, capital stock of the Company, except as may be
properly described in the Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company or the Subsidiary, except as may
be properly described in the Prospectus. The certificates evidencing the Common
Stock are in due and proper form.
<PAGE>
(g) The consolidated financial statements of the Company included in
the Registration Statement and the Prospectus fairly present, with respect to
the Company, the financial position, the results of operations, the cash flows,
and the other information purported to be shown therein at the respective dates
and for the respective periods to which they apply. Such consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in effect in the United States (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 Securities Act
and/or the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
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. Pannell Kerr Forster, the accountants whose report on the audited
consolidated financial statements is filed with the Commission as a part of the
Registration Statement, are, and during the periods covered by their reports
included in the Registration Statement and the Prospectus were, independent
certified public accountants with respect to the Company within the meaning of
the Securities 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. There has at no time been a material adverse change in the
financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company on a consolidated basis from the
latest information set forth in the Registration Statement or the Prospectus,
except as may be properly described in the Prospectus.
(h) There is no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation pending, threatened, or
in prospect (or any basis therefor) with respect to the Company, the Subsidiary,
or any of their respective operations, businesses, properties, or assets, except
as may be properly described in the Prospectus or such as individually or in the
aggregate do not now have, and will not in the future have, a material adverse
effect upon the operations, business, properties, or assets of the Company and
the Subsidiary taken as a whole. To the best knowledge of the Company, neither
the Company nor the Subsidiary is not in violation of, or in default with
respect to, any law, rule, regulation, order, judgment, or decree, except as may
be properly described in the Prospectus or such as in the aggregate do not now
have, and will not in the future have, a material adverse effect upon the
operations, business, properties, or assets of the Company and the Subsidiary
taken as a whole; nor is the Company or the Subsidiary currently required to
take any action in order to avoid any such violation or default.
(i) Each of the Company and the Subsidiary has good and marketable
title to all properties and assets which the Prospectus indicates are owned by
it, free and clear of all liens, security interests, pledges, charges,
encumbrances, and mortgages, except as may be properly described in the
Prospectus or as are not material to the Company and the Subsidiary taken as a
whole. No real property owned, leased, licensed, or used by the Company or the
Subsidiary lies in an area which is, or to the knowledge of the Company will be,
subject to zoning, use, or building code restrictions which would prohibit, and
no state of facts relating to the actions or inaction of another person or
entity or his or its ownership, leasing, licensing, or use of any real or
personal property exists or will exist which would prevent, the continued
effective ownership, leasing, licensing, or use of such real property in the
business of the Company and the Subsidiary, each as presently conducted or as
the Prospectus indicates it contemplates conducting, except as may be properly
described in the Prospectus.
<PAGE>
(j) Neither the Company or the Subsidiary nor, to the knowledge of
the Company, any other party, is now, or is expected by the Company to be, in
violation or breach of, or in default with respect to, any provision of any
contract, agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company and the Subsidiary taken as a whole, 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 parties thereto and is enforceable as to them in accordance
with its respective terms. Each of the Company and the Subsidiary enjoys
peaceful and undisturbed possession under all leases and licenses under which it
is operating. Except as described in the Prospectus, neither the Company nor the
Subsidiary is a party to, or bound by, any contract, agreement, instrument,
lease, license, arrangement, or understanding, or subject to any charter or
other restriction, which has had, or may in the future have, a material adverse
effect on the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company and the Subsidiary taken
as a whole. Neither the Company nor the Subsidiary is in violation or breach of,
or in default with respect to, any term of its respective certificate of
incorporation (or other charter document) or by-laws.
(k) Each of the Company and the Subsidiary owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
licenses, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names, and copyrights described or referred to
in the Prospectus as owned or used by it or which are necessary for the conduct
of its respective business as currently conducted as described in the Prospectus
and, to the best knowledge of the Company, its respective business as
contemplated as described in the Prospectus. To the best knowledge of the
Company, all such patents, patent rights, licenses, trademarks, service marks,
and copyrights are (i) valid and enforceable, (ii) not being infringed by any
third parties which infringement could, singly or in the aggregate, materially
and adversely affect the business, properties, operations, condition (financial
or otherwise), results of operations, income, or business prospects of the
Company and the Subsidiary taken as a whole, as presently being conducted or as
proposed to be conducted as described in the Prospectus, and (iii) are
uncontested by any third party. The Company has no knowledge of, nor has it
received any notice of, infringement of, or conflict with, asserted rights of
others with respect to any patents, patent rights, inventions, trade secrets,
licenses, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding could
materially and adversely affect the business, properties, operations, condition
(financial or otherwise), results of operations, income, or business prospects
of the Company and the Subsidiary taken as a whole, as presently being conducted
or as proposed to be conducted as described in the Prospectus.
(l) Neither the Company or the Subsidiary, nor, to the best
knowledge of the Company, any director, officer, agent, employee, or other
person associated with, or acting on behalf of, the Company or the Subsidiary,
has, directly or indirectly: used any corporate funds 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 corporate funds; violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment. The Company's internal accounting controls
and procedures are sufficient to cause each of the Company and the Subsidiary to
comply in all respects with the Foreign Corrupt Practices Act of 1977, as
amended.
<PAGE>
(m) The Company has all requisite power and authority to execute,
deliver, and perform each of this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company and the Subsidiary have been
duly taken to authorize the execution, delivery, and performance by the Company
of this Agreement and the Representative's Warrants. This Agreement has been
duly authorized, executed, and delivered by the Company, is the legal, valid,
and binding obligation of the Company, and is enforceable as to the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, or other laws affecting the rights of creditors
generally. The Representative's Warrants have been duly authorized by the
Company and, when executed and delivered by the Company, will be legal, valid,
and binding obligations of the Company, each enforceable as to the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, or other laws affecting the rights of creditors
generally. No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is required by the
Company or the Subsidiary for the execution, delivery, or performance by the
Company of this Agreement or the Representative's Warrants, except filings under
the Securities Act which have been or will be made before the Closing Date and
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 the Subsidiary is a party, or to which any
of its respective properties or assets are subject, is required for the
execution, delivery, or performance of this Agreement and the Representative's
Warrants; and the execution, delivery, and performance of this Agreement and the
Representative's Warrants will not violate, result in a breach 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 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 such contract,
agreement, instrument, lease, license, arrangement, or understanding, or
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 the
Subsidiary, or violate, result in a breach of, or conflict with, any law, rule,
regulation, order, judgment, or decree binding on the Company or the Subsidiary
or to which any of their respective operations, businesses, properties, or
assets are subject.
(n) The Firm Stock is validly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully paid,
and nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive or similar rights
of stockholders, and the Underwriters will receive good title to the shares of
Firm Stock purchased by them, respectively, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts. The Additional Stock is validly authorized and duly and
validly reserved for issuance and, when issued in accordance with the terms
hereof, will validly issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, and will not issued in violation
of any preemptive or similar rights of stockholders, and the Underwriters will
receive good title to the shares of Additional Stock, if any, purchased by them,
respectively, free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts. . The Stock conforms
to all statements relating thereto contained in the Registration Statement and
the Prospectus.
<PAGE>
(o) The Warrant Stock is validly authorized and has been duly and
validly reserved for issuance and, when issued and delivered upon exercise of
the Representative's Warrants in accordance with the terms thereof, will be
validly issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of any
preemptive or similar rights of stockholders; and the holders of the
Representative's Warrants will receive good title to the securities purchased by
them upon the exercise of the Representative's Warrants, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Company shall reserve such additional number
of shares of Common Stock as shall be issuable as Warrant Stock from time to
time. The Representative's Securities conform to all statements relating thereto
contained in the Registration Statement and the Prospectus.
(p) 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 the
Subsidiary has (i) issued any securities or incurred any material liability or
material obligation, primary or contingent, for borrowed money, (ii) entered
into any material transaction not in the ordinary course of business, (iii)
declared or paid any dividend on its capital stock, except dividends by the
Subsidiary to the Company, or (iv) experienced any adverse changes or any
development which may materially adversely effect the condition (financial or
otherwise), net assets or stockholders' equity, results of operations, business,
key personnel, assets, or properties of the Company and the Subsidiary taken as
a whole.
(q) Neither the Company or the Subsidiary nor any of their
respective officers, directors, or affiliates (as defined in the Regulations),
has taken or will take, directly or indirectly, prior to the termination of the
offering contemplated by this Agreement, 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 in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of any of the Firm Stock or the
Additional Stock.
(r) The Company has obtained from each of its stockholders a written
agreement, in form and substance satisfactory to counsel for the Underwriters,
that, for a period of 24 months from the date on which the Registration
Statement is declared by the Commission to be effective under the Securities
Act, he, she, or it will not, without the prior written consent of the
Representative, offer, pledge, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any shares of Common
Stock or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of Common Stock or other
securities of the Company, including, without limitation, any shares of Common
Stock issuable pursuant to the terms of any employee stock options.
(s) The Company is not, and does not intend to conduct its business
in a manner in which it would be required to register as, an "investment
company" as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations promulgated thereunder.
(t) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement, which right has not been waived.
<PAGE>
(u) Except as may be set forth in the Prospectus, the Company has
not 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.
(v) Neither the Company or the Subsidiary, nor any of their
respective affiliates, is presently doing business with the government of Cuba
or with any person or affiliate located in Cuba. If, at any time after the date
on which the Registration Statement is declared by the Commission to be
effective under the Securities Act or with the Florida Department of Banking and
Finance (the "Florida Department"), whichever is later, and prior to the end of
the period referred to in the first clause of Section 2(b) hereof, the Company
or the Subsidiary commences engaging in business with the government of Cuba or
with any person or affiliate located in Cuba, the Company will so inform the
Florida Department within 90 days after such commencement of business in Cuba,
and, during the period referred to in Section 2(b) hereof, will inform the
Florida Department within 90 days after any change occurs with respect to
previously reported information.
(w) No officer, director, or stockholder of the Company has any
affiliation or association with the National Association of Securities Dealers,
Inc. (the "NASD") or any member thereof.
(x) Except as disclosed in the Prospectus, each of the Company and
the Subsidiary has filed all necessary federal, state, local, and foreign income
and franchise tax returns and other reports required to be filed and has paid
all taxes shown as due thereon; and there is no tax deficiency which has been,
or, to the knowledge of the Company, might be, asserted against the Company or
the Subsidiary.
(y) To the best knowledge of the Company, none of the activities or
business of the Company or the Subsidiary is in violation of, or will cause the
Company or the Subsidiary to violate, any law, rule, regulation, or order of the
United States or Brazil, any state, county, or locality of either thereof, or of
any agency or body of the United States or Brazil or of any state, county, or
locality thereof, the violation of which would have a material adverse effect
upon the condition (financial or otherwise), business, property, prospective
results of operations, or net worth of the Company and the Subsidiary taken as a
whole.
(z) The Common Stock has been approved for quotation on the Nasdaq
National Market.
3. Purchase, Sale, and Delivery of the Stock and the Representative's
Warrants.
(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 issue and sell to the several
Underwriters, and, the Underwriters, severally and not jointly, agree to
purchase from the Company, the numbers of shares of Firm Stock set forth
opposite the respective names of the Underwriters in Schedule I hereto.
The purchase price per share of the Firm Stock to be paid by the
several Underwriters shall be US$____. The initial public offering price per
share of the Firm Stock shall be US$ 10.00.
<PAGE>
Payment for the Firm Stock by the Underwriters shall be made by
certified or official bank check in New York Clearing House (next day) funds or
by electronic wire transfer of next day funds, payable to the order of the
Company, at the offices of H.J. Meyers & Co., Inc., 180 Maiden Lane, New York,
New York 10038, or at such other place in the New York City metropolitan area as
the Representative shall determine and advise the Company by at least two full
days' notice in writing, upon delivery of the Firm Stock to the Representative
for the respective accounts of the Underwriters. Such delivery and payment shall
be made at 9:00 a.m., New York City local time, no later than the tenth business
day following the time of the initial public offering, as defined in Section
11(a) hereof (unless such time and date is postponed in accordance with the
provisions of Section 9(c) hereof), or at such other time as shall be agreed
upon between the Representative and the Company. The time and date of such
delivery and payment are hereinafter referred to as the "Closing Date."
Certificates representing the Firm Stock shall be registered in such
name or names and in such authorized denominations as the Representative may
request in writing at least two full business days prior to the Closing Date.
The Company shall permit the Representative to examine and package such
certificates for delivery at least one full business day prior to the Closing
Date.
(b) The Company hereby grants to the Underwriters the Over-allotment
Option to purchase up to 300,000 shares of Common Stock, as may be necessary to
cover over-allotments, at the same purchase price per share to be paid by the
several Underwriters to the Company for the Firm Stock as provided for in this
Section 3 hereof. The Over-allotment Option may be exercised only to cover
over-allotments in the sale of shares by the Underwriters. The Over-allotment
Option may be exercised by the Representative 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, at any time
and from time to time on or before the [thirtieth][forty-fifth] day following
the date on which the Registration Statement becomes effective under the
Securities Act, by written notice by the Representative to the Company. Such
notice shall set forth the aggregate number of shares of Additional Stock as to
which the Over-allotment Option is being exercised, the name or names in which
the certificates representing the Additional Stock are to be registered, the
authorized denominations in which the Additional Stock is to be registered, and
the time and date, as determined by the Representative, when such shares of
Additional Stock are to be delivered (each such time and date are hereinafter
referred to as an "Additional Closing Date"); provided, however, that no
Additional Closing Date shall 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 Over-allotment Option shall have been given nor later than the eighth
business day after the date on which such notice shall have been given.
In the event the Company declares or pays a dividend or a distribution
on the Common Stock, whether in the form of cash, shares of Common Stock, or
other consideration, prior to the Additional Closing Date, such dividend or
distribution shall also be paid on the Additional Stock on the later of the
Additional Closing Date and the date on which such dividend or distribution is
payable.
Payment for the shares of Additional Stock by the Underwriters shall be
made by certified or official bank check in New York Clearing House (next day)
funds or by electronic wire transfer of next day funds payable to the order of
the Company at the offices of H.J. Meyers & Co., Inc., 180 Maiden Lane, New
York, New York 10038, or at such other place in the New York City metropolitan
area as the Representative shall determine and advise the Company by at least
two full days' notice in writing, upon delivery of the shares of Additional
Stock to the Representative for the respective accounts of the Underwriters.
<PAGE>
Certificates representing the shares of Additional Stock shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two full business days prior to
the Additional Closing Date with respect thereto. The Company shall permit the
Representative to examine and package such certificates for delivery at least
one full business day prior to the Additional Closing Date with respect thereto.
(c) The Company hereby agrees to issue and sell to H.J. Meyers
and/or its designees on the Closing Date the Representative's Warrants to
purchase the Warrant Shares for an aggregate purchase price of US$5.00.
Delivery and payment for the Representative's Warrants shall be made on
the Closing Date. The Company shall deliver to H.J. Meyers, upon payment
therefor, certificates representing the Representative's Warrants in the name or
names and in such authorized denominations as H.J. Meyers may request. The
Representative's Warrants shall be exercisable for a period of four years
commencing one year from the date on which the Registration Statement was
declared effective under the Securities Act at an initial exercise price per
Warrant Share equal to US$____________, provided, however, that the
Representative's Warrants shall also provide for cashless exercise.
(d) It is understood that the Representative may (but shall not be
obligated to) make any and all the payments required pursuant to this Section 3
on behalf of any Underwriters whose check or checks shall not have been received
by the Representative at the time of delivery of the Stock or any Additional
Stock to be purchased by such Underwriter or Underwriters. Any such payment by
the Representative shall not relieve any such Underwriter or Underwriters of any
of its or their obligations hereunder.
4. Offering. The Underwriters are to make a public offering of the Firm
Stock as soon, on or after the date on which the Registration Statement is
declared by the Commission to be effective under the Securities Act, as the
Representative deems it advisable so to do. The Firm Stock is to be offered
initially to the public at the initial public offering price as provided for in
Section 3(a) (such price being hereinafter referred to as the "public offering
price"). After the initial public offering, the Representative may from time to
time increase or decrease the public offering price, in the sole discretion of
the Representative, by reason of changes in general market conditions or
otherwise.
5. Covenants. The Company covenants that it will:
(a) Use its best efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as possible and notify the
Representative and counsel to the Underwriters immediately, and confirm such
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective under the Securities 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)
of 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. If the Registration Statement has become or becomes effective under
the Securities Act with a form of prospectus omitting Rule 430A Information, or
filing of the Prospectus with the Commission is otherwise required under Rule
424(b) of the Regulations, the Company will file with the Commission the
Prospectus, properly completed, pursuant to Rule 424(b) of the Regulations
within the time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing.
<PAGE>
(b) During the time when a prospectus relating to the Firm Stock or
the Additional Stock is required to be delivered hereunder or under the
Securities Act or the Regulations, comply with all requirements imposed upon it
by the Securities 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 Firm Stock and the Additional Stock
in accordance with the provisions hereof and the Prospectus. If, at any time
when a prospectus relating to the Firm Stock or the Additional Stock is required
to be delivered hereunder or under the Securities 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 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 Securities Act or the Regulations, the Company will immediately notify the
Representative and promptly prepare and file with the Commission an appropriate
amendment or supplement (in form and substance satisfactory to the
Representative and counsel to the Underwriters) 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 Securities Act
as soon as possible.
(c) 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 Securities Act or a supplement is filed
with the Commission, deliver without charge to the Representative 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 the Representative may request for the
purposes contemplated by the Securities Act.
(d) Endeavor in good faith, in cooperation with the Representative,
at or prior to the time the Registration Statement is declared by the Commission
to be effective under the Securities Act, to qualify the Securities for offering
and sale under the "blue sky" or securities laws of such jurisdictions as may be
designated by the Representative; 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 the Representative agrees 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.
(e) Make generally available, within the meaning of Section 11(a) of
the Securities Act and the Regulations, to its security holders as soon as
practicable, but not later than __________, 1997, an earnings statement, which
need not be certified by independent certified public accountants unless
required by the Securities Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Securities Act and the Regulations, covering
a period of at least 12 months beginning after the date on which the
Registration Statement was declared effective under the Securities Act.
<PAGE>
(f) For a period of 12 months after the date of the Prospectus, not,
without the prior written consent of the Representative, offer, issue, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities of the
Company, or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of Common Stock, except as
contemplated by Section 3 hereof and except for (i) the issuance of securities
upon the exercise of warrants and options outstanding on the date hereof, as
properly described in the Prospectus, (ii) the issuance of shares of Warrant
Stock issuable upon exercise of the Representative's Warrants, and (iii) the
issuance of shares of Common Stock in connection with an acquisition by the
Company. Notwithstanding the foregoing, the Company shall not, for a period of
24 months from the date of the Prospectus, offer or sell any securities pursuant
to Regulation S under the Securities Act without the prior written consent of
the Representative.
(g) For a period of five years after the date on which the
Registration Statement is declared effective under the Securities Act furnish
you, without charge, the following:
(1) within 90 days after the end of each fiscal year, one copy
of financial statements certified by independent certified public accountants,
including a balance sheet, statement of income, and statement of changes in cash
flows of the Company and its then existing subsidiaries, if any, with supporting
schedules, prepared in accordance with generally accepted accounting principles
in effect in the United States, as at the end of such fiscal year and for the 12
months then ended, which may be on a consolidated basis;
(2) as soon as practicable after they have been sent to
stockholders of the Company or filed with, or furnished to, the Commission or
the NASD, one copy of each annual 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 NASD;
(3) as soon as practicable, one copy of every press release and
every material news item and article in respect of the Company, the Subsidiary,
or their respective affairs which was released by the Company or the Subsidiary;
and
(4) such additional documents and information with respect to
the Company, the Subsidiary, and their respective affairs, as the Representative
may from time to time reasonably request; provided, however, that such
additional documents and information shall be received by the Representative on
a confidential basis, unless otherwise disclosed to the public, and shall not be
used in violation of the federal securities laws and the rules and regulations
promulgated thereunder.
(h) Apply the net proceeds received by the Company from the offering
contemplated by this Agreement in the manner set forth under the heading "Use of
Proceeds" in the Prospectus.
(i) Furnish to the Representative as early as practicable prior to
the Closing Date and each Additional Closing Date, if any, as the case may be,
but not less than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which have been
read by the Company's independent certified public accountants, as stated in
their letters to be furnished pursuant to Section 7(f) hereof.
<PAGE>
(j) File no 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 Securities Act, unless
such filing shall comply with the Securities Act and the Regulations and unless
the Representative shall previously have been advised of such filing and
furnished with a copy thereof, and the Representative shall have approved such
filing in writing. Until the later of (i) the completion by the Underwriters of
the distribution of the Stock (but in no event more than nine months after the
date on which the Registration Statement shall have been declared effective
under the Securities Act) and (ii) 25 days after the date on which the
Registration Statement shall have been declared effective under the Securities
Act, the Company will prepare and file with the Commission, promptly upon the
Representative's request, any amendments or supplements to the Registration
Statement or the Prospectus which, in the sole opinion of the Representative,
may be necessary or advisable in connection with the distribution of the Stock.
The Company shall, at its own expense, file such post-effective amendments to
the Registration Statement as may be required in order to ensure the existence
of a current prospectus with respect to the resale of the Representative's
Warrants and the issuance and resale of the Warrant Shares upon the exercise
thereof for such period as the Warrants shall remain outstanding, subject,
however, to the Regulations and policies of the Commission and the staff
thereof, and shall, at its own expense, maintain the state securities or blue
sky law registrations and qualifications or exemptions therefrom with respect to
the Representative's Securities for such period.
(k) File timely with the Commission an appropriate form to register
the Common Stock pursuant to Section 12(g) of the Exchange Act and comply with
all registration, filing, and reporting requirements of the Exchange Act, which
may from time to time be applicable to the Company.
(l) Comply with all provisions of all undertakings contained in the
Registration Statement.
(m) Prior to the Closing Date or any Additional Closing Date, as the
case may be, issue no press release or other communication, directly or
indirectly, and hold no press conference with respect to the Company or the
Subsidiary, the financial condition, results of operations, business,
properties, assets, liabilities of the Company or the Subsidiary, or this
offering, without the prior written consent of the Representative.
(n) Make all filings required to maintain the inclusion of the
Common Stock on the Nasdaq National Market for at least four years from the date
of this Agreement.
(o) On the Closing Date, sell to the H.J. Meyers, individually and
not as Representative of the several Underwriters, at the aggregate price of
US$5.00, warrants to purchase the Warrant Stock, which Representative's
Warrants shall be substantially in the form set forth as an exhibit to the
Registration Statement.
(p) Until expiration of the Representative's Warrants, keep reserved
sufficient shares of Common Stock for issuance upon exercise of the
Representative's Warrants.
(q) Deliver to the Representative, without charge, within a
reasonable period after the last Additional Closing Date or the expiration of
the period during which the Representative may exercise the Over-allotment
Option, three sets of bound volumes of the Registration Statement and all
related materials, and such other matters as the Representative may designate,
to the individuals designated by the Representative or counsel to the
Underwriters.
<PAGE>
(r) For a period of three years after the effective date on which
the Registration Statement is declared effective under the Securities Act,
provide, at its sole expense, to the Representative copies of the Company's
weekly transfer sheets, and monthly transfer sheets thereafter.
(s) Maintain key-person life insurance payable to the Company on the
life of each of William C. St. Laurent and George c. St. Laurent, III, the
__________ and ___________ of the Company, respectively, in the amount of at
least US$1,000,000 each, for the period of time equal to the longer of three
years from the date on which the Registration Statement becomes effective under
the Securities Act and the term of the employment agreement between the Company
and such officer.
