<PAGE>
As filed with the Securities and Exchange Commission on October 15, 1996
Registration No. 333-11505
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------
AMENDMENT NO. 1
to
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. Michael A. Meisler, Esq.
Atlas, Pearlman, Trop & Borkson, P.A. Brock, Fensterstock,
200 East Las Olas Blvd., Suite 1900 Silverstein,
Fort Lauderdale, Florida 33301 McAuliffe & Wade, LLC
(954) 766-7823 One Citicorp Center, 56th Floor
Telecopier: (954)766-7800 New York, New York 10022
(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/
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. / /
=============================================================================
<PAGE>
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 per share 2,340,944 Shares(2) $10.00 $23,409,440 $8,072.28
- -------------------------------------------------------------------------------------------------
Representative's
Warrants .......... 200,000 Warrants(3) $0.000025 $5.00 $0.01
- -------------------------------------------------------------------------------------------------
Common Stock, no par
value per share ... 200,000 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.
<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."
<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 OCTOBER 15, 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
$9.50 and $10.00 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." Concurrently with this offering, the
Company is registering the resale from, time to time, of an additional 40,994
shares of Common Stock by certain selling shareholders.
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 6.
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) ............ $ __________ $_________ $__________
==============================================================================
(1) Does not include additional compensation to be received by the
Representative in the form of: (i) a non-accountable expense allowance
equal to 2% of the gross proceeds of this offering ($_______, 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 for 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
<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.
<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, (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, or (v) up to 27,296 shares
of Common Stock issuable upon the exercise of warrants issued by the Company
in August 1996 (the "August 1996 Private Placement".) 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 principal operations are conducted in Brazil by its wholly-owned
Brazilian subsidiary, Bahia. The parent company, Vitech America, Inc.,
sources products in the United States and throughout the world for Bahia and
engages in the distribution of those products to Bahia. 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 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:
o to expand inventory;
o to expand consumer financing operations;
3
<PAGE>
o to expand marketing activities;
o to repay indebtedness; and
o 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.
THE OFFERING
Common Stock Offered by the
Company...................... 2,000,000 shares
Common Stock Outstanding Prior
to Offering.................. 8,013,648 shares
Common Stock Outstanding After
the Offering................. 10,013,648 shares
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 NASDAQ National
Market(R) Symbol............. "VTCH"
4
<PAGE>
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.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Period June
24, 1993
(Inception)
Year Ended December 31, to December
Six Months Ended June 30, ------------------------------ -------------
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 (1) ........... $ .32 $ .05 $ .84 $ .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, 1996
---------------------------------------------------
As Adjusted
Actual Pro forma (2) (3)
------------- ------------- --------------
<S> <C> <C> <C>
Current Assets ...... $23,640,435 $24,940,070 $38,025,292
Working capital ..... $ 7,598,941 $ 7,533,798 $25,183,798
Total assets ........ $26,150,724 $27,535,974 $40,425,120
Long-term debt ...... $ 0 $ 0 $ 0
Total liabilities ... $16,041,494 $17,406,272 $12,841,494
Shareholders' equity . $10,109,230 $10,129,702 $27,583,626
</TABLE>
- ------
(1) Restrictions presently exist on the ability of Bahia to distribute excess
retained earnings in U.S. dollars to the U.S. parent company, Vitech
America, Inc. See "Dividend Policy" and "Risk Factors -- Limitation on
Subsidiary to Repatriate Excess Retained Earnings."
(2) Adjusted to reflect the sale of, warrants exercisable for up to 27,296
shares of Common Stock, 13,648 shares of Common Stock, and $1,364,778
aggregate principal amount of debentures issued in the August 1996
Private Placement and the application of the net proceeds therefrom. See
"Capitalization" and "Use of Proceeds."
(3) Adjusted to reflect 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."
5
<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 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-
6
<PAGE>
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. Competitors include internationally recognized companies
such as IBM, Acer, and Compaq. No assurance can be given that the Company
will successfully compete in any market in which it conducts or may conduct
operations.
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. Prior to 1995,
the Company did not engage in hedging transactions to reduce the Company's
exposure to risks associated with exchange rate fluctuation. Since such time,
the Company has engaged, and will continue to engage, in hedge transactions
as it deems appropriate. While translation losses have not had a material
effect on the Company's financial position, the Company did experience a
translation loss of approximately $374,000 for the six months ended June 30,
1996. See "Conditions in Brazil" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
7
<PAGE>
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 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."
AFFILIATED TRANSACTIONS AND CONFLICTS OF INTEREST
From inception through mid-1996, the Company bought and sold products to
and from Victoria Tecnologia S.A., an entity controlled by William C. St.
Laurent, the President and Chief Operating Officer of the Company. The
Company also received loans in 1995 and sold certain of its accounts
receivables during 1996 to Mr. 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 terms of these
transactions were no less favorable to
8
<PAGE>
the Company than could be obtained from unaffiliated parties. To the extent
the Company enters into transactions with affiliated persons and entities in
the future, it will do so only on terms no less favorable to the Company than
those available from unaffiliated parties. See "Certain Transactions" and the
Notes to the Company's Financial Statements dated December 31, 1995 and June
30, 1996.
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."
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."
LIMITATION ON SUBSIDIARY TO REPATRIATE EXCESS RETAINED EARNINGS
For the foreseeable future, Bahia, the Company's Brazilian subsidiary,
does not intend to distribute any excess retained earnings to its U.S.
parent, but to reinvest such earnings, if any, in the development and
expansion of its business. Substantially all of the retained earnings of the
Company on a consolidated basis are attributable to Bahia. Bahia is exempt
from the payment of Brazilian federal income tax through and including the
year 2004. Tax exemption benefits cannot be distributed as dividends to the
Company in U.S. dollars and are segregated for capital reserves and
offsetting accumulated losses in accordance with Brazilian law. For the year
ended December 31, 1995 and the six months ended June 30, 1996, the tax
exemption benefits amounted to $2,832,000 or approximately $0.34 per share
and $609,932 or approximately $0.08 per share, respectively. In the future,
should Bahia wish to remit retained earnings in excess of the tax exemption
benefits, Brazilian law requires the registration of the foreign capital upon
which those retained earnings were made in order to send such earnings abroad
in currency other than the Real. Currently, the Company is in the process of
taking the administrative steps necessary to permit such remittances. While
the Company believes that such administrative steps will allow Bahia to remit
excess retained earnings if it so chooses, there can be no assurance that
such administrative steps will comply with all Brazilian laws and regulations
and accordingly might result in the inability of Bahia to remit excess
retained earnings to its U.S parent.
9
<PAGE>
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 a
substantial number 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. In addition,
Georges C. St. Laurent, Jr. has an option to convert a note into 5.925% of
the shares of Common Stock outstanding at any time during the term of such
note. Meris Financial Incorporated ("Meris") has an option to convert its
note into approximately 4.7% of issued or issuable Common Stock and an
additional option to purchase 5% of issued or issuable Common Stock. The
Meris options will terminate in the event the debt to Meris is repaid in full
on or prior to November 1, 1996. Holders of such options and warrants have
the opportunity to profit from a rise in the market price of the Common
Stock, if any, without assuming the risk of ownership. See "Certain
Transactions."
The existence of such options and warrants may adversely affect the terms
under which the 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.
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.
10
<PAGE>
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."
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 for a period of up to 60 days depending
upon a variety of factors. Such restriction shall commence from the time the
Representative plans to effect such distribution until the distribution of
the Representative's Warrants or the Warrant Shares has been completed unless
the Representative qualifies at the time as a "passive market maker," which
is based in part on the Representative's net purchases not exceeding 30% of
the average daily trading volume during the two month period prior to the
date of the filing of the post-effective amendment relating to such
distribution. In the latter event, the Representative's market making
activities during the distribution will be subject to certain conditions,
including not effecting a transaction at a price that exceeds the highest
independent bid price for the Warrant Shares at the time of the transaction.
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."
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."
11
<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 principal
operations are conducted in Brazil by its wholly-owned Brazilian subsidiary,
Bahia. The parent company, Vitech America, Inc., sources products in the
United States and throughout the world for Bahia and engages in the
distribution of those products to Bahia. 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 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:
o to expand inventory;
o to expand consumer financing operations;
o to expand marketing activities;
o to repay indebtedness; and
o to increase manufacturing capacity.
12
<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:
<TABLE>
<CAPTION>
Amount Percent
------------ ---------
<S> <C> <C>
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%
</TABLE>
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.
The Company intends to use approximately $4,565,000 of the estimated net
proceeds from this offering to repay indebtedness. Approximately $1,365,000
of the estimated net proceeds of this offering will be used to repay the
principal amount of, and accrued and unpaid interest on, the senior
debentures issued in the August 1996 Private Placement. Such debentures bear
a 9% annual interest rate and mature on the earlier of fifteen months from
the date of the initial closing of such private placement or the date of the
closing of a public offering of securities of the Company. The proceeds of
such debentures are being used for general working capital purposes.
Approximately $1,800,000 of the estimated net proceeds of this offering will
be used to repay a note payable to Meris. Such note bears a 12% annual
interest rate and, according to the modification agreement associated with
such note, matures on November 1, 1997. Such note is guaranteed by the two
majority shareholders of the Company. The proceeds from such note have been
used for the expansion of inventory and general working capital purposes. See
"Certain Transactions." Approximately $1,400,000 of the estimated net
proceeds of this offering will be used to repay short-term debt with various
banks in Brazil. Such debt consists of discounted accounts receivable and
lines of credit and bears interest at rates ranging from 3% to 4% per month.
Such debt matures on a rotating basis and has been used for general working
capital purposes. Such debt is also guaranteed by the two majority
shareholders of the Company.
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.
13
<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.
In addition, the Company's ability to declare or pay cash dividends is
subject to certain limitations in the ability of Bahia to repatriate excess
retained earnings. See "Risk Factors -- Limitation on Subsidiary to
Repatriate Excess Retained Earnings."
14
<PAGE>
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>
15
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
June 30, 1996, a pro forma capitalization to give effect to 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 as adjusted to give effect to 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.
<TABLE>
<CAPTION>
As of June 30, 1996
----------------------------------------------
Actual Pro Forma As Adjusted
------------- ------------- -------------
<S> <C> <C> <C>
Short-term debt $ 6,156,476 $ 7,521,254 $ 2,956,476
Long-term debt $ 0 $ 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 $ 0
Common Stock: no par value Authorized,
30,000,000 shares; issued and outstanding,
8,000,000 shares actual, 8,013,648 shares
pro forma, and 10,013,648 shares, as
adjusted $ 306,398 $ 326,870 $17,780,794
Retained earnings(1) $ 9,802,832 $ 9,802,832 $ 9,802,832
------------- ------------- -------------
Total shareholder equity $10,109,230 $10,129,702 $27,583,626
------------- ------------- -------------
Total Capitalization $16,265,706 $17,650,956 $30,540,102
============= ============= =============
</TABLE>
- ------
(1) Restrictions presently exist on the ability of Bahia to distribute excess
retained earnings in U.S. Dollars to the U.S. parent company, Vitech
America, Inc. See "Dividend Policy" and "Risk Factors -- Limitation on
Subsidiary to Repatriate Excess Retained Earnings."
16
<PAGE>
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 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.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Period June
24, 1993
Six Months Ended June 30, Year Ended December 31, (Inception)
------------------------------ ------------------------------ to December
1996 1995 1995 1994 31, 1993
------------- ------------- ------------- ------------- ------------
<S> <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 of Common and
Common Stock equivalents(1) $ .32 $ .05 $ .84 $ .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,
------------------------------ --------------------------------------------
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>
- ------
(1) Restrictions presently exist on the ability of Bahia to distribute excess
retained earnings in U.S. Dollars to the U.S. parent company, Vitech
America, Inc. See "Dividend Policy" and "Risk Factors -- Limitation on
Subsidiary to Repatriate Excess Retained Earnings."
17
<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. ("Vitoria"), 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. Simultaneously with the development
and expansion of Bahia's operation and independent of Vitoria, the Company
shifted its focus and dependence away from Vitoria, a company principally
engaged in sales to OEM's and resellers. Similarly, the Company's customer
base shifted to a diversified group of end users. The Company did not in any
material respect assume the prior activity of Vitoria. In 1996, management of
Vitoria disclosed to the Company that based on lack of competitive tax and
fiscal incentives in the State of Espirito Santo, Vitoria ceased all
manufacturing and selling operations. Since that time, Vitoria has paid all
outstanding amounts owed to the Company.
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.
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(TR) 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
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<PAGE>
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(TR) brand of Brazilian Portuguese multimedia kits and the
EasyNet(TR) brand of networking kits.
Although the Company's financial statements are presented in U.S. dollars
in accordance with generally accepted accounting principles, the Company's
transactions are consummated in both the Brazilian Real and the U.S. dollar.
Inflation and devaluation have had, and may continue to have, an effect on
the Company's results of operations and financial condition. Although the
Company has used Brazilian Real futures and options contracts, during 1996,
in an effort to hedge against currency risks, its highest coverage at any one
time has only met 20% of its exposure consisting of accounts receivable
denominated in Reals, net of accounts payable and other current liabilities
denominated in Reals. The Company plans to continue to use hedging activities
to offset currency risks as appropriate. See "Risk Factors -- Foreign
Exchange Risk."
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
Six Months Ended Year Ended 24, 1993
June 30, December 31, (Inception)
---------------- ---------------- 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 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
19
<PAGE>
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. Specifically, $1,166,342
of this increase was attributable to the Company's sale of accounts
receivable to an affiliate of the Company in connection with the Company's
10X consumer financing program which was introduced in early 1996. The
$1,166,342 represented the discount on the consumer debt portfolios which had
a face value of approximately $10,400,000. See "Certain Transactions" and
Note 8 to the Company's Financial Statements dated June 30, 1996.
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.
During the six month period ended June 30, 1996, the Company experienced a
foreign currency exchange loss of $373,627 from the settlement of certain
receivables and payables denominated in the Real and the translation of
financial statements from the Brazilian Real to the U.S. Dollar. At June 30,
1996, the Company had a net exposure to currency fluctuations of
approximately $7,450,000. Additionally, at June 30, 1996, the Company had
$8,238,729 of exposure to currency rate fluctuations as a result of the
Company's sale of receivables to a related party. See "Certain Transactions."
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.
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.
20
<PAGE>
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.
During the year ended December 31, 1995, the Company experienced a foreign
currency exchange loss of $16,229 from the settlement of certain receivables
and payables denominated in the Brazilian Real and the translation of
financial statements from the Brazilian Real to the U.S. Dollar. At December
31, 1995, the Company had a net exposure to currency fluctuations of
approximately $3,418,000.
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.
21
<PAGE>
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements have been to fund increased levels
of inventories and accounts receivable. The Company has historically
satisfied its working capital requirements principally through cash flow from
operations and debt financing.
At June 30, 1996, the Company had a working capital surplus of $7,598,941
compared to $6,412,154 at December 31, 1995. This increase in working capital
was primarily attributable to the increased levels of inventory which more
than offset the increases in accounts payable, short-term borrowings, and
decreases in accounts receivable.
Net cash provided by operating activities for the six months ended June
30, 1996 was $1,999,856. During the six months ended June 30, 1995, the
Company used $927,572 of cash in operating activities. The increase in cash
provided was primarily attributable to the decrease in accounts receivable
and increase in net income and income and other taxes payable which more than
offset increases in inventory. Net cash used by operating activities for the
year ended December 31, 1995 was $2,455,581, as compared to $37,946 for the
year ended December 31, 1994. Such increase was primarily attributable to the
increase in accounts receivable associated with the increased level of sales.
Net cash used in investing activities was $1,566,457 for the six months
ended June 30, 1996, as compared to $47,286 for the six months ended June 30,
1995. Such increase was primarily attributable to capital expenditures
relating to the purchase of furniture and fixtures, computer equipment, and
warehouse equipment. Net cash used in financing activities was $345,239 for
the six months ended June 30, 1996, as compared to $1,280,672 in net cash
provided from financing activities for the six months ended June 30, 1995.