(t) For a period of three years from the date on which the
Registration Statement becomes effective under the Securities Act, the
Representative shall have the right to appoint a designee, which designee shall
be reasonably acceptable to the Company, as an observer of the Company's Board
of Directors. Such observer will have the right to attend all meetings of the
Board of Directors. Such observer shall be entitled to receive reimbursement for
all out-of-pocket expenses incurred in attending such meetings, including, but
not limited to, food, lodging, transportation, and any fees paid to non-employee
directors for attending meetings. The Representative shall be given notice of
such meetings at the same time and in the same manner as directors of the
Company are informed. The Representative and such observer shall be indemnified
to the same extent as the other directors.
(u) For a period of 12 months from the date hereof, maintain a
relationship with a public relations firm acceptable to the Company and the
Representative on terms acceptable to the Underwriter.
(v) Use its best efforts to list itself in Moody's OTC Industrial
Manual within ten days of the date hereof, and maintain such listing for a
period of at least five years from the date hereof.
(w) At or prior to the Closing, execute and deliver to the
Representative a consulting agreement, substantially in the form filed as an
exhibit to the Registration Statement, pursuant to which the Underwriter will be
entitled to a fee of $3,000 per month for a period of 12 months, all of which
fee will be payable at the Closing.
(x) At or prior to the Closing, execute and deliver to the
Representative a merger and acquisition agreement, substantially in the form
filed as an exhibit to the Registration Statement.
(y) The Board of Directors of the Company will hold a minimum of
four meetings per year for each of the next three years.
(z) Until the expiration of two years from the date the Registration
Statement becomes effective under the Securities Act, afford to the
Representative, individually and not as the representative of the several
Underwriters, the right of first refusal (on terms at least as favorable as can
be obtained from other sources) to act as lead manager, placement agent, or
investment banker, as the case may be, with respect to any proposed underwritten
public distribution or private placement of securities by the Company or any
merger, acquisition, or disposition of assets of the Company, if the Company
uses a lead manager, placement agent, investment banker, or other person
performing such functions for a fee. If, during such two-year period, the
Company intends to engage in any of the aforementioned transactions, the Company
shall notify the Representative in writing of such intention and of the proposed
terms thereof. The Company shall thereafter promptly furnish the Representative
with such information concerning the operations, business, properties, or assets
of the Company or such subsidiary as it may reasonably request. If, within 10
business days after such notice, the Representative does not accept in writing
<PAGE>
the offer to act as lead manager, placement agent, or investment banker, as the
case may be, or, at its option, as co-manager or co-agent, or investment banker
with others, as the case may be, as aforesaid with respect to such transaction
upon the terms proposed, the Company shall be free to enter into discussions
with other parties with respect to such transaction and to effect such
transaction upon such proposed terms. Before the Company shall accept any
proposal less favorable to it than that conveyed to the Representative in such
notice, the rights set forth herein shall be reinstated and the same procedure
with respect to such modified proposal as provided above shall be adopted. In
connection with any public offering, the Representative may include other
persons as underwriters or dealers. Any election by the Representative at any
time not to exercise its right of first refusal hereunder shall not effect its
right of first refusal for future transactions hereunder.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(other than fees of counsel for the Underwriters, except as provided in Section
6(c)) in connection with (a) the preparation, printing, filing, distribution,
and mailing of the Registration Statement and the Prospectus and the printing,
filing, distribution, and mailing of this Agreement and the Master Agreement
Among Underwriters, any Master Selected Dealer 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 the
Underwriters in quantities as hereinabove stated, (b) the issuance, offer, sale,
transfer, and delivery (as applicable) of the Securities, including any transfer
or other taxes payable thereon, (c) the qualification of the Securities under
state or foreign "blue sky" or securities laws, including the costs of printing
and mailing the preliminary and final "Blue Sky Survey" and the fees of counsel
for the Underwriters, which shall be US$30,000, and the disbursements in
connection therewith, (d) the filing fees payable to the Commission, the NASD,
and the jurisdictions in which such qualification is sought, (e) any fees
relating to the listing of the Common Stock on the Nasdaq National Market, (f)
the cost of printing certificates representing the shares of Common Stock, (g)
the fees of the transfer agent for the Common Stock, (h) the cost of publication
of "tombstone" advertisements with respect to offerings, not to exceed
US$10,000, (i) the cost of Company due diligence meetings and presentations,
including, without limitation, preparation of video presentations therefor, and
(j) a non-accountable expense allowance equal to two percent of the gross
proceeds of the sale of the Firm Stock and the Additional Stock (less amounts,
if any, previously paid to the Representative by the Company in respect of such
non-accountable expense allowance) to the Representative on the Closing Date.
Notwithstanding the foregoing, if the offering contemplated hereby should be
terminated, the Company agrees to pay the Representative only the out-of-pocket
expenses incurred by the Underwriters in connection with this Agreement or the
proposed offer, sale, and delivery of the Securities.
7. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Stock and the Additional
Stock, as provided herein, and the obligation of H.J. Meyers to purchase and pay
for the Representative's Warrants, each as provided herein, shall be subject, in
the discretion of the Representative, to the continuing accuracy of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
the Underwriters, as of the date hereof and as of the Closing Date (or any
Additional Closing Date, as the case may be), to the performance by the Company
of its obligations hereunder, and to the following conditions:
<PAGE>
(a) The Registration Statement shall have become effective under the
Securities 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 the Representative; on or prior to the Closing Date, or any
Additional Closing Date, as the case may be, no Stop Order shall have been
issued and no proceeding shall have been initiated or threatened with respect to
a Stop Order; and any request by the Commission for additional information shall
have been complied with by the Company to the reasonable satisfaction of the
Representative. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Securities Act.
(b) (1) At the Closing Date and any Additional Closing Date, as the
case may be, you shall have received the opinion of Messrs. Atlas, Pearlman,
Trop & Borkson, P.A., counsel for the Company, dated the date of delivery,
addressed to the Underwriters, and in form and scope satisfactory to the
Representative, with reproduced copies or signed counterparts thereof for each
of the Underwriters, to the effect that:
(i) the only subsidiary (as defined in the Regulations) of the
Company is the Subsidiary. Each of the Company and the Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of its respective jurisdiction of 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, to own, lease, license, and use its respective
properties and assets and to conduct its respective business in the manner
described in the Prospectus. Each of the Company and the Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing as
such in every jurisdiction in which its respective ownership, leasing,
licensing, or use of property and assets or the conduct of its respective
business makes such qualification necessary;
(ii) the authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, of which 6,000,000 shares are outstanding,
and ____________ shares of preferred stock, par value US$1.00 per share, of
which none are outstanding. Except as disclosed in the Prospectus, each
outstanding share of capital stock of the Subsidiary is owned of record and
beneficially by the Company, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting trusts.
Except as disclosed in the Prospectus, each outstanding share of Common Stock
and each share of capital stock of the Subsidiary is validly authorized and
issued, fully paid, and nonassessable, 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 similar rights of stockholders. To the knowledge
of such counsel, 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 Subsidiary or any security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company or the Subsidiary, except as may
be properly described in the Prospectus. There is outstanding no security or
other instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company or the Subsidiary. The
certificates evidencing the Common Stock are in due and proper form;
<PAGE>
(iii) to the knowledge of such counsel, there is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or
investigation pending, threatened, or in prospect (or any basis therefor) with
respect to the Company or the Subsidiary or any of their respective operations,
businesses, properties, or assets, except as may be properly described in the
Prospectus or such as individually or in the aggregate do not now have, and will
not in the future have, a material adverse effect upon the operations, business,
properties, or assets of the Company and the Subsidiary taken as a whole. To the
knowledge of such counsel, neither the Company nor the Subsidiary is in
violation of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree, except as may be properly described in the Prospectus or
such as in the aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business, properties, or assets of
the Company; nor is the Company or the Subsidiary required to take any action in
order to avoid any such violation or default;
(iv) to the knowledge of such counsel, neither the Company or
the Subsidiary, nor any other party is now, or is expected by the Company to be,
in violation or breach of, or in default with respect to, any provision of any
contract, agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company and the Subsidiary taken as a whole, and, to
the knowledge of such counsel, each such contract, agreement, instrument, lease,
license, arrangement, or understanding is in full force and effect and is the
legal, valid, and binding obligation of the parties thereto and is enforceable
in accordance with its terms;
(v) neither the Company nor the Subsidiary is in violation or
breach of, or in default with respect to, any term of its respective certificate
of incorporation (or other charter document) or by-laws;
(vi) the Company has all requisite power and authority to
execute, deliver, and perform this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company and the Subsidiary have been
taken to authorize the execution, delivery, and performance by the Company of
this Agreement and the Representative's Warrants. This Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid, and
binding obligation of the Company, and, subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors' rights
generally, is enforceable as to the Company in accordance with its terms. The
Representative's Warrants have been duly authorized by the Company and, when
executed and delivered by the Company, will be legal, valid, and binding
obligations of the Company, each enforceable as to the Company in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by the Company for the execution, delivery, or performance by the
Company of this Agreement or the Representative's Warrants, except filings under
the Securities Act which have been made prior to the Closing Date or Additional
Closing Date, as the case may be, and consents consisting only of consents under
"blue sky" or securities laws, which have been obtained. No consent of any party
to any contract, agreement, instrument, lease, license, arrangement, or
understanding known to such counsel to which the Company or the Subsidiary is a
party, or to which any of their respective properties or assets are subject, is
required for the execution, delivery, or performance of this Agreement and the
Representative's Warrants; and the execution, delivery, and performance of this
Agreement and the Representative's Warrants will not violate, result in a breach
of, conflict with, result in the creation or imposition of any lien, charge, or
encumbrance upon any properties or assets of the Company 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 such contract,
agreement, instrument, lease, license, arrangement, or understanding known to
such counsel, violate or 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 violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on the Company or the Subsidiary
to which any of their respective operations, businesses, properties, or assets
are subject;
<PAGE>
(vii) each share of Firm Stock to be delivered on the Closing
Date is validly authorized and, when issued and delivered in accordance with the
terms hereof, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, and will not issued in
violation of any preemptive or similar rights of stockholders. Each share of
Additional Stock to be delivered on any Additional Closing Date is validly
authorized and, when issued and delivered in accordance with the terms hereof,
will be validly issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, and will not issued in violation
of any preemptive or similar rights of stockholders. The Underwriters will
receive good title to the shares of Firm Stock and Additional Stock purchased by
them, respectively, free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements, and voting trusts. The Stock
conforms to all statements relating thereto contained in the Registration
Statement or the Prospectus;
(viii) the Warrant Stock is validly authorized and has been duly
and validly reserved for issuance pursuant to the terms of this Agreement and
the Representative's Warrants. The Representative's Warrants have been duly and
validly issued and delivered. The Warrant Stock, when issued and delivered in
accordance with the Representative's Warrants, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and will not have been issued in violation of any preemptive
rights of stockholders. The Representative, and any other holders of the
Representative's Warrants, will receive good title to the securities purchased
by them upon exercise of the Representative's Warrants, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Representative's Securities conform to all
statements relating thereto contained in the Registration Statement or the
Prospectus;
(ix) to the knowledge of such counsel, each contract, agreement,
instrument, lease, or license required to be described in the Registration
Statement or the Prospectus has been properly described therein, and each
contract, agreement, instrument, lease, or license required to be filed as an
exhibit to the Registration Statement has been filed with the Commission as an
exhibit to the Registration Statement;
(x) insofar as statements in the Prospectus purport to summarize
the status of litigation or the provisions of laws, rules, regulations, orders,
judgments, decrees, contracts, agreements, instruments, leases, or licenses,
such statements have been prepared or reviewed by such counsel and accurately
reflect the status of such litigation and provisions purported to be summarized
and are correct in all respects;
(xi) the Company is not an "investment company" as defined in
the Investment Company Act and the rules and regulations thereunder and, if the
Company conducts its business as set forth in the Prospectus, will not become an
"investment company", and will not be required to be registered under the
Investment Company Act;
(xii) to the knowledge of such counsel, no person or entity has
the right to require registration of shares of Common Stock or other securities
of the Company because of the filing or effectiveness of the Registration
Statement, except by entities which have waived such rights as described in the
Registration Statement and the Prospectus; and
<PAGE>
(xiii) the Registration Statement has become effective under the
Securities Act, the Prospectus has been filed in accordance with Rule 424(b) of
the Regulations, including the applicable time periods set forth therein, or
such filing is not required. To the knowledge of such counsel, no Stop Order has
been issued and no proceeding for that purpose has been instituted or
threatened. 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, but without independent verification by such counsel of
the accuracy, completeness, or fairness of the statements contained in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
such counsel have no knowledge that (other than financial statements and other
financial data and schedules which are or should be contained therein, as to
which such counsel need express no opinion): (A) the Registration Statement, any
Rule 430A Prospectus, and the Prospectus, and any amendment or supplement
thereto, does not appear on its face to comply as to form in all material
respects with the requirements of the Securities Act and the Regulations; (B)
any of the Registration Statement, any Rule 430A Prospectus, or the Prospectus,
or any amendment or supplement thereto, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (C) since the date
of effectiveness under the Securities Act of the Registration Statement, any
event has occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has not been
set forth in such an amendment or supplement.
In rendering such opinion, such counsel the application of laws other
than the laws of the United States and the laws of the State of Florida, 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 and that reliance thereon by counsel for the Company and the
Underwriters is reasonable; (B) as to matters of fact, to the extent 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 copies of any
such opinions, certificates, or statements shall be annexed as exhibits to the
opinion of counsel for the Company.
(2) At the Closing Date and any Additional Closing Date, as the
case may be, you shall have received the opinion of Messrs. __________,
Brazilian counsel for the Company, dated the date of delivery, addressed to the
Underwriters, and in form and scope satisfactory to the Representative, with
reproduced copies or signed counterparts thereof for each of the Underwriters.
In rendering such opinion, such counsel for the Company may rely (A) as
to matters involving the application of laws other than the laws of the Federal
Republic of Brazil, 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 and that reliance thereon by counsel for
the Company and the Underwriters is reasonable; (B) as to matters of fact, to
the extent 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 copies of any such opinions, certificates, or statements shall be
annexed as exhibits to the opinion of counsel for the Company.
(c) On or prior to the Closing Date and any Additional Closing Date,
as the case may be, the Underwriters shall have been furnished such information,
documents, certificates, and opinions as they may reasonably require for the
purpose of enabling them to review the matters referred to in Section 7(b), and
in order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions herein
contained, or as the Representative may reasonably request.
<PAGE>
(d) At the Closing Date or any 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 Securities 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 the Subsidiary from that
set forth in the Registration Statement and the Prospectus, except changes which
the Registration Statement and Prospectus indicate might occur after the date on
which the Registration Statement becomes effective under the Securities Act, and
neither the Company nor the Subsidiary shall have incurred any material
liabilities or entered into any agreements not in the ordinary course of
business other than as referred to in the Registration Statement and 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 the Subsidiary or any of their respective operations, businesses,
properties, or assets which would be required to be set forth in the
Registration Statement, wherein an unfavorable decision, ruling, or finding
would materially adversely affect the business, property, condition (financial
or otherwise), results of operations, or general affairs of the Company or such
Subsidiary, and (iv) the Stock be quoted upon the Nasdaq National Market.
(e) At the Closing Date and any Additional Closing Date, as the case
may be, you shall have received a certificate of the chief executive officer,
the chief financial officer, and the chief accounting officer of the Company,
dated the Closing Date or such Additional Closing Date, as the case may be, to
the effect, among other things, that (i) the conditions set forth in Sections
7(a) and 7(d) 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 contained herein were and are
accurate and correct in all materials respects, 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 to such time have been fully
performed.
(f) At the time this Agreement is executed and at the Closing Date
and any Additional Closing Date, as the case may be, you shall have received a
letter, addressed to the Underwriters, and in form and substance satisfactory to
the Representative, with reproduced copies or signed counterparts thereof for
each of the Underwriters, from Pannell Kerr Forster, independent certified
public accountants for the Company, dated the date of delivery:
(i) confirming that they are, and during the period covered by
their report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the published Regulations and stating that the
answer to Item 10 of the Registration Statement is correct insofar as it relates
to them;
<PAGE>
(ii) stating that, in their opinion, the financial statements
and schedules of the Company included in the Registration Statement examined by
them comply in form in all material respects with the applicable accounting
requirements of the Securities 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 a reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of the
latest available minutes of the stockholders and Boards of Directors of the
Company and committees of such Board of Directors, inquiries to certain officers
and other employees of the Company responsible for financial and accounting
matters, and other specified procedures and inquiries, nothing has come to their
attention that caused them to believe that: (A) the unaudited consolidated
financial statements and schedules of the Company included in the Registration
Statement and Prospectus do not comply in form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange Act
and the related published rules and regulations under the Securities 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)
there was any change in the capital stock or long-term debt of the Company or
any decrease in the net current assets or stockholders' equity of the Company as
of the date of the latest available monthly financial statements of the Company
as of a specified date not more than five business days prior to the date of
such letter, each as compared with the amounts shown in the December 31, 1995
balance sheet included in the Registration Statement and Prospectus, other than
as properly described in the Registration Statement and Prospectus or any change
or decrease (which shall be set forth therein) which, in the sole discretion of
the Representative, the Representative shall accept, or (C) there was any
decrease in net sales, net earnings, or net earnings per share of Common Stock
during the period from December 31, 1995 to the date of the latest available
monthly financial statements of the Company or to a specified date not more than
five business days prior to the date of such letter, each as compared with the
corresponding period in 1995, other than as properly described in the
Registration Statement and Prospectus or any decrease (which shall be set forth
therein) which, the sole discretion of the Representative, the Representative
shall accept; and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the Registration
Statement, which have been specified by the Representative 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 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.
(g) All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Securities shall be satisfactory in form and
substance to the Representative and to counsel for the Underwriters, and the
Underwriters shall have received from such counsel for the Underwriters the
opinion, dated as of the Closing Date and the Additional Closing Date, as the
case may be, with respect to such of the matters set forth under Section 7(b),
and with respect to such other related matters, as the Representative may
reasonably request.
<PAGE>
(h) The NASD, upon review of the terms of the public offering of the
Stock shall not have objected to the Underwriters' participation in such
offering.
(i) Prior to or on the Closing Date, the Company shall have entered
into the Representative's Warrants with the Representative.
(j) Prior to or on the Closing Date, the Company shall have provided
to you copies of the agreements referred to in Section 2(r).
Any certificate or other document signed by any officer of the Company
and delivered to the Representative or to counsel for the Underwriters shall be
deemed a representation 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 prior to or at the Closing
Date or any Additional Closing Date, as the case may be, is not so fulfilled,
the Representative may, on behalf of the several Underwriters, terminate this
Agreement or, if the Representative so elects, in writing waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company 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 Securities 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 be 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 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 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
referred to as 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 Securities under the "blue sky" or
securities laws thereof or filed with the Commission or any securities exchange;
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,
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)
with respect to any Underwriter by, or on behalf of, such Underwriter through
the Representative 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, 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.
<PAGE>
If any action is brought against an Underwriter or any of its
respective officers, directors, partners, employees, agents, or counsel, or any
controlling persons of an Underwriter(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
in writing of the institution of such action (but the failure so to notify shall
not relieve the Company from any liability it may have other than pursuant to
this Section 8(a)) and the Company 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. 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 the employment of such counsel shall
have been authorized in writing by the Company in connection with the defense of
such action or 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 such indemnified party or parties shall have 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 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. 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 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 agrees promptly to notify the Underwriters of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Securities, the Registration
Statement, any Preliminary Prospectus, or the Prospectus, or any amendment or
supplement thereto, or any application.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, 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 Securities Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the several Underwriters in Section 8(a), but only with
respect to statements or omissions, if any, 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 any Underwriter by, or on
behalf of, such Underwriter through the Representative expressly for inclusion
in the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or on any application, as the case may be;
provided, however, that the obligation of each Underwriter to provide indemnity
under the provisions of this Section 8(b) shall be limited to the amount which
represents the product of (i) the number of shares of Stock underwritten by such
Underwriter hereunder and the (ii) the underwriting discount per share of Common
Stock set forth on the cover page of the Prospectus. For all purposes of this
Agreement, the amounts of the selling concession and reallowance and the name of
each of the Underwriters, and the number of shares of Firm Stock purchased by
each of the Underwriters set forth in the Prospectus constitute the only
information furnished in writing by, or on behalf of, such Underwriter expressly
for inclusion in the Registration Statement, any Preliminary Prospectus, or the
Prospectus (as from time to time amended or supplemented), 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
the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against any Underwriter pursuant to this Section
8(b), such Underwriter 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 8(a).
<PAGE>
(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 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 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, in the aggregate, are responsible
for the proportion thereof equal to the percentage which the underwriting
discount per share of Common Stock set forth on the cover page of the Prospectus
represents of the initial public offering price per share of Common Stock set
forth on the cover page of the Prospectus and the Company is 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 the Underwriters in connection with the facts
which resulted in such losses, liabilities, claims, damages, and expenses shall
also be considered. 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 the Under
writers, 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 Underwriters agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Underwriters 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 Securities 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 any Underwriter 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 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 Securities 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
the 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
Securities Act, the Exchange Act, or otherwise.
<PAGE>
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Stock or Additional Stock hereunder, and if the
number of shares of Firm Stock or Additional Stock to which the defaults of all
Underwriters in the aggregate relate does not exceed 10% of the number of shares
of Firm Stock or Additional Stock, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such shares of Firm Stock or Additional
Stock to which such defaults relate shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
(b) If such defaults exceed in the aggregate 10% of the number of
shares of Firm Stock or Additional Stock, as the case may be, which all
Underwriters have agreed to purchase hereunder, the Representative may, in its
discretion, arrange to purchase itself or for another party or parties to
purchase such shares of Firm Stock or Additional Stock, as the case may be, to
which such default relates on the terms contained herein. If the Representative
does not arrange for the purchase of such shares of Firm Stock or Additional
Stock, as the case may be, within one business day after the occurrence of
defaults relating to in excess of 10% of the Firm Stock or the Additional Stock,
as the case may be, then the Company shall be entitled to a further period of
one business day within which to procure another party or parties satisfactory
to the Representative to purchase such shares of Firm Stock or Additional Stock,
as the case may be, on such terms. If the Representative or the Company does not
arrange for the purchase of the shares of Firm Stock or Additional Stock, as the
case may be, to which such defaults relate as provided in this Section 9(b),
this Agreement may be terminated by the Representative or by the Company without
liability on the part of the Company (except that the provisions of Sections
5(a)(1), 6, 8, 10, and 13 shall survive such termination) or the several
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter of its liability, if any, to the other several Underwriters and to
the Company for any damages occasioned by its default hereunder.
(c) If the shares of Stock or Additional Stock to which such
defaults relate are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or parties as aforesaid, the Representative or
the Company shall have the right to postpone the Closing Date or the Additional
Closing Date, as the case may be, for a reasonable period but not in any event
more than seven 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 with respect to the Firm Stock or the Additional
Stock, and the Company agrees to prepare and file promptly any amendment or
supplement to the Registration Statement or the Prospectus which in the opinion
of counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 as if such party had originally been a party to this
Agreement and had been allocated the number of shares of Firm Stock and
Additional Stock actually purchased by it as a result of its original commitment
to purchase Firm Stock and Additional Stock and its purchase of shares of Firm
Stock or Additional Stock pursuant to this Section 9.
<PAGE>
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 and
the Company, including 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, any Underwriter or any indemnified
person, or by, or on behalf of, the Company, or any person or entity which is
entitled to be indemnified under Section 8(b), and shall survive termination of
this Agreement or the delivery of the Firm Stock and the Additional Stock, if
any, to the several Underwriters. In addition, the provisions of Sections
5(a)(1), 6, 8, 10, 11, and 13 shall survive termination of this Agreement,
whether such termination occurs before or after the Closing Date or any
Additional Closing Date. Notwithstanding anything in the second sentence of
Section 6 hereof to the contrary, and in addition to the obligations assumed by
the Company pursuant to the first sentence of Section 6 hereof, if the offering
should be terminated, the Company shall be liable to the Underwriters only for
out-of-pocket expenses incurred by the Underwriters in connection with this
Agreement or the proposed, offer, sale, and delivery of the Securities.
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 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 Securities Act or at the time
of the initial public offering by the Underwriters of the Firm Stock, whichever
is earlier. The time of the initial public offering shall mean the time, after
the Registration Statement becomes effective under the Securities Act, of the
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Firm Stock or the
time, after the Registration Statement becomes effective under the Securities
Act, when the Firm Stock is first released by the Representative for offering by
the Underwriters or dealers by letter or telegram, whichever shall first occur.
The Representative or the Company may prevent this Agreement from becoming
effective without liability of any party to any other party, except as noted
below in this Section 11, by giving the notice indicated in Section 11(d) before
the time this Agreement becomes effective under the Securities Act.
(b) If the purchase price of the Firm Stock has not been determined
as provided for in Section 3 prior to 4:30 p.m., New York City local time, on
the fifth full business day after the date on which the Registration Statement
becomes was declared effective under the Securities Act, this Agreement may be
terminated at any time thereafter either by the Representative or by the Company
by giving notice to the other unless before such termination the purchase price
for the Firm Stock has been so determined. If the purchase price of the Firm
Stock has not been so 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 Securities Act, this Agreement shall
automatically terminate forthwith.
<PAGE>
(c) In addition to the right to terminate this Agreement pursuant to
Sections 7 and 9 hereof, the Representative 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, and, if exercised,
the Over-allotment Option, at any time prior to any Additional Closing Date, by
giving notice to the Company, (i) if any domestic or international event, act,
or occurrence has materially and adversely disrupted, or, in the opinion of the
Representative, will in the immediate future materially and adversely 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 or the American 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 communication within the United States; or
(vii) if the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage, or other calamity
or malicious act, whether or not such loss shall have been insured, or from any
labor dispute or court or government action, order, or decree, which will, in
the opinion of the Representative, make it inadvisable to proceed with the
offering, sale, or delivery of the Firm Stock or the Additional Stock, as the
case may be; 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 any act or measure, or adopted by
any governmental body or authoritative accounting institute or board, or any
governmental executive, any orders, rules, or regulations, which the
Representative believes likely to have a material adverse effect on the
business, financial condition, or financial statements of the Company or the
market for the Common Stock; or (x) if there shall have been such material and
adverse change in the market for the Company's securities or securities in
general or in political, financial, or economic conditions as in the judgment of
the Representative makes it inadvisable to proceed with the offering, sale, and
delivery of the Firm Stock or the Additional Stock, as the case may be, on the
terms contemplated by the Prospectus.
(d) If the Representative elects to prevent this Agreement
from becoming effective, as provided in this Section 11, or to terminate this
Agreement pursuant to Section 7 of this Agreement or this Section 10, the
Representative shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects to prevent
this Agreement from becoming effective or to terminate this Agreement, the
Company shall notify the Representative 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 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 to the several Underwriters, in addition to the
obligations the Company assumed pursuant to the first sentence of Section 6,
will be to reimburse the several Underwriters for such out-of-pocket expenses
(including the fees and disbursements of their counsel) as shall have been
incurred by them in connection with this Agreement or the proposed offer, sale,
and delivery of the Securities, and, upon demand, the Company agrees to pay
promptly the full amount thereof to the Representative for the respective
accounts of the Underwriters. Anything in this Agreement to the contrary
notwithstanding other than Section 11(f), if this Agreement shall not be carried
out within the time specified herein for any reason other than the failure on
the part of the Company to perform any covenant or agreement or satisfy any
condition of this Agreement by it to be performed or satisfied, the Company
shall have no liability to the several Underwriters other than for obligations
assumed by the Company pursuant to Section 6.
<PAGE>
(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 5(a)(1), 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. Notwithstanding anything in the second
sentence of Section 6 hereof to the contrary, and in addition to the obligations
assumed by the Company pursuant to the first sentence of Section 6 hereof, if
the offering should be terminated, the Company shall be liable to the several
Underwriters only for out-of-pocket expenses incurred by the several
Underwriters in connection with this Agreement or the proposed, offer, sale, and
delivery of the Securities.
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 such Underwriter, c/o H.J. Meyers & Co., Inc., 180 Maiden Lane,
19th Floor, New York, New York 10038, Attention: Mr. Jerry Feldman, Senior Vice
President, with a copy to Brock, Fensterstock, Silverstein, McAuliffe & Wade,
LLC, One Citicorp Center, 56th Floor, York, New York 10022, Attention: Robert
Steven Brown, Esq.; or if sent to the Company, shall be mailed, delivered, or
telexed or telegraphed and confirmed by letter, to the Company, Vitech America,
Inc., 8807 Northwest 23rd Street, Miami, Florida 33172, Attention: Mr. William
C. St. Laurent, President, with a copy to Atlas, Pearlman, Trop & Borkson, P.A.,
200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301,
Attention: James M. Schneider, Esq. All notices hereunder shall be effective
upon receipt by the party to which it is addressed.
13. Parties. H.J. Meyers represents that it is authorized to act as
Representative on behalf of the several Underwriters named in Schedule I hereto,
and the Company shall be entitled to act and rely on any request, notice,
consent, waiver, or agreement purportedly given on behalf of the Underwriters
when the same shall have been given by H.J. Meyers on such behalf. This
Agreement shall inure solely to the benefit of, and shall be binding upon, the
several Underwriters and the Company 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 Firm Stock or the Additional Stock), and no
other person shall have, or be construed to have, any legal or equitable right,
remedy, or claim under, 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 hereunder are
several and not joint.
14. Construction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
conflict of laws. Time is of the essence in this Agreement.
15. 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 Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement 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. Within 30 days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to such action
or proceeding, the Company shall appear or answer such summons, complaint, or
other process. Should the Company fail to appear or answer within such 30-day
period or such extended period, as the case may be, the Company shall be deemed
in default and judgment may be entered against the Company for the amount as
demanded in any summons, complaint, or other process so served.
<PAGE>
If the foregoing correctly sets forth the understandings between the
Representative and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
VITECH AMERICA, INC.
By:
---------------------------------
William C. St. Laurent, President
Accepted as of the date first above
written in New York, New York
H.J. MEYERS & CO., INC.*
By:
--------------------------------------
Jerry Feldman, Senior Vice President
* On behalf of itself and the other several
Underwriters named in Schedule I hereto.
<PAGE>
SCHEDULE I
Total
Number
of Shares
to be
Underwriter Purchased
----------- ----------
H.J. Meyers & Co., Inc.......................................
---------
Total................................................. 2,000,000
=========
<PAGE>
Exhibit 1.2
THE SECURITIES REPRESENTED HEREBY AND ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
HOWEVER, NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION
STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
THIS WARRANT IS NOT EXERCISABLE PRIOR TO ___________, 1997.
VOID AFTER 5:00 P.M. NEW YORK CITY LOCAL TIME, ___________, 2001.
VITECH AMERICA, INC.
Warrants for the Purchase
of
200,000 Shares of Common Stock, No Par Value
No. IPO-1
THIS CERTIFIES that, for receipt in hand of $5.00 and other value
received, H.J. MEYERS & CO., INC. (the "Holder") is entitled to subscribe for,
and purchase from, VITECH AMERICA, INC., a Florida corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to time
after 12:00 A.M., New York City local time ___________, 1997 until 5:00 P.M. New
York City local time on ___________, 2001 (the "Exercise Period"), up to an
aggregate of 200,000 shares of common stock, no par value (the "Common Stock").
This Warrant is initially exercisable at $___ per share; provided, however, that
upon the occurrence of any of the events specified in Section 5 hereof, the
rights granted by this Warrant, including the exercise price and the number of
shares of Common Stock to be received upon such exercise, shall be adjusted as
therein specified. The term "Exercise Price" shall mean, depending on the
context, the initial exercise price (as set forth above) or the adjusted
exercise price per share.
This Warrant is the Representative's Warrant or one of the
Representative's Warrants (collectively, including any Representative's Warrant
issued upon the exercise or transfer of any such Representative's Warrants in
whole or in part, the "Warrants") issued pursuant to the Underwriting Agreement,
dated __________, 1996 (the "Underwriting Agreement"), between the Company and
H.J. Meyers & Co., Inc., as the representative (the "Representative") of the
several underwriters (the "Underwriters"). As used herein, the term "this
Warrant" shall mean and include this Warrant and any Warrant or Warrants
hereafter issued as a consequence of the exercise or transfer of this Warrant in
whole or in part. This Warrant may not be sold, transferred, assigned, or
hypothecated until ______________, 1997, except that it may be transferred, in
whole or in part, 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 public offering of shares
of Common Stock which commenced on __________, 1996 (or the officers or partners
of any such firm); (iii) a successor to the Holder, or the officers or partners
of such successor; (iv) a purchaser of substantially all of the assets of the
Holder; or (v) by operation of law. The term the "Holder" as used herein shall
include any transferee to whom this Warrant has been transferred in accordance
with the above.
<PAGE>
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share".
1. This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (with the election at the end
hereof duly executed) to the Company at its office at 8807 Northwest 23rd
Street, Miami, Florida 33172, or at such other place as is 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 product of the Exercise Price and
the number of Warrant Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Warrant
Shares, the Holder shall be deemed to be the holder of record of the Warrant
Shares, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing the Warrant Shares with respect to which
this Warrant was exercised 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
representing 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, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a Warrant evidencing the right of the Holder to purchase the
balance of the aggregate number of Warrant Shares purchasable hereunder as to
which this Warrant has not been exercised or assigned.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"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 of 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 on the books of the Company only upon
delivery thereof duly endorsed by the Holder or by his 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, her, 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
thereof, 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. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations thereunder.
4. 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 represents that all
shares of Common Stock issuable upon exercise of this Warrant are duly
authorized and, upon receipt by the Company of the full payment for such Warrant
Shares, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof and will not be issued in
violation of any preemptive or similar rights of stockholders.
<PAGE>
5. (a) The Exercise Price for the Warrants in effect from time to time,
and the number of shares of Common Stock issuable upon exercise of the Warrants,
shall be subject to adjustment, as follows:
(i) In the event that the Company shall at any time after the date
hereof (A) declare a dividend on the outstanding Common Stock payable in shares
of its capital stock, (B) subdivide the outstanding Common Stock, (C) combine
the outstanding Common Stock into a smaller number of shares, or (D) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price per Warrant Share in effect at the time of the record date for the
determination of stockholders entitled to receive such dividend or distribution
or of the effective date of such subdivision, combination, or reclassification
shall be adjusted so that it shall equal the price determined by multiplying
such Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action. Such adjustment shall be made successively
whenever any event listed above shall occur and shall become effective at the
close of business on such record date or at the close of business on the date
immediately preceding such effective date, as applicable.
(ii) In the event that the Company shall fix a record date for the
determination of stockholders entitled to receive issuance of rights or warrants
to be issued to all holders of Common Stock entitling such stockholders to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the Current Market Price (as hereinafter defined) per
share of Common Stock, the Exercise Price in effect at the time of such record
date shall be adjusted so that the same shall equal the price determined by
multiplying such Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the sum of the number of shares
of Common Stock outstanding on such record date and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such Current Market Price
per share of the Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
(iii) In the event the Company shall fix a record date for the
determination of stockholders entitled to receive (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 in a
distribution to all holders of Common Stock) evidences of its indebtedness,
cash, or assets (other than distributions and dividends payable in shares of
Common Stock), or rights, options, or warrants to subscribe for or purchase
shares of Common Stock, or securities convertible into, or exchangeable for,
shares of Common Stock (excluding those referred to in paragraph (ii) above) in
a distribution to all holders of Common Stock, then, in each case, the Exercise
Price in effect at the time of such record date shall be adjusted by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on such record date, 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 of such rights, options, or
warrants, or convertible or exchangeable securities, 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 on such record date. Such
adjustment shall be made successively whenever any event listed above shall
occur and become effective at the close of business on such record date.
<PAGE>
(iv) In case the Company shall issue shares of Common Stock for a
consideration per share (the "Offering Price") less than the Current Market
Price per share of Common Stock on the date the Company fixes the offering price
of such additional shares, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying such
Exercise Price by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in Subsection (i)
below) for the issuance of such additional shares would purchase at such Current
Market Price per share of Common Stock, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made. Notwithstanding anything herein to the contrary, no
adjustment pursuant to this paragraph (a)(iv) of Section 5 shall take place as a
result of this issuance of shares of Common Stock pursuant to an employee,
officer, or director securities ownership or compensation plan duly adopted by
the Board of Directors of the Company, including, but not limited to, any
employee stock option plan duly adopted by the Board of Directors of the
Company.
(v) In case the Company shall issue any securities convertible into, or
exchangeable for, Common Stock (excluding securities issued in transactions
described in Subsections (ii) and (iii) above) for a consideration per share of
Common Stock (the "Conversion Price") initially deliverable upon conversion or
exchange of such securities (determined as provided in Subsection (i) below)
less than the Current Market Price per share of Common Stock in effect
immediately prior to the issuance of such securities, the Exercise Price in
effect immediately prior to the date of such issuance shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying such Exercise Price by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such securities and the number of shares of Common Stock which
the aggregate consideration received (determined as provided in Subsection (i)
below) for such securities would purchase at such Current Market Price per share
of Common Stock, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance and the
maximum number of shares of Common Stock deliverable upon conversion of, or in
exchange for, such securities at the initial conversion or exchange price or
rate. Such adjustment shall be made successively whenever such an issuance is
made. Notwithstanding anything herein to the contrary, no adjustment pursuant to
this paragraph (a)(v) of Section 5 shall take place as a result of the issuance
of securities convertible into, or exchangeable for, shares of Common Stock
pursuant to an employee, officer, or director securities ownership or
compensation plan duly adopted by the Board of Directors of the Company,
including, but not limited to, any employee stock option plan duly adopted by
the Board of Directors of the Company.
(b) 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 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) 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. through the Nasdaq SmallCap Market or a similar
organization if the Nasdaq SmallCap Market is no longer reporting such
information. If, on any such date, the Common Stock is not listed or admitted to
trading on any national securities exchange and is not quoted on the Nasdaq
SmallCap Market or any similar organization, the Current Market Price shall be
deemed to be 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, absent
manifest error.
<PAGE>
(c) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(d) 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, 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 Warrant Shares, if any, issuable upon such exercise over
and above the number of Warrant Shares issuable upon such exercise on the basis
of the number of shares of Common Stock outstanding or in effect prior to such
adjustment; provided, however, that the Company shall deliver to the Holder a
due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares of Common Stock upon the occurrence of the event
requiring such adjustment.
(e) Whenever there shall be an adjustment as provided in this Section
5, the Company shall within 15 days thereafter cause written notice thereof to
be sent by registered or certified mail, postage prepaid, to the Holder, at 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 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.
(f) 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 of capital stock would be issuable on 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.
(g) No adjustment in the Exercise Price per Warrant Share shall be
required if such adjustment is less than $.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.
(h) Whenever the Exercise Price payable upon exercise of this Warrant
is adjusted pursuant to Subsections (a)(i), (a)(ii), (a)(iii), (a)(iv), or
(a)(v) above, the number of Warrant Shares issuable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number of Warrant
Shares theretofore issuable upon exercise of this Warrant by the Exercise Price
in effect on _________, 1996 and dividing the product so obtained by the
Exercise Price, as adjusted.
(i) For purposes of any computation respecting consideration received
pursuant to Subsections (a)(iv) and (a)(v) above, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts, or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board
of Directors of the Company (irrespective of the accounting
treatment thereof), the determination of which shall be a
conclusive absent manifest error; and
<PAGE>
(iii) in the case of the issuance of securities convertible into, or
exchangeable for, shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any,
to be received by the Company upon the conversion or exchange
thereof (the consideration in each case to be determined in
the same manner as provided in clauses (i) and (ii) of this
Subsection (i)).
(j) Notwithstanding anything herein to the contrary, if any adjustment
under this Section 5 of the Exercise Price or the number of shares of Common
Stock or other securities issuable upon exercise of this Warrant shall be
determined by the National Association of Securities Dealers, Inc. (the "NASD")
to violate either or both of Section 44(c)(6)(B)(vi)(7) or Section
44(c)(6)(B)(vi)(8) of Article III of the Rules of Fair Practice of the NASD, and
such determination shall not be subject to further appeal or review, the
violative provisions or provisions shall be deemed to be amended to the minimum
extent necessary to cause each such provision to comply with the applicable
violated paragraph of Section 44 of the NASD Rules of Fair Practice.
(k) Notwithstanding anything to the contrary set forth in clauses (ii),
(iii), (iv), and (v) of clause (a) of this Section 5, the antidilution
provisions set forth therein shall have no effect on the Exercise Price and the
number of Warrant Shares until such time as the aggregate dilution as a result
of the circumstances described therein exceeds 15%, and shall be effective only
with respect to dilution as a result of the circumstances described therein
which shall occur in addition to such 15%.
6. (a) In case of any capital reorganization, other than in the cases
referred to in Section 5(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in the case of any sale, lease, or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (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 Warrant
Shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the respective number of Warrant
Shares which would otherwise have been deliverable upon the exercise of this
Warrant would have been entitled 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 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, with respect to this Warrant, 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 such holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of sale, lease, or conveyance or other transfer of all or
substantially all of the assets of the Company as part of a plan for liquidation
of the Company, all rights to exercise this Warrant shall terminate 30 days
after the Company gives written notice to the Holder and each registered holder
of a Warrant that such sale or conveyance or other transfer has been
consummated.
<PAGE>
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from a specified par value to no par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), 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 (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder or holders of this
Warrant 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 Warrant Shares 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. 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 make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) 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, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered or certified mail, postage prepaid, to the Holder
at the Holder's address as it shall appear in the Warrant Register, mailed at
least 20 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, (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, or (iii) the date of such action which would require
an adjustment to the Exercise Price per Warrant Share.
<PAGE>
8. 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, and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. (a) If, at any time during the seven-year period commencing on
___________, 1997, 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") while any Registrable Securities (as hereinafter
defined) are outstanding, the Company shall give all the then holders of any
Registrable Securities (the "Eligible Holders") at least 45 days prior written
notice of the filing of such registration statement. If requested by any
Eligible Holder in writing within 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 the underwriting
discounts, if any, payable in respect of the Registrable Securities sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Securities of any Eligible Holders 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
Registrable Securities, 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. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then any
Eligible Holder who shall have requested registration of his, her, or its
Registrable Securities shall delay the offering and sale of such Registrable
Securities (or the portions thereof so designated by such managing underwriter)
for such period, not to exceed 90 days (the "Delay Period"), as the managing
underwriter shall request, provided that no such delay shall be required as to
any Registrable Securities if any securities of the Company are included in such
registration statement and eligible for sale during the Delay Period for the
account of any person other than the Company and any Eligible Holder unless the
securities included in such registration statement and eligible for sale during
the Delay Period for such other person shall have been reduced pro rata to the
reduction of the Registrable Securities which were requested to be included and
eligible for sale during the Delay Period in such registration. As used herein,
"Registrable Securities" shall mean the Warrants and the Warrant Shares which,
in each case, have not been previously sold pursuant to a registration statement
or Rule 144 promulgated under the Securities Act.
<PAGE>
(b) If, on any two occasions during the four-year period commencing on
________, 1996, the Company shall receive a written request from Eligible
Holders who in the aggregate own (or upon exercise of all Warrants or 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
Registrable Securities (the "Majority Holders"), to register the sale of all or
part of such Registrable Securities, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Registrable Securities
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 to file one such
registration statement pursuant to this Section 9(b) for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Registrable Securities sold by the Eligible
Holders) shall be borne by the Company. Within five 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 Holder's Registrable Securities,
provided that the Company receives a written request to do so from such Eligible
Holder within 30 days after receipt by him, her, or it 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 Registrable
Securities 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; provided, however, that the Company shall not be
required by reason of this Section 9(c) to register or qualify the Registrable
Securities 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 the Company is not then subject.
(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 Registrable Securities 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 months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities 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 Registrable Securities included in
such registration.
<PAGE>
(f) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall furnish each Eligible Holder of any Registrable
Securities 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 and no order suspending the
effectiveness of the registration statement, or 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, to the knowledge
of such counsel, 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 theSecurities Act and
the rules and regulations thereunder, 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 Registrable Securities 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 provision 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 Registrable
Securities.
(h) The Company agrees that until all the Registrable Securities have
been sold under a registration statement or pursuant to Rule 144 under the
Securities Act, it shall keep current in filing all reports, statements, and
other materials required to be filed with the Commission to permit holders of
the Registrable Securities to sell such securities under Rule 144 under the
Securities Act.
10. (a) 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 theSecurities Act or Section
20(a) of the Securities Exchange Securities 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 expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced 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 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 offer and sale of any of the Registrable Securities, or (B) any application
or other document or communication (in this Section 10, referred to collectively
as 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 Registrable Securities
under the securities or "blue sky" laws thereof or filed with the Commission or
any securities exchange; 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, 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.
<PAGE>
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 in writing 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, without
limitation, the employment of counsel reasonably satisfactory to such
indemnified party or parties) and 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 the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or the named parties to such action include both the indemnified
and the indemnifying parties and 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, which, for reasons of conflict of
interest or otherwise, counsel to the Company is not in a position to assert, in
any of which events such reasonable 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 Section
10 to the contrary notwithstanding, the Company 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. 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.
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 Registrable Securities or any
preliminary prospectus, prospectus, registration statement, or amendment or
supplement thereto, or any application relating to any sale of any Registrable
Securities.
(b) Each Eligible Holder severally agrees to indemnify and hold
harmless the Company, each director of the Company, each officer of the Company
who shall have signed any registration statement covering Registrable Securities
held by such Eligible 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 Eligible Holders in Section
10(a), but only with respect to statements or omissions, if any, made in any
registration statement, preliminary prospectus, or final 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 with respect to any Eligible Holder by, or
on behalf of, such Eligible 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 any application,
and in respect of which indemnity may be sought against any Eligible Holder
pursuant to this Section 10(b), such Eligible 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).
<PAGE>
(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) hereof (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 Warrant 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
Registrable Securities 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
Eligible Holders agree 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 Eligible Holders 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 Registrable
Securities) 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
Registrable Securities) 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 Holders 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.
<PAGE>
11. Unless registered pursuant to the provisions of Section 9 hereof,
the Warrant Shares issued upon exercise of the Warrants shall be subject to a
stop transfer order and the certificate or certificates representing the Warrant
Shares shall bear the following legend:
THE SECURITIES REPRESENTED HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO
THE HOLDER HEREOF, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS.
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by the Company of reasonably
satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder 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. 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. The Holder and the Company irrevocably consent 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 Holder or the Company, as applicable, 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. Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the Company shall
appear to answer such summons, complaint, or other process. Should the Company
so served fail to appear or answer within such 30-day period or such extended
period, as the case may be, the Company shall be deemed in default and judgment
may be entered against the Company for the amount as demanded in any summons,
complaint, or other process so served.
Dated: ________, 1996
VITECH AMERICA, INC.
By: _______________________________
William C. St. Laurent
President
[Seal]
- ----------------------
Secretary
<PAGE>
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 to purchase __________
shares of Common Stock, no par value, of Vitech America, Inc., a Florida
corporation (the "Company"), and does hereby irrevocably constitute and appoint
___________ 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.
<PAGE>
ELECTION TO EXERCISE
To: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
The undersigned hereby exercises his, her, or its rights to purchase
shares of Common Stock, no par value ("the Common Stock"), of Vitech America,
Inc., a Florida corporation (the "Company"), covered by the within Warrant and
tenders payment herewith in the amount of $____________ in accordance with the
terms thereof, and requests that certificates for the securities constituting
such shares of Common Stock be issued in the name of, and delivered to:
(Print Name, Address, and Social Security
or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for the
balance of the shares of Common Stock covered by the within Warrant shall be
registered in the name of, and delivered to, the undersigned at the address
stated below.