The increase in net cash used by financing activities was primarily
attributable to the repayments on a note payable to a related party which
more than offset the increases in the proceeds under lines of credit and
other borrowings. See "Certain Transactions."
On August 30, 1996, the Company completed a private placement issuing 27.3
units for $50,750 per unit. Each unit consisted of a $50,000 principal amount
of 9% senior debentures, 1,000 common stock purchase warrants with an
exercise price per share of $10, and 500 shares of Common Stock. The
debentures mature on the date which is the earlier of (i) fifteen months from
the date of the closing of the August 1996 Private Placement and (ii) the
date of the closing of a public offering of securities of the Company. The
$1,299,635 in net proceeds of this offering are being used for general
working capital purposes.
22
<PAGE>
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 has allocated approximately $2,150,000 from the proceeds of
this offering to increase manufacturing facilities. The proceeds will be used
principally to equip the Company's manufacturing plant and administrative
center in Ilheus, Brazil. In connection with the development thereof, the
Company has secured a $3.4 million loan to fund the development of such
facility. The terms of commitment provide for a six year term loan with
interest payable at 4% above the long-term rate imposed by the Central Bank
of Brazil (currently 16% per annum). The payment of interest is delayed for
the first year and is thereafter payable quarterly. Payments of principal
shall be made at maturity. The loan will be secured by the real property and
building in Ilheus, Brazil.
The Company owns an underdeveloped parcel of land near Ilheus, Brazil held
for investment. The Company has no present intention to develop such land.
Other than as stated above, the Company does not plan to make any
significant capital expenditures during the next fiscal year.
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.
The Company has a three year employment agreement with its President and
with its Chief Executive Officer. Under the terms of the agreements each
individual will receive annual compensation of $240,000 subject to annual
increases. Each of such agreements will terminate on December 31, 1998. See
"Management -- Employment Agreements."
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 "Condi-
23
<PAGE>
tions 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. Inflation for
the year ended December 31, 1995 was 22%. As of July 1996, inflation was
estimated to be 12% for the year ended December 31, 1996. See "Conditions in
Brazil."
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS 121"). SFAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. SFAS 121 is effective for fiscal years beginning after
December 15, 1995. The Company believes that the adoption of SFAS 121 will
not have a material impact on its financial statements.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS 123 establishes a fair value based method of accounting for stock-based
employee compensation plans; however, it also allows companies to continue to
measure costs for such plans using the method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). Companies that elect to continue with the accounting
under APB 25 must provide certain pro forma disclosures of net income, as if
SFAS 123 had been applied. The accounting and disclosure requirements of SFAS
123 are effective for the Company for transactions entered into during the
year ended December 31, 1996. The Company is currently evaluating its
alternatives under SFAS 123, and its impact on operating results is not
presently known.
24
<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 principal
operations are conducted in Brazil by its wholly-owned Brazilian subsidiary,
Bahia. The parent company, Vitech America, Inc., sources products in the
United States and throughout the world for Bahia and engages in the
distribution of those products to Bahia. 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:
o to expand inventory;
o to expand consumer financing operations;
o to expand marketing activities;
o to repay indebtedness; and
o to increase manufacturing capacity.
BUSINESS STRATEGY
The Company's strategy has been to utilize: (i) the Company's 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.
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<PAGE>
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.
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(TR) brand name, including Pentium(TR) and Pentium
Pro(TR) based systems.
The Company also designs, develops, manufactures, and markets under its
MultiShow(TR) 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
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<PAGE>
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.
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, pro-
27
<PAGE>
ducing 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.
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. The
Company has received a loan commitment from the development bank of the State
of Bahia of $3.4 million to begin construction of this facility. The loan
proceeds are anticipated to pay for 100% of the construction costs, and the
Company has allocated approximately $2,150,000 from this offering for
acquisition of the equipment necessary to operate the facility. Construction
is expected to begin in late 1996 and occupancy is expected in the first
quarter of 1998. The Company does not anticipate any initial or continuing
involvement or any ownership of the government of the State of Bahia either
before or after completion of the facility. Upon completion of the facility,
management believes that the facility should allow the Company to continue to
operate at its anticipated capacity levels for at least 12 months.
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.
28
<PAGE>
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 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.
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.
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<PAGE>
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. Competitors include internationally recognized companies
such as IBM, Acer, and Compaq. No assurance can be given that the Company
will successfully compete in any market in which it conducts or may conduct
operations.
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.
TRADEMARKS
The Company's trademarks, Vitech Vision(TM), Multi-Show(TM), and
EasyNet(TM) are owned by an affiliated third party and are licensed to the
Company under a long-term license agreement. The Company has an option to
purchase the trademarks from the licensee at a cost of $1.00.
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.
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.
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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.
In addition to the facilities discussed above, the Company owns, for
investment purposes, an undeveloped parcel of land near Ilheus, Bahia. The
Company does not plan to make material capital expenditures or improvements
with respect to this property during the next fiscal year.
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.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors, proposed directors and executive officers of the Company
and their ages are as follows:
<TABLE>
<CAPTION>
Name Age Position
------ ----- ---------
<S> <C> <C>
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 E. Asher .......... 40 Chief Financial Officer, Treasurer, Secretary,
and Director
Joseph K. Meyer ............ 40 Proposed Director(1)
H.R. Shephard .............. 75 Proposed Director(1)
</TABLE>
- ------
(1) Following this offering, Messrs. Meyer and Shephard have agreed to join
the Board.
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
Brazil and other countries in 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. Since 1986 to the present, Mr. St. Laurent
has been a director of Clinica Kirpalmar, a not-for-profit Latin American
medical foundation. 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. William C. St. Laurent is the brother of Georges
C. St. Laurent III.
Mitchell E. 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, a Brazilian distributor and manufacturer of
computer peripherals and components. 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, a multi-national manufacturer
(including Manaus, Brazil), 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 interfacing with factories in Asia. 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 a specialty restaurant chain. Mr. 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.
Joseph K. Meyer will become a director of the Company following this
offering. Mr. Meyer has served as president and chief executive officer of
Compass Advisors, Inc., an institutional financial and investment consulting
firm since 1991. Mr. Meyer is also president of Christina Partners, Inc., an
investment advisory and
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<PAGE>
money management firm. Mr. Meyer also serves as principal of CAI Tradex
Clearing Corporation, which provides fully-disclosed securities brokerage
services to institutional clients. Prior to 1991 Mr. Meyer was first Vice
President and Senior Consultant at Kemper Securities Group, Inc. and Kemper
Consulting Group, respectively.
H.R. Shephard will become a director of the Company following this
offering. Since 1993, Mr. Shephard has served as special advisor to the
Chairman of Medeva PLC, an international pharmaceutical company. From 1955 to
1993 Mr. Shephard served as Founder and Chairman of Armstrong
Pharmaceuticals, previously known as Aerosol Techniques, a pharmaceutical
drug delivery company which was acquired by Medeva PLC. Mr. Shephard
presently is the Chairman of the Albert F. Sabin Vaccine Foundation.
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.
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 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
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<PAGE>
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,
Chairman of the Board and
Chief Executive Officer .. 1995 $120,000 $ 0 0 $ 0
1994 $ 96,000 $ 0 0 $ 0
1993 $ 0 $ 0 0 $ 0
William C. St. Laurent,
President and
Chief Operating Officer .. 1995 $120,000 $ 0 0 $4,500*
1994 $ 96,000 $ 0 0 $ 0
1993 $ 0 $ 0 0 $ 0
Mitchell E. Asher,
Chief Financial Officer .. 1995 $ 71,190 $15,000 0 $9,000*
1994 $ 63,432 $10,000 0 $3,750*
1993 $ 23,000 $ 0 0 $ 0
</TABLE>
- ------
* Mr. William C. St. Laurent and Mr. Mitchell E. 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 in connection with a loan provided to the Company
on October 28, 1995. In addition, the Company obtained keyman insurance 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. 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.
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<PAGE>
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.
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.
35
<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 periods on open terms. Also,
Bahia, the Company's wholly owned subsidiary, bought and sold products to and
from Vitoria Tecnologia S.A. during the years ended December 31, 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.
Sales to Vitoria were $1,156,253 for the period from June 24, 1993 to
December 31, 1993, $17,407,363 for the year ended December 31, 1994 and
$36,677,077 for the year ended December 31, 1995 and $8,066,878 for the six
months ended June 30, 1996. 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
4,080,000 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 10X 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 $9,244,052.
The Company on July 1, 1996 entered into a long term license agreement
with a company controlled by William C. St. Laurent pursuant to which the
Company licensed the trademarks, VitechVision(TM), MultiShow(TM), and
EasyNet(TM) to the Company. The Company has an option to purchase the
trademarks from the licensee at a cost of $1.00.
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 as assignments of life insurance
policies on the lives of Messrs. St. Laurent and St. Laurent. The note was
convertible into approximately 4.7% of the 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
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<PAGE>
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. Meris has
advised the Company that, irrespective of the Amendment, it has certain
rights to an equity ownership position in the Company. While the Company
believes such claims are without merit, Georges C. St. Laurent, III and
William C. St. Laurent have agreed to settle such equity claims, should the
need arise, from their personal share holdings. Meris is not an affiliate of
the Company.
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<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.
38
<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.
<TABLE>
<CAPTION>
Percentage Beneficially
Owned(1)(2)
Name and Address ---------------------------------
of Beneficial Owner Number of Shares Before Offering After Offering
----------------------------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
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 E. Asher ....................... 52,000 .65% .52%
c/o Vitech America, Inc.
8807 N.W. 23rd Street
Miami, FL 33172(6)
All directors and executive officers as a
group (3 persons) ...................... 7,857,000 98.05% 78.46%
</TABLE>
- ------
(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. 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 E. Asher.
(6) Represents options to purchase 52,000 shares of Common Stock from Georges
and William St. Laurent proportional to their holdings.
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<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, (ii) options granted in the future pursuant to the Plan
or (iii) shares of Common Stock issued in connection with an acquisition by
the Company. 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."
NASDAQ NATIONAL MARKET(R)
The Company has applied for listing of its shares of Common Stock on the
Nasdaq 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 pro-
40
<PAGE>
vides 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.
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.
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<PAGE>
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.
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. Except
as set forth below, all shareholders of the Company have agreed not to
dispose of their 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.
In addition, Georges St. Laurent, Jr. has an option to convert a note into
5.925% of the shares of Common Stock outstanding at any time during the term
of such note. Meris has an option to convert its note into approximately 4.7%
of issued or issuable Common Stock and an additional option to purchase 5% of
issued or issuable Common Stock. The Meris options will terminate in the
event the debt to Meris is repaid in full as agreed.
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
42
<PAGE>
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 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. As of July, 1996, inflation was estimated to be 12% for the year
ended December 31, 1996. 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.
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
43
<PAGE>
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.
44
<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 $------ 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 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.
45
<PAGE>
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. The Company has also
agreed to engage the Representative as an advisor to the Company under a
financial advisory agreement for a period of one year for a fee of $36,000
commencing at the closing of this offering. In addition, the Company has
agreed to grant the Representative the right of first refusal 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 manger, placement agent,
investment banker, or other person performing such functions for a fee.
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, other than 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. 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, options granted under the Plan, and shares
of Common Stock issued in connection with an acquisition by the Company)
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.
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
46
<PAGE>
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 P.A., 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.
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.
47
<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-16
Statement of Income for the Six Months Ended June 30, 1996 and 1995 (Unaudited) ................... F-17
Statement of Changes in Shareholders' Equity for the Six Months Ended June 30, 1996 (Unaudited) ... F-18
Statement of Cash Flows for the Six Months Ended June 30, 1996 and 1995 (Unaudited) ............... F-19
Notes to Financial Statements (Unaudited) ......................................................... F-20
</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>
December 31,
-----------------------------
1995 1994
------------- ------------
<S> <C> <C>
Assets
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>
Period June
Year Ended 24, 1993
December 31, (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 ..... $ 0.84 $ 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 consisting of 4,080,000 shares issued for assets
and 3,920,000 shares issued as founder's shares ....... $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>
Period June
Year Ended 24, 1993
December 31, (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
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%
interest in the Subsidiary for $112,994. 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 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 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 Northeast 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.
The Company expects to use a portion of the proceeds from the initial
public offering to repay certain outstanding debt. Earnings per share
adjusted for the effect of the expected repayment of this debt and the
issuance of additional shares of common stock for the year ended December 31,
1995, as if this transaction occurred on January 1, 1995, would have been
$0.67 on a primary and fully diluted basis.
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.
F-8
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
December 31, 1995
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.
INTERNATIONAL OPERATIONS
The Company operates in one industry segment (the manufacture and
distribution of computer equipment and related products) and markets its
products and services through its foreign subsidiary located in Brazil. As a
result, a significant portion of the company's sales and operations are
subject to certain risks, including adverse developments in the foreign
political and economic environment, exchange rates, tariffs and other trade
barriers, staffing and managing foreign operations and potentially adverse
tax consequences. There can be no assurance that any of these factors will
not have a material adverse effect on the Company's financial condition or
results of operations in the future. Sales through the Company's foreign
subsidiary totalled $15,978,000, $-0- and $-0- for the years ended December
31, 1995 and 1994 and the period June 24, 1993 (inception) to December 31,
1993, respectively.
NOTE 3 -- RELATED PARTY TRANSACTIONS
The Company made sales to 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:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Finished goods $1,753,970 $3,297,979
Components .... 3,814,762 --
Packaging ..... 10,242 --
------------ ------------
$5,578,974 $3,297,979
------------ ------------
</TABLE>
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.
F-9
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
December 31, 1995
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 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.
NOTE 7 -- SHORT-TERM DEBT
Short-term debt consists of the following at December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
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
-------------
</TABLE>
(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.
F-10
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
December 31, 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. Furthermore, the options will expire if the
debt is repaid in full as agreed.
NOTE 8 -- REVOLVING LINES-OF-CREDIT
The Company had the following lines-of-credit borrowings with one bank at
December 31, 1994:
<TABLE>
<CAPTION>
<S> <C>
$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
-----------
</TABLE>
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.
F-11
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
December 31, 1995
NOTE 10 -- INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
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
----------- ----------- ----------
</TABLE>
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 Subsidiary is
exempt from the payment of Brazilian federal income tax through and including
the year 2004. Tax exemption benefits cannot be distributed as dividends to
the Company in US dollars and are segregated for capital reserves and
offsetting accumulated losses in accordance with Brazilian law. For the year
ended December 31, 1995, the tax exemption benefits amounted to $2,832,000
($0.34 per share). Should Bahia wish to remit retained earnings in excess of
the tax exemption benefits, Brazilian law requires the registration of the
foreign capital upon which those retained earnings were made in order to send
such earnings
F-12
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
December 31, 1995
abroad in currency other than the Brazilian currency. Currently, the Company
is in the process of taking the administrative steps necessary to permit such
remittances. While the Company believes that such administrative steps will
allow the Subsidiary to remit excess retained earnings, if it so chooses,
there can be no assurance that such administrative steps will comply with all
Brazilian laws and regulations.
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:
<TABLE>
<CAPTION>
<S> <C>
Inventories ....................................... $250,346
Property and equipment 49,052
Other assets ...................................... 7,000
-----------
$306,398
-----------
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
1996 ................................................... $340,500
1997 ................................................... 148,850
1998 ................................................... 67,300
-----------
$556,650
-----------
</TABLE>
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.
F-13
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
December 31, 1995
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.
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-14
<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-15
<PAGE>
VITECH AMERICA, INC.
BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
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
--------------
Total assets ..................................................... $26,150,724
--------------
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
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
--------------
</TABLE>
See notes to financial statements.
F-16
<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 $ 0.32
-------------- --------------
Weighted average common and common share equivalents outstanding ......... 8,041,988 8,503,853
-------------- --------------
</TABLE>
See notes to financial statements
F-17
<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-18
<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-19
<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. All of the Company's sales
are concentrated in Brazil, with approximately 14% to one customer and 31% to
Vitoria Tecnologia S.A. (an affiliate through common ownership) for the six
months ended June 30, 1996.