Dated: __________________ Name________________________
(Print)
Address:
------------------------
(Signature)
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF
VITECH AMERICA, INC.
<PAGE>
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy
of the Articles of Incorporation of VITECH
AMERICA, INC., a Florida corporation, filed on
June 24, 1993, as shown by the records of this
office.
The document number of this corporation is
P93000045800.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Twenty-ninth day of June, 1993
[SEAL] /s/ Jim Smith
CR2EQ22 (2-91) ----------------------
Jim Smith
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
VITECH AMERICA, INC.
The undersigned subscriber to these Articles of Incorporation, being a
natural person competent to contract, hereby declares that these Articles of
Incorporation are being executed, for the purpose of forming a body corporate
under and by virtue of the laws of the State of Florida, and specifically under
and by virtue of the provisions of Chapter 607, Florida Statutes.
ARTICLE I
NAME AND PRINCIPAL OFFICE
The name of the corporation shall be VITECH AMERICA, INC. and its
principal office shall be located at 8807 N.W. 23rd Street, Miami, Florida
33172.
ARTICLE II
PURPOSE AND POWERS
A. This corporation shall have all of the powers conferred upon general
corporations pursuant to the statutes of the State of Florida, as amended; and
B. Without limiting the generality of the foregoing, this corporation
shall have the following purposes and objects, to-wit:
(1) To purchase, lease, exchange, sell, import, export
or otherwise dispose of or acquire all types and
kinds of property, both real and personal, in the
State of Florida and elsewhere.
(2) To conduct business in, have one or more offices in,
and buy, hold, mortgage, sell convey, lease, and
otherwise dispose of real and personal
<PAGE>
property, including franchises, patents,
copyrights, trademarks, secret processes and
licenses, in the State of Florida and in all other
states and countries.
(3) To contract debts and borrow money, issue and sell
or pledge bonds, debentures, notes and other
evidences of indebtedness, and execute such
mortgages, transfers of corporate property, or
other instruments to secure the payment of
corporation indebtedness as may be required.
(4) To guarantee, endorse, purchase, hold, sell,
transfer, mortgage, pledge or otherwise acquire or
dispose of the shares of the capital stock of or
any bonds, securities, or other evidences of
indebtedness created by, any other corporation of
the State of Florida or any other state or
government, and while the owner of such stock to
exercise all rights, powers and privileges of
ownership, including the right to vote such stock.
(5) To enter into, make, perform, and carry out
contracts of every sort and kind which may be
necessary or convenient for the business of this
corporation, or business of a similar nature, with
any person, firm, corporation, or body politic
under the government of the United States, or any
state or territory as the same is permitted by law.
(6) To do all and everything necessary, suitable or
proper for the accomplishment of any of the objects
or the furtherance of any of the powers
hereinbefore set forth, either alone or in
connection with other corporations, firms, or
individuals, and either as principal or agent, and
to do every other act or acts, thing or things,
incidental or appurtenant to or growing out of or
connected with the aforesaid objects, purposes or
powers, or any of them.
(7) To engage in any other business, or do any and all
acts and things incident to or which the Board of
Directors may deem necessary in the carrying out of
the success of any business which may now or
hereafter be conducted by this corporation.
2
<PAGE>
ARTICLE III
CAPITAL STOCK
The maximum number of shares of stock which may be issued by the
corporation shall be One Thousand (1000) shares of common stock.
ARTICLE IV
REGISTERED AGENT
The name and street address of the initial registered agent and
registered office of this corporation shall be PHILIP TATICH, Suite 200, The
Maitland Green Building, 601 South Lake Destiny Road, Maitland, Florida 32751.
ARTICLE V
TERM OF EXISTENCE
This corporation shall have perpetual existence to commence upon the
subscription and acknowledgment of these Articles of Incorporation.
ARTICLE VI
BOARD OF DIRECTORS
The business of this corporation shall be managed and its corporate
powers exercised by a Board consisting of one (1) or more Directors, to be fixed
from time to time as provided in the By-Laws of the corporation. The members of
the Board of Directors shall be elected in the manner set forth in said By-Laws
at the annual meeting of the shareholders of this corporation and said officers
shall be elected by the Board of Directors at any meeting held for that purpose.
3
<PAGE>
ARTICLE VII
SUBSCRIBER
The name and street address of the subscriber to these Articles of
Incorporation, and the number of shares of stock which each subscribe, is as
follows, to-wit:
Name and Address Number of Shares
---------------- ----------------
Philip Tatich 1000
601 South Lake Destiny Road
Suite 200
Maitland, Florida 32752
ARTICLE VIII
MANAGEMENT OF THE CORPORATION
The business of this corporation shall be conducted by a Board of
Directors and by a President, a Secretary, and such other officer or officers as
the Board of Directors from time to time and at any time determine to be
necessary or advisable.
ARTICLE IX
PAYMENT FOR STOCK
The capital stock of this corporation shall be issued as fully paid
stock and shall not be subject to assessment for the payment of debts of this
corporation or for any other purpose. All payments for stock of the corporation
may be payable in lawful money of the United States of America; provided,
however, that any designated portion of the stock shall be payable in other
property and/or services at a just valuation to be fixed by a majority agreement
of the Directors of the corporation at a meeting called for the purpose of
establishing such valuation. Shares of stock shall be transferable only in the
manner prescribed in the By-Laws and every person becoming a shareholder by such
transfer shall acquire the rights and liabilities of the prior holder.
4
<PAGE>
ARTICLE X
REGULATION OF THE BUSINESS
The following provisions for the regulation of the business and for the
conduct of the affairs of the corporation and for creating, dividing, limiting,
and regulating the powers of this corporation, its shareholders, officers and
directors are hereby adopted as a part of these Articles of Incorporation.
A. This corporation shall have the power to include in
its By-Laws any regulatory or restrictive
provisions relating to the proposed sale, transfer
or other disposition of any and all of its
authorized and outstanding stock, or both, by and
of its shareholders, their respective heirs,
executors, administrators, successors or assigns,
as the case may be; provided, however, that no such
regulatory or restrictive provisions shall affect
the rights of third parties without actual
knowledge thereof unless notice of such provisions
shall be given upon the certificate evidencing the
ownership of said stock or as provided in the
By-Laws.
B. Any holder or holders of shares of the stock of
this corporation may include in agreements among
themselves limitations upon the transfer of
assignment of such shares, and this corporation may
become a party to any such agreement or agreements.
C. This corporation shall have the power to enter
into, or become a partner in, any arrangement for
sharing profits, union or interest, cooperation,
joint-venture or otherwise, with any person, firm,
corporation or other entity now carrying on or
contemplating carrying on any business which this
corporation has direct or incidental authority to
pursue.
D. This corporation shall have the power to amend,
alter, change, or repeal any provisions of these
Articles of Incorporation, subsequently to be known
as its Certificate of Incorporation, as from time
to time amended, in form or substance when proposed
5
<PAGE>
and approved by its Board of Directors and approved
at any meeting of the shareholders by the holders
of not less than a majority of its outstanding
stock entitled to be voted.
E. The Board of Directors of this corporation shall
have the power to authorize and cause to be
executed mortgages and liens upon real and personal
property owned, either legally or equitably, by
this corporation, to fix the amount to be reserved
as working capital over and above the capital stock
paid in; to determine the conditions, times and
places when the books of this corporation can be
examined, except as otherwise conferred by statutes
of the State of Florida; and to sell, lease, or
exchange all of the property or assets essential to
the business of this corporation upon such terms
and conditions as a majority of the whole Board of
Directors deems expedient and in the best interest
of this corporation.
F. This corporation may, in its By-Laws, confer powers
upon its Directors in addition to any conferred
herein and in any addition to the powers and
authorities expressly conferred upon it by statutes
of the State of Florida.
G. Every Director and every officer of this
corporation, every former Director and every former
officer of this corporation, and every person who
may have served at the request of this corporation
as a Director or officer of another corporation in
which this corporation owns shares of capital stock
or of which it is a creditor, and the heirs,
executors, administrators or assigns of all the
persons above listed shall be indemnified by this
corporation against expenses actually and
necessarily incurred by him in connection with the
defense of any action, suit or proceeding to which
he may be made a party by reason of his being or
having been a Director or officer of this
corporation or of such other corporation regardless
of whether or not he continues to be a Director or
officer at the time of incurring such expenses,
except with respect to matters as to which he shall
be finally adjudged in such action, suit, or
proceeding to be liable for negligence or
misconduct in the performance of his duty. The
foregoing right of indemnification shall not be
exclusive of other rights to which such person may
be entitled by law or otherwise.
6
<PAGE>
H. This corporation shall have the power to keep the
books either within or without the State of Florida
at such place of Florida at such place or places as
may from time to time be designated by the Board of
Directors.
I. The Directors shall receive compensation for their
services as such directors in accordance with
provisions set forth in the By-Laws.
J. No officer of this corporation shall be prevented
from receiving a salary to be fixed by the Board of
Directors by reason of the fact that such officer
is also a director of this corporation, nor shall
any director be precluded from voting upon the
salary he is to receive as an officer of this
corporation.
K. No contract or other transaction between this
corporation and any other corporation, whether or
not a majority of the capital stock of such other
corporation is owned by this corporation, and no
other act of this corporation shall in any way be
affected or invalidated by the fact that any of
the Directors of this corporation are pecuniarily
or otherwise interested in, or are directors or
officers of, such other corporation; any Director,
individually, or any corporation, partnership,
proprietorship or business of which any such
director may be a member, may be a party to, or may
be pecuniarily or otherwise interested in, any
contract or transaction of this corporation;
provided, however, that the fact that any such
director is interested in such corporation,
partnership proprietorship or business shall be
disclosed or shall have been known to the Board of
Directors of this corporation, or to be majority
thereof; and any director or officer of any such
corporation, or who is so interested in any such
partnership, proprietorship or business may be
counted in determining the existence of a quorum at
any meeting of the Board of Directors of this
corporation which shall authorize, confirm, ratify,
or approve such contract or transaction with like
force and effect as if he were not such director or
officer of such other corporation or not so
interested in said partnership, proprietorship or
business.
L. This corporation, at the time of its organization,
or any time or times thereafter, may purchase or
acquire shares, stocks, bonds, debentures, real,
7
<PAGE>
personal, or mixed, from any person or persons,
corporation or corporations, or other business,
commercial or industrial entity, who may be
promoters, officers, or directors of this
corporation, and each shareholder of this
corporation shall be deemed by reason of his having
become such, to have waived any and all objections
to such acquisition of shares, stocks, bonds,
debentures, and other securities, obligations, or
property, real, personal or mixed, and to have
agreed that no promoter, officer or director shall
be liable to account to this corporation for any
profit or benefit derived by him by reason of such
transaction.
IN WITNESS WHEREOF, the undersigned Subscriber to these Articles of
Incorporation has hereunto set his hand and seal on this the 21st day of June,
1993.
Signed, sealed and delivered
in the presence of:
/s/ Karen H. Gates /s/ Philip Tatich
- ------------------------------ ----------------------------
Name: Karen H. Gates Philip Tatich
/s/ Mary Ann Duxbury
- ------------------------------
Name: Mary Ann Duxbury
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing Articles of Incorporation were acknowledged before me
this 21st day of June, 1993, by Philip Tatich, as Incorporator and Subscriber
thereof, who is personally known to me and who did not take an oath.
/s/ Karen Ann Duxbury
----------------------------
Notary Public
Name: Mary Ann Duxbury
My Commission Expires:
[Notary seal - State of Florida
Commission No. CC285041 -
Commission Expires June 17, 1997)
8
<PAGE>
ACCEPTANCE OF DESIGNATION AS REGISTERED AGENT
The undersigned, having been designated as a Registered Agent in the
Articles of Incorporation of VITECH AMERICA, INC., a proposed Florida
corporation, does hereby accept such designation and agrees to comply with the
requirements incident thereto.
/s/ Philip Tatich
----------------------------
PHILIP TATICH
The Maitland Green Building
601 South Lake Destiny Road
Suite 200
Maitland, Florida 32751
9
<PAGE>
Exhibit 3.2
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF VITECH AMERICA, INC.
DATED JULY 26, 1996
<PAGE>
State of Florida
[LOGO]
Department of State
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on July 26, 1996, to Articles of Incorporation for VITECH AMERICA, INC., a
Florida corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H96000010424. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P93000045800.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Twenty-ninth day of July, 1996
Authentication Code: 196A00036204-072996-P93000045800-1/1
/s/ Sandra B. Mortham
[SEAL] -------------------------------
Sandra B. Mortham
CR2EO22 (1-95) Secretary of State
<PAGE>
H96000010424
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
VITECH AMERICA, INC.
Pursuant to Section 607.1006 of the Business Corporation Act of the
State of Florida, the undersigned President of VITECH AMERICA, INC., a
corporation organized and existing under and by virtue of the Business
Corporation Act of the State of Florida (the "Corporation"), does hereby
certify:
FIRST: That pursuant to a meeting of the Shareholders on July 24, 1996
and the Unanimous Consent of the Directors of said Corporation, dated July 24,
1996, the Shareholders and the Directors approved the amendments to the
Corporation's Articles of Incorporation as follows:
Article III of the Articles of Incorporation of this Corporation is
amended to read in its entirety as follows:
ARTICLE III
The maximum number of shares of stock that this corporation is
authorized to issue and have outstanding at any one time shall
be thirty million (30,000,000) shares of Common Stock, no par
value, and three million (3,000,000) shares of Preferred
Stock, no par value.
Series of the Preferred Stock may be created and issued from
time to time, with such designations, preferences, conversion
rights, cumulative, relative, participating, optional or other
rights, including voting rights, qualifications, limitations
or restrictions thereof as shall be stated and expressed in
the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock as adopted by the
Board of Directors pursuant to the authority in this paragraph
given.
SECOND: The foregoing amendment was adopted by all of the Directors on
July 24, 1996 and a majority of the Shareholders of the Corporation at a meeting
held on July 24, 1996, which shares consenting and voted at such meeting
represented a majority of the total issued and outstanding capital stock of the
Corporation entitled to
H96000010424 MARA K. LERNER, ESQ., FL BAR # 0065463
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 EAST LAS OLAS BOULEVARD, SUITE 1900
FORT LAUDERDALE, FLORIDA 33301
PHONE NO.: (954) 763-1200
<PAGE>
H96000010424
vote. Therefore, the number cast for the amendment to the Corporation's Articles
of Incorporation was sufficient for approval.
IN WITNESS WHEREOF, the undersigned, being the Vice President of this
Corporation, has executed these Articles of Amendment as of July 24, 1996.
VITECH AMERICA, INC.
By: /s/ Mitchell E. Asher
--------------------------------------
Mitchell E. Asher, Vice President
and Corporate Treasurer
H96000010424
2
<PAGE>
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF VITECH AMERICA, INC.
DATED NOVEMBER 13, 1995
<PAGE>
State of Florida
[LOGO]
Department of State
I certify the attached is a true and correct copy of the
Articles of Amendment, filed on November 13, 1995, to Articles
of Incorporation for VITECH AMERICA, INC., a Florida
corporation, as shown by the records of this office.
The document number of this corporation is P93000045800.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Twentieth day of November, 1995
/s/ SANDRA B. MORTHAM
[SEAL] -----------------------------
CR2EO22 (2-95) SANDRA B. MORTHAM
SECRETARY OF STATE
<PAGE>
- -------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
- -------------------------------------------------------------------------------
Pursuant to the provisions of Section 607.1001 of the Florida
Statutes, VITECH AMERICA, INC., a Florida corporation, hereby adopts the
following Articles of Amendment to its Articles of Incorporation:
ARTICLE I - ADOPTION AND TEXT OF AMENDMENT
All of the directors of the Corporation approved a resolution amending
Article III of the Articles of Incorporation by written consent dated the 27th
day of October, 1995, in accordance with the provisions of Section 607.0821 of
the Florida Statutes, and all of the shareholders of the Corporation, approved
the resolution amending Article III of the Articles of Incorporation by written
consent dated the 27th day of October, 1995, in accordance with the provisions
of Section 607.0704 of the Florida Statutes. The following is a true and correct
copy of the resolution amending Article III of the Articles of Incorporation:
RESOLVED, that Article III of the Articles of Incorporation
of the Corporation be amended to read as follows:
"Article III
CAPITAL STOCK
The maximum number of shares of stock
which may be issued by the corporation
shall be Ten Million (10,000,000) shares
of common stock."
<PAGE>
ARTICLE II - EFFECTIVE DATE OF AMENDMENT
The effective date of the amendment to the Articles of Incorporation of
the Corporation set forth herein will be as of the date of filing the Articles
of Amendment to the Articles of Incorporation with the Secretary of State of the
State of Florida.
DATED this 3lst day of October, 1995.
VITECH AMERICA, INC.
By: /s/ William C. St. Laurent
---------------------------------
William C. St. Laurent, President
STATE OF FLORIDA
COUNTY OF DADE
The foregoing Articles of Amendment was acknowledged before me this
31st day of October, 1995, by WILLIAM C. ST. LAURENT, as President of VITECH
AMERICA, INC., who is personally known to me.
/s/ Linda G. Odom
---------------------------------
Notary Public, State of Florida
Name: Linda G. Odom
----------------------------
My Commission Expires:
[Notary Seal - State of Florida
Commission No. CC437527
Commission Expires Feb. 7, 1999]
2
<PAGE>
EXHIBIT 3.3
BY-LAWS OF
VITECH AMERICA, INC.
<PAGE>
BY-LAWS
OF
VITECH AMERICA, INC.
----------------------
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS:
The annual meeting of the shareholders shall be held on the 3rd Monday
in the month of June of each and every year for the election of Directors of the
corporation and the transaction of any business which may be brought before the
meeting; provided, however, that when such date shall fall upon a legal holiday
the meeting shall be held on the next succeeding business day.
Section 2. SPECIAL MEETING:
Special meetings of the shareholders shall be held when directed by the
President or the Board of Directors, or when requested in writing by the
shareholders who hold at least one-tenth of the outstanding shares having the
right and entitled to vote at such meeting. A meeting requested by shareholders
shall be called for a date not less than ten (10) nor more than sixty (60) days
after the request is made. The notice of the meeting shall be issued by the
Secretary or by the President, unless the President, Board of Directors, or
stockholders requesting the calling of the meeting shall designate another
person to do so.
<PAGE>
Section 3. PLACE:
Meetings of shareholders may be held either within or without the State
of Florida. Unless otherwise directed by the Board of Directors, meetings of the
shareholders shall be held at the principal offices of the corporation in the
State of Florida.
Section 4. NOTICE:
Notice in writing shall be given by the Secretary or by the Assistant
Secretary or by the President or any Vice President of all meetings of
shareholders to the holders of shares having the right and entitled to vote at
such meeting, and said notice shall be mailed to each such shareholder at such
shareholder's address as shown upon the stock book or other records of the
corporation. Such notice shall state the day, the hour, and the place of said
meeting, and must be delivered, by mail or personally, not less than ten (10)
nor more than sixty (60) days before the date set for such meeting. Such notice
shall be sufficient for said meeting and any adjournment thereof. If any
shareholder shall transfer any of his shares after notice, it shall not be
necessary to notify the transferee.
Section 5. WAIVER OF NOTICE AND VALIDATION:
By written consent of any shareholder, either before, at or after any
meeting, the minimum time required for giving notice of such meeting may be
waived as to such shareholder. Any shareholder may waive notice of any meeting
either before, at, or after such meeting.
2
<PAGE>
Section 6. RECORD DATE:
The Board of Directors may fix a date not less than ten (10) or more
than sixty (60) days prior to the date set for a meeting of shareholders as the
record date as of which the shareholders of record who have the right to and are
entitled to notice of and to vote at the meeting and any adjournment thereof
shall be determined.
Section 7. VOTING:
Each shareholder having the right and entitled to vote at a meeting of
shareholders shall be entitled, at each meeting and upon each proposal presented
at such meeting, to one (1) vote for each share having the right and entitled to
vote at such meeting, recorded in his name on the books of the corporation on
the record date fixed as provided in Section 6 of this Article, or if no such
record date was fixed, on the day of the meeting. The books of record of
shareholders shall be produced at any shareholders' meeting upon the request of
any shareholder. Shares of its own stock owned by this corporation shall not be
voted, directly or indirectly, or counted as outstanding for the purpose of any
shareholders' vote.
Section 8. OMISSION OF MEETING:
If the annual meeting of the shareholders be not held as herein
provided on the date herein specified, the election of Directors may be held at
any meeting thereafter called pursuant to these By-Laws.
3
<PAGE>
Section 8. Omission of Meeting:
Any shareholders' meeting, at which a quorum is present in person or by
proxy, may be adjourned from day to day or from time to time by the vote of the
holders of a majority of the shares having the right and entitled to vote at
such meeting. In case there be no quorum present on the day fixed for any
shareholders' meeting, by vote of the shareholders of a majority of the shares
having the right and entitled to vote thereat, such meeting may be adjourned
from time to time until a quorum be obtained, or may be adjourned sine die. At
any adjourned meeting at which a quorum shall be present in person or by proxy,
any business may be transacted which might have been transacted at the original
meeting.
Section 10. QUORUM:
The presence of the holders of at least a majority of the outstanding
shares having the right and entitled to vote at any meeting, either in person or
by proxy, shall be necessary to constitute a quorum at any shareholders'
meeting. Shares of its own stock owned by the corporation shall not be counted
as outstanding for the purpose of any quorum.
Section 11. PROXIES:
At any meeting of shareholders or any adjournment thereof, any
shareholder of record having the right and entitled to vote thereat may be
represented and vote by a proxy appointed by an instrument in writing. Before
any such written proxy is voted, it shall be filed with the Secretary. In the
event that any such
4
<PAGE>
instrument shall designate two (2) or more persons to act as proxies, a majority
of such person present at the meeting, or, if only one (1) be present, that one
(1) shall have all of the powers conferred by the instrument upon all the
persons so designated unless the instrument shall otherwise provide. Any
question as to the validity, sufficiency or effectiveness of any such written
instrument purporting to appoint a proxy or proxies, shall be submitted to the
shareholders present or represented at said meeting, and the vote of the holders
of a majority of the shares entitled to vote thereat shall be conclusive upon
all such questions. No such written instrument shall be valid after the
expiration of eleven (11) months from the date thereof, unless such instrument,
on its face, shall name a longer period for which it is to remain in force.
ARTICLE II
DIRECTORS
Section 1. FUNCTION:
The business of this corporation shall be managed and its corporate
powers exercised by the Board of Directors.
Section 2. NUMBER:
The Board of Directors shall consist of one (1) or more members. The
provisions of this Section relating to the number of Directors constituting the
Board of Directors may be amended, changed or altered only by vote of the
holders of a majority of the shares present and having the right and entitled to
vote at any duly convened meeting of such shareholders at which a quorum is
present.
5
<PAGE>
Section 3. QUALIFICATION:
All of the members of the Board of Directors shall be of full age but
need not be residents of the State of Florida. It shall not be necessary that a
Director be a stockholder of the corporation.
Section 4. ELECTION AND TERM:
The Directors shall be chosen at the annual meeting of the shareholders
and, unless otherwise provided in the articles of incorporation, by a plurality
of the votes cast at such election. The term of office of such Directors shall
be for one (1) year, from the date of the annual meeting of the shareholders at
which elected until the date of the next succeeding annual meeting of the
shareholders. Directors shall hold office until the election and qualification
of their successors.
Section 5. VACANCIES:
Any vacancy in the Board of Directors, or executive committee of the
corporation, caused by an increase in the number of the Directors or executive
committee, or by death, resignation, disqualification or other cause, may be
filled by the remaining Director or Directors in office, although less than a
quorum, by the affirmative vote of a majority thereof, and the person so chosen
to fill any such vacancy shall hold office until the next annual meeting of the
shareholders, and until his successor shall have been elected and shall have
qualified.
6
<PAGE>
Section 6. REMOVAL:
Any Director shall be subject to removal for cause at any time by vote
of a majority of the shares represented and having the right and entitled to
vote at any duly convened meeting of such shareholders at which a quorum is
present; and, shall be subject to removal without cause at any time by vote of a
majority of the shares issued and outstanding and having the right to vote at
any meeting of such shareholders lawfully held.
Section 7. ANNUAL AND REGULAR MEETINGS:
Immediately after the annual meeting of the shareholders, there shall
be held the annual meeting of the Board of Directors to elect officers of the
corporation for the ensuing year, and to transact other business brought before
the meeting. Regular meetings of the Board of Directors shall be those held at
specified intervals during the year. Regular meetings, if held, shall be held
at such stated time as the Directors shall direct, or in the absence of such
direction, at such stated time as may be directed by the President. In case the
day appointed for a regular meeting falls upon a legal holiday, such meeting
shall be held on the next succeeding business day, at the same hour.
Section 8. SPECIAL MEETINGS:
Special meetings of the Board of Directors may be called at any time by
the Chairman of the Board, the President, or by any two (2) Directors.
7
<PAGE>
Section 9. PLACE OF MEETING:
Any meeting of the Board of Directors may be held either within or
without the State of Florida. Unless otherwise directed by the Board of
Directors, the annual meeting of the Board of Directors shall be held at the
principal offices of the corporation in the State of Florida. Regular and
special meetings of the Board of Directors shall be held at said principal
offices of the corporation, or at such other place as may be designated by the
vote or written consent of a majority of the Directors, or in the absence of
such vote or written consent, at such place as may be designated by the officer
or Directors calling such meeting.
Section 10. OMISSION OF MEETING:
If the annual meeting of the Board of Directors be not held as herein
provided on the date herein specified, the election of officers may be held at
any meeting thereafter held pursuant to these By-Laws.
Section 11. ADJOURNMENTS:
Any meeting of the board of Directors at which a quorum is present may
be adjourned from day to day or from time to time by a vote of a majority of the
Directors present and voting at such meeting. In case there be no quorum present
on the day fixed for any meeting of the Board of Directors, by vote of a
majority of the Directors present and voting, the same may be adjourned from
time to time until a quorum be obtained, or may be adjourned sine die. At any
adjourned meeting at which a quorum be present, any business may be transacted
which might have been transacted at the original meeting.
8
<PAGE>
Section 12. QUORUMS:
The presence of a majority of all the Directors shall be necessary at
any meeting of the Board of Directors to constitute a quorum to transact
business. The act of a majority of the Directors present and voting at a meeting
where a quorum is present shall be the act of the Board of Directors.
Section 13. NOTICE OF MEETINGS:
Notice in writing shall be given to each Director by the Secretary or
by an Assistant Secretary or the President or any Vice President of all meetings
of the Board of Directors. Said notice may be given by telegraphic message, or
by leaving such written notice in an envelope addressed to him at his residence
or place of business, or such notice may be given by mailing same to such
Director at his address as shown on the records of the corporation, and such
notice, if served on such Director as herein provided other than by mail, must
be served at least two (2) days before the time appointed for the meeting, and
if given by mail as herein provided, must be mailed to such Director at least
three (3) days before the time appointed for the meeting. Such notice shall
state the day, hour, and the place of said meeting.
Section 14. WAIVER OF NOTICE AND VALIDATION:
By written consent of any Director, either before, at or after any
meeting, the minimum time required for giving notice of such meeting, or any
other matter required to be contained in any
9
<PAGE>
written notice of a meeting may likewise be waived as to such Director. Any
Director may waive notice of any meeting either before, at or after such
meeting.
Section 15. EXECUTIVE COMMITTEE:
The Board of Directors shall have the power, by resolution adopted by a
majority of all the Directors of the corporation, to designate from among its
members an executive committee, and one or more other committees each of which,
to the extent authorized by such resolution, may have and may exercise all of
the powers of the Board of Directors, except as may be otherwise limited by law.
The committees shall keep regular minutes of all business transacted by them,
and of all actions taken in connection with the affairs of the corporation.
ARTICLE III
OFFICERS
Section 1. OFFICERS, ELECTION AND TERMS OF OFFICE:
The principal officers of the corporation shall be a President, one or
more Vice Presidents, a Secretary, and a Treasurer, as the Board of Directors
may from time to time direct. The Board of Directors shall have the power to
create and fill by appointment, for such term as they may see fit, such offices
as Assistant Secretary, Assistant Treasurer, and such other offices as it may
see fit, and to prescribe such duties for them to perform as may be deemed
necessary. The Board of Directors may also appoint or authorize the appointment
of agents and prescribe, or authorize the prescribing of, such duties for them
to perform, as the Board may deem advisable. The Board of Directors may elect a
Chairman of
10
<PAGE>
the Board to preside at its meetings, if it sees fit to do so. One person may
hold more than one office in the corporation except that no one person may at
any time hold the offices of both President and Secretary of the corporation, or
the offices of both President and Vice President of the corporation. All of said
officers shall be chosen annually by the Board of Directors at the annual
meeting thereof, by a plurality of the votes cast, and shall hold their
respective offices from the date of the annual meeting of the Board of Directors
at which elected until the time of the next succeeding annual meeting of the
Board of Directors, and such officers shall hold their respective offices until
their successors are chosen and qualified in their stead. In its discretion, the
Board of Directors may leave unfilled for any period of time any office of the
corporation except that of President, Secretary or Treasurer.
Section 2. REMOVAL:
Any officer elected by the Board of Directors shall be subject to
removal, with or without cause, at any time, by the affirmative vote of a
majority of the whole Board of Directors. All agents and employees, other than
those elected or appointed by the Board of Directors, shall hold office at the
discretion of the committee or the officer appointing them.
Section 3. VACANCIES:
Any vacancy occurring in the office of the President, any Vice
President, the Secretary, or the Treasurer of the corporation shall be filled
for the remainder of the year, and until their successors are duly elected and
qualified, by the Board of Directors.
11
<PAGE>
Section 4. PRESIDENT:
The President shall be the chief executive officer of the corporation,
subject to the directions of and limitations imposed by the Board of Directors,
and shall perform all the duties and have all the power usually pertaining and
attributed by law or otherwise to the office of the President of the
corporation, except as may be expressly limited by the Board of Directors. The
President shall coordinate and supervise the activities of all other officers of
the corporation. The President shall, from time to time, call special meetings
of the Board of Directors when he deems it necessary so to do, or whenever the
requisite number of members of the Board of Directors shall request him in
writing so to do. He shall preside at all meetings of the shareholders and,
unless a Chairman of the Board of Directors has been elected and is present,
shall preside at all meetings of the Board of Directors. The President, unless
some other person is thereunto expressly authorized by resolution of the Board
of Directors, shall sign all certificates of stock, execute all contracts,
deeds, notes, mortgages, bonds and other instruments and papers in the name of
the corporation and on its behalf, subject, however, to the control, when
exercised, by the Board of Directors. He shall, at each annual Meeting, present
a report of the business and affairs of the corporation, and shall, whenever
requested, report to the Board all matters within his knowledge which the
interest of the
12
<PAGE>
corporation may require be brought to the attention of the Directors. The
President shall have the power to employ and terminate the employment of all
such subordinate officers, agents, clerks, and other employees not herein
provided to be selected by the Board, as he may find necessary to transact the
business of the corporation, and shall have the right to fix the compensation
thereof.
Section 5. VICE PRESIDENT:
The Vice Presidents shall have the powers and perform much duties as
may be delegated to them, respectively, by Board of Directors, or, in the
absence of such action by the Board, then by the President. In case of the
death, absence or inability of the President to act, except as may be expressly
limited by action of the Board of Directors, and unless and until the Board of
Directors has appointed a President Pro Tempore, any Vice President may, and any
one of them expressly designated by the Board of Directors shall, perform the
duties and exercise the powers of the President following such death of the
President or during the absence or inability of the President to act; and,
concurrently with the President, shall at all times have the power to sign all
certificates of stock, execute all contracts, deeds, notes, mortgages, bonds and
other instruments and documents in the name of the corporation on its behalf
which the President is authorized to do, but subject to the control and
authority at all times of the Board of Directors.
13
<PAGE>
Section 6. PRESIDENT PRO TEMPORE:
In came of the death, absence or inability of the President to act, the
Board of Directors, in its discretion, may appoint a President Pro Tempore who
shall exercise the powers and duties of the President until the return of the
President or until the President in again able to act, or until a successor to
the President has been duly elected.
Section 7. SECRETARY:
The Secretary shall keep minutes of all meetings of the shareholders
and the Board of Directors in a book or books to be kept for such purposes, and
also, when so requested, the minutes of all meetings of committees in a book or
books to be kept for such purposes. He shall attend to giving and serving of all
notices, and he shall have charge of all books and papers of the corporation,
except those hereinafter directed to be in charge of the Treasurer or except as
otherwise expressly directed by the Board of Directors. He shall keep the stock
certificate book or books. The secretary shall be the custodian of the seal of
the corporation. The Secretary shall sign with the President, or with a Vice
President, all certificates of stock as the Secretary of this corporation and as
Secretary affix or cause to be affixed thereto the seal of the corporation. The
Secretary may sign with the President, or with a Vice President, in the name of
the corporation and on its behalf, all contracts, deeds, mortgages, bonds, notes
and other papers, instruments and documents, except as otherwise expressly
provided by the Board of Directors, and as
14
<PAGE>
Secretary shall affix the seal of the corporation thereto. Under the direction
of the Board of Directors or the President, the Secretary shall perform all the
duties usually pertaining to the office of Secretary and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
Section 8. ASSISTANT SECRETARY:
The Assistant Secretary shall have such powers and perform such duties
an may be delegated to him by the Board of Directors or the President; and, in
the case of the death, absence, or inability of the Secretary to act, whether
temporary or not, he may exercise the powers and duties of the Secretary. The
Assistant Secretary may, together with the President or with a Vice President,
sign certificates of stock, contracts, and other instruments and documents
involving the carrying on of the business of the corporation which the Secretary
is authorized to sign, which power shall be concurrent with the power of the
Secretary.
Section 9. TREASURER:
The Treasurer shall have the custody of all the funds and securities of
the corporation, except as may be otherwise provided by the Board of Directors,
and shall make such disposition of the funds and other assets of the corporation
as may be directed by the Board of Directors. He shall keep, or cause to be
kept, a record of all money received and paid out, and all vouchers and receipts
given therefor, and all other financial transactions of the corporation. He
shall have general charge of all financial books, vouchers and papers belonging
to the corporation or pertaining to
15
<PAGE>
its business. He shall render an account of the corporation's funds at each
annual meeting of the Board of Directors and at such other meetings as he may be
requested, and he shall make an annual statement of the finances of the
corporation. If at any time there is a person designated as Comptroller of the
corporation, the Treasurer may delegate to such Comptroller such duties and
powers as the Treasurer may deem proper. The Treasurer shall perform such other
duties as are usually incident by law or otherwise to the office of the
Treasurer, and as he may be directed or required by the Board of Directors of
the President.
Section 10. ASSISTANT TREASURER:
The Assistant Treasurer shall have such powers and shall perform such
duties as may be delegated to him by the Board of Directors or the President or
the Treasurer; and in case of the death, absence or inability of the Treasurer
to act, he may exercise the powers and duties of the Treasurer.
Section 11. SUBORDINATE OFFICERS:
In all cases where the duties of subordinate officers and the duties of
agents or employees of the corporation are not specifically prescribed by the
By-Laws or resolution of the Board of Directors, such officers, agents, and
employees shall obey the orders and instructions of the President. The President
may, with or without the consent of the Board of Directors, suspend or remove
any subordinate officer, agent or clerk or other employee of the corporation who
has not been elected to such office by the Board of Directors.
16
<PAGE>
ARTICLE IV
FUNDS OF THE CORPORATION
Section 1. DEPOSIT:
All moneys of the corporation or under its charge deposited in any bank
or other place of deposit shall be deposited to the credit of the corporation in
its corporate name, unless otherwise expressly directed by the Board of
Directors.
Section 2. EVIDENCE OF INDEBTEDNESS:
All bonds, notes, mortgages and other evidences of indebtedness of the
corporation shall be signed by the President, or by a Vice President or the
President Pro Tempore, in case such has been appointed, and no such instrument
shall be valid or binding without being so signed; and all such instruments may
be attested by the Secretary or the Assistant Secretary.
Section 3. CHECKS:
All checks or warrants drawn upon funds of the corporation shall be in
such form and signed and countersigned as the Board of Directors may be
resolution direct.
ARTICLE V
DIVIDENDS
The Board of Directors may at any time declare and direct the payment
of a dividend from the net earnings of the corporation or from the surplus of
the assets over the liabilities, including capital, as the Board of Directors
may deem prudent or wise; and the Board of Directors shall have the power to
carry any part or all of the net earnings to the surplus account or accounts, or
for use in improvements or otherwise, as it shall deem most advisable; and the
Board of Directors shall have the power to determine what
17
<PAGE>
constitutes net earnings, profits and surplus respectively, and what amount, if
any, shall be used for the purpose of declaring any paying dividends. If and
when the Board of Directors shall so determine, dividends may be paid in stock.
ARTICLE VI
SEAL
The seal of this corporation shall be circular and shall have inscribed
therein the name of the corporation and such other words and figures and in such
design as may be prescribed by the Board of Directors, and may be facsimile,
engraved, printed, or an impression, or other type seal.
ARTICLE VII
STOCK
Section 1. CERTIFICATES OF STOCK:
Certificates of stock shall be numbered and registered in order in
which they are issued. They shall be signed by the President or Vice President,
and by the Secretary or Assistant Secretary, and the seal of the corporation
shall be affixed thereto. All stock certificates shall be bound in a book, and
shall be issued in consecutive order therefrom, and on the margin of the stub of
each certificate shall be entered the name of the person to whom such
certificate is issued, the number of shares issued, and the date thereof.
Section 2. LOST CERTIFICATES:
Any shareholder claiming a certificate of stock to be lost or destroyed
shall make affidavit or affirmation of that fact and the fact that he is the
owner and holder thereof, and give
18
<PAGE>
notice of the loss or destruction of same in such manner an the Board of
Directors may require, and shall give the corporation a bond of indemnity in
form, and with one or more sureties satisfactory to the Board of Directors,
which shall be at least double the value of all the shares of stock represented
by such certificate, payable as may be required by the Board of Directors to
protect the corporation and any person injured by the issuance of the new
certificate from any liability or expense which it or they may be put to or
incur by reason of the original certificate remaining outstanding, whereupon the
President or Vice President and the Secretary or Assistant Secretary may cause
to be issued a new certificate in the same tenor as the one alleged to be lost
or destroyed, but always subject to approval of the Board of Directors.
Section 3. TRANSFER:
(A) Transfers of shares shall be made only on the books of the
corporation by the holder, in person, or by at attorney-in-fact under a power of
attorney duly executed by such shareholder and filed with the Secretary with
written direction for the transfer, upon surrender of the original certificate
for such shares and upon the payment of all indebtedness by such shareholder to
the corporation, and the possession of a certificate of stock (as between the
holder and the corporation) shall not be regarded as evidence of ownership of
the same in any person other than the registered owner until the transfer
thereof is duly made on the books of the corporation. No transfer of stock
shall be valid
19
<PAGE>
against this corporation until it shall have been effected and registered upon
the corporation's books in the manner herein provided.
(B) On the transfer of any shares, each certificate shall be receipted
for and such receipt shall be attached to the margin or stub of such certificate
in the certificate book. When such certificate is delivered by the corporation
by registered or certified mail, the return receipt of such registered or
certified mail shall be sufficient as the receipt herein provided for. All
certificates exchanged or surrendered to the corporation shall be cancelled by
the Secretary or Assistant Secretary and affixed in their original places in the
certificate book, and no new certificates shall be issued until the certificate
for which it replaces is cancelled and returned to its original place in said
book, except as provided in Section 2 of this Article pertaining to lost or
destroyed certificates.
(C) If the holder of any shares of stock of the corporation shall have
entered into an agreement with any other holder of any shares of stock of the
corporation or with the corporation, or both, relating to a sale or sales or
transfer of any shares of stock of the corporation, or wherein or whereby any
restriction or condition is imposed or placed upon or in connection with the
sale or transfer of any shares of stock of the corporation, and if a duly
executed or certified copy thereof shall have been filed with the Secretary of
the corporation, none of the shares of stock covered by such agreement or to
which it relates,
20
<PAGE>
of any such contracting shareholder, shall be transferred upon the books of the
corporation until there has been filed with the Secretary of the corporation
evidence, satisfactory to the Secretary of the corporation, of compliance with
such agreement, and any evidence, of any kind or quality, of compliance with the
terms of such agreement which the Secretary deems satisfactory or sufficient,
shall be conclusive upon all parties interested; provided, however, that neither
the corporation nor any director, officer, employee or transfer agent thereof
shall be liable for transferring or effecting or permitting the transfer of any
such shares of stock contrary to or inconsistent with the terms of any such
agreement, in the absence of proof of willful disregard thereof or fraud, bad
faith or gross negligence on the part of the party to be charged; provided
further, that the certificate of the Secretary, under the seal of the
corporation, bearing the date of its issuance by the Secretary, certifying that
such an agreement is or is not on file with the Secretary, shall be conclusive
as to such fact so certified for a period of five (5) days from date of such
certificate, with respect to the rights of any innocent purchaser or transferee
for value of any such shares without actual notice of the existence of any such
restrictive agreement.
Section 4. STOCK BOOK:
The corporation shall keep at its office in the State of Florida, or in
the office of its transfer agent wherever located, a book (or books, if more
than one kind, class or series of stock is outstanding) to be known as the stock
book, containing the
21
<PAGE>
names, alphabetically arranged, with the address of every stockholder, showing
the number of shares of each kind, class or series of stock held of record by
him. If the stock book is kept in the office of the transfer agent, the
corporation shall keep at its office in the State of Florida copies of the stock
lists prepared from the stock book as sent to it from time to time by the
transfer agent. The stock book or books shall show the current status, but if
the transfer agent is located elsewhere, a reasonable time shall be allowed for
transit of mail.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Section 1. BY THE DIRECTORS:
Except as in these By-Laws hereinbefore provided with respect to any
amendment changing the number of members of the Board of Directors, these
By-Laws may be repealed, altered, amended, added to, or modified by a majority
vote of the Directors present and voting at any annual or regular meeting of the
Board of Directors, without notice; or at any special meeting of the Board of
Directors if notice that a proposal would be presented at the special meeting
for repeal, alteration, amendment, adding to, or modifying the By-Laws was
included in the notice of the meeting, unless waived in writing by a majority of
the Directors.
Section 2. BY THE SHAREHOLDERS:
The provisions of these By-Laws may be repealed, altered, amended,
added to, or modified by vote of a majority of the shares entitled to vote
thereof represented at any special meeting of the
22
<PAGE>
shareholders if notice of the proposed action was included in the notice of such
special meeting, or is waived in writing by the holders of a majority of the
shares entitled to vote thereon.
23
<PAGE>
EXHIBIT 10.1
STOCK OPTION PLAN
<PAGE>
VITECH AMERICA, INC.
1996 STOCK OPTION PLAN
1. Grant of Options; Generally. In accordance with the provisions
hereinafter set forth in this stock option plan, the name of which is the VITECH
AMERICA, INC. 1996 STOCK OPTION PLAN (the "Plan"), the Board of Directors (the
"Board") or, the Compensation Committee (the "Stock Option Committee") of Vitech
America, Inc. (the "Corporation") is hereby authorized to issue from time to
time on the Corporation's behalf to any one or more Eligible Persons, as
hereinafter defined, options to acquire shares of the Corporation's no par value
common stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is
authorized to issue options which meet the requirements of Section ss.422 of the
Internal Revenue Code of 1986, as amended (the "Code"), which options are
hereinafter referred to collectively as ISOs, or singularly as an ISO. The Board
or the Stock Option Committee is also, in its discretion, authorized to issue
options which are not ISOs, which options are hereinafter referred to
collectively as NSOs, or singularly as an NSO. Except where the context
indicates to the contrary, the term "Option" or "Options" means ISOs, NSOs and
Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock which may
be purchased pursuant to the exercise of Options shall be 200,000 shares. Of
this amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock on account of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because of one or more recapitalizations,
reorganizations or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon exercise of an Option,
the Eligible Person will receive what the holder would have
<PAGE>
owned if the holder had exercised the Option immediately before the first such
corporate event and not disposed of anything the holder received as a result of
the corporate event.
4. Eligible Persons.
(a) With respect to ISOs, an Eligible Person means any
individual who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any
individual who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or by any subsidiary of the Corporation or (iii) any
consultant of the Corporation or by any subsidiary of the Corporation.
5. Grant of Options. The Board or the Stock Option Committee has the
right to issue the Options established by this Plan to Eligible Persons. The
Board or the Stock Option Committee shall follow the procedures prescribed for
it elsewhere in this Plan. A grant of Options shall be set forth in a writing
signed on behalf of the Corporation or by a majority of the members of the Stock
Option Committee. The writing shall identify whether the Option being granted is
an ISO or an NSO and shall set forth the terms which govern the Option. The
terms shall be determined by the Board or the Stock Option Committee, and may
include, among other terms, the number of shares of Stock that may be acquired
pursuant to the exercise of the Options, when the Options may be exercised, the
period for which the Option is granted and including the expiration date, the
effect on the Options if the Eligible Person terminates employment and whether
the Eligible Person may deliver shares of Stock to pay for the shares of Stock
to be purchased by the exercise of the Option. However, no term shall be set
forth in the writing which is inconsistent with any of the terms of this Plan.
The terms of an Option granted to an Eligible Person may differ from the terms
of an Option granted to another Eligible Person, and may differ from the terms
of an earlier Option granted to the same Eligible Person.
6. Option Price. The option price per share shall be determined by the
Board or the Stock Option Committee at the time any Option is granted, and shall
be not less than (i) in the case of an ISO, the fair market value, (ii) in the
case of an ISO granted to a ten percent or greater stockholder, 110 percent of
the fair market value, or (iii) in the case of an NSO, not less than 75% of the
fair market value (but in no event less than the par value) of one share of
Stock on the date the Option is granted, as determined by the Board or the Stock
Option Committee. Fair market value as used herein shall be:
2
<PAGE>
(a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the mean between the high and low sales prices of Stock
on such exchange or over-the-counter market on which such shares shall be traded
on that date, or if such exchange or over-the-counter market is closed or if no
shares shall have traded on such date, on the last preceding date on which such
shares shall have traded.
(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by a recognized appraiser as
selected by the Board or the Stock Option Committee.
7. Purchase of Shares. An Option shall be exercised by the tender to
the Corporation of the full purchase price of the Stock with respect to which
the Option is exercised and written notice of the exercise. The purchase price
of the Stock shall be in United States dollars, payable in cash or by check, or
in property or Corporation stock, if so permitted by the Board or the Stock
Option Committee in accordance with the discretion granted in Paragraph 5
hereof, having a value equal to such purchase price. The Corporation shall not
be required to issue or deliver any certificates for shares of Stock purchased
upon the exercise of an Option prior to (i) if requested by the Corporation, the
filing with the Corporation by the Eligible Person of a representation in
writing that it is the Eligible Person's then present intention to acquire the
Stock being purchased for investment and not for resale, and/or (ii) the
completion of any registration or other qualification of such shares under any
government regulatory body, which the Corporation shall determine to be
necessary or advisable.
8. Stock Option Committee. The Stock Option Committee may be appointed
from time to time by the Corporation's Board of Directors. The Board may from
time to time remove members from or add members to the Stock Option Committee.