NOTE 2 -- INVENTORIES
Inventories as of June 30, 1996 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Finished goods .......................................... $ 3,716,634
Components .............................................. 4,630,724
Packaging ............................................... 41,557
Consigned inventories .................................... 1,858,669
--------------
$10,247,584
--------------
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1996, are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
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
-------------
</TABLE>
NOTE 4 -- NOTE PAYABLE - RELATED PARTY
The Company had the following notes payable to an affiliate of the
shareholders' at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
6% promissory note payable on demand (assumed from
Vitoria Tecnologia, S.A.) ............................ $ 661,917
Promissory note payable, due on demand, bearing
interest at 9% ....................................... 2,000,000
-------------
$2,661,917
-------------
</TABLE>
During 1996, the Company incurred interest expense of $134,214, in
connection with these obligations.
F-20
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
(unaudited)
Note 4 -- Note payable - related party - (Continued)
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:
<TABLE>
<CAPTION>
<S> <C>
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
------------
</TABLE>
NOTE 6 -- REVOLVING LINES-OF-CREDIT
The Company had the following lines-of-credit borrowings with various
banks at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
$200,000 line-of-credit, due June 1997, bearing interest
at the prime rate plus 2% ............................... $100,000
Various bank borrowings expiring through September 1996 at
interest rates ranging from 3% to 4% per month .......... 792,210
-----------
$892,210
-----------
</TABLE>
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 Subsidiary is
exempt from the payment of Brazilian federal income tax through and including
the year 2004. Tax exemption benefits cannot be distributed as dividends to
the Company in US dollars and are segregated for capital reserves and
offsetting accumulated losses in accordance with Brazilian law. For the six
months ended June 30, 1996, the tax exemption benefits amounted to $609,932
($0.08 per share). Should Bahia wish to remit retained earnings in excess of
the tax exemption benefits, Brazilian law requires the registration of the
foreign capital upon which those retained earnings were made in order to send
such earnings abroad in currency other than the Brazilian currency.
Currently, the Company is in the process of taking the administrative steps
necessary to permit such remittances. While the Company believes that such
administrative steps will allow the Subsidiary to remit excess retained
earnings, if it so chooses, there can be no assurance that such
administrative steps will comply with all Brazilian laws and regulations.
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-21
<PAGE>
VITECH AMERICA, INC.
Notes to Financial Statements - (Continued)
(unaudited)
NOTE 9 -- PER SHARE INFORMATION
Per share information is based on the weighted average 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 4). Fully diluted earnings per common and common
equivalent shares are not presented as such amounts are the same as primary
earnings per share.
The Company expects to use a portion of the proceeds from its initial
public offering to repay certain outstanding debt. Earnings per share
adjusted for the effect of the expected repayment of this debt and the
issuance of additional shares of common stock for the six months ended June
30, 1996, as if this transaction occurred on January 1, 1996, would have been
$0.29 on a primary and fully diluted basis.
F-22
<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 ................................................ 3
Risk Factors ..................................................... 6
The Company ...................................................... 12
Use of Proceeds .................................................. 13
Dividend Policy .................................................. 14
Dilution ......................................................... 15
Capitalization ................................................... 16
Selected Financial Data .......................................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operation ....................................................... 18
Business ......................................................... 25
Management ....................................................... 32
Certain Transactions ............................................. 36
Concurrent Offering .............................................. 38
Principal Shareholders ........................................... 39
Description of Securities ........................................ 40
Shares Eligible for Future Sale .................................. 42
Conditions in Brazil ............................................. 43
Underwriting ..................................................... 45
Legal Matters .................................................... 47
Experts .......................................................... 47
Additional Information ........................................... 47
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.
=============================================================================
<PAGE>
=============================================================================
2,000,000 SHARES
VITECH AMERICA, INC.
COMMON STOCK
----------
PROSPECTUS
-----------
H.J. MEYERS & CO., INC.
, 1996
=============================================================================
<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 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
<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.
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.
4
<PAGE>
[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
<TABLE>
<CAPTION>
Page
--------
<S> <C>
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 ................................
</TABLE>
-----------
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.
=============================================================================
<PAGE>
=============================================================================
VITECH AMERICA, INC.
40,944 OF COMMON STOCK
-----------
PROSPECTUS
-----------
------ , 1996
=============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<CAPTION>
<S> <C>
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*
</TABLE>
- ------
*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.
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.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. The exhibits constituting part of the Registration Statement are as
follows:
<TABLE>
<CAPTION>
<S> <C>
(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.**
(10.7) License Agreement between the Company and Ann Moore dated July 1, 1996.
(10.8) Loan Agreement between the Company and Meris Financial Incorporated dated October 25, 1996 as amended
July 20, 1996.
(10.9) Contract dated September 1, 1995 between the Company and Casa Bahia.
(10.10) Contract dated August 2, 1996 between Bahia and Desembance.
(11) Statement re: Computation of per share earnings.
(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.*
(99.1) Consent of Joseph K. Meyer.
(99.2) Consent of H.R. Shephard.
</TABLE>
- ------
* To be filed by amendment.
** Previously filed.
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-2
<PAGE>
(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.
(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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Miami, State of Florida on the 15th day of October, 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 October 15, 1996
--------------------------------- (Principal Executive Officer)
WILLIAM C. ST. LAURENT
/s/ Mitchell Asher Vice President and Director October 15, 1996
--------------------------------- Chief Financial Officer
MITCHELL ASHER (Principal Accounting Officer)
/s/ Georges C. St. Laurent III Chief Executive Officer and Director October 15, 1996
---------------------------------
GEORGES C. ST. LAURENT, III
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
----------- --------------------------------------------------------------------------------------- --------
<S> <C> <C>
(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.**
(10.7) License Agreement between the Company and Ann Moore dated July 1, 1996.
(10.8) Loan Agreement between the Company and Meris Financial Incorporated dated October 25, 1996
as amended July 20, 1996.
(10.9) Contract dated September 1, 1995 between the Company and Casa Bahia.
(10.10) Contract dated August 2, 1996 between Bahia and Desembance.
(11) Statement re: Computation of per share earnings.
(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.*
(99.1) Consent of Joseph K. Meyer.
(99.2) Consent of H.R. Shephard.
</TABLE>
- ------
* To be filed by amendment.
** Previously filed.
<PAGE>
VITECH
VA
VITECH AMERICA, INC.
INCORPORATE UNDER THE LAWS OF THE STATE OF FLORIDA
--------------- ---------------
| | | |
| | | |
| | | |
--------------- ---------------
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 928489 10 3
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK NO PAR VALUE OF
======================== VITECH AMERICA, INC. ========================
transferable on the books of the corporation by the holder hereof in person, or
by duly authorized attorney, upon surrender of this certificate properly
endorsed.
This Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal and facsimile signatures of its duly authorized
officers.
Dated:
VITECH AMERICA, INC.
CORPORATE
SEAL
1993
FLORIDA
/s/ /s/
- --------------------------- ------------------------
SECRETARY PRESIDENT
<PAGE>
VITECH AMERICA, INC.
The Corporation will furnish to any shareholder upon request and
without charge a full statement of: (a) the designations, preferences,
limitations, and relative rights of the shares of each class of series of
capital stock authorized to be issued; (b) the variations in its relative
rights, preferences and limitations between the shares of each such series; and
( c) the authority of the Board of Directors to fix and determine variations for
future series.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN - ACT________Custodian________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _______________________________________ hereby
sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
| |
| |
| |
--------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------
the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- ----------------------------------------------------------------------
to transfer the said shares on the books of the within named Corporation
with full power of substitution in the premises.
Dated
-----------------------
-----------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
- -------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
<PAGE>
October 14, 1996
Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
Re: Vitech America, Inc. (the "Company")
Registration Statement
on Form S-1 (File No. 333-11505)
Dear Sir/Madam:
We refer to the Registration Statement (the "Registration Statement")
filed by Vitech America, Inc., a Florida corporation, with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, in connection
with the sale of up to 2,000,000 shares of Common Stock, no par value per share
and 300,000 shares to cover the Underwriter's Over-Allotment Option (the
"Shares"), as set forth in the above Registration Statement.
In our capacity as counsel to the Company, we have examined the
original or certified copies of all such records of the Company and all such
agreements, certificates of public officials, certificates of officers or
representatives of the Company and others, and such other documents as we deem
relevant and necessary as a basis for the opinions hereinafter expressed. In
such examination we have assumed the genuineness of all signatures on original
documents and the conformity to original documents of all copies submitted to us
as conformed or photostat copies. As to various questions of fact material to
such opinions, we have relied upon statements or certificates of officials and
representatives of the Company and others.
Based upon the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Florida.
2. The Shares offered for the account of the Company have been duly
and validly authorized and, when (i) the Registration Statement
has become effective under the Securities Act of 1933, as amended,
(ii) the Shares have been issued and sold as contemplated in the
Registration Statement and the Underwriting Agreement referred to
therein, and (iii) the Shares have been delivered and paid for,
such Shares will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. We also hereby consent to the use of our name under
"Legal Matters" in the Prospectus constituting part of the Registration
Statement.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
/s/ Atlas, Pearlman, Trop & Borkson, P.A.
<PAGE>
EXHIBIT 10.7
LICENSE AGREEMENT
BETWEEN THE COMPANY AND ANN MOORE
DATED JULY 1, 1996
<PAGE>
PARTICULAR DOCUMENT OF PROMISE OF SURRENDER
OF RIGTHS ON BRANDS
By this present particular document, on one side, ANN MOORE COMERCIO,
REPRESENTACAO, IMPORTACAO, EXPORTACAO LTDA, brazilian businesswoman, registered
in CGC/MF under no. 00.162.153./0001-35, in the city of Embu a state in Sao
Paulo, in Rua Maranhao, no.359, suite 05, Centro, this act represented in
agreement to this social contract by Mr. WILLIAM CRANE SAINT LAURENT, that also
signs as William St. Laurent, north-american, married, businessman, bearer of
Carteira de Identidade para Estrangeiro no. 046.533.3, registered under REGISTRO
NACIONAL DE ESTRANGEIRO - RNE no. V 148.583 -1 SPMAE/SR/ES and written in CPF
under no. 030.893.877-19, dwelled in the Capital State of Sao Paulo, Rua Antonio
das Chagas no. 1612- Chacara Santo Antonio, in the quality to give up from now
on appointed ANN MOORE, and in the other side, VITECH AMERICA, INC., this
company properly constituted in the State of Florida, in the United States of
America under no. P93000045800, with the headquarters at 8807 NW 23rd St.,
Miami, Florida, EUA, in this act represented in the terms of the attached proxy,
by George St. Laurent III, north-american, single, administrator of the
business, carrier of passport no. 044.215.108-USA, carrier of Registro de
Permanencia Definitiva para Estrangeiro, granted in 04.12.9, a confirmed copy of
DOU proxy and written in CPF under no. 051.541.49-26, residence in the Capital
State of Sao Paulo, in Rua Antonio das Chagas no. 1612, Chacara Santo Antonio,
in the quality to be optional, from now on appointed VITECH AMERICA, has amongst
themselves, a fair contract that follows:
Clause #1 - ANN MOORE grants VITECH AMERICA the right to obtain the rights
relative to the request to register the following brands:
a) VITECH VISION, category 09`.40/55, process no. 819.100.456
b) MULITSHOW PRO CD16, category 09:35; 45;55, process no. 817.858.059
c) MULITSHOW, category 40:34 & 37:44, process nos. 818.357.762 & 818.357.754;
d) VITECH EASY NET, category 37:44; 40.15/34 & 09.40/ 55/80, process nos.
818235195, 818235209 &818235187.
Clause #2 - VITECH AMERICA can exercise and grant the right in the first clause
through written correspondence to ANN MOORE, starting on 02/01/97 until
01/01/2007, in which to determine the condition and to ask for the action
necessary by ANN MOORE so that the surrender can come true.
Clause #3 - VITECH AMERICA can exercise the rights and grants of this contract,
by payment to ANN MOORE of the value of US $1.00 (1 dollar in American money),
or by it's equivalent in current national currency.
Clause #4 - ANN MOORE is obliged to carry out all of the acts necessary to
transfer all of the requests of the registered brands listed above to VITECH
AMERICA, among, but not limited to:
(a) to sign the request and to address it to the Instituto Nacional de
Propriedade Industrial, requesting the transfer of the holder of the
registered brands above, in it's various classes to VITECH AMERICA,
gathering its social documents and respective change and card of CGC;
(b) give all of the many documents demanded by Instituto Nacional de
propriedade industrial for the effective transfer of the holder of the
registered brands.
<PAGE>
Clause #5 - It stays to agree that the legal transaction realized in the middle
of this document doesn't imply a transfer of liabilities or any obligation of
ANN MOORE to VITECH AMERICA, continuing that the only responsibility here is
that of social business.
Clause #6 - The party that is in default of the terms and conditions stipulated
in this contract will be obligated to pay the other a fine in the value of R$
1,000.00 (one thousand reis), or the equivalent thereof corrected for any
changes in the currency valuation.
Unique Paragraph: The payment of the fine does not exempt the party in the case
of breach of contract and the obligation to restore the loss eventually suffered
by the other party or by a third.
Clause #7 - This particular document in character is established and
unchangeable, obligating the parties, their heiress and successors.
Clause #8 - In the case of dispute the Court of Justice of Comarca da capital do
Estado de Sao Paulo, exclusive of any other, will settle whatever doubt or
dispute arising from this contract.
For being fair and contracted, fixed at present in 04 (four) copies of the same
text and for a single effect, before the undersigned witnesses.
Sao Paulo , July 1st 1996
/S/ William St. Laurent
----------------------------------
ANN MOORE COMERCO , REPRESENTACAO,
IMPORTACAO E EXPORTACAO LTDA
/S/ Georges C. St. Laurent III
----------------------------------
VITECH AMERICA, INC.
Witnesses :
/S/ Ricardo Brito Costa
- ----------------------------
Name: Ricardo Brito Costa
RG: 23271246-3
/S/ Fabiana Regina Siviero
- ----------------------------
Name: Fabiana Regina Siviero
RG: 18881261-1
<PAGE>
LOAN AGREEMENT
THIS LOAM AGREEMENT (this "Agreement") is made and entered into this 28th
day of (October, 1995, by and between MERIS FINANCIAL INCORPORATED, a Nevada
corporation ("Lender"), and VITECH AMERICA, INC., a Florida corporation
("Borrower").
RECITALS:
A. Borrower has requested Lender to make a loan to Borrower in the
principal amount of $2,000,000 (the "Loan"), the proceeds of which shall be
utilized by Borrower in part for the purpose of purchasing inventory.
B. The Loan will be evidenced by a certain Promissory Note (the "Note")
dated of even date herewith executed by Borrower in favor of Lender. The Loan is
secured by and subject to the documents and instruments more particularly
described in Section 2.3 hereof (the "Collateral Documents~).
C. Lender is willing to make the Loan to Borrower as described above upon
and subject to the terms and conditions hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of $10.00 and in reliance upon the
representations, warranties, covenants and Recitals hereinabove and hereinafter
set forth, and as contained in the instruments, agreements and documents
contemplated hereby, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
SECTION I
ADVANCE
1.1 Agreement to Advance. Upon the satisfaction of each of the conditions
hereinafter set forth, Lender agrees to advance to Borrower the Loan proceeds on
or before October 31, 1995.
SECTION II
AMOUNT AND GENERAL TERMS OF THE LOAN
2.1 The Loan. Borrower agrees to borrow from Lender, and Lender agrees to
advance to or for the benefit of Borrower, the total principal sum of Two
Million Dollars ($2,000,000} to be used to purchase inventory. ~
2.2 Promissory Note: Interest. In addition to being evidenced by this
Agreement, Borrower's obligation to repay the
<PAGE>
Loan shall be further evidenced by the Note. The Note will bear interest and be
payable in accordance with the terms of the Note.
2.3 Collateral. The Loan will be secured by the assets, documents and
instruments described on the attached Schedule 2.3 (the "Collateral").