The Stock Option Committee shall be constituted so as to permit the Plan to
comply in all respects with the provisions set forth in Paragraph 19 herein. The
members of the Stock Option Committee may elect one of its members as its
chairman. The Stock Option Committee shall hold its meetings at such times and
places as its chairman shall determine. A majority of the Stock Option
Committee's members present in person shall constitute a quorum for the
transaction of business. All determinations of the Stock Option Committee will
be made by the majority vote of the members constituting the quorum. The members
may participate in a meeting of the Stock Option Committee by conference
telephone or similar communications equipment by means of which all members
participating in the meeting can hear each other. Participation in a meeting in
that manner will constitute presence in person at the meeting. Any decision or
determination reduced to writing and signed by all members of the Stock Option
Committee will be effective as if it
3
<PAGE>
had been made by a majority vote of all members of the Stock Option Committee at
a meeting which is duly called and held.
9. Administration of Plan. In addition to granting Options and to
exercising the authority granted to it elsewhere in this Plan, the Board or the
Stock Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraph 19 and 20
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.
10. Provisions Applicable to ISOs. The following provisions shall apply
to all ISOs granted by the Board or the Stock Option Committee and are
incorporated by reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from
August 20, 1996, the date that this Plan was originally adopted by the
Corporation's Board of Directors.
(b) An ISO may not be exercised after the expiration of ten
(10) years from the date the ISO is granted.
(c) The option price may not be less than the fair market
value of the Stock at the time the ISO is granted.
(d) An ISO is not transferrable by the Eligible Person to whom
it is granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time
of the grant stock possessing more than ten (10%) percent of the total combined
voting power of all classes of stock of the employer corporation or of its
parent or subsidiary corporation (as those terms are defined in the Code), then
the option price shall be at least 110% of the fair market value of the Stock,
and the ISO shall not be exercisable after the expiration of five (5) years from
the date the ISO is granted.
(f) The aggregate fair market value (determined at the time
the ISO is granted) of the Stock with respect to which the ISO
4
<PAGE>
is first exercisable by the Eligible Person during any calendar year (under this
Plan and any other incentive stock option plan of the Corporation) shall not
exceed $100,000.
(g) Even if the shares of Stock which are issued upon exercise
of an ISO are sold within one year following the exercise of such ISO so that
the sale constitutes a disqualifying disposition for ISO treatment under the
Code, no provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan was adopted by the Corporation on August 20,
1996, by virtue of its approval by the Corporation's Board of Directors.
Approval by the stockholders of the Corporation occurred on such date.
11. Determination of Fair Market Value. In granting ISOs under this
Plan, the Board or the Stock Option Committee shall make a good faith
determination as to the fair market value of the Stock at the time of granting
the ISO.
12. Restrictions on Issuance of Stock. The Corporation shall not be
obligated to sell or issue any shares of Stock pursuant to the exercise of an
Option unless the Stock with respect to which the Option is being exercised is
at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition the exercise of an Option granted in
accordance herewith upon receipt from the Eligible Person, or any other
purchaser thereof, of a written representation that at the time of such exercise
it is his or her then present intention to acquire the shares of Stock for
investment and not with a view to, or for sale in connection with, any
distribution thereof; except that, in the case of a legal representative of an
Eligible Person, "distribution" shall be defined to exclude distribution by will
or under the laws of descent and distribution. Prior to issuing any shares of
Stock pursuant to the exercise of an Option, the Corporation shall take such
steps as it deems necessary to satisfy any withholding tax obligations imposed
upon it by any level of government.
13. Exercise in the Event of Death of Termination or Employment.
(a) If an optionee shall die (i) while an employee of the
Corporation or a Subsidiary or (ii) within three months after termination of his
employment with the Corporation or a Subsidiary because of his disability, or
retirement or otherwise, his Options may be exercised, to the extent that the
optionee shall have been entitled to do so on the date of his death or such
termination of employment, by the person or persons to whom the optionee's right
under the Option pass by will or applicable law, or if no such person has such
right, by his executors or administrators, at any
5
<PAGE>
time, or from time to time. In the event of termination of employment because of
his death while an employee or because of disability, his Options may be
exercised not later than the expiration date specified in Paragraph 5 or one
year after the optionee's death, whichever date is earlier, or in the event of
termination of employment because of retirement or otherwise, not later than the
expiration date specified in Paragraph 5 hereof or one year after the optionee's
death, whichever date is earlier.
(b) If an optionee's employment by the Corporation or a
Subsidiary shall terminate because of his disability and such optionee has not
died within the following three months, he may exercise his Options, to the
extent that he shall have been entitled to do so at the date of the termination
of his employment, at any time, or from time to time, but not later than the
expiration date specified in Paragraph 5 hereof or one year after termination of
employment, whichever date is earlier.
(c) If an optionee's employment shall terminate by reason of
his retirement in accordance with the terms of the Corporation's tax-qualified
retirement plans or with the consent of the Board or the Stock Option Committee
or involuntarily other than by termination for cause, and such optionee has not
died within the following three months, he may exercise his Option to the extent
he shall have been entitled to do so at the date of the termination of his
employment, at any time and from to time, but not later than the expiration date
specified in Paragraph 5 hereof or thirty (30) days after termination of
employment, whichever date is earlier. For purposes of this Paragraph 13,
termination for cause shall mean termination of employment by reason of the
optionee's commission of a felony, fraud or willful misconduct which has
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary, all as the Board or the Stock Option Committee in
its sole discretion may determine.
(d) If an optionee's employment shall terminate for any reason
other than death, disability, retirement or otherwise, all right to exercise his
Option shall terminate at the date of such termination of employment.
14. Corporate Events. In the event of the proposed dissolution or
liquidation of the Corporation, a proposed sale of all or substantially all of
the assets of the Corporation, a merger or tender for the Corporation's shares
of Common Stock the Board of Directors may declare that each Option granted
under this Plan shall terminate as of a date to be fixed by the Board of
Directors; provided that not less than thirty (30) days written notice of the
date so fixed shall be given to each Eligible Person holding an Option, and each
such Eligible Person shall have the right, during the period of thirty (30) days
preceding such termination, to exercise his Option as to all or any part of the
shares of Stock covered thereby, including shares of Stock as to which such
Option
6
<PAGE>
would not otherwise be exercisable. Nothing set forth herein shall extend the
term set for purchasing the shares of Stock set forth in the Option.
15. No Guarantee of Employment. Nothing in this Plan or in any writing
granting an Option will confer upon any Eligible Person the right to continue in
the employ of the Eligible Person's employer, or will interfere with or restrict
in any way the right of the Eligible Person's employer to discharge such
Eligible Person at any time for any reason whatsoever, with or without cause.
16. Nontransferability. No Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution.
During the lifetime of the optionee, an Option shall be exercisable only by him.
17. No Rights as Stockholder. No optionee shall have any rights as a
stockholder with respect to any shares subject to his Option prior to the date
of issuance to him of a certificate or certificates for such shares.
18. Amendment and Discontinuance of Plan. The Corporation's Board of
Directors may amend, suspend or discontinue this Plan at any time. However, no
such action may prejudice the rights of any Eligible Person who has prior
thereto been granted Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in this Paragraph 19, and Paragraphs 20 and
21.
19. Compliance with Rule 16b-3. This Plan is intended to comply in all
respects with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to participants who are subject to Section 16 of
the Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.
20. Compliance with Code. The aspects of this Plan on ISOs is intended
to comply in every respect with Section 422 of the Code
7
<PAGE>
and the regulations promulgated thereunder. In the event any future statute or
regulation shall modify the existing statute, the aspects of this Plan on ISOs
shall be deemed to incorporate by reference such modification. Any stock option
agreement relating to any Option granted pursuant to this Plan outstanding and
unexercised at the time any modifying statute or regulation becomes effective
shall also be deemed to incorporate by reference such modification and no notice
of such modification need be given to optionee.
If any provision of the aspects of this Plan on ISOs is
determined to disqualify the shares purchasable pursuant to the Options granted
under this Plan from the special tax treatment provided by Code Section 422,
such provision shall be deemed null and void and to incorporate by reference the
modification required to qualify the shares for said tax treatment.
21. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Corporation to sell
and deliver Stock under such options, shall be subject to all applicable federal
and state laws, rules, and regulations and to such approvals by any government
or regulatory agency as may be required. The Corporation shall not be required
to issue or deliver any certificates for shares of Stock prior to (a) the
listing of such shares on any stock exchange or over-the-counter market on which
the Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.
22. Disposition of Shares. In the event any share of Stock acquired by
an exercise of an Option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution within two years of the date
such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice thereof
to the Corporation or the Stock Option Committee.
23. Name. The Plan shall be known as the "Vitech America, Inc. 1996
Stock Option Plan."
24. Notices. Any notice hereunder shall be in writing and sent by
certified mail, return receipt requested or by facsimile transmission (with
electronic or written confirmation of receipt) and when addressed to the
Corporation shall be sent to it at its office, 8607 Northwest 23rd Street,
Miami, Florida 33172, subject to the right of such party to designate at any
time hereafter in writing some other address, facsimile number or person to
whose attention such notice shall be sent.
8
<PAGE>
25. Headings. The headings preceding the text of Sections and
subparagraphs hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Plan nor shall they affect its meaning,
construction or effect.
26. Effective Date. This Plan, the Vitech America, Inc. 1996 Stock
Option Plan, was adopted by the Board of Directors of the Corporation on August
20, 1996. The effective date of the Plan shall be the same date.
Dated as of August 20, 1996.
VITECH AMERICA, INC.
By: /s/ William St. Laurent
-----------------------------
Its: President
9
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
BETWEEN THE COMPANY AND WILLIAM ST. LAURENT
DATED JANUARY 1, 1996
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is effective as
of January 1, 1996 (the "Effective Date"), between VITECH AMERICA, INC., a
Florida corporation (the "Company"), whose principal place of business is 8807
Northwest 23rd Street, Miami, Florida 33172, and WILLIAM C. ST. LAURENT, an
individual (the "Employee"), whose address is 107 Parke-Gulch Elkhorn, Sun
Valley, ID.
WHEREAS, the Company is a Florida corporation engaged in the
manufacture and distribution of computer equipment and related products in the
Federal Republic of Brazil; and
WHEREAS, the Company presently employs the Employee and desires to
continue to employ the Employee and the Employee desires to continue in the
employ of the Company; and
WHEREAS, the Company has established a valuable reputation and goodwill
in its business, of the manufacture and distribution of computer equipment and
related products (the "Business"); and
WHEREAS, the Employee has created and established, at least in part,
and is in possession of, the manner, methods, trade secrets and other
confidential information pertaining to the Company's Business;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this
Agreement, Employee shall serve as President and Chief Operating Officer and
Director of the Company and shall have general executive and operating
supervision over the property, business and affairs of the Company, its
subsidiaries and divisions, subject to the guidelines and direction of the board
of directors of the Company. It is further the intention of the parties that at
all times during the "Term," as hereinafter defined, of this Agreement, the
Employee shall serve as a member of the board of directors of the Company. In
the event Employee shall at any time not be on the board of directors of the
Company it shall
1
<PAGE>
be presumed (if Employee so elects) that the Employee has been terminated other
than for cause and Employee shall have all of the rights specified in Section
6.h. of this Agreement just as if the Employee had been terminated "Without
Cause."
b. Time Devoted. Throughout the term of the Agreement, the
Employee shall devote substantially all of the Employee's business time and
attention to the business and affairs of the Company consistent with the
Employee's senior executive position with the Company, except for reasonable
vacations and except for illness or incapacity, but nothing in the Agreement
shall preclude the Employee from engaging in personal business and/or serving as
a member of the board of directors of other companies, charitable and community
affairs, provided that such activities do not interfere with the regular
performance of the Employee's duties and responsibilities under this Agreement.
4. Term. The Term of employment hereunder will commence on the
Effective Date as set forth above and be for three (3) years from the Effective
Date.
5. Compensation and Benefits.
a. Salary. The Employee shall be paid a base salary (the "Base
Salary"), payable bi-weekly, at an annual rate of no less than Two Hundred Forty
Thousand Dollars ($240,000) for the first year, with annual incremental
increases of the greater of: (i) the percentage increase in the Consumer Price
Index, all items, as published by the United States Department of Labor, since
the Effective Time (in the case of the first annual increase) or since the most
recent anniversary of the Effective Time (in the case of all subsequent annual
increases), or (ii) six percent (6%) of the previous year's base salary.
b. Performance-based Bonus. Employee may be entitled to an
annual performance based bonus in such amounts as the Board of Directors shall
determine.
c. Employee Benefits. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to executives and/or other salaried employees,
including, but not limited to, pension and other retirement plans, group life
insurance, hospitalization, surgical and major medical coverage, sick leave,
salary continuation, vacation and holidays, cellular telephone and all related
costs and expenses, long-term disability, and other fringe benefits.
d. Vacation. During each fiscal year of the Company, the
Employee shall be entitled to reasonable time and to utilize such vacation as
the Employee shall determine; provided however, that the Employee shall evidence
reasonable judgment with regard to appropriate vacation scheduling.
Notwithstanding the foregoing, employee shall be entitled to four (4) weeks
vacation per year.
2
<PAGE>
e. Business Expense Reimbursement. During the Term and any
Renewal Term of employment, the Employee shall be entitled to receive proper
reimbursement for all reasonable, out-of-pocket expenses incurred by the
Employee (in accordance with the policies and procedures established by the
Company for its senior executive officers) in performing services hereunder,
provided the Employee properly accounts therefor.
f. Automobile Expenses. The Company shall provide the Employee
with an automobile of the Employee's choice. The Company shall also be
responsible for all expenses in connection with such automobile including, but
not limited to, maintenance, insurance and gas. The Company shall pay or
reimburse Employee a monthly amount up to $850 for a leased automobile or $1,200
for a purchased automobile.
g. Life Insurance. The Company shall pay or reimburse Employee
for premiums and other charges associated with such life insurance policies as
Employee and the Company shall mutually agree.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Employee during the
Term of the Agreement, salary shall be paid to the Employee's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Employee for a period of one (1) year from and after
the date of death. In the event Employee dies while in Brazil, Employee's estate
or other legal representative shall be entitled to salary for the greater of two
(2) years or the remaining Term of this Agreement. Except as set forth herein,
other death benefits will be determined in accordance with the terms of the
Company's benefit programs and plans.
b. Disability.
i. In the event of the Employee's disability, as
hereinafter defined, the Employee shall be entitled to compensation in
accordance with the Company's disability compensation practice for
senior executives, including any separate arrangement or policy
covering the Employee, but in all events the Employee shall continue to
receive the Employee's salary for a period, at the annual rate in
effect immediately prior to the commencement of disability, of not less
than 360 days (720 if Employee becomes disabled while in Brazil) from
the date on which the disability has deemed to occur as hereinafter
provided below. Any amounts provided for in this Section 6(b) shall not
be offset by other long-term disability benefits provided to the
Employee by the Company.
ii. "Disability," for the purposes of this Agreement, shall be
deemed to have occurred in the event (A) the Employee is unable by
reason of sickness or accident, to perform the Employee's duties under
this Agreement for an aggregate of 180 days in any twelve-month period
or (B) the Employee has a guardian of the person or estate appointed by
a court of competent jurisdiction. Termination due to disability shall
be deemed to have occurred upon the first day of the month following
the determination of disability as defined in the preceding sentence.
3
<PAGE>
Anything herein to the contrary notwithstanding, if,
following a termination of employment hereunder due to disability as
provided in the preceding paragraph, the Employee becomes reemployed,
whether as an Employee or a consultant to the Company, any salary,
annual incentive payments or other benefits earned by the Employee from
such employment shall offset any salary continuation due to the
Employee hereunder commencing with the date of re-employment.
c. Termination by the Company for Cause.
i. Nothing herein shall prevent the Company from
terminating Employment for "Cause," as hereinafter defined. The
Employee shall continue to receive salary only for the period ending
with the date of such termination as provided in this Section 6(c). Any
rights and benefits the Employee may have in respect of any other
compensation shall be determined in accordance with the terms of such
other compensation arrangements or such plans or programs.
ii. "Cause" shall mean and include those actions or
events specified below in subsections (A) through (E) to the extent the
same occur, or the events constituting the same take place, subsequent
to the date of execution of this Agreement: (A) Committing or
participating in an injurious act of fraud, gross neglect or
embezzlement against the Company; (B) committing or participating in
any other injurious act or omission wantonly, willfully, recklessly or
in a manner which was grossly negligent against the Company, monetarily
or otherwise; (C) engaging in a criminal enterprise involving moral
turpitude; (D) conviction of an act or acts constituting a felony under
the laws of the United States or any state thereof; or (E) any
assignment of this Agreement by the Employee in violation of Section 14
of this Agreement. Anything herein to the contrary notwithstanding, the
employment of Employee shall not be terminable by the Company for Cause
if the grounds for such termination includes, but is not limited to:
(i) the result of bad judgment or poor economic results on the part of
the Employee, (ii) any act or omission believed by Employee in good
faith to have been in or not opposed to the interests of the Company,
or (iii) any act or omission in respect of which a determination could
properly be made that Employee met the applicable standard of conduct
described for indemnification or reimbursement or payment of expenses
under the Articles of Incorporation or Bylaws of the Company or the
laws of the State of Florida or the directors' and officers' liability
insurance of the Company, in each case as in effect at the time of such
act or omission.
4
<PAGE>
iii. Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been terminated
for Cause unless and until there shall have been delivered to the
Employee a notice of termination stating that the Employee committed
one of the types of conduct set forth in this Section 6(c) contained in
this Agreement and specifying the particulars thereof and the Employee
shall be given a thirty (30) day period to cure such conduct, if
possible.
d. Termination by the Company Other than for Cause.
i. The foregoing notwithstanding, the Company may
terminate the Employee's employment for whatever reason it deems
appropriate provided, however, that in the event such termination is
not based on cause, as provided in Section 6(c) above, the Company may
terminate this Agreement upon giving three (3) months' prior written
notice. During such three (3) month period, the Employee shall continue
to perform the Employee's duties pursuant to this Agreement, and the
Company shall continue to compensate the Employee in accordance with
this Agreement. The Employee will receive, at the Employee's option
either (A) a lump sum equal to the "Compensation and Benefits," as
hereinafter defined, for the remaining balance of the Term of this
Agreement, at the then current rate, reduced to present value, as set
forth in Section 280G of the Internal Revenue Code or (B) for the
remaining balance of the Term or any Renewal Term of this Agreement
from and after the date of any such termination and the Company shall
on the last day of each calendar month pay to the Employee such
"Compensation and Benefits," which shall be an amount equal to (Y) one
hundred percent (100%) of the Employee's compensation and benefits set
forth in Section 5, which shall specifically include the Base Salary
and Bonus, which Bonus shall be payable on a pro-rata basis for the
year in which the Employee' employment was terminated other than for
cause (the "Compensation and Benefits"), on the date of any such
termination, divided by (Z) twelve (12); provided however that if (A)
there is a decrease in the Employee's Compensation and Benefits, which
specifically include the Employee's then Base Salary and Bonus, for any
reason other than the targets set forth in Section 5(b) are not met,
and (B) the Employee is terminated without cause, the Compensation and
Benefits shall be as existed immediate prior to such a decrease. The
Employee will be entitled to continued Compensation and Benefits
coverage and credits as provided in Section 5 or to reimbursement for
the cost of providing the Employee with comparable benefit coverage
during the term in which the Employee is receiving payments from the
Company after termination pursuant to Section 6(d). Such benefit
coverage will not be offset by comparable coverage provided to the
Employee in connection with subsequent employment.
ii. In the event that the Employee's employment with the
Company is terminated pursuant to this Section 6(d), Section 6(f) or
Section 6(g), Section 7(a) of this Agreement and all references thereto
shall be inapplicable as to the Employee and the Company.
5
<PAGE>
iii. The foregoing notwithstanding, the Employee's
employment may not be terminated by the Company for any reason other
than pursuant to Section 6(a), Section 6(b) and/or Section 6(c) during
the first three (3) years of this Agreement.
e. Voluntary Termination. In the event the Employee terminates
the Employee's employment on the Employee's own volition (except as provided in
Section 6(f) and/or Section 6(g)) prior to the expiration of the Term or during
any Renewal Term of this Agreement, including any renewals thereof, such
termination shall constitute a voluntary termination and in such event the
Employee shall be limited to the same rights and benefits as provided in
connection with a termination for Cause as provided in Section 6(c).
f. Constructive Termination of Employment. If the Employee so
elects, a termination by the Company without Cause under Section 6(d) shall be
deemed to have occurred upon the occurrence of one or more of the following
events without the express written consent of the Employee:
i. a significant change in the nature or scope of the
authorities, powers, functions, duties or responsibilities attached to
Employee's position as described in Section 3; or
ii. five percent (5%) reduction in the Employee's base
salary or any change in the method of calculating Employee's Bonus
Compensation hereunder which would be detrimental to Employee in any
respect; or
iii. a material breach of the Agreement by the Company;
or
iv. a material reduction of the Employee's benefits
under any employee benefit plan, program or arrangement (for Employee
individually or as part of a group) of the Company as then in effect or
as in effect on the Effective Date of the Agreement, which reduction
shall not be effectuated for similarly situated employees of the
Company; or
v. failure by a successor company to assume the
obligations under the Agreement.
Anything herein to the contrary notwithstanding, the Employee shall give written
notice to the Board of Directors of the Company that the Employee believes an
event has occurred which would result in a Constructive Termination of the
Employee's employment under this Section 6(f), which written notice shall
specify the particular act or acts, on the basis of which the Employee intends
to so terminate the Employee's employment, and the Company shall then be given
the opportunity, within fifteen (15) days of its receipt of such notice to cure
said event, provided, however, there shall be no time period permitted to cure a
second or subsequent occurrence under this Section 6(f) (whether such second
occurrence be of the same or a different event specified in subsections (i)
through (v) above).
6
<PAGE>
g. Termination Following a Change of Control.
i. In the event that a "Change in Control" or an "Attempted Change in
Control" as hereinafter defined, of the Company shall occur at any time during
the Term hereof, the Employee shall have the right to terminate the Employee's
employment under this Agreement upon thirty (30) days written notice given at
any time within one year after the occurrence of such event, and such
termination of the Employee's employment with the Company pursuant to this
Section 6(g)(i), then, in any such event, such termination shall be deemed to be
a Termination by the Company Other than for Cause and the Employee shall be
entitled to such Compensation and Benefits as set forth in Subsection 6(d) of
this Agreement.
ii. For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control (A) as set forth
in Section 280G of the Internal Revenue Code or (B) of a nature that
would be required to be reported in response to Item 1 of the current
report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred at such time as:
(A) any "person", other than the Employee,
(as such term is used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's
outstanding securities then having the right to vote at
elections of directors; or,
(B) the individuals who at the commencement
date of the Agreement constitute the Board of Directors cease
for any reason to constitute a majority thereof unless the
election, or nomination for election, of each new director was
approved by a vote of at least two thirds of the directors
then in office who were directors at the commencement of the
Agreement; or
(C) there is a failure to elect four or more
(or such number of directors as would constitute a majority of
the Board of Directors) candidates nominated by management of
the Company to the Board of Directors; or
7
<PAGE>
(D) the business of the Company for which
the Employee's services are principally performed is disposed
of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets (including stock
of a subsidiary of the Company) or otherwise.
Anything herein to the contrary notwithstanding, this Section 6(g)(ii) will not
apply where the Employee gives the Employee's explicit written waiver stating
that for the purposes of this Section 6(g)(ii) a Change in Control shall not be
deemed to have occurred. The Employee's participation in any negotiations or
other matters in relation to a Change in Control shall in no way constitute such
a waiver which can only be given by an explicit written waiver as provided in
the preceding sentence.