SECTION III
CONDITIONS PRECEDENT TO DISBURSEMENTS
The following conditions precedent shall be satisfied prior to Lender
making any advance hereunder:
4.1 Loan Documents. The documents evidencing or securing the Loan,
including, without limitation, this Agreement, the Collateral Documents and the
Note (collectively, the "Loan Documents") and other documents required by this
Agreement or any of the other Loan Documents and all closing documents which
Lender may require and all other writings reasonably deemed necessary by Lender
to close the Loan, in form and substance reasonably satisfactory to and approved
by Lender, shall have been duly and validly executed and delivered by Borrower
or such other person as may be appropriate, and in recordable form where
appropriate.
4.2 Accuracy of Representations and Warranties. The representations and
warranties contained herein and in the Loan Documents are then true with the
same effect as though they had been made at such time.
4.3 No Default. There shall exist or have occurred no condition, event or
act that would constitute an Event of Default under any of the Loan Documents or
any other instrument or agreement by which Borrower is bound and no condition,
event or act which, as a result of the giving of notice or the lapse of time, or
both, as specified in this Agreement, would constitute such an Event of Default.
4.4 No Waiver. Lender may, in its sole discretion, advance the Loan
proceeds even though the conditions in this Section are not satisfied. Any
advance so made shall be deemed to have been made pursuant to this Agreement and
shall not be deemed a waiver by Lender of any such default or any future default
or of the remedies afforded Lender in any of the Loan Documents nor a waiver of
any requirement by Lender that Borrower satisfy its obligation to Lender under
any of the foregoing.
SECTION V
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender (all of said
representations and warranties, together with all of
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<PAGE>
Borrower's covenants contained herein, which shall also be deemed to be
representations and warranties, and all representations and warranties set forth
elsewhere herein, or in any of the Loan Documents, shall survive until all
obligations of Borrower to Lender shall have been fully Performed, as follows:
5.1 Organization.
(a) Borrower is duly organized, validly existing and in good standing
under the laws of the state Florida and is qualified to do business and is
in good standing in each state in which it is doing business.
(b) Each of VITECH-VITORIA TECNOLOGIA S.A., BAHIATECHBAHIA TECNOLOGIA
LTDA., MULTISHOW-PRODUCTOS DE INFORMATICA E TELECOMMUNICACOES LTDA (the
"EntitiesN) are duly organized, validly existing and in good standing under
the laws of Brazil and the jurisdiction of its organization and are each
qualified to do business and are each in good standing under the laws of
Brazil and the jurisdiction of its organization and in each jurisdiction in
which it is doing business.
5.2 General Authority.
(a) Borrower has full power and authority to own its properties and
assets and to carry on its business as now being conducted.
(b) Each of the Entities has full power and authority to own its
properties and assets and to carry on its business as now being conducted.
5.3 Transaction Authority.
(a) Borrower is fully authorized and permitted to enter into the Loan
Documents, to execute any and all of the documentation required therein, to
borrow the amounts contemplated therein upon the terms set forth therein
and to perform the terms of the Loan Documents, none of which conflicts
with any provision of law or regulation applicable to Borrower. The Loan
Documents are valid and binding legal obligations of Borrower and each is
enforceable in accordance with its terms
(b) Each of the Entities is fully authorized and permitted to execute
any and all of the documentation required herein to be executed by the
Entities, to guarantee the Loan and to secure Borrower's payment and
performance hereunder in accordance with the Loan Documents and to perform
as required under the Loan Documents, none of which conflicts with any
provision of law or regulation applicable to such Entity. Each Loan
Document is a valid and binding legal obligations of the Entity executing
the Loan Document and each is enforceable in accordance with its terms.
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<PAGE>
5.4 Security. The liens, security interests and assignments created by the
Loan Documents will, when granted, be valid, effective, properly perfected and
enforceable liens, security interests and assignments.
5.5 Third-Party Consents. Neither Borrower nor any Entity is required,
pursuant to any law, regulation or contractual or other obligation, to obtain
the consent, approval or authorization of any person (including any governmental
authority) to validly enter into, execute and deliver the Loan Documents and
perform the acts and obligations required or contemplated thereby.
5.6 Absence of Actions or Judgments.
(a) There are: (i) no outstanding or unpaid Judgments or arbitration
awards against Borrower; and (ii) no actions, suits or proceedings tin a
court of law or otherwise) pending or, to Borrower's knowledge, threatened
against Borrower or which materially affects Borrower which would
reasonably be expected to result in any material adverse change in the
business, operations, properties, assets or condition (financial or
otherwise) of Borrower, or would materially adversely affect Borrower's
ability to perform any of its contractual obligations and, there is no
basis known to Borrower for any such action, suit or proceeding. No
judgment, award, decree, order, action, suit or proceeding (whether in a
court of law or otherwise, and whether entered, outstanding, pending or
threatened) materially affects or could materially affect the ability of
Borrower to perform any of its obligations under the Loan Documents.
Borrower is not in default or violation with respect to any regulation,
order, writ, judgment or decree of any court or other governmental
authority, the violation of which would have a material and adverse effect
on the business of Borrower.
(b) There are: (i) no outstanding or unpaid judgments or arbitration
awards against any of the Entities; and (ii) no actions, suits or
proceedings (in a court of law or otherwise) pending or, to Borrower's
knowledge, threatened against any one of the Entities or which materially
affects any one of the Entities which would reasonably be expected to
result in any material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Entities or
would materially adversely affect an Entity's ability to perform any of its
contractual obligations and, there is no basin known to Borrower for any
such action, suit or proceeding. No judgment, award, decree, order, action,
suit or proceeding (whether in a court of law or otherwise, and whether
entered, outstanding, pending or threatened) materially affects or could
materially affect the ability of any one of the Entities to perform any of
its obligations under the Loan Documents. None of the Entities is in
default or violation with respect to any regulation, order, writ, judgment
or decree of any court or other
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<PAGE>
governmental authority, the violation of which would have a material and adverse
effect on the business of such Entity.
5.7 Other Contracts: No Default. Neither Borrower nor any one of the
Entities is a party to or bound by any contract or instrument or subject to any
contractual restriction that does or may materially and adversely affect their
businesses, property, assets, operations or conditions, or restrict or impair
their ability to perform under the Loan Documents.
5.S Compliance With Laws and Other Regulations.
(a) To the best of Borrower's knowledge, after due inquiry, Borrower:
(i) is in compliance with all federal, state and local laws, rules,
regulations and requirements (whether tax, commercial or otherwise), and
all rules, regulations and requirements of all governmental authorities
having jurisdiction over it, the conduct of its business, the use of its
assets and properties and all property occupied by it; (ii) has properly
filed all reports, paid all monies and obtained all licenses, permits,
certificates and authorizations needed or required for the conduct of its
business and the use of its assets and properties and the property occupied
by it in connection therewith and is in material compliance in all respects
with all conditions, restrictions and provisions of all of the foregoing
except taxes and improvement district assessments which are presently in
arrears; and (iii) has not received any notice, not heretofore complied
with, from any governmental authority or any insurance or inspection body
that any of its assets, properties, facilities, equipment or business
procedures or practices fails to comply with any applicable law, ordinance,
regulation, building or zoning law or requirement of any public authority
or body. -
(b) To the best of Borrower's knowledge, after due inquiry, each of
the Entities: (i) is in compliance with all federal, state and local laws,
rules, regulations and requirements (whether tax, commercial or-
otherwise), and all rules, regulations and requirements of all governmental
authorities having jurisdiction over it, the conduct of its business, the
use of its assets and properties and all property occupied by the Entity;
(ii) has properly filed all reports, paid all monies and obtained all
licenses, permits, certificates and authorizations needed or required for
the conduct of its business and the use of its assets and properties and
the property occupied by it in connection therewith and is in material
compliance in all respects with all conditions, restrictions and provisions
of all of the foregoing except taxes and improvement district assessments
which are presently in arrears; and (iii) has not received any notice, not
heretofore complied with, from any governmental authority or any insurance
or inspection body that any of its assets, properties, facilities,
equipment or business procedures or practices fails to comply with any
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<PAGE>
applicable law, ordinance, regulation, building or zoning law or requirement of
any public authority or body.
5.9 Non-Default of Borrower. The execution and delivery of the Loan
Documents and the performance of the obligations and acts required or
contemplated thereby will not result in the creation or imposition of, or be any
cause for imposing, any lien,- charge or encumbrance of any nature whatsoever
upon any of Borrower's or any of the Entity's property other than those
permitted, created, imposed or required by the Loan Documents. There exists no
Event of Default and there exists no event which, as a result of the giving of
notice or the lapse of time, or both, would constitute an Event of Default,
under any of the Loan Documents.
5.IO Financial Statements. All financial statements, profit and loss
statements, statements as to ownership and other statements or reports
previously or hereafter given to Lender by or on behalf of Borrower or any of
the Entities are and shall be true, complete and correct as of the date thereof.
There has been no material adverse change in the financial condition or the
results of the operation of Borrower or any Entity since the latest financial
statements of Borrower and the Entities given to Gender.
5.11 Tax Returns.
(a) Except for the years 1993 and 1994, Borrower has filed all
federal, state and local tax returns and has paid all of its current
obligations before delinquent, including all federal, state and local taxes
and all other payments required under federal, state or local law.
(b) Except for the years 1993 and 1994, the Entities have filed all
returns and reports and paid all of their current tax obligations before
delinquent and all other payments required by governing taxing authorities.
5.12 Propose of the Loan. The Loan is a business loan and the proceeds
thereof shall be used solely for commercial or business purposes, and no portion
thereof is intended to be or shall be used for the purpose (whether immediate,
incidental or ultimate) of consumer spending.
5.13 No Broker's or Finder's Fee. Borrower and Lender have not employed or
retained any broker or finder or incurred liability for any brokerage fees,
commissions or finder's fees in connection with the lending transactions
contemplated herein. Borrower and Lender hereby each indemnifies and holds
harmless the other from and against any claims by third parties for brokerage
fees, commissions or finder's fees claimed as a result of the indemnifying
party's acts or omissions in connection with the Loan.
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<PAGE>
5.14 No Usury. Etc. To the best of Borrower's knowledge, after due inquiry,
the Loan is an exempt transaction under the Truth in Lending Act, 15 U.S.C.
(ss)1601, et seq.; and the Loan does not, and when disbursed will not, violate
the provisions of any Florida or federal usury laws, any consumer credit laws or
the usury laws Or consumer credit laws of any state which may have jurisdiction
over this transaction, Borrower or any property securing the Loan. Borrower
agrees to pay the interest rate -stated in the Note.
5.15 Property Value. The fair market value of the assets secured by the
Collateral Documents substantially exceeds the amount of the Loan.
5.16 Contract Rights. All leases, contracts, agreements and other
obligations affecting the assets secured by the Loan Documents to which Borrower
and/or an Entity is a party, under or by which any of them may be a payee, or by
which Borrower, an Entity or any of their assets is or may be bound are binding
and enforceable in accordance with their terms and neither Borrower, any of the
Entities nor any other party to any such agreement is in default or in arrears
thereunder nor has Borrower, any of the Entities or any other party to any such
agreement committed any act or failed to perform any obligations which, with the
passage of time or giving of notice or both, would constitute a default under
any such lease, contract, agreement or other obligation affecting their assets.
5.17 Hazardous Substances.
(a) There has been no production, disposal, transport, treatment,
storage or discovery of any hazardous waste or toxic substance affecting
the real property secured by the Loan Documents or otherwise leased to
Borrower or any of the Entities (the "Real Property").
(b) No activity has occurred on the Real Property which could have
toxic results; and there is no proceeding or inquiry pending or to
Borrower's knowledge anticipated by any governmental agency or other
authority with respect thereto.
(c) The Real Property is not now, nor has ever been, used for the
production, treatment, collection, storage or disposal of any refuse;
objectionable waste or any material.
(d) Borrower shall indemnify and hold Lender harmless from any loss
incurred by Lender by reason of the existence of any hazardous waste or
toxic substance. Without limiting the generality of the indemnification set
forth in Section 12.15 hereof or the foregoing, subject to the limitation
set forth below, Borrower hereby indemnifies Lender and agrees to hold
Lender harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever,
including reasonable attorneys' fees paid.
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<PAGE>
incurred or suffered by, or asserted against, Lender for, with respect to, or as
a direct or indirect result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emissions, discharging or release from,
the Real Property, or into or Lion the land, the atmosphere, or any watercourse,
body of water or wetland of any hazardous material "including, without
limitation, any losses, liabilities, damages, injuries, coats, -expenses or
claims asserted or arising under any statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
Standards of conduct concerning any hazardous material).
5.17 No Other Agreements. The Loan Documents contain the complete
understanding of the parties with respect to the Loan transaction, and there are
no other oral or written understandings or agreements giving rice to any
expectation with respect to the Loan transaction or any interpretation of the
Loan terms except as set forth in the Loan Documents.
5.18 Untrue Statements. None of the information contained in the
representations and warranties set forth in this Agreement or in any of the
other Loan Documents made by Borrower to Lender, or in any certificate to be
delivered pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact or
omits to state a material fact necessary to make the Statements contained
therein not misleading. In addition to the foregoing, Borrower has not failed to
inform Lender as to any material fact relating to Borrower's business, assets,
properties, prospects or affairs.
5.16 Capitalization. There are 1,OOO shares of no par value, voting common
stock issued and outstanding ("Stock") and no shares of preferred stock issued
and outstanding. There are no shares of Stock held as treasury shares. The sole
owners of record and sole beneficial owners of all of the shares of Stock are as
follows:
Georges St. Laurent, III 510 shares of Stock
William St. Laurent 164 shares of Stock
Nicholas St. Laurent 163 shares of Stock
Alexander St. Laurent 163 shares of Stock
Other than: (i) that certain Stock Option Agreement with Lender and (ii)
commitments to issue no more than 400 shares of voting common stock, or
equivalent, Borrower is not a party to or bound by any contract, agreement or
arrangement to issue or sell any capital stock or any other security of Borrower
or any other security exercisable or convertible into any capital stock or any
other security of Borrower.
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<PAGE>
SECTION VI
AFFIRMATIVE COVENANTS
6.1 Use of Loan Proceeds. Borrower shall expend the Loan proceeds in
accordance with Sections 2.1 and 5.9 of this Agreement and "hall in no event use
the same for any other purpose.
6.2 Financial Statements and Other Reports. Borrower shall keep books and
records in accordance with generally accepted accounting principles,
consistently applied, and shall deliver to Lender such financial and profit and
loss statements (in form satisfactory to Lender) on Borrower and the Entities as
Lender may request from time to time and will permit a representative on behalf
of Lender to examine and audit the books of business of Borrower and the
Entities. Borrower shall immediately inform Lender of any litigation involving
Borrower or the Entities, the adverse determination of which might prejudice
repayment of the Loan.
6.3 Payment of Taxes. Obligations. Indebtedness and Claims. Borrower will
payer cause to be paid all taxes, assessments and other governmental charges
imposed upon Borrower or any of the Entities or any of their properties or
assets or in respect to any business, income or property before any penalty or
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums which have become due and
payable and which by law have or may become a lien upon any of its properties or
assets. Without limiting the foregoing, Borrower shall pay or cause to be paid
when due, all bills, taxes, assessments, charger, levies or indebtedness
constituting a lien on the assets or properties of Borrower or the Entities.
Borrower represents and warrants that the outstanding principal balance on
indebtedness to William St. Laurent, Georges St. Laurent, Jr. or Georges St.
Laurent, III or any of their affiliates does not exceed $4,000,000 and that,
notwithstanding the the provisions of this Section 6.3, Borrower covenants and
agrees not to reduce or cause the Entities to reduce any indebtedness owing by
Borrower or the Entities to William St. Laurent, Georges St. Laurent, Jr. (other
than payments not exceeding $100,000 per month) or Georges St. Laurent, III or
any of their affiliates without the prior written consent of Lender.
6.4 Inspection. Borrower will permit or cause to be granted permission for
any authorized representatives designated by Lender to visit and inspect the
physical facilities of Borrower and the Entities.
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<PAGE>
6.5 Compliance with Laws. Etc. Borrower shall exercise or cause the
Entities to exercise all reasonable due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which would adversely affect the
business, properties, assets, operations or condition (financial or otherwise)
of Borrower or the Entities.
6.6 Representations and Warranties Accurate. The representations and
warranties made by Borrower Shall be and remain true at all times with the same
effect as though the representations and warranties had been made at any and all
times during the term of this Agreement.
6.7 Compliance with Loan Documents. Borrower shall make all payments of
interest and principal in the Loan and shall keep and comply or cause the
Entities to keep and comply with all covenants, terms and provisions of the Loan
Documents.
SECTION VII
NEGATIVE COVENANTS
Borrower hereby agrees to undertake the following obligations:
7.1 Dissolution: Liquidation. Borrower shall not nor shall Borrower permit
the Entities to dissolve or liquidate, or merge or consolidate with or into any
other entity, or turn over the management or operation of their properties,
assets or business to any other person, firm or corporation; provided, however,
that in the event that Lender does not consent to any of the foregoing and a
Conversion (as that tern is defined in the Note) has not occurred, Borrower may
prepay the Loan in whole.
7.2 Disposition of Assets. Borrower shall not nor shall Borrower permit the
Entities to assign, transfer or convey any of its right, title and interest in
any property whether real or personal encumbered by the Loan Documents; create
or suffer to be created any mortgage, pledge, security interest, encumbrance or
other lien on any property encumbered by the Loan Documents; or create or suffer
to be created any mortgage, pledge, security interest, encumbrances or other
lien on any other property or assets which it now owns or hereafter acquires
except in consideration of the contemporaneous receipt by it of benefits equal
or greater in value to the lien created.
7.3 Restriction on Fundamental Changes. Borrower will not nor will Borrower
permit the Entities to:
(a) change the times of commencement or termination of its fiscal year
or other accounting periods; or change its methods of accounting other than
to conform to generally accepted accounting principles applied on a
consistent basis; or
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<PAGE>
(b) enter into any transaction of bankruptcy (or suffer any bankruptcy
proceedings).
SECTION VIII
EVENTS OF DEFAULT
The existence or occurrence of any one or more of the following shall
constitute an Event of Default under the Loan Documents and all other documents
executed or to be executed in connection with the Loan:
8.1 Default in Performance: Breach of Condition.
(a) Borrower's default in the performance of any obligation to be
performed under, or breach of, any term, condition, covenant, warranty or
representation contained in any of the Loan Documents subject to applicable
notice and grace periods as set forth in the Loan Documents.
(b) A default by any of the Entities in the performance of any
obligation to be performed under, or breach of, any term, condition,
covenant, warranty or representation contained in any of the Loan Documents
subject to applicable notice and grace periods as set forth in the Loan
Documents.
8.2 Lien Status. Lender at any time shall fail to have a legal, valid,
binding and enforceable lien of the priority described herein on the
property and assets secured by the Loan Documents securing all advances
made now or at any time in the future Pursuant to the Note and the other
Loan document~
8.3 Unenforceability. Performance by Borrower or any of the Entities
of any obligation under any Loan Document is rendered unenforceable in any
respect.
SECTION IX
LENDER'S REMEDIES
Upon the occurrence of any Event of Default hereunder, Lender shall have
the absolute right, without further notice, at Lender's option and election and
in its sole discretion, to:
9.1 Acceleration. Declare all indebtedness of Borrower hereunder
immediately due and payable, without notice or demand.
9.2 Protect Collateral. Proceed to protect and enforce its rights and
remedies under the Loan Documents.
9.3 Advances to Cure Default. Advance such portion or portions of the Loan
or any other additional sums as may be necessary to cure any default. All sums
so advanced shall be
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deemed advances of principal under the Loan and the Note and shall bear interest
at the Default Rate.
9.4 Other Remedies. Exercise any other right, privilege or remedy available
to Lender under any of the Loan Documents. Lender shall have the right to
enforce any one or more of the remedies provided hereunder either successively
or concurrently, and any such action by Lender shall not be deemed an election
of remedies or otherwise prevent Lender from pursuing any further remedy it may
have hereunder or at law or in equity.
9.5 Costs and Expenses. Borrower shall pay to Lender upon demand all
reasonable costs, expenses and fees (including reasonable attorneys' fees),
whether suit be instituted or not, incurred by Lender in protecting or enforcing
its rights under the Loan Documents, and all expenses of taking possession,
holding and disposing of the Collateral, whether the same shall be paid or
incurred pursuant to provisions of this Section or otherwise, and all payments
made or liabilities incurred by Lender under this Agreement of any kind
whatsoever. All or any portion of such cost=, fees and expenses:, at Lender'=
election, and without notice, shall be payable on demand with interest at the
Default Rate "et forth in the Note computed from the date of disbursement
thereon or may be added to the principal balance of the Loan and shall bear
interest at the rate then and thereafter applied to said balance.
SECTION X
RIGHTS OF LENDER AGAINST COLLATERAL
The parties acknowledge and agree that the Loan is a single, unitary Loan
and that upon occurrence of an Event of Default, Lender is entitled to pursue,
in its sole discretion, its remedies against all or any of the Collateral
described in this Agreement. Furthermore, Borrower acknowledges and agrees that
he shall have no rights of contribution or subrogation against or from the
Collateral until such time a. all sums owed to Lender pursuant to this Agreement
and the other Loan Documents have been paid in full.
SECTION XI
REPRESENTATION BY QUALIFIED ADVISORS; ARM'S-LENGTH AGREEMENT;
EQUAL BARGAINING POWER
The parties to this Agreement represent, acknowledge and agree that, with
respect to this Agreement, each of the other Loan Documents, and all of the
transactions contemplated herein: (a) the parties are of equal or relatively
equal bargaining power; (b) the parties are represented by qualified counsel
and/or qualified business advisors and have been advised by and consulted with
such counsel and advisors; (c) the parties are aware of the risk" and benefits
associated with the Loan, the
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<PAGE>
Loan Documents and the terms thereof, and such terms are in no sense grossly
unfair, oppressive or unconscionable; (d) the Loan (and each provision of the
Loan Documents) is an arm's-length, bargained-for transaction entered into by
the parties freely, with full knowledge of all facts and without duress or
Coercion of any form; and (e) each of the parties to this Agreement is
sophisticated and experienced in real estate, financing and commercial
transactions and understands the respective rights and obligations of the
parties under the Loan Documents.
SECTION XII
MISCELLANEOUS
12.1 This Loan Agreement Part of Loan Documents. The Loan Documents shall
be deemed to incorporate this Loan Agreement. In the event of a conflict between
any of the provisions of this Loan Agreement and any provision of any of the
other Loan Documents, the provisions of this Loan Agreement shall control. Any
breach or default by Borrower of any term or condition of this Loan Agreement
shall constitute a default under all other Loan Documents and vi so vent
12.2 Lender's Right to Appear in Litigation. Lender shall have the right to
commence, appear in or defend any action or proceeding which Lender believes may
affect the rights or duties of any of the parties hereunder or in connection
therewith or in and to the Collateral and in connection therewith, to pay all
necessary and reasonable expenses in connection therewith (including, but not
limited to, fees of counsel retained by Lender in connection with such action or
proceeding), and Borrower shall repay all of the foregoing expenses to Lender
upon demand. ~ -
12.3 No Other Parties to Benefit. The Loan Documents are made for the sole
benefit of Borrower and Lender and their successors and assigns, and no other
Person or entity is intended to or shall have any rights or benefits hereunder
or under any escrow account contemplated hereby, whether as third-party
beneficiary or otherwise.
12.4 Notice. All notices provided for herein and in the other Loan
Documents shall be in writing and shall be (a) personally delivered or delivered
by courier service (e.g., Federal Express) to the party being notified if an
individual, or (b) transmitted by certified or registered mail, return receipt
requested, addressed to all parties hereto at the address designated for each
party beside its signature or at such other address as the party who in to
receive such notice may designate in writing. Notice shall be deemed effective
and received upon: (i) the date of receipt if delivered by courier or by
personal delivery, or (ii) seven (7) days after the deposit of same in a letter
box or other means provided for the posting of mail, postage prepaid as provided
above. Failure to give notice to
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persons designated as also receiving copies of such notices "hall not affect the
validity of such notice if proper notice is effected with respect to the primary
party to receive same.
12.5 Construction. This Agreement and the other Loan Documents are intended
to express the mutual intent of the parties hereto after opportunity to consult
with counsel, and irrespective of the party preparing any document, no rule of
strict construction shall be applied against any party. All words used herein
shall refer to the appropriate number or gender, regardless of the number of
gender stated.
12.6 Modification and Waiver. No provision of this Loan Agreement shall be
amended, waived or modified except by an instrument in writing signed by the
parties hereto.
12.7 Materiality. All covenants, agreements, representations and warranties
made herein or in any document delivered in support of the Loan shall be deemed
to be material and to have been relied on by Lender in making this Loan, and
shall survive the execution and delivery of any of the Loan Documents and any
disbursement or advance of funds made pursuant to this Loan Agreement.
12.8 Headings. All sections and descriptive headings of sections in this
Loan Agreement are inserted for convenience only, and shall not affect the
construction or interpretation hereof .
12.9 Severability: Integration: Form and Substance of Documents: Time of
the Essence. Inapplicability or unenforceability of any provision of this Loan
Agreement shall not limiter impair the operation or validity of any other
provision of this Loan Agreement. The Loan Documents supersede all prior
agreements (including, without limitation, any commitment letter), and
constitute the entire agreement between the parties with respect to the subject
matter hereof. All documents and other matters required to be furnished by
Borrower shall be satisfactory in form and substance to counsel for Lender. Time
is of the essence hereof.
12.10 CounterDarts. This Loan Agreement may be executed in any number of
counterparts, each of which when executed and delivered, shall be an original,
but all of which shall together constitute one and the same instrument.
12.11 Assignability. Neither party "hall assign their rights or delegate
their obligation hereunder without the prior written consent of the other party.
12.12 No Agency Relationship. Borrower understands and agrees that Lender
is not its agent or representative.
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12.13 No Joint Venture. Nothing contained in this Agreement or in any of
the other Loan Documents shall be construed as creating a joint venture,
partnership or any other relationship between Borrower and Lender except that of
debtor and creditor.
12.14 Waiver of Defaults. The waiver by Lender of any breach or default by
Borrower under any of the terms of any of the Loan Documents shall not be deemed
to be a waiver of any subsequent breach or default on the part of Borrower under
the same or any other of the Loan Documents.
12.15 Indemnification. Borrower agrees to indemnify and hold Lender
harmless from and against any and all losses, liabilities, claims, demands or
obligations which may be asserted in connection with or arising out of the Loan,
the Collateral or any aspect thereof, or a breach by Borrower of any
representations or warranties set forth herein, whenever asserted, and for all
reasonable expenses (including attorney=' fees) which may be incurred by Lender
on account of or arising out of or in connection with any such claim, demand or
obligation, except as arises out of the willful malfeasance or gross negligence
of Lender.
12.16 Lender's Consent. Whenever Lender's consent! approval or judgment is
called for in the Loan Documents, it may be withheld, exercised or given in
Lender's sole discretion unless otherwise provided.
12.17 Attorneys' Fees. Should any proceedings or litigation be commenced
between the parties hereto concerning the terms of this Agreement, or the rights
and duties of the parties hereto, the prevailing party in such proceeding or
litigation shall be entitled, in addition to such Other relief as may be
granted, to a reasonable sum as and for the prevailing party's attorneys' fees.
12.18 Further Assurances. Each party shall execute and deliver all such
other instruments and take all such other action as any party may reasonably
request from time to time, before or after the Closing, in order to effectuate
the transactions Provided for herein.
12.19 Incorporate Recitals. The prefatory language and Recitals made and
stated hereinabove are hereby incorporated by reference into, and made a part
of, this Agreement.
12.20 Participation. Lender, at any time, shall have the right to sell
participation interests in the Loan and in any documents and instruments
executed in connection herewith. Lender is authorized to furnish to any
participant or prospective participant any information or document that Lender
may have or obtain regarding the Loan, Borrower, guarantors of the Loan and the
Entities.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the day and year first above written.
ADDRESS FOR NOTICES TO "BORROWER"
BORROWER:
8807 Northwest 23rd Street VITECH AMERICA, INC., a
Miami, Florida 33172 Florida Corporation
Attn: William St. Laurent
By: /s/ William St. Laurant
-------------------------------
William St. Laurant
Its,: President
ADDRESS FOR NOTICES TO LENDER: "LENDER"
917 Tahoe Boulevard
Suite 300H MERIS FINANCIAL INCORPORATED,
Incline Village, Nevada 89451 a Nevada corporation
Attn: Nicholas Meris
WITH A COPY TO: By:________________________________
Nicholas S. Meris
Laura A. Short, Esq. President
Morrison & Hecker
2800 North Central Avenue
Suite 1600
Phoenix, Arizona 85004-1047
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<PAGE>
Schedule 2.3
Description of Collateral ~
personal guaranty of William St. Laurent
personal guaranty of Georges St. Laurent III
corporate/limited liability company guarantee of the 3 Brazilian
entities: (1) VITECH-VITORIA TECNOLOGIA S.A., (a) BAHIATECH-BAHIA
TECNOLOGIA LTDA., and (3) NULTISHOW-PRODUCTOS DE INFORMATICA E
TELECOMMUNICACOES LTDA. (collectively, the "Brazilian Entities")
collateral assignment of the beneficial rights under the following option
agreements:
a. option from Maria Aparecida Caldas in favor of Vitech for her 9 quotas
representing a 60% interest in Multishow Produtos de Informactica e
Telecomunicacoes Ltda. ("Multishow").
b. option from Georges St. Laurent, III in favor of Vitech for all but
.01% of his quotas representing a right to purchase a 39.99% interest
in Multishow.
c. option from Georges St. Laurent, III in favor of Vitech for all of his
shares (ordinary and preferred, currently owned or acquired in the
future) in Vitech Vitoria Tecnologia S.A. ("Vitoria").
d. option from William St. Laurent in favor of Vitech for all of his
shares (ordinary and preferred, currently owned or acquired in the
future) in Vitoria.
e. option from Nicolas St. Laurent in favor of Vitech for his 51 quotas
representing a 51% interest in Bahiatech Bahia Tecnologia Ltda.
("Bahiatech").
f. option from William St. Laurent in favor of Vitech all but .01% of his
quotas representing a right to purchase a 48.99% interest in
Bahiatech.
security interest in the fixed assets of the Brazilian Entities (excluding
inventory and accounts receivable)
second lien mortgage on real property Vitoria
security interest in the fixed assets of Borrower
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pledge by Georges St. Laurent, III, William St. St. Laurent, Nicholas Laurents")
of Laurent and Alexander St. Laurent (the "St. their stockholdings in Borrower
pledge by the St. Laurents of their ownership interests in the Brazilian
Entities
pledge of keyman life insurance on the St. Laurents
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<PAGE>
UNCONDITIONAL GUARANTY
This Unconditional Guaranty (the "Guaranty") is made and entered into this
28 day of October, 1995, by and between WILLIAM C. ST. LAURENT and WENDY ANN
MOORE ST. LAURENT, husband and wife (collectively, "Guarantor") and MERIS
FINANCIAL INCORPORATED, a Nevada corporation ("Lender").
RECITALS:
Contemporaneously with this Guaranty, Lender is making a loan to Vitech
America, Inc., a Florida corporation ("Borrower.), in the original principal
amount of Two Million Dollar ($2,000,000.00) (the "Loan"), which loan is
evidenced by a Promissory Note (the "Note") dated of even date herewith executed
by Borrower to the order of Lender. The Loan is secured by the collateral and
security instruments listed on the attached Exhibit "A. (the "Collateral"). All
documents and instruments evidencing or securing the Loan are hereinafter
referred to as the "Loan Documents".
AGREEMENT: For good and valuable consideration , the receipt and sufficiency of
which are hereby acknowledged and confessed by Guarantor, Guarantor hereby
unconditionally covenants and agrees with Lender as follows:
ARTICLE I
GUARANTEE
1.1 Guarantor jointly, severally, and unconditionally guarantees the full,
timely and faithful payment, performance and compliance by Borrower of and with
all the terms, covenants, conditions, agreements and provisions of the Loan
Documents (collectively, the "Obligations").