An "Attempted Change in Control" shall be deemed to have
occurred if any substantial attempt, accompanied by significant work efforts and
expenditures of money, is made to accomplish a Change in Control, as described
in subparagraphs (A), (B), (C) or (D) above whether or not such attempt is made
with the approval of a majority of the then current members of the Board of
Directors.
iii. In the event that, within twelve (12) months of any
Change in Control of the Company or any Attempted Change in Control of
the Company, the Company terminates the employment of the Employee
under this Agreement, for any reason other than for Cause as defined in
Section 6(c), or the Employee's employment is constructively terminated
as defined in Section 6(g)(iv), then, in any such event, such
termination shall be deemed to be a Termination by the Company Other
than for Cause and the Employee shall be entitled to such Compensation
and Benefits as set forth in Subsection 6(d) of this Agreement.
iv. For purposes of this Section 6(g), the Employee's
employment shall be deemed constructively terminated in the event one
or more of the following events occurs without the express written
consent of the Employee:
(A) Significant change in the nature or
scope of the authorities, powers, functions, duties or
responsibilities attached to Employee's position as described
in Section 3; or
(B) A five percent (5%) reduction in the
Employee's salary below the salary in effect immediately prior
to such reduction or a reduction in the target bonus
participation under Section 5(d) as a percentage of salary; or
(C) Material breach of the Agreement by the
Company; or
8
<PAGE>
(D) Material reduction of the Employee's
benefits under any employee benefit plan, program or
arrangement (for Employee individually or as part of a group)
of the Company as then in effect or as in effect on the
effective date or the Agreement, which reduction shall not be
effectuated for similarly situated employees of the Company;
or
(E) Failure by a successor company to assume
the obligations under the Agreement; or
(F) Change in the Employee's principal
office to a location outside the Dade-Palm Beach-Broward
County, Florida area.
v. Anything in this Section 6(g) to the contrary
notwithstanding, in no event will any action or non-action by the
Employee at any time prior to the first anniversary date of the
applicable Change in Control or Attempted Change in Control (including
any action or non-action prior to the effective date of this Agreement)
be deemed consent to any of the events described in this Section 6(g).
vi. Anything herein to the contrary notwithstanding, in
the event the circumstances giving rise to an Attempted Change in
Control are included in those circumstances giving rise to an actual
Change in Control the twelve (12) month period under this Section 6
will be deemed to have recommenced on the date the actual Change in
Control occurred.
7. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. Except as set forth in Section
6(d)(ii) of this Agreement, the Employee acknowledges and recognizes the highly
competitive nature of the Company's business and the goodwill, continued
patronage, and specifically the names and addresses of the Company's Clients (as
hereinafter defined) constitute a substantial asset of the Company having been
acquired through considerable time, money and effort. Accordingly, in
consideration of the execution of this Agreement, the Employee agrees to the
following:
i. That during the Restricted Period (as hereinafter
defined) and within the Restricted Area (as hereinafter defined), the
Employee will not, individually or in conjunction with others, directly
or indirectly, engage in any Business Activities (as hereinafter
defined), whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder
solely as an investment of less than 1% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise.
ii. That during the Restricted Period and within the
Restricted Area, the Employee will not, directly or indirectly, compete
with the Company by soliciting, inducing or influencing any of the
Company's clients which have a business relationship with the Company
at the time during the Restricted Period to discontinue or reduce the
extent of such relationship with the Company.
9
<PAGE>
iii. That during the Restricted Period and within the
Restricted Area, the Employee will not (A) directly or indirectly
recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the
Company, or (B) employ or seek to employ, or cause or permit any
business which competes directly or indirectly with the Business
Activities of the Company (the "Competitive Business") to employ or
seek to employ for any Competitive Business any person who is then ( or
was at any time within six (6) months prior to the date Employee or the
Competitive Business employs or seeks to employ such person) employed
by the Company.
iv. That during the Restricted Period the Employee
will not interfere with, or disrupt or attempt to disrupt any past,
present or prospective relationship, contractual or otherwise, between
the Company and any customer, employee or agent of the Company.
b. Non-Disclosure of Information. The Employee acknowledges
that the Company's trade secrets, private or secret processes, methods and
ideas, as they exist from time to time, customer lists and information
concerning the Company's products, services, training methods, development,
technical information, marketing activities and procedures, credit and financial
data concerning the Company and/or the Company's Clients, and (the "Proprietary
Information") are valuable, special and unique assets of the Company, access to
and knowledge of which are essential to the performance of the Employee
hereunder. In light of the highly competitive nature of the industry in which
the Company's business is conducted, the Employee agrees that all Proprietary
Information, heretofore or in the future obtained by the Employee as a result of
the Employee's association with the Company shall be considered confidential.
In recognition of this fact, the Employee agrees that the Employee,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Employee's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Employee is legally required to disclose such Proprietary Information. Documents
(as hereinafter defined) prepared by the Employee or that come into the
Employee's possession during the Employee's association with the Company are and
remain the property of the Company, and when this Agreement terminates, such
Documents shall be returned to the Company at the Company's principal place of
business, as provided in the Notice provision (Section 10) of this Agreement.
c. Documents. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever, and any and all copies thereof,
including, but not limited to: papers; books; records; tangible things;
correspondence; communications; telex messages; memoranda; work-papers; reports;
affidavits; statements; summaries; analyses; evaluations; client records and
information; agreements; agendas; advertisements; instructions; charges;
manuals; brochures; publications; directories; industry lists; schedules; price
lists; client lists; statistical records; training manuals; computer printouts;
books of account, records and invoices reflecting business operations; all
things similar to any of the foregoing however denominated. In all cases where
originals are not available, the term "Documents" shall also mean identical
copies of original documents or non-identical copies thereof.
10
<PAGE>
d. Company's Clients. The "Company's Clients" shall be deemed
to be any persons, partnerships, corporations, professional associations or
other organizations for whom the Company has performed Business Activities.
e. Restrictive Period. The "Restrictive Period" shall be
deemed to be during the Term of this Agreement and for a period of twelve (12)
months following termination of this Agreement).
f. Restricted Area. The Restricted Area shall be deemed to
mean any country in South America in which the Company is providing service at
the time of termination and Dade County and Broward County, Florida.
g. Business Activities. "Business Activities" shall be deemed
to include the manufacture and distribution of computer equipment and related
products and any additional activities which the Company or any of its
affiliates may engage in during the term of this Agreement.
h. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing covenants
contained in Sections 7(a) and (b) are essential elements of this Agreement, and
that but for the agreement by the Employee to comply with such covenants, the
Company would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants against the Employee.
i. Survival After Termination of Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the covenants in Sections
7(a) and (b) shall survive the termination of this Agreement and the Employee's
employment with the Company.
11
<PAGE>
j. Remedies.
i. The Employee acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Section 7(a) or (b) herein would be inadequate and the
breach shall be per se deemed as causing irreparable harm to the
Company. In recognition of this fact, in the event of a breach by the
Employee of any of the provisions of Section 7(a) or (b), the Employee
agrees that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the
Employee to payment or otherwise under this Agreement and all amounts
then or thereafter due to the Employee from the Company under this
Agreement may be terminated and the Company, without posting any bond,
shall be entitled to obtain, and the Employee agrees not to oppose the
Company's request for equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to
the Company.
ii. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent
injunction merely prohibiting the use of Proprietary Information would
not be an adequate remedy upon breach or threatened breach of Section
7(a) or (b) and consequently agrees, upon proof of any such breach, to
the granting of injunctive relief prohibiting any form of competition
with the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to
it for such breach or threatened breach.
8. Indemnification. The Employee shall continue to be covered by the
Articles of Incorporation and/or the Bylaws of the Company with respect to
matters occurring on or prior to the date of termination of the Employee's
employment with the Company, subject to all the provisions of Florida and
Federal law and the Articles of Incorporation and Bylaws of the Company then in
effect. Such reasonable expenses, including attorneys' fees, that may be covered
by the Articles of Incorporation and/or Bylaws of the Company shall be paid by
the Company on a current basis in accordance with such provision, the Company's
Articles of Incorporation and Florida law. To the extent that any such payments
by the Company pursuant to the Company's Articles of Incorporation and/or Bylaws
may be subject to repayment by the Employee pursuant to the provisions of the
Company's Articles of Incorporation or Bylaws, or pursuant to Florida or Federal
law, such repayment shall be due and payable by the Employee to the Company
within twelve (12) months after the termination of all proceedings, if any,
which relate to such repayment and to the Company's affairs for the period prior
to the date of termination of the Employee's employment with the Company and as
to which Employee has been covered by such applicable provisions.
9. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Employee or the Employee's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
12
<PAGE>
10. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate.
11. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
12. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Employment Agreement. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties or, in the case of a waiver, by the party to be charged.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
14. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Employee but shall be assignable by the
Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
15. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida. Anything in this Agreement to
the contrary notwithstanding, the Employee shall conduct the Employee's business
in a lawful manner and faithfully comply with applicable laws or regulations of
the state, city or other political subdivision in which the Employee is located.
13
<PAGE>
16. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
17. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
18. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
19. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
20. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
21. Venue. Company and Employee acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor) in and for Palm Beach
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
22. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date set
forth in the first paragraph of this Agreement.
Witness: THE COMPANY:
VITECH, AMERICA, INC.
/s/ Mitchell Asher By: /s/ Georges C. St. Laurent III
- -------------------------- -------------------------------
MITCHELL ASHER GEORGES C. ST. LAURENT III
Witness: THE EMPLOYEE:
/s/ Edward Kelly /s/ William C. St. Laurent
- -------------------------- ---------------------------------
EDWARD KELLY WILLIAM C. ST. LAURENT
14
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
BETWEEN THE COMPANY AND GEORGES C. ST. LAURENT III
DATED JANUARY 1, 1996
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is effective as
of January 1, 1996 (the "Effective Date"), between VITECH AMERICA, INC., a
Florida corporation (the "Company"), whose principal place of business is 8807
Northwest 23rd Street, Miami, Florida 33172, and GEORGES C. ST. LAURENT III, an
individual (the "Employee"), whose address is 9746 NW 29 Ter., Miami, FL.
WHEREAS, the Company is a Florida corporation engaged in the
manufacture and distribution of computer equipment and related products in the
Federal Republic of Brazil; and
WHEREAS, the Company presently employs the Employee and desires to
continue to employ the Employee and the Employee desires to continue in the
employ of the Company; and
WHEREAS, the Company has established a valuable reputation and goodwill
in its business, of the manufacture and distribution of computer equipment and
related products (the "Business"); and
WHEREAS, the Employee has created and established, at least in part,
and is in possession of, the manner, methods, trade secrets and other
confidential information pertaining to the Company's Business;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this
Agreement, Employee shall serve as President and Chief Executive Officer and
Director of the Company and shall have general executive and operating
supervision over the property, business and affairs of the Company, its
subsidiaries and divisions, subject to the guidelines and direction of the board
of directors of the Company. It is further the intention of the parties that at
all times during the "Term," as hereinafter defined, of this Agreement, the
Employee shall serve as a member of the board of directors of the Company. In
<PAGE>
the event Employee shall at any time not be on the board of directors of the
Company and serving as chairman of such board, it shall be presumed (if Employee
so elects) that the Employee has been terminated other than for cause and
Employee shall have all of the rights specified in Section 6.h. of this
Agreement just as if the Employee had been terminated "Without Cause."
b. Time Devoted. Throughout the term of the Agreement, the
Employee shall devote substantially all of the Employee's business time and
attention to the business and affairs of the Company consistent with the
Employee's senior executive position with the Company, except for reasonable
vacations and except for illness or incapacity, but nothing in the Agreement
shall preclude the Employee from engaging in personal business and/or serving as
a member of the board of directors of other companies, charitable and community
affairs, provided that such activities do not interfere with the regular
performance of the Employee's duties and responsibilities under this Agreement.
4. Term. The Term of employment hereunder will commence on the
Effective Date as set forth above and be for three (3) years from the Effective
Date.
5. Compensation and Benefits.
a. Salary. The Employee shall be paid a base salary (the "Base
Salary"), payable bi-weekly, at an annual rate of no less than Two Hundred Forty
Thousand Dollars ($240,000) for the first year, with annual incremental
increases of the greater of: (i) the percentage increase in the Consumer Price
Index, all items, as published by the United States Department of Labor, since
the Effective Time (in the case of the first annual increase) or since the most
recent anniversary of the Effective Time (in the case of all subsequent annual
increases), or (ii) six percent (6%) of the previous year's base salary.
b. Performance-based Bonus. Employee may be entitled to an
annual performance based bonus in such amounts as the Board of Directors shall
determine.
c. Employee Benefits. The Employee shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to executives and/or other salaried employees,
including, but not limited to, pension and other retirement plans, group life
insurance, hospitalization, surgical and major medical coverage, sick leave,
salary continuation, vacation and holidays, cellular telephone and all related
costs and expenses, long-term disability, and other fringe benefits.
d. Vacation. During each fiscal year of the Company, the
Employee shall be entitled to reasonable time and to utilize such vacation as
the Employee shall determine; provided however, that the Employee shall evidence
reasonable judgment with regard to appropriate vacation scheduling.
Notwithstanding the foregoing, employee shall be entitled to four (4) weeks
vacation per year.
2
<PAGE>
e. Business Expense Reimbursement. During the Term and any
Renewal Term of employment, the Employee shall be entitled to receive proper
reimbursement for all reasonable, out-of-pocket expenses incurred by the
Employee (in accordance with the policies and procedures established by the
Company for its senior executive officers) in performing services hereunder,
provided the Employee properly accounts therefor.
f. Automobile Expenses. The Company shall provide the Employee
with an automobile of the Employee's choice. The Company shall also be
responsible for all expenses in connection with such automobile including, but
not limited to, maintenance, insurance and gas. The Company shall pay or
reimburse Employee a monthly amount up to $850 for a leased automobile or $1,200
for a purchased automobile.
g. Life Insurance. The Company shall pay or reimburse Employee
for premiums and other charges associated with such life insurance policies as
Employee and the Company shall mutually agree.
6. Consequences of Termination of Employment.
a. Death. In the event of the death of the Employee during the
Term of the Agreement, salary shall be paid to the Employee's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Employee for a period of one (1) year from and after
the date of death. In the event Employee dies while in Brazil, Employee's estate
or other legal representative shall be entitled to salary for the greater of two
(2) years or the remaining Term of this Agreement. Except as set forth herein,
other death benefits will be determined in accordance with the terms of the
Company's benefit programs and plans.
b. Disability.
i. In the event of the Employee's disability, as
hereinafter defined, the Employee shall be entitled to compensation in
accordance with the Company's disability compensation practice for
senior executives, including any separate arrangement or policy
covering the Employee, but in all events the Employee shall continue to
receive the Employee's salary for a period, at the annual rate in
effect immediately prior to the commencement of disability, of not less
than 360 days (720 if Employee becomes disabled while in Brazil) from
the date on which the disability has deemed to occur as hereinafter
provided below. Any amounts provided for in this Section 6(b) shall not
be offset by other long-term disability benefits provided to the
Employee by the Company.
ii. "Disability," for the purposes of this Agreement,
shall be deemed to have occurred in the event (A) the Employee is
unable by reason of sickness or accident, to perform the Employee's
duties under this Agreement for an aggregate of 180 days in any
twelve-month period or (B) the Employee has a guardian of the person or
3
<PAGE>
estate appointed by a court of competent jurisdiction. Termination due
to disability shall be deemed to have occurred upon the first day of
the month following the determination of disability as defined in the
preceding sentence.
Anything herein to the contrary notwithstanding, if,
following a termination of employment hereunder due to disability as
provided in the preceding paragraph, the Employee becomes reemployed,
whether as an Employee or a consultant to the Company, any salary,
annual incentive payments or other benefits earned by the Employee from
such employment shall offset any salary continuation due to the
Employee hereunder commencing with the date of re-employment.
c. Termination by the Company for Cause.
i. Nothing herein shall prevent the Company from
terminating Employment for "Cause," as hereinafter defined. The
Employee shall continue to receive salary only for the period ending
with the date of such termination as provided in this Section 6(c). Any
rights and benefits the Employee may have in respect of any other
compensation shall be determined in accordance with the terms of such
other compensation arrangements or such plans or programs.
ii. "Cause" shall mean and include those actions or
events specified below in subsections (A) through (E) to the extent the
same occur, or the events constituting the same take place, subsequent
to the date of execution of this Agreement: (A) Committing or
participating in an injurious act of fraud, gross neglect or
embezzlement against the Company; (B) committing or participating in
any other injurious act or omission wantonly, willfully, recklessly or
in a manner which was grossly negligent against the Company, monetarily
or otherwise; (C) engaging in a criminal enterprise involving moral
turpitude; (D) conviction of an act or acts constituting a felony under
the laws of the United States or any state thereof; or (E) any
assignment of this Agreement by the Employee in violation of Section 14
of this Agreement. Anything herein to the contrary notwithstanding, the
employment of Employee shall not be terminable by the Company for Cause
if the grounds for such termination includes, but is not limited to:
(i) the result of bad judgment or poor economic results on the part of
the Employee, (ii) any act or omission believed by Employee in good
faith to have been in or not opposed to the interests of the Company,
or (iii) any act or omission in respect of which a determination could
properly be made that Employee met the applicable standard of conduct
described for indemnification or reimbursement or payment of expenses
under the Articles of Incorporation or Bylaws of the Company or the
laws of the State of Florida or the directors' and officers' liability
insurance of the Company, in each case as in effect at the time of such
act or omission.
4
<PAGE>
iii. Notwithstanding anything else contained in this
Agreement, this Agreement will not be deemed to have been terminated
for Cause unless and until there shall have been delivered to the
Employee a notice of termination stating that the Employee committed
one of the types of conduct set forth in this Section 6(c) contained in
this Agreement and specifying the particulars thereof and the Employee
shall be given a thirty (30) day period to cure such conduct, if
possible.
d. Termination by the Company Other than for Cause.
i. The foregoing notwithstanding, the Company may
terminate the Employee's employment for whatever reason it deems
appropriate provided, however, that in the event such termination is
not based on cause, as provided in Section 6(c) above, the Company may
terminate this Agreement upon giving three (3) months' prior written
notice. During such three (3) month period, the Employee shall continue
to perform the Employee's duties pursuant to this Agreement, and the
Company shall continue to compensate the Employee in accordance with
this Agreement. The Employee will receive, at the Employee's option
either (A) a lump sum equal to the "Compensation and Benefits," as
hereinafter defined, for the remaining balance of the Term of this
Agreement, at the then current rate, reduced to present value, as set
forth in Section 280G of the Internal Revenue Code or (B) for the
remaining balance of the Term or any Renewal Term of this Agreement
from and after the date of any such termination and the Company shall
on the last day of each calendar month pay to the Employee such
"Compensation and Benefits," which shall be an amount equal to (Y) one
hundred percent (100%) of the Employee's compensation and benefits set
forth in Section 5, which shall specifically include the Base Salary
and Bonus, which Bonus shall be payable on a pro-rata basis for the
year in which the Employee' employment was terminated other than for
cause (the "Compensation and Benefits"), on the date of any such
termination, divided by (Z) twelve (12); provided however that if (A)
there is a decrease in the Employee's Compensation and Benefits, which
specifically include the Employee's then Base Salary and Bonus, for any
reason other than the targets set forth in Section 5(b) are not met,
and (B) the Employee is terminated without cause, the Compensation and
Benefits shall be as existed immediate prior to such a decrease. The
Employee will be entitled to continued Compensation and Benefits
coverage and credits as provided in Section 5 or to reimbursement for
the cost of providing the Employee with comparable benefit coverage
during the term in which the Employee is receiving payments from the
Company after termination pursuant to Section 6(d). Such benefit
coverage will not be offset by comparable coverage provided to the
Employee in connection with subsequent employment.
ii. In the event that the Employee's employment with the
Company is terminated pursuant to this Section 6(d), Section 6(f) or
5
<PAGE>
Section 6(g), Section 7(a) of this Agreement and all references thereto
shall be inapplicable as to the Employee and the Company.
iii. The foregoing notwithstanding, the Employee's
employment may not be terminated by the Company for any reason other
than pursuant to Section 6(a), Section 6(b) and/or Section 6(c) during
the first three (3) years of this Agreement.
e. Voluntary Termination. In the event the Employee terminates
the Employee's employment on the Employee's own volition (except as provided in
Section 6(f) and/or Section 6(g)) prior to the expiration of the Term or during
any Renewal Term of this Agreement, including any renewals thereof, such
termination shall constitute a voluntary termination and in such event the
Employee shall be limited to the same rights and benefits as provided in
connection with a termination for Cause as provided in Section 6(c).
f. Constructive Termination of Employment. If the Employee so
elects, a termination by the Company without Cause under Section 6(d) shall be
deemed to have occurred upon the occurrence of one or more of the following
events without the express written consent of the Employee:
i. a significant change in the nature or scope of the
authorities, powers, functions, duties or responsibilities attached to
Employee's position as described in Section 3; or
ii. five percent (5%) reduction in the Employee's base
salary or any change in the method of calculating Employee's Bonus
Compensation hereunder which would be detrimental to Employee in any
respect; or
iii. a material breach of the Agreement by the Company;
or
iv. a material reduction of the Employee's benefits
under any employee benefit plan, program or arrangement (for Employee
individually or as part of a group) of the Company as then in effect or
as in effect on the Effective Date of the Agreement, which reduction
shall not be effectuated for similarly situated employees of the
Company; or
v. failure by a successor company to assume the
obligations under the Agreement.
Anything herein to the contrary notwithstanding, the Employee shall give written
notice to the Board of Directors of the Company that the Employee believes an
event has occurred which would result in a Constructive Termination of the
Employee's employment under this Section 6(f), which written notice shall
specify the particular act or acts, on the basis of which the Employee intends
6
<PAGE>
to so terminate the Employee's employment, and the Company shall then be given
the opportunity, within fifteen (15) days of its receipt of such notice to cure
said event, provided, however, there shall be no time period permitted to cure a
second or subsequent occurrence under this Section 6(f) (whether such second
occurrence be of the same or a different event specified in subsections (i)
through (v) above).
g. Termination Following a Change of Control.
i. In the event that a "Change in Control" or an
"Attempted Change in Control" as hereinafter defined, of the Company
shall occur at any time during the Term hereof, the Employee shall have
the right to terminate the Employee's employment under this Agreement
upon thirty (30) days written notice given at any time within one year
after the occurrence of such event, and such termination of the
Employee's employment with the Company pursuant to this Section
6(g)(i), then, in any such event, such termination shall be deemed to
be a Termination by the Company Other than for Cause and the Employee
shall be entitled to such Compensation and Benefits as set forth in
Subsection 6(d) of this Agreement.
ii. For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control (A) as set forth
in Section 280G of the Internal Revenue Code or (B) of a nature that
would be required to be reported in response to Item 1 of the current
report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred at such time as:
(A) any "person", other than the Employee,
(as such term is used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's
outstanding securities then having the right to vote at
elections of directors; or,
(B) the individuals who at the commencement
date of the Agreement constitute the Board of Directors cease
for any reason to constitute a majority thereof unless the
election, or nomination for election, of each new director was
approved by a vote of at least two thirds of the directors
then in office who were directors at the commencement of the
Agreement; or
(C) there is a failure to elect four or more
(or such number of directors as would constitute a majority of
the Board of Directors) candidates nominated by management of
the Company to the Board of Directors; or
7
<PAGE>
(D) the business of the Company for which
the Employee's services are principally performed is disposed
of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets (including stock
of a subsidiary of the Company) or otherwise.
Anything herein to the contrary notwithstanding, this Section 6(g)(ii) will not
apply where the Employee gives the Employee's explicit written waiver stating
that for the purposes of this Section 6(g)(ii) a Change in Control shall not be
deemed to have occurred. The Employee's participation in any negotiations or
other matters in relation to a Change in Control shall in no way constitute such
a waiver which can only be given by an explicit written waiver as provided in
the preceding sentence.