1.2 If Borrower or Guarantor defaults in the performance of any of the
Obligations, then within: (at five days after written notice from or on behalf
of Lender to the effect that there exist. such a default and identifying the
Obligations which Borrower or Guarantor has failed to pay or perform, or (b)
such unexpired grace period, if any, as Borrower or Guarantor may then have
remaining under the appropriate documents to cure such default before it becomes
an "event of default" (as the term may be defined under such document),
whichever period is longer, Guarantor, as demanded by Lender, will pay such
Obligations (including any amount which may have been accelerated as a result of
Borrower or Guarantor'. default) to Lender at its offices at 917 Tahoe
Boulevard, Suite 300H, Incline Village, Nevada 8945-1 or such other address as
Lender may by notice direct, or will provide Lender with evidence of the
performance of the Obligations which Borrower has failed to perform. If
Guarantor fails to pay any sums due Lender hereunder within the period
applicable pursuant to the terms of the preceding sentence, then, as to
Guarantor, such sums shall bear interest at
<PAGE>
the Default Rate (the term "Default Rate" shall have the name meaning as
ascribed to such term in the Note) in lieu of the interest rate otherwise
applicable thereto. Further, if Guarantor shall fail to pay any amount or
perform any obligation properly due Lender hereunder, Lender may institute and
pursue an action or proceeding to judgment or final decree and may enforce any
such judgment or final decree against Guarantor and collect in the manner
provided by law out of Guarantor's property, wherever situated, the monies
adjudged or decreed to be payable.
ARTICLE II
SUBORDINATION
2.1 Guarantor subordinates all of Guarantor's liens, security interests,
claims and rights of any kind that Guarantor may now have or hereafter acquire
against Borrower and/or Borrower's property resulting from Borrower's present
and future indebtedness to Guarantor (the Subordinated Indebtedness), and agrees
that all liens, security interests, claims and rights of any kind that Guarantor
may now have or hereafter acquire against Borrower and Borrower's property
resulting from the Subordinated Indebtedness shall be subordinate, inferior and
subject to the claims and rights of Lender against Borrower and/or Borrower's
property under the terms of any of the Loan Documents, whether direct or
contingent or whether now or hereafter created. Guarantor grants to Lender a
security interest in the Subordinated Indebtedness, which shall be collected,
enforced and received by the holder(s) thereof for Lender and be paid over to
Lender on account of the obligations, but without reducing or affecting in any
manner the liability of Guarantor under any of the other provisions of this
Guaranty; provided, however, that unless an Event of Default has occurred and is
continuing, Guarantor may retain for their own account reasonable salaries or
fees for services actually rendered to Borrower. Notwithstanding anything herein
to the contrary, if any portion of the Subordinated Indebtedness become" due and
payable prior to its stated maturity, Lender shall be entitled to receive full
performance of the Obligations before the holder(s) thereof are entitled to
receive any payment with respect to the Subordinated Indebtedness.
2.2 Guarantor will not take any action which will either (i) force the sale
of Borrower's property in order to Satisfy the Subordinated Indebtedness or (ii)
affect in any manner any and all of Lender's liens, security interests, claims
or rights of any kind that Lender may now have or hereafter acquire against
Borrower and/or Borrower's property. Guarantor will refrain from taking any
action which is in any way inconsistent with or in derogation of this
subordination or of- the rights of Lender hereunder and covenants to perform
such further acts a. necessary or appropriate to give effect to this
subordination. Without limiting the generality of the foregoing, Guarantor will
not assign any portion of the Subordinated Indebtedness, except expressly
subject to the terms of this Guaranty; and Guarantor shall cause all evidence of
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the Subordinated Indebtedness to set forth the provisions hereof or to bear a
legend that it is subject hereto.
ARTICLE III
GENERAL COVENANTS AND WAIVERS OF
GUARANTOR: REMEDIES AND RIGHTS OF LENDER
3.1 Neither failure to give, nor defect in, any notice to Guarantor
concerning default in the performance of the Obligations, an Event of Default or
any event which might mature into an Event of Default shall extinguish or in any
way affect the obligations of Guarantor hereunder or the rights of Lender
hereunder. Neither demand on, nor the pursuit of any remedies against, Borrower
or any other guarantor of or surety for the Obligations ("Obligor") shall be
required as a condition precedent to, and neither the pendency nor the prior
termination of any action, suit or proceeding against Borrower or any other
Obligor (whether for the same or a different remedy) shall bar or prejudice, the
making of a demand on Guarantor by Bender and the commencement against
Guarantor, before or after such demand, of any action, suit or proceeding, at
law or in equity, for the specific performance of any covenant or agreement
contained in the Loan Documents or for the enforcement of any other appropriate
legal or equitable remedy.
3.2 The liability of each party named as a Guarantor hereunder is
continuing, primary, direct, immediate, and joint and several with Borrower,
each other party named as a Guarantor hereunder and each and every other
Obligor. Neither (a) the exercise or the failure to exercise by Lender of any
rights or remedies conferred on it under the Loan Documents, hereunder or
existing at law or otherwise, or against any Collateral, (b) the commencement of
an action at law or the recovery of a judgment at law against Borrower or any
other Obligor and the enforcement thereof through levy or execution or
otherwise, (c) the taking or institution or any other action or proceeding
against Borrower or any other Obligor, nor (d) any delay in taking, pursuing or
exercising any of the foregoing actions, rights, powers or remedies (even though
requested by Guarantor, by Lender or anyone acting for Lender), shall extinguish
or affect the obligations of Guarantor hereunder, but Guarantor shall be and
remain liable for all Obligations until fully paid, notwithstanding the previous
discharge (total or partial) from further liability of Borrower or any other
Obligor or the existence of any bar (total, partial or temporary) to the pursuit
by Guarantor of any right or claim to indemnity against Borrower or any other
Obligor or any right or claim of Guarantor or any other Obligor to be subrogated
to the rights or claims of Lender in and to the Collateral resulting from any
action, failure or omission to act or delay in acting by Lender, or anyone
entitled to act in its place.
3.3 Except as expressly set forth herein in this or any other Loan
Document, Guarantor hereby expressly waives: (a) notice of the acceptance by
Lender of this Guaranty; (b) notice of the
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<PAGE>
existence, creation or nonpayment of all or any of the Obligations; (c)
presentment, protest, demand, notice of dishonor, protest and all other notices
whatsoever; (d) all diligence in collection or protection of or realization on
the Obligations of any thereof, any obligating hereunder, or any security for or
guarantee of any of the foregoing; (e) any and all suretyship defenses and
defenses in the nature thereof; (f) the claim that the Loan Documents were not
duly authorized and executed by Borrower or are not legal, valid and binding
instruments, enforceable in accordance with their terms; (g) any right to raise
the defense of the statute of limitations in any action hereunder or for the
collection of the Obligation-; (h) any right to raise any defense by reason of
incapacity, lack of authority, death or disability of or revocation hereof by
any other guarantor of the failure of Lender to file or enforce a claim against
the estate (probate, bankruptcy or any other proceeding) of any other guarantor;
(i) any right to raise any defense based upon an election of remedies by Lender;
and (I) any right to impose any duty on the part of Lender to disclose to
Guarantor any facts it may now or hereafter know about Borrower, regardless of
whether Lender has reason to believe that such facts are unknown to Guarantor or
ha a reasonable opportunity to communicate such facts to Guarantor, it being
understood and agreed that Guarantor is fully responsible for being and keeping
informed of the financial condition of Borrower and of all circumstances bearing
on the risk of non-payment or non-performance of the Obligations.
3.4 If Guarantor at any time becomes insolvent or admits in writing the
inability to pay their debts as they mature, or generally falls to pay
Guarantor's debts as they mature, or apply for, consent to or acquiesce in the
appointment of a trustee, receiver, liquidator, assignee, sequestrator or other
similar official for Guarantor or any of Guarantor's property; or, in the
absence of such application, consent or acquiescence, a trustee, receiver,
liquidator, assignee, sequestrator or other similar official is appointed for
Guarantor, or for a substantial part of Guarantor's property and is not
discharged within ninety (90) day-; or if any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy, admiralty or insolvency
law or at common law or in equity is instituted by or against Guarantor, or
remains for ninety (90) days undismissed, and if any such event shall occur at a
time when any of the Obligations may not be then due and payable, then Guarantor
will pay to Lender forthwith the whole then unpaid amount of the Note (together
with any other sums due under the Loan Documents herein called the Unpaid
Amount.), whether or not then due and payable, as if such Unpaid Amount were
then due and payable. Furthermore, in any such event Lender, irrespective of
whether any demand shall have been made on Guarantor, Borrower or any other
Obligor, by intervention in or initiation of proceedings relative to Guarantor,
Guarantor'. creditors or Guarantor's property, may file and prove a claim or
claims for the whole Unpaid Amount or any portion thereof and file such other
papers or documents as may be necessary or advisable in order to have such claim
allowed in such proceedings and to collect
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<PAGE>
and receive any monies or other property payable or deliverable on any such
claim, and to distribute the same; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized to make such payments to
Lender.
3.5 The benefits, remedies and rights provided or intended to be provided
hereby for Lender are in addition to and without prejudice to any rights,
benefits, remedies or security to which Lender might otherwise be entitled.
3.6 Anything else contained herein to the contrary notwithstanding' Lender,
from time to time, without notice to Guarantor, may take all or any of the
following actions without in any manner affecting or impairing the liability of
Guarantor hereunder: (a) receive or accept a lien or a security interest in any
property to secure any of the Obligations or any obligation hereunder; (b)
receive or accept the primary or secondary liability of any party or parties, in
addition to Guarantor, with respect to any of the Obligations; (c) renew, extend
or otherwise change the time for payment or performance of the Obligations; (d)
release of compromise any liability of Guarantor hereunder or any liability of
any nature of any other party or parties with respect to the Obligations; (e)
exchange, enforce, waive, release and apply any Collateral and direct the order
or manner of sale thereof as Lender may in its discretion determine; (f) resort
to Guarantor for payment of any Obligations, whether or not Lender shall proceed
against any other party primarily or secondarily liable on any of the
Obligations; and (g) agree to any amendment, modification or alteration of the
Loan Documents and/or exercise any of its rights conferred by the Loan Documents
or by law.
3.7 No delay on the part of Lender in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Lender
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy; nor shall any modification or waiver of
any of the provisions of this Guaranty be binding on Lender except as expressly
set forth in writing, duly signed and delivered on behalf of Lender. No action
of Lender permitted hereunder shall in any way affect or impair the rights of
Lender and the obligations of Guarantor under this Guaranty.
3.8 If at any time all or any part of any payment theretofore applied by
Lender to any of the Obligations is or must be rescinded or returned by Lender
for any reason whatsoever (including, without limitation, the insolvency, or
bankruptcy of Borrower), such Obligations, for purposes of this Guaranty, to the
extent that such payment is or must be rescinded or returned, shall be deemed to
have never been performed; and this Guaranty shall continue to be effective or
be reinstated, as the case may be, a" to such Obligations, all as though such
application by Lender had not been made.
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<PAGE>
3.9 Until all the Obligations have been paid and performed in full,
Guarantor shall have no right of subrogation and hereby waives any right to
participate in any of the collateral for the Obligations.
3.10 It is not necessary for Lender to inquire into the powers of Borrower
or its trustees or agents purporting to act on its behalf and the Obligations
are hereby guaranteed notwithstanding the lack of power or authority on the part
of Borrower or anyone acting on its behalf to incur the Obligations.
ARTICLE IV
GUARANTOR'S WARRANTIES
4.1 Guarantor represents and warrants to Lender that:
(a) Guarantor, Nicholas St. Laurent, Alexander St. Laurent and Georges
St. Laurent, III are the sole Shareholders of the Borrower.
(b) The execution, delivery and performance by Guarantor of this
Guaranty does not and will not conflict with or contravene any law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Guarantor or Guarantor's
activities or properties or conflict with, or result in any default under
any agreement or instrument of any kind to which Guarantor is a party or by
which Guarantor or Guarantor's properties may be bound or affected.
(c) Neither the execution and delivery by Guarantor of this Guaranty
nor the performance by Guarantor hereunder requires the consent, approval,
order or authorization of, or registration with, or the giving of notice to
any governmental authority, domestic or foreign.
(d) This Guaranty has been duly executed and delivered by Guarantor
and constitutes a legal, valid and binding obligation of Guarantor
enforceable against Guarantor in accordance with its terms.
(e) There is no action, litigation or other proceeding pending or, to
Guarantor's best knowledge, threatened against Guarantor before any court,
arbitrator or administrative agency which may have an adverse effect on
Guarantor's assets, businesses, or financial condition or which would
prevent, hinder or Jeopardize Guarantor's performance under this Guaranty.
(f) Guarantor is fully familiar with all of the covenants, terms and
conditions of the Loan Documents and has reviewed such documents personally
and with counsel.
(g) Except as may be set forth in the written financial statements
Presented by Guarantor to Lender. Guarantor is not a
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party to any contract, agreement, indenture or instrument or subject to any
restriction which individually or in the aggregate require any obligations of
Guarantor to be performed as of the date hereof or as a result of executing this
Guaranty, which might adversly affect Guarantor's financial condition or
businesses, or which would in any way jeopardize the ability of Guarantor to
perform hereunder.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 All the covenants, stipulations, promises and agreement. contained in
this Guaranty by or on behalf of Guarantor are for the benefit of Lender, its
successors or assigns and shall bind Guarantor, Guarantor's heir-, executors,
personal representatives, successors and assigns. Lender, without notice of any
kind, may sell, assign or transfer the Loan Documents and/or the Collateral, and
in such event each and every immediate and successive assignee or transferee
thereof may be given the right by Lender to enforce this Guaranty in full, by
suit or otherwise, for its own benefit. Guarantor agrees for the benefit of any
such assignee or transferee that Guarantor's obligations hereunder shall not be
subject to any reductions, abatement, defense, set-off, counterclaim or
recoupment for any reason whatsoever.
5.2 All notices provided for herein shall be in writing and shall be (a)
personally delivered or delivered by courier service (e.g., Federal Express) to
the party being notified if an individual, or (b) transmitted by certified or
registered mail, return receipt requested, addressed to all parties hereto at
the address designated for each party beside its signature or at such other
address as the party who is to receive such notice may designate in writing.
Notice shall be deemed effective and received upon: (i) the date of receipt if
delivered by courier or by personal delivery, or (ii) seven (7) days after the
deposit of same in a letter box or other means provided for the posting of mail,
postage prepaid as provided above. Failure to give notice to persons designated
as also receiving copies of such notices shall not affect the validity of such
notice if proper notice is effected with respect to the primary party to receive
same.
5.3 Terms used and not otherwise defined herein shall have the same
meanings given thereto in the Loan Documents.
5.4 This Guaranty has been delivered and accepted in Miami, Florida. This
Guaranty shall in all respects be governed by and construed and enforced in
accordance with the internal, substantive laws of the State of Florida.
Guarantor: (a) hereby irrevocably submits himself to the process and
jurisdiction of the courts of the State of Florida and to the venue in and for
the County of Dade, for the purpose of suit, action or other proceedings arising
out of or relating to this Guaranty or the subject matter hereof brought by
Lender; and (b) without limiting the generality of the
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<PAGE>
foregoing, hereby waive and agree not to assert by way of motion, defense or
otherwise in any such suit, action or proceeding any claim that Guarantor is not
personally subject to the jurisdiction of the above-named courts, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper.
5.5 Any provision of this Guaranty which is prohibited or unenforceable in
any jurisdiction shall, as to such Jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and no such prohibition or unenforceability shall invalidate
or render unenforceable such provision in any other jurisdiction.
5.6 None of the provisions of this Guaranty shall be limited to any
particular period of time, but rather all such provision. shall continue
absolutely, unconditionally and irrevocably until all the terms, covenants,
conditions and Obligations set forth in the Loan Documents have been fully
performed by Borrower; and Guarantor shall not be released from any duty,
obligation or liability hereunder so long as there is any claim of Lender
against Borrower arising out of the Loan Documents.
5.7 This Agreement may be executed in any number of counterparts, each of
which shall have the force and effect of an original.
ARTICLE VI
TERMINATION
6.1 Upon an "IPO Event" Guarantor's liability hereunder shall extinguish.
For purposes of this Section 6.1, the term "IPO Event" means that Borrower has
an effective registration statement filed with the Securities Exchange
Commission for the public sale of voting common stock of Borrower.
IN WITNESS WHEREOF, the parties hereto have executed this Guaranty as of
the day and year first above written.
ADDRESS FOR NOTICES TO "GUARANTOR"
GUARANTOR:
8807 Northwest 23rd Street
Miami, Florida 33172 /S/ William C. St. Laurent
Attn: William St. Laurent ------------------------------------
William C. St. Laurent
/S/ Wendy Ann Moore St. Laurent
------------------------------------
Wendy Ann Moore St. Laurent
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<PAGE>
ADDRESS FOR NOTICES TO LENDER: "LENDER"
917 Tahoe Boulevard
Suite 300H MERIS FINANCIAL INCORPORATED,
Incline Village, Nevada 89451 a Nevada corporation
Attn: Nicho1as Meris
WITH A COPY TO:
Laura A. Short, Esq. By:________________________________
Morrison & Hecker Nicholas S. Meris
2800 North Central Avenue President
Suite 1600
Phoenix. Arizona 85004-1047
STATE OF __________________ )
) ss
County of _________________ )
The foregoing instrument was acknowledged before me this _____ day of
_______________________, 1995, by Nicholas S. Meris, the President of Meris
Financial Incorporated, a Nevada corporation, on behalf of the Corporation.
-----------------------------------
Notary Public
My Commission Expires:
- ----------------------------------
STATE OF FLORIDA )
) ss
County of Dade )
The foregoing instrument was acknowledged before me this 28 day of October,
1995, by WILLIAM C. ST. LAURENT AND WENDY ANN MOORE ST. LAURENT.
/S/ Linda G. Odon
-----------------------------------
Notary Public
My Commission Expires:
- ----------------------------------
OFFICIAL NOTARY SEAL
LINDA G. ODOM
COMMISSION NUMBER
CC437527
MY COMMISSION EXP.
FEB. 7,1999
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<PAGE>
Exhibit "A"
Description of Collateral
personal 'guaranty of William St. Laurent
personal guaranty of Georges St. Laurent III
corporate/limited liability company guarantee of the 3 Brazilian entities: (1)
VITECH-VITORIA TECNOLOGIA S.A., (2) BAHIATECH-BAHIA TECNOLOGIA LTDA., and (3)
MULTISHOW-PRODUCTOS DE INFORMATICA E TELECOMMUNICACOES LTDA. (collectively, the
"Brazilian Entities
collateral assignment of the beneficial rights under the following option
agreements:
a. option from Maria Aparecida Caldas in favor of Vitech for her 9 quotas
representing a 60% interest in Multishow Produtos de Informactica e
Telecomunicacoes Ltda. ("Multishow").
b. option from Georges St. Laurent, I7I in favor of Vitech for all but
.01% of his quotas representing a right to purchase a 39.99% interest
in Multishow.
c. option from Georges St. Laurent, III in favor of Vitech for all of his
shares (ordinary and preferred, currently owned or acquired in the
future) in Vitech Vitoria Tecnologia S.A. ("Vitoria").
d. option from William St. Laurent in favor of Vitech for all of his
shares (ordinary and preferred, currently owned or acquired in the
future) in Vitoria.
e. option from Nicolas St. Laurent in favor of Vitech for his 51 quotas
representing a S1% interest in Bahiatech Bahia Tecnologia Ltda.
("Bahiatech").
f. option from William St. Laurent in favor of Vitech for all but .01% of
his quotas representing a right to purchase a 48.99% interest in
Bahiatech.
security interest in the fixed assets of the Brazilian Entities (excluding
inventory and accounts receivable)
second lien mortgage on real property Vitoria security interest in the fixed
assets of Borrower
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pledge by Georges St. Laurent, III, William St. Laurent, Nicholas St. Laurent
and Alexander St. Laurent (the "St. Laurents.) of their stockholdings in
Borrower
pledge by the St. Laurents of their ownership interests in the Brazilian
Entities
pledge of keyman life insurance on the St. Laurents
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<PAGE>
UNCONDITIONAL GUARANTY
This Unconditional Guaranty (the "Guaranty") is made and entered into this
28 day of October, 1995, by and between GEORGES ST. LAURENT, III, an unmarried
man ("Guarantor") and MERIS FINANCIAL INCORPORATED, a Nevada corporation
(blenders).
RECITALS:
Contemporaneously with this Guaranty, Lender is making a loan to Vitech
America, Inc., a Florida corporation ("Borrower"), in the original principal
amount of Two Million Dollar ($2,000,000.~) (the "Loan.), which loan is
evidenced by a Promissory Note (the "Note") dated of even date herewith executed
by Borrower to the order of Lender. The Loan is secured by the collateral and
security instruments listed on the attached Exhibit "A" (the "Collateral"). All
documents and instruments evidencing or securing the Loan are hereinafter
referred to as the "Loan Documents".
AGREEMENT: For good and valuable consideration , the receipt and sufficiency of
which are hereby acknowledged and confessed by Guarantor, Guarantor hereby
unconditionally covenants and agrees with Lender as follows:
ARTICLE I
GUARANTEE
1.1 Guarantor jointly, severally, and unconditionally guarantees the full,
timely and faithful payment, performance and compliance by Borrower of and with
all the terms, covenants, conditions, agreements and provisions of the Loan
Documents (collectively, the "Obligations).
1.2 If Borrower or Guarantor defaults in the performance of any of the
Obligations, then within: (a) five days after written notice from or on behalf
of Lender to the effect that there exists such a default and identifying the
Obligations which Borrower or Guarantor has failed to pay or perform, or (b)
such unexpired grace period, if any, as Borrower or Guarantor may then have
remaining under the appropriate documents to cure such default before it becomes
an "event of default" (as the term may be defined under such document),
whichever period is longer, Guarantor, as demanded by Lender, will pay such
Obligations (including any amount which may have been accelerated as a result of
Borrower or Guarantor 'a default) to Lender at its offices at 917 Tahoe
Boulevard, Suite 300H, Incline Village, Nevada 89451 or such other address a.
Lender may by-notice direct-, or will provide Lender with evidence of the
performance of the Obligations which Borrower has failed to perform. If
Guarantor fails to pay any sums due Lender hereunder within the period
applicable pursuant to the terms of the preceding sentence, then, as to
Guarantor, such sums shall bear interest at the Default Rate (the term default
Rates shall have the name
<PAGE>
meaning as ascribed to such term in the Note) in lieu of the interest rate
otherwise applicable thereto. Further, if Guarantor shall fail to pay any amount
or perform any obligation properly due Lender hereunder, Lender may institute
and pursue an action or proceeding to judgment or final decree and may enforce
any such judgment or final decree against Guarantor and collect in the manner
provided by law out of Guarantor's property, wherever situated, the monies
adjudged or decreed to be payable.
ARTICLE II
SUBORDINATION
2.1 Guarantor subordinates all of Guarantor's liens, security interests,
claims and rights of any kind that Guarantor may now have or hereafter acquire
against Borrower and/or Borrower 'a property resulting from Borrower's present
and future indebtedness to Guarantor (the "Subordinated Indebtedness"), and
agrees that all liens, security interests, claims and rights of any kind that
Guarantor may now have or hereafter acquire against Borrower and Borrower's
property resulting from the Subordinated Indebtedness shall be subordinate,
inferior and subject to the claims and right. of Lender against Borrower and/or
Borrower's property under the terms of any of the Loan Documents, whether direct
or contingent or whether now or hereafter created. Guarantor grants to Lender a
security interest in the Subordinated Indebtedness, which shall be collected,
enforced and received by the holder(s) thereof for Lender and be paid over to
Lender on account of the obligations, but without reducing or affecting in any
manner the liability of Guarantor under any of the other provisions of this
Guaranty; Provided, however, that unless an Event of Default has occurred and is
continuing, Guarantor may retain for their own account reasonable salaries or
fees ~for services actually rendered to Borrower. Notwithstanding anything
herein to the contrary, if any portion of the Subordinated Indebtedness becomes
due and payable prior to its stated maturity, Lender shall be entitled to
receive full performance of the Obligations before the holder(s) thereof are
entitled to receive any payment with respect to the Subordinated Indebtedness.
2.2 Guarantor will not take any action which will either (i) force the sale
of Borrower's property in order to satisfy the Subordinated Indebtedness or (ii)
affect in any manner any and all of Lender's liens, security interests, claims
or rights of any kind that Lender may now have or hereafter acquire against
Borrower and/or Borrower's property. Guarantor will refrain from taking any
action which is in any way inconsistent with or in derogation of this
subordination or of the rights of Lender hereunder and covenants to perform such
further acts as necessary or appropriate to give effect to this subordination.
Without limiting the generality of the foregoing, Guarantor will not assign any
portion of the Subordinated Indebtedness, except expressly subject to the terms
of this Guaranty; and Guarantor shall cause all evidence of
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<PAGE>
the Subordinated Indebtedness to "et forth the provisions hereof or to bear a
legend that it is subject hereto.
ARTICLE III
GENERAL COVENANTS AND WAIVERS OF
GUARANTOR: REMEDIES AND RIGHTS OF LENDER
3.1 Neither failure to give, nor defect in, any notice to Guarantor
concerning default in the performance of the Obligations, an Event of Default or
any event which might mature into an Event of Default shall extinguish or in any
way affect the obligations of Guarantor hereunder or the rights of Lender
hereunder. Neither demand on, nor the pursuit of any remedies against, Borrower
or any other guarantor of or surety for the Obligations ("Obligor") shall be
required as a condition precedent to, and neither the pendency nor the prior
termination of any action, Suit or proceeding against Borrower or any other
Obligor (whether for the same or a different remedy) shall bar or prejudice, the
making of a demand on Guarantor by Lender and the commencement against
Guarantor, before or after such demand, of any action, suit or proceeding, at
law or in equity, for the specific performance of any covenant or agreement
contained in the Loan Documents or for the enforcement of any other appropriate
legal or equitable remedy.
3.2 The liability of each party named as a Guarantor hereunder is
continuing, primary, direct, immediate, and joint and several with Borrower,
each other party named as a Guarantor hereunder and each and every other
Obligor. Neither (a) the exercise or the failure to exercise by Lender of any
rights or remedies conferred on it under the Loan Documents, hereunder or
existing at law or otherwise, or against any Collateral, (b) the commencement of
an action at raw or the recovery of a judgment at law against Borrower or any
other Obligor and the enforcement thereof through levy or execution or
otherwise, (c) the taking or institution or any other action or proceeding
against Borrower or any other Obligor, nor (d) any delay in taking, pursuing or
exercising any of the foregoing actions, rights, powers or remedies (even though
requested by Guarantor, by Lender or anyone acting for Lender), shall extinguish
or affect the obligations of Guarantor hereunder, but Guarantor shall be and
remain liable for all Obligations until fully paid, notwithstanding the previous
discharge (total or partial) from further liability of Borrower or any other
Obligor or the existence of any bar (total, partial or temporary) to the pursuit
by Guarantor of any right or claim to indemnity against Borrower or any other
Obligor or any right or claim of Guarantor or any other Obligor to be subrogated
to the rights or claims of Lender in and to the Collateral resulting from any
action, Failure or omission to act or delay in acting by Lender, or anyone
entitled to act in its place.
3.3 Except as expressly set forth herein in this or any other Loan
Document, Guarantor hereby expressly waives: (a) notice of the acceptance by
Lender of this Guaranty; (b) notice of the
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<PAGE>
existence, creation or nonpayment of all or any of the Obligations; (e)
presentment, protest, demand, notice of dishonor, protest and all other notices
whatsoever; (d) all diligence in collection or protection of or realization on
the Obligations of any thereof, any obligation hereunder, or any security for or
guarantee of any of the foregoing; (e) any and all suretyship defenses and
defenses in the nature thereof; (f) the claim that the Loan Documents were not
duly authorized and executed by Borrower or are not legal, valid -and binding
instruments, enforceable in accordance with their terms; (g) any right to raise
the defense of the statute of limitations in any action hereunder or for the
collection of the Obligations; (h) any right to raise any defense by reason of
incapacity, lack of authority, death or disability of or revocation hereof by
any other guarantor of the failure of Lender to file or enforce a claim against
the estate (probate, bankruptcy or any other proceeding) of any other guarantor;
(i) any right to raise any defense based upon an election of remedies by Lender;
and (I) any right to impose any duty on the part of Lender to disclose to
Guarantor any facts it may now or hereafter know about Borrower, regardless of
whether Lender has reason to believe that such facts are unknown to Guarantor or
ha a reasonable opportunity to communicate such facts to Guarantor, it being
understood and agreed that Guarantor is fully responsible for being and keeping
informed of the financial condition of Borrower and of all circumstances bearing
on the risk of non-payment or non-performance of the Obligations. .
3.4 If Guarantor at any time becomes insolvent or admits in writing the
inability to pay their debts as they mature, or generally falls to pay
Guarantor's debts as they mature, or apply for, consent to or acquiesce in the
appointment of a trustee, receiver,- liquidator, assignee, sequestrator or other
similar official for Guarantor or any of Guarantor's property; or, in the
absence of such application, consent or acquiescence, a trustee, receiver,
liquidator, assignee, sequestrator or other similar official is appointed for
Guarantor, or for a substantial part of Guarantor's property and is not
discharged within ninety (90) days; or if any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy, admiralty or insolvency
law or at common law or in equity is instituted by or against Guarantor, or
remains for ninety (90) days undismissed, and if any such event shall occur at a
time when any of the Obligations may not be then due and payable, then Guarantor
will pay to Lender forthwith the whole then unpaid amount of the Note (together
with any other sums due under the Loan Documents herein called the Unpaid
Amount.), whether or not then due and payable, as if such Unpaid Amount were
then due and payable. Furthermore, in any such event Lender, irrespective of
whether any demand shall have been made on Guarantor, Borrower or any other
Obligor, by intervention in or initiation of proceedings relative to Guarantor,
Guarantor's creditors or Guarantor's property, may file and prove a claim or
claims for the whole Unpaid Amount or any portion thereof and file such other
papers or documents as may be necessary or advisable in order to have such claim
allowed in such proceedings and to collect
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<PAGE>
and receive any monies or other property payable or deliverable on any such
claim, and to distribute the same; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized to make such payments to
Lender.
3.5 The benefits, remedies and rights provided or intended to be provided
hereby for Lender are in addition to and without prejudice to any rights,
benefits, remedies or security to which -Lender might otherwise be entitled.
3.6 Anything else contained herein to the contrary notwithstanding, Lender,
from time to time, without notice to Guarantor, may take all or any of the
following actions without in any manner affecting or impairing the liability of
Guarantor hereunder: (a) receive or accept a lien or a security interest in any
property to secure any of the Obligations or any obligation hereunder; (b)
receive or accept the primary or secondary liability of any party or parties, in
addition to Guarantor, with respect to any of the Obligations; (c) renew, extend
or otherwise change the time for payment or performance of the Obligations; (d)
release of compromise any liability of Guarantor hereunder or any liability of
any nature of any other party or parties with respect to the Obligations; (e)
exchange, enforce, waive, release and apply any Collateral and direct the order
or manner of sale thereof as Lender may in its discretion determine; (f) resort
to Guarantor for payment of any Obligations, whether or not Lender "hall proceed
against any other party primarily or secondarily liable on any of the
Obligations; and (g) agree to any amendment, modification or alteration of the
Loan Documents and/or exercise any of its rights conferred by the Loan Documents
or by law.
3.7 No delay on the part of Lender in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Lender
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy; nor shall any modification or waiver of
any of the provisions of this Guaranty be binding on Lender except as expressly
set forth in writing, duly signed and delivered on behalf of Lender. No action
of Lender permitted hereunder shall in any way affect or impair the rights of
Lender and the obligations of Guarantor under this Guaranty.