An "Attempted Change in Control" shall be deemed to have
occurred if any substantial attempt, accompanied by significant work efforts and
expenditures of money, is made to accomplish a Change in Control, as described
in subparagraphs (A), (B), (C) or (D) above whether or not such attempt is made
with the approval of a majority of the then current members of the Board of
Directors.
iii. In the event that, within twelve (12) months of any
Change in Control of the Company or any Attempted Change in Control of
the Company, the Company terminates the employment of the Employee
under this Agreement, for any reason other than for Cause as defined in
Section 6(c), or the Employee's employment is constructively terminated
as defined in Section 6(g)(iv), then, in any such event, such
termination shall be deemed to be a Termination by the Company Other
than for Cause and the Employee shall be entitled to such Compensation
and Benefits as set forth in Subsection 6(d) of this Agreement.
iv. For purposes of this Section 6(g), the Employee's
employment shall be deemed constructively terminated in the event one
or more of the following events occurs without the express written
consent of the Employee:
(A) Significant change in the nature or
scope of the authorities, powers, functions, duties or
responsibilities attached to Employee's position as described
in Section 3; or
(B) A five percent (5%) reduction in the
Employee's salary below the salary in effect immediately prior
to such reduction or a reduction in the target bonus
participation under Section 5(d) as a percentage of salary; or
(C) Material breach of the Agreement by the
Company; or
(D) Material reduction of the Employee's
benefits under any employee benefit plan, program or
arrangement (for Employee individually or as part of a group)
8
<PAGE>
of the Company as then in effect or as in effect on the
effective date or the Agreement, which reduction shall not be
effectuated for similarly situated employees of the Company;
or
(E) Failure by a successor company to assume
the obligations under the Agreement; or
(F) Change in the Employee's principal
office to a location outside the Dade-Palm Beach-Broward
County, Florida area.
v. Anything in this Section 6(g) to the contrary
notwithstanding, in no event will any action or non-action by the
Employee at any time prior to the first anniversary date of the
applicable Change in Control or Attempted Change in Control (including
any action or non-action prior to the effective date of this Agreement)
be deemed consent to any of the events described in this Section 6(g).
vi. Anything herein to the contrary notwithstanding, in
the event the circumstances giving rise to an Attempted Change in
Control are included in those circumstances giving rise to an actual
Change in Control the twelve (12) month period under this Section 6
will be deemed to have recommenced on the date the actual Change in
Control occurred.
7. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. Except as set forth in Section
6(d)(ii) of this Agreement, the Employee acknowledges and recognizes the highly
competitive nature of the Company's business and the goodwill, continued
patronage, and specifically the names and addresses of the Company's Clients (as
hereinafter defined) constitute a substantial asset of the Company having been
acquired through considerable time, money and effort. Accordingly, in
consideration of the execution of this Agreement, the Employee agrees to the
following:
i. That during the Restricted Period (as hereinafter
defined) and within the Restricted Area (as hereinafter defined), the
Employee will not, individually or in conjunction with others, directly
or indirectly, engage in any Business Activities (as hereinafter
defined), whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder
solely as an investment of less than 1% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise.
ii. That during the Restricted Period and within the
Restricted Area, the Employee will not, directly or indirectly, compete
with the Company by soliciting, inducing or influencing any of the
Company's clients which have a business relationship with the Company
at the time during the Restricted Period to discontinue or reduce the
extent of such relationship with the Company.
9
<PAGE>
iii. That during the Restricted Period and within the
Restricted Area, the Employee will not (A) directly or indirectly
recruit, solicit or otherwise influence any employee or agent of the
Company to discontinue such employment or agency relationship with the
Company, or (B) employ or seek to employ, or cause or permit any
business which competes directly or indirectly with the Business
Activities of the Company (the "Competitive Business") to employ or
seek to employ for any Competitive Business any person who is then (or
was at any time within six (6) months prior to the date Employee or the
Competitive Business employs or seeks to employ such person) employed
by the Company.
iv. That during the Restricted Period the Employee will
not interfere with, or disrupt or attempt to disrupt any past, present
or prospective relationship, contractual or otherwise, between the
Company and any customer, employee or agent of the Company.
b. Non-Disclosure of Information. The Employee acknowledges
that the Company's trade secrets, private or secret processes, methods and
ideas, as they exist from time to time, customer lists and information
concerning the Company's products, services, training methods, development,
technical information, marketing activities and procedures, credit and financial
data concerning the Company and/or the Company's Clients, and (the "Proprietary
Information") are valuable, special and unique assets of the Company, access to
and knowledge of which are essential to the performance of the Employee
hereunder. In light of the highly competitive nature of the industry in which
the Company's business is conducted, the Employee agrees that all Proprietary
Information, heretofore or in the future obtained by the Employee as a result of
the Employee's association with the Company shall be considered confidential.
In recognition of this fact, the Employee agrees that the Employee,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Employee's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Employee is legally required to disclose such Proprietary Information. Documents
(as hereinafter defined) prepared by the Employee or that come into the
Employee's possession during the Employee's association with the Company are and
remain the property of the Company, and when this Agreement terminates, such
Documents shall be returned to the Company at the Company's principal place of
business, as provided in the Notice provision (Section 10) of this Agreement.
c. Documents. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever, and any and all copies thereof,
including, but not limited to: papers; books; records; tangible things;
correspondence; communications; telex messages; memoranda; work-papers; reports;
affidavits; statements; summaries; analyses; evaluations; client records and
information; agreements; agendas; advertisements; instructions; charges;
10
<PAGE>
manuals; brochures; publications; directories; industry lists; schedules; price
lists; client lists; statistical records; training manuals; computer printouts;
books of account, records and invoices reflecting business operations; all
things similar to any of the foregoing however denominated. In all cases where
originals are not available, the term "Documents" shall also mean identical
copies of original documents or non-identical copies thereof.
d. Company's Clients. The "Company's Clients" shall be deemed
to be any persons, partnerships, corporations, professional associations or
other organizations for whom the Company has performed Business Activities.
e. Restrictive Period. The "Restrictive Period" shall be
deemed to be during the Term of this Agreement and for a period of twelve (12)
months following termination of this Agreement).
f. Restricted Area. The Restricted Area shall be deemed to
mean any country in South America in which the Company is providing service at
the time of termination and Dade County and Broward County, Florida.
g. Business Activities. "Business Activities" shall be deemed
to include the manufacture and distribution of computer equipment and related
products and any additional activities which the Company or any of its
affiliates may engage in during the term of this Agreement.
h. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing covenants
contained in Sections 7(a) and (b) are essential elements of this Agreement, and
that but for the agreement by the Employee to comply with such covenants, the
Company would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants against the Employee.
i. Survival After Termination of Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the covenants in Sections
7(a) and (b) shall survive the termination of this Agreement and the Employee's
employment with the Company.
j Remedies.
i. The Employee acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Section 7(a) or (b) herein would be inadequate and the
breach shall be per se deemed as causing irreparable harm to the
Company. In recognition of this fact, in the event of a breach by the
11
<PAGE>
Employee of any of the provisions of Section 7(a) or (b), the Employee
agrees that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the
Employee to payment or otherwise under this Agreement and all amounts
then or thereafter due to the Employee from the Company under this
Agreement may be terminated and the Company, without posting any bond,
shall be entitled to obtain, and the Employee agrees not to oppose the
Company's request for equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available to
the Company.
ii. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent
injunction merely prohibiting the use of Proprietary Information would
not be an adequate remedy upon breach or threatened breach of Section
7(a) or (b) and consequently agrees, upon proof of any such breach, to
the granting of injunctive relief prohibiting any form of competition
with the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to
it for such breach or threatened breach.
8. Indemnification. The Employee shall continue to be covered by the
Articles of Incorporation and/or the Bylaws of the Company with respect to
matters occurring on or prior to the date of termination of the Employee's
employment with the Company, subject to all the provisions of Florida and
Federal law and the Articles of Incorporation and Bylaws of the Company then in
effect. Such reasonable expenses, including attorneys' fees, that may be covered
by the Articles of Incorporation and/or Bylaws of the Company shall be paid by
the Company on a current basis in accordance with such provision, the Company's
Articles of Incorporation and Florida law. To the extent that any such payments
by the Company pursuant to the Company's Articles of Incorporation and/or Bylaws
may be subject to repayment by the Employee pursuant to the provisions of the
Company's Articles of Incorporation or Bylaws, or pursuant to Florida or Federal
law, such repayment shall be due and payable by the Employee to the Company
within twelve (12) months after the termination of all proceedings, if any,
which relate to such repayment and to the Company's affairs for the period prior
to the date of termination of the Employee's employment with the Company and as
to which Employee has been covered by such applicable provisions.
9. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Employee or the Employee's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
12
<PAGE>
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
10. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate.
11. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
12. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Employment Agreement. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties or, in the case of a waiver, by the party to be charged.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
14. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Employee but shall be assignable by the
Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
15. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida. Anything in this Agreement to
the contrary notwithstanding, the Employee shall conduct the Employee's business
in a lawful manner and faithfully comply with applicable laws or regulations of
the state, city or other political subdivision in which the Employee is located.
13
<PAGE>
16. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
17. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
18. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
19. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
20. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
21. Venue. Company and Employee acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor) in and for Palm Beach
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
22. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of date set
forth in the first paragraph of this Agreement.
Witness: THE COMPANY:
VITECH, AMERICA, INC.
/s/ Mitchell Asher By: /s/ William C. St. Laurent III
- ----------------------------------- --------------------------------
MITCHELL ASHER WILLIAM C. ST. LAURENT III
Witness: THE EMPLOYEE:
/s/ Edward Kelly /s/ Georges St. Laurent III
- ----------------------------------- -----------------------------------
EDWARD KELLY GEORGES ST. LAURENT, III
15
<PAGE>
Exhibit 10.5
OPTION AGREEMENTS FOR
WILLIAM ST. LAURENT AND GEORGES C. ST. LAURENT III
<PAGE>
VITECH AMERICA, INC.
8807 Northwest 23rd Street
Miami, Florida 33172
Date: September 3, 1996
----
Mr. William C. St. Laurent
107 Parker Gulch Elkhorn
Sun Valley, ID 83354
Dear William:
The undersigned principal shareholder of Vitech America, Inc. (the
"Corporation") is pleased to award you an Option to purchase an aggregate of
1,960,000 shares of the Corporation's Common Stock. This letter will describe
the Option granted to you. Your signature on this letter is an acknowledgement
to us that you have read and understand this Agreement and that you agree to
abide by its terms.
1. Mutual Intent. It is important to the Corporation that the Optionee
be encouraged to enhance the value of the Corporation and its subsidiaries
through Optionee's services to the Corporation and its subsidiaries.
Accordingly, the Corporation desires to afford the Optionee the opportunity to
purchase shares of the Corporation's Common Stock as hereinafter provided.
2. Rights and Privileges. Subject to the conditions hereinafter set
forth, the Corporation grants you the right to purchase 1,960,000 shares of
Stock at: $15.00 for 490,000 shares, $20.00 for 490,000 shares and $25.00 for
980,000 shares. The right to purchase the shares of Stock accrues in three
installments over the time periods described below:
The right to acquire all shares accrues on the date hereof.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written
notice to the Corporation at the Corporation's principal place of business. The
notice shall set forth the number of shares of Stock to be acquired and shall
contain a check payable to the undersigned in full payment for the shares to be
purchased. We shall make delivery of the shares of restricted stock promptly
after notice of exercise.
<PAGE>
In addition to the method of payment set forth in this Section 4 and
in lieu of any cash payment required thereunder, the Optionee shall have the
right at any time and from time to time to exercise the Options in full or in
part in the manner specified in this Section 4 as payment of the aggregate
exercise price. The number of Options to be surrendered in payment of the
aggregate exercise price for the Options to be exercised shall be determined by
multiplying the number of Options to be exercised by the exercise price per
share of common stock, and then dividing the product thereof by an amount equal
to the Market Price (as defined below) minus the exercise price. Market Price
shall be calculated either (i) on the date which the notice to purchase has been
sent to the Company ("Notice Date") or (ii) as the average of the market prices
for each of the five trading days preceding the Notice Date, whichever of (i) or
(ii) is greater.
5. Termination of Option. To the extent not exercised, the Option
shall terminate four (4) years from the closing of the Corporation's initial
public offering.
6. Anti-Dilution. If there is any change in the number of shares of
stock on account of the declaration of stock dividends, recapitalization
resulting in stock split-ups, or combinations or exchanges of shares of stock,
or otherwise, the number of shares of stock available for purchase upon the
exercise of Options, the shares of Stock subject to any Option and the exercise
price of any outstanding Option shall be appropriately adjusted by the Board.
The Board shall give notice of any adjustments to the Optionee and such
adjustments shall be, absent negligence, effective and binding. If because of
one or more recapitalizations, reorganizations or other corporate events, the
holders of outstanding stock receive something other than shares of stock then,
upon exercise of an Option, the Optionee will receive what the holder would have
owned if the holder had exercised the Option immediately before the first such
corporate event and not disposed of anything the holder received as a result of
the corporate event.
7. Merger or Consolidation. In case of any consolidation of the
Corporation with, or merger of the Corporation with, or merger of the
Corporation into another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding common
stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Optionee, a supplemental option agreement providing that the
holder of each Option then outstanding or to be outstanding shall have the right
thereafter (until the expiration of such Option) to receive, upon exercise of
such Option the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of common stock of the Corporation for which such Option might have
been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental option agreement shall provide for adjustments which
shall be identical to the adjustments provided in Section 6. The above provision
of this subsection shall similarly apply to successive consolidations or
mergers.
2
<PAGE>
8. Securities Laws. The Option and the shares of Stock underlying the
Option have not been registered under the Securities Act of 1933, as amended
(the "Act"). The Corporation has no obligations to ever register the Option or
the shares of Stock underlying the Option. All shares of Stock acquired upon the
exercise of the Option shall be "restricted securities" as that term is defined
in Rule 144 promulgated under the Act. The certificate representing the shares
shall bear an appropriate legend restricting their transfer. Such shares cannot
be sold, transferred, assigned or otherwise hypothecated without registration
under the Act or unless a valid exemption from registration is then available
under applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
9. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
10. Date of Grant. The Option shall be treated as having been granted
to you on the date of this letter even though you may sign it at a later date.
11. Counterparts. This Agreement shall be executed in multiple
counterparts, each of which when considered together, comes to one and the same
Agreement.
12. Integration. This Agreement supersedes all prior agreements
understanding between the undersigned and the Optionee related to the subject
matter hereof.
Very truly yours,
VITECH AMERICA, INC.
By: /s/ Georges C. St. Laurent III
-------------------------------------
Name:
Georges C. St. Laurent III
----------------------------------------
Title: Chief Executive Officer
AGREED AND ACCEPTED THIS
3rd day of September, 1996
- ------ ------------
/s/ William St. Laurent
- ------------------------------
3
<PAGE>
VITECH AMERICA, INC.
8807 Northwest 23rd Street
Miami, Florida 33172
Date: September 3, 1996
----
Mr. Georges St. Laurent, III
9746 NW 29 Ter.
Miami, Fl 33172
Dear Georges:
The undersigned principal shareholder of Vitech America, Inc. (the
"Corporation") is pleased to award you an Option to purchase an aggregate of
2,040,000 shares of the Corporation's Common Stock. This letter will describe
the Option granted to you. Your signature on this letter is an acknowledgement
to us that you have read and understand this Agreement and that you agree to
abide by its terms.
1. Mutual Intent. It is important to the Corporation that the Optionee
be encouraged to enhance the value of the Corporation and its subsidiaries
through Optionee's services to the Corporation and its subsidiaries.
Accordingly, the Corporation desires to afford the Optionee the opportunity to
purchase shares of the Corporation's Common Stock as hereinafter provided.
2. Rights and Privileges. Subject to the conditions hereinafter set
forth, the Corporation grants you the right to purchase 1,960,000 shares of
Stock at: $15.00 for 510,000 shares, $20.00 for 510,000 shares and $25.00 for
1,020,000 shares. The right to purchase the shares of Stock accrues in three
installments over the time periods described below:
The right to acquire all shares accrues on the date hereof.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written
notice to the Corporation at the Corporation's principal place of business. The
notice shall set forth the number of shares of Stock to be acquired and shall
contain a check payable to the undersigned in full payment for the shares to be
purchased. We shall make delivery of the shares of restricted stock promptly
after notice of exercise.
<PAGE>
In addition to the method of payment set forth in this Section 4 and
in lieu of any cash payment required thereunder, the Optionee shall have the
right at any time and from time to time to exercise the Options in full or in
part in the manner specified in this Section 4 as payment of the aggregate
exercise price. The number of Options to be surrendered in payment of the
aggregate exercise price for the Options to be exercised shall be determined by
multiplying the number of Options to be exercised by the exercise price per
share of common stock, and then dividing the product thereof by an amount equal
to the Market Price (as defined below) minus the exercise price. Market Price
shall be calculated either (i) on the date which the notice to purchase has been
sent to the Company ("Notice Date") or (ii) as the average of the market prices
for each of the five trading days preceding the Notice Date, whichever of (i) or
(ii) is greater.
5. Termination of Option. To the extent not exercised, the Option
shall terminate four (4) years from the closing of the Corporation's initial
public offering.
6. Anti-Dilution. If there is any change in the number of shares of
stock on account of the declaration of stock dividends, recapitalization
resulting in stock split-ups, or combinations or exchanges of shares of stock,
or otherwise, the number of shares of stock available for purchase upon the
exercise of Options, the shares of Stock subject to any Option and the exercise
price of any outstanding Option shall be appropriately adjusted by the Board.
The Board shall give notice of any adjustments to the Optionee and such
adjustments shall be, absent negligence, effective and binding. If because of
one or more recapitalizations, reorganizations or other corporate events, the
holders of outstanding stock receive something other than shares of stock then,
upon exercise of an Option, the Optionee will receive what the holder would have
owned if the holder had exercised the Option immediately before the first such
corporate event and not disposed of anything the holder received as a result of
the corporate event.
7. Merger or Consolidation. In case of any consolidation of the
Corporation with, or merger of the Corporation with, or merger of the
Corporation into another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding common
stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Optionee, a supplemental option agreement providing that the
holder of each Option then outstanding or to be outstanding shall have the right
thereafter (until the expiration of such Option) to receive, upon exercise of
such Option the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of common stock of the Corporation for which such Option might have
been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental option agreement shall provide for adjustments which
shall be identical to the adjustments provided in Section 6. The above provision
of this subsection shall similarly apply to successive consolidations or
mergers.
2
<PAGE>
8. Securities Laws. The Option and the shares of Stock underlying the
Option have not been registered under the Securities Act of 1933, as amended
(the "Act"). The Corporation has no obligations to ever register the Option or
the shares of Stock underlying the Option. All shares of Stock acquired upon the
exercise of the Option shall be "restricted securities" as that term is defined
in Rule 144 promulgated under the Act. The certificate representing the shares
shall bear an appropriate legend restricting their transfer. Such shares cannot
be sold, transferred, assigned or otherwise hypothecated without registration
under the Act or unless a valid exemption from registration is then available
under applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
9. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
10. Date of Grant. The Option shall be treated as having been granted
to you on the date of this letter even though you may sign it at a later date.
11. Counterparts. This Agreement shall be executed in multiple
counterparts, each of which when considered together, comes to one and the same
Agreement.
12. Integration. This Agreement supersedes all prior agreements
understanding between the undersigned and the Optionee related to the subject
matter hereof.
Very truly yours,
VITECH AMERICA, INC.
By: /s/ William St. Laurent
-------------------------------------
Name:
William St. Laurent
----------------------------------------
Title: President
AGREED AND ACCEPTED THIS
3 day of September, 1996
- ------ -----------
/s/ Georges C. St. Laurent
- ------------------------------
3
<PAGE>
EXHIBIT 10.6
PROMISSORY NOTE
FROM COMPANY TO GEORGES C. ST. LAURENT, JR.
<PAGE>
Promissory Note
For value received, Vitech America, Inc., a Florida Corporation, agrees to pay
Georges Campbell St. Laurent, Jr., an individual, the sum of Two Million United
States Dollars and No Cents, US$2,000,000.00, 335 days from date of receipt of
the funds into Vitech America, Inc. corporate account. This note shall bear
interest of 9% per annum, simple interest, paid monthly commencing thirty days
from the date of receipt of funds. This note shall convert to a demand note if
the financial condition of Vitech America, Inc. changes in any material way
which might lessen the financial ability of Vitech to repay this or any debts.
This shall be legal and enforceable according to the laws of the State of
Florida.
/s/ William St. Laurent, Pres. 5-26-95
- --------------------------------------- ---------
William St. Laurent, President Date
I, William St. Laurent, being President and a shareholder of Vitech America,
Inc., and materially benefiting from the use of above funds by Vitech America,
Inc., do personally guarantee the sum in its entirety.
/s/ William St. Laurent 5-26-95
- --------------------------------------- ---------
William St. Laurent, Personally Date
Signed before me this 26th day of May, 1995. Personally known.
/s/ Linda G. Odom
- ---------------------------------------
Linda G. Odom, Notary Public
State of Florida
My Commission Expires: 2/7/99
<PAGE>
Amendment to Promissory Note
This is an amendment to the promissory note dated May 26, 1995. For value
received, Vitech America, Inc., a Florida Corporation, agrees to pay Georges
Campbell St. Laurent, Jr. , an individual, the sum of Two Million United States
Dollars and No Cents, US$ 2,000,000.00, on demand. This note shall bear interest
of 9% per annum, simple interest, paid monthly commencing thirty days from the
date of receipt of funds. This note shall convert to a demand note if the
financial condition of Vitech America, Inc. changes in any material way which
might lessen the financial ability of Vitech to repay this or any debts. This
shall be legal and enforceable according to the laws of the state of Florida.
/s/ William St. Laurent 5-26-95
- --------------------------------------- ---------
William St. Laurent, President Date
<PAGE>
Conversion Option
In consideration for services rendered and capital provided, Vitech America,
Inc., a Florida Corporation, located at 8807 N.W. 23rd Street, Miami, Florida,
33172, does grant Georges Campbell St. Laurent the right to purchase $2.0
million worth of "units" of the pending "first-round" private placement offering
for capital by Vitech America, Inc.. The price of the equity portion of the
"units" will be discounted 20% to the final price as set by Underwriters or
Vitech as the case may be. Debt portion of the "units" will not be discounted.
/s/ William St. Laurent 5-26-95
- --------------------------------------- ---------
William St. Laurent, President Date
[Corporate Seal for Vitech America Inc., Florida]
Signed before me this 26th Day of May, 1995. Personally Known.
/s/ Linda G. Odom
- ---------------------------------------
Linda G. Odom, Notary Public
State of Florida
My Commission Expires: 2/7/99
[Notary seal, State of Florida, Commission No. CC437627]
<PAGE>
Amendment to Conversion Option
Considering the successful closing of the Meris Financial Private Convertible
Issue, and pursuant to the conversion option dated May 25, 1995, Vitech America,
Inc. does grant George Campbell St. Laurent, Jr. the right to purchase Five and
Nine Hundred Twenty Five Thousandths (5.925%) of the common shares of Vitech
America outstanding for Two Million Dollars and No Cents ($2,000,000.00).
/s/ William St. Laurent 11-1-95
- --------------------------------------- ---------
William St. Laurent, President Date
Signed before me this 1st Day of November, 1995. Personally Known.
/s/ Linda G. Odom
- ---------------------------------------
Linda G. Odom, Notary Public
State of Florida
My Commission Expires: 2/7/99
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<PAGE>
SUBSIDIARIES
1. Bahiatech-Bahia Tecnologia LTDA
<PAGE>
CONSENT OF PANNELL KERR FORSTER PC
We hereby consent to the inclusion in the Registration Statement on Form S-1
of Vitech America, Inc, of our report dated July 19, 1996, except for Note 15
for which the date is September 3, 1996, on our audit of the financial
statements of Vitech America, Inc. as of December 31, 1995 and December 31,
1994 and for the two years ended December 31, 1995 and 1994 and for the period
June 24, 1993 (inception) to December 31, 1993.
We also hereby consent to the reference to our firm under the caption
"Experts" in the Registration Statement.
/s/ PANNELL KERR FORSTER PC
- ----------------------------
Pannell Kerr Forster PC
New York, New York
September 5, 1996