3.8 If at any time all or any part of any payment theretofore applied by
Lender to any of the Obligations is or must be rescinded or returned by Lender
for any reason whatsoever (including, without limitation, the insolvency, or
bankruptcy of Borrower), such Obligations, for purposes of this Guaranty, to the
extent that such payment is or must be rescinded or returned, shall be deemed to
have never been performed; and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Obligations, all as though such
application by Lender had not been made.
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<PAGE>
3.9 Until all the Obligations have been paid and performed in full,
Guarantor shall have no right of subrogation and hereby waives any right to
participate in any of the collateral for the Obligations.
3.10 It is not necessary for Lender to inquire into the powers of Borrower
or its trustees or agents purporting to act on its behalf and the Obligations
are hereby guaranteed notwithstanding the lack of power or authority on the part
of Borrower or anyone acting on its behalf to incur the Obligations.
ARTICLE IV
GUARANTOR'S WARRANTIES
4.1 Guarantor represents and warrants to Lender that:
(a) Guarantor, Nicholas St. Laurent, Alexander St. Laurent and Georges
St. Laurent, III are the sole shareholders of the Borrower.
(b) The execution, delivery and performance by Guarantor of this
Guaranty does not and will not conflict with or contravene any law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Guarantor or Guarantor's
activities or properties or conflict with, or result in any default under
any agreement or instrument of any kind to which Guarantor is a party or by
which Guarantor or Guarantor's properties may be bound or affected.
(c) Neither the execution and delivery by Guarantor of this Guaranty
nor the performance by Guarantor hereunder requires the consent, approval,
order or authorization of, or registration with, or the giving of notice to
any governmental authority, domestic or foreign.
(d) This Guaranty has been duly executed and delivered by Guarantor
and constitutes a legal, valid and binding obligation of Guarantor
enforceable against Guarantor in accordance with its terms.
(e) There is no action, litigation or other proceeding pending or, to
Guarantor's best knowledge, threatened against Guarantor before any court,
arbitrator or administrative agency which may have an adverse effect on
Guarantor's assets, businesses, or financial condition or which would
prevent, hinder or jeopardize Guarantor's performance under this Guaranty.
(f) Guarantor is fully familiar with all of the covenants, terms and
conditions of the Loan Documents and has reviewed such documents personally
and with counsel.
(g) Except as may be set forth in the written financial statements
presented by Guarantor to Lender, Guarantor is not a
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<PAGE>
party to any contract, agreement, indenture or instrument or subject to any
restriction which individually or in the aggregate require any obligations of
Guarantor to be performed as of the date hereof off as a result of executing
this Guaranty, which might adversely affect Guarantor's financial condition or
businesses, or which would in any way jeopardize the ability of Guarantor to
perform hereunder.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 All the covenants, Stipulations, promises and agreement. contained in
this Guaranty by or on behalf of Guarantor are for the benefit of Lender, its
successors or assigns and shall bind Guarantor, Guarantor's heirs, executors,
personal representatives, successors and assigns. Lender, without notice of any
kind, may sell, assign or transfer the Loan Documents and/or the Collateral, and
in such event each and every immediate and successive assignee or transferee
thereof may be given the right by Lender to enforce this Guaranty in full, by
suit or otherwise, for its own benefit. Guarantor agrees for the benefit of any
such assignee or transferee that Guarantor's obligations hereunder shall not be
subject to any reductions, abatement, defense, set-off, counterclaim or
recoupment for any reason whatsoever.
5.2 All notices provided for herein shall be in writing and shall be (a)
personally delivered or delivered by courier Service (e.g., Federal Express) to
the party being notified if an individual, or (b) transmitted by certified or
registered mail, return receipt requested, addressed to all parties hereto at
the address designated for each party beside its Signature or at much other
address as the party who is to receive such notice may designate in writing.
Notice shall be deemed effective and received upon: (i) the date of receipt if
delivered by courier or by personal delivery, or (ii) seven (7) days after the
deposit of same in a letter box or other means provided for the posting of mail,
postage prepaid as provided above. Failure to give notice to persons designated
as also receiving copies of such notices shall not affect the validity of such
notice if proper notice is effected with respect to the primary party to receive
same.
5.3 Terms used and not otherwise defined herein shall have the same
meanings Given thereto in the Loan Documents.
5.4 This Guaranty has been delivered and accepted in Miami, Florida. This
Guaranty shall in all respects be governed by and construed and enforced in
accordance with the internal, substantive laws of the State of Florida.
Guarantor: (a) hereby irrevocably submits himself to the process and
jurisdiction of the courts of the State of Florida and to the venue in and for
the County of Dade, for the purpose of suit, action or other proceedings arising
out of or relating to this Guaranty or the subject matter hereof brought by
Lender; and (b) without limiting the generality of the
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<PAGE>
foregoing, hereby waive and agree not to assert by way of motion, defense or
otherwise in any such suit, action or proceeding any claim that Guarantor is not
personally subject to the jurisdiction of the above-named courts, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper.
5.5 Any provision of this Guaranty which is prohibited or unenforceable in
any jurisdiction shall, as to such Jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and no such prohibition or unenforceability shall invalidate
or render unenforceable such provision in any other jurisdiction.
5.6 None of the provisions of this Guaranty shall be limited to any
particular period of time, but rather all such provisions shall continue
absolutely, unconditionally and irrevocably until all the terms, covenants,
conditions and Obligations "et forth in the Loan Documents have been fully
performed by Borrower; and Guarantor shall not be released from any duty,
obligation or liability hereunder so long as there is any claim of Lender
against Borrower arising out of the Loan Documents.
5.7 This Agreement may be executed in any number of counterparts, each of
which shall have the force and effect of an original.
ARTICLE VI
TERMINATION
6.1 Upon an "IPO Event" Guarantor's liability hereunder "hall extinguish.
For purposes of this Section 6.1, the term "IPO Events means that Borrower has
an effective registration statement filed with the Securities Exchange
Commission for the public sale of voting common stock of Borrower.
IN WITNESS WHEREOF, the parties hereto have executed this Guaranty as of
the day and year first above written.
ADDRESS FOR NOTICES TO "GUARANTOR"
GUARANTOR:
8807 Northwest 23rd Street
Miami, Florida 33172 - /s/ Georges St. Laurent, III
----------------------------
Attn: Georges St. Laurent Georges St. Laurent, III
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<PAGE>
ADDRESS FOR NOTICES TO LENDER: "LENDER"
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
Attn:. Nicholas Meris:
WITH A COPY TO:
Laura A. Short, Esq.
Morrison & Hecker
2800 North Central Avenue
Suite 1600
Phoenix, Arizona 85004-1047
STATE OF _______________ )
) ss
County of ______________ )
MERIS FINANCIAL INCORPORATED, a Nevada corporation
By:
Nicholas S. Meris
President
The foregoing instrument was acknowledged before me this ____ day of __________,
1995, by Nicholas S. Meris, the President of Meris Financial Incorporated, a
Nevada corporation, on behalf of the Corporation.
----------------------------------
Notary Public
My Commission Expires:
- ----------------------------------
STATE OF FLORIDA )
) ss
County of Dade )
The foregoing instrument was acknowledged before me this 28th day of
October, 1995, by GEORGES ST. LAURENT, III.
/s/ Linda G. Odom
----------------------------------
Notary Public
My Commission Expires:
- ----------------------------------
OFFICIAL NOTARY SEAL
LINDA G. ODOM
COMMISSION NUMBER
CC437527
MY COMMISSION EXP.
FEB. 7,1999
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<PAGE>
Exhibit "A"
Description of Collateral
personal guaranty of William St. Laurent
personal guaranty of Georges St. Laurent III
corporate/limited liability company guarantee of the 3 Brazilian entities: (1)
VITECH-VITORIA TECNOLOGIA S.A., (2) BAHIATECH-BAHIA TECNOLOGIA LTDA., and (3)
MnLTISHOW-PRODUCTOS DE INFOKMATICA E TELECOMMUNICACOES LTDA. (collectively, the
"Brazilian Entities.)
collateral assignment of the beneficial rights under the following option
agreements:
a. option from Maria Aparecida Caldas in favor of Vitech for her 9 quotas
representing a 60% interest in Multishow Produtos de Informactica e
Telecomunicacoen Ltda. ("Multishow~).
b. option from Georges St. Laurent, III in favor of Vitech for all but
.011 of his quotas representing a right to purchase a 39.99% interest
in Multishow.
c. option from Georges St. Laurent, III in favor of Vitech for all of his
shares (ordinary and preferred, currently owned or acquired in the
future) in Vitech Vitoria Tecnologia S.A. (editorial).
d. option from William St. Laurent in favor of Vitech for all of his
shares (ordinary and preferred, currently owned or acquired in the
future) in Vitoria.
e. option from Nicolas St. Laurent in favor of Vitech for his 51 quotas
representing a 51% interest in Bahiatech Bahia Tecnologia Ltda.
("BahiatechN).
f. option from William St. Laurent in favor of Vitech for all but .01% of
his quotas representing a right to purchase a 48.99% interest in
Bahiatech.
g. option from Astra Com. Imp. Exp. Ltda. of its 79.180 shares of Class B
Preferred stock in Vitoria.
security interest in the fixed assets of the Brazilian Entities (excluding
inventory and accounts receivable)
second lien mortgage on real property Vitoria security interest in the fixed
assets of Borrower
-10-
<PAGE>
pledge by Georges St. Laurent, III, William St. Laurent, Nicholas St. Laurent
and Alexander St. Laurent (the "St. Laurents") of their stockholdings in
Borrower
pledge by the St. Laurents of their ownership interests in the Brazilian
Entities
pledge of keyman life insurance on the St. Laurents
-11-
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreements) is made and entered into as of
the 28 day of October, 1995, by and between MERIS FINANCIAL INCORPORATED, a
Nevada corporation, whose address is 917 Tahoe Boulevard, Suite 300H, Incline
Village, Nevada 89451 ("Secured Party"), and VITECH AMERICA, INC., a Florida
corporation, whose address is 8807 Northwest 23rd Street, Miami, Florida 33172 (
"Debtor" ) .
RECITALS
A. Contemporaneously with this Security Agreement (this "Agreements),
Secured Party is making a loan to Debtor in the original principal amount of Two
Million Dollar (62,000,000.00) (the "Loan"), which loan is evidenced by a
Promissory Note (the "Note") dated of even date herewith executed by Borrower to
the order of Lender.
B. Secured Party desires to secure Debtor's obligations under the Note
pursuant to the terms and conditions of this Agreement.
AGREEMENT:
For good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, Secured Party and Debtor hereby agree as follows:
1. Definitions.
1.1 "Collateral" means and includes all of Debtor's right, title and
interest in and to the property described on the attached Exhibit "A".
1.2 "Loan Documents" means all of those instruments and documents
evidencing or securing the Loan.
1.3 "Obligations" means and includes the Loan, any additional loans as may
hereafter be made by Secured Party to Debtor, and all liabilities, obligations,
covenants and duties of Debtor to Secured Party of every kind, nature and
description whether or not arising out of the Loan Documents, or by oral
agreement or operation of law and whether or not for the payment of money,
direct or indirect, absolute or contingent, due or to become due, liquidated or
unliquidated, now existing or hereafter arising, including, without limitation,
all interest and Secured Party's Costs which Debtor is required to pay or
reimburse to Secured Party by the Loan Documents, by law or otherwise.
1.4 "Secured Party's Costs" means and includes: all filing, recording, and
search fees, all reasonable costs and expenses incurred by Secured Party in any
manner or way with
<PAGE>
respect to Secured Party's enforcement of its rights and remedies under this
Agreement, or defending this Agreement or its security interest in the
Collateral; expenses in connection with selling, preparing for sale and
advertising to sell the Collateral, whether or not Whale is consummated; and all
reasonable attorney'= fees and expenses incurred by Secured Party as provided
for in this Agreement.
1.5 Any and all terms used in this Agreement shall be construed and defined
in accordance with the meaning and definition of such terms under and pursuant
to the Florida Uniform Commercial Code, as amended from time to time
(hereinafter referred to as the "Code").
2. Creation and Perfection of Security Interest.
2.1 Debtor does hereby grant to Secured Party a security interest in the
Collateral to secure the prompt payment and performance by Debtor of the
Obligations. Debtor doe. hereby agree that until all Obligations of Debtor to
Secured Party have been fully paid and satisfied, Secured Party shall have a
perfected security interest in the Collateral.
2.2 Debtor shall, at the request of Secured Party, execute from time to
time all financing statements, continuation statements, assignments, affidavits,
reports, notices, letters of authority and any other documents that Secured
Party may request, in form satisfactory to Secured Party, to perfect and
maintain Secured Party's security interest in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents.
Debtor hereby irrevocably makes, constitutes and appoints Secured Party (and any
agents designated by Secured Party) as Debtors true and lawful attorney with
power to sign the name of Debtor on any financing statements,
continuation-statements, security agreements, assignments, affidavits, letters
of authority, notices or other similar documents which must be executed and/or
filed in order to perfect or continue the perfection of Secured Party's security
interest in the Collateral.
2.3 Debtor authorizes Secured Party and Secured Party shall have the right
at any time or times to verify any matter relating to the Collateral in the name
of Debtor or Secured Party.
2.4 Debtor does hereby irrevocably designate, make, constitute and appoint
Secured Party, and any agents designated by Secured Party, as Debtor's true and
lawful attorney, with the power to be exercised by Secured Party as it may, in
its sole discretion, determine, in Debtor's or Secured Party's name and at
Debtor's expense, upon the occurrence of an event of default under this
Agreement, to sign Debtor's name on any document relating to the Collateral.
Secured Party shall not be obligated to do any of the acts or exercise any of
the powers hereinabove authorized, but, if
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<PAGE>
Secured Party elects to do any such act or exercise any of the foregoing powers,
it may do so in any manner or means as it may determine, and it shall not be
liable to Debtor for any error in judgment or mistake of fact or law, excepting
willful misconduct or bad faith. This power being coupled with an interest, is
irrevocable until all Obligations of Debtor to Secured Party are fully paid and
satisfied. All acts by or on behalf of Secured Party pursuant hereto are hereby
ratified and approved by Debtor.
3. Rights to the Collateral.
3.1 If the Collateral or any part thereof, is sold, transferred, exchanged
or otherwise disposed of, the security interest of Secured Party shall extend to
the proceeds payable to Debtor and all such amounts shall be payable directly to
Secured Party up to the amount of the Obligations, including all accrued
interest and any other charges payable with respect to the Obligations. Nothing
contained in this Agreement shall be construed to authorize a sale, exchange or
any other disposition of the Collateral.
3.2 Notwithstanding the preceding, so long as Debtor is not in default
hereunder, Debtor shall have the right to sell inventory in the ordinary course
of business and to use and consume any materials or supplies, the use and
consumption of which is necessary in order to carry on Debtor's business. The
security interest granted hereunder shall attach to all proceeds of all sales or
other dispositions of the inventory.
d. Debtor's Representations.
4.1 Until all Obligations of Debtor to Secured Party have been fully paid
and satisfied, Debtor does hereby warrant and represent that:
a. It is corporation, duly organized, validly existing and in
good standing under the laws of the State of Florida.
b. The address stated herein is the principal place of business
of Debtor and the place where Debtor maintains, and will continue to
maintain, all books and records of Debtor, as well as all Collateral.
Debtor "hall not remove any Collateral from the address stated herein
unless Debtor notifies Secured Party in writing prior to its removal
and Secured Party consents in writing in advance of its removal to
another location.
c. It is the true and lawful owner of the Collateral and has the
right and power and is duly authorized to grant a security interest
therein to Secured Party.
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<PAGE>
d. The execution, delivery and performance hereof does not
constitute a default under any indenture, agreement or undertaking to
which Debtor is now or hereafter a party or by which it is or will be
bound.
e. There are no actions or proceedings pending by or against
Debtor or in any court or administrative agency and Debtor has no
knowledge of any pending, threatened or imminent litigation,
governmental investigation or claim, complaint, action or prosecution
involving Debtor and if any of the foregoing arise during the term of
this Agreement, Debtor shall immediately notify Secured Party in
writing with respect thereto.
f. With respect to all Collateral, Secured Party's security
interest therein is now and shall hereafter at all times constitute a
perfected, chaste, and first security interest in the Collateral and
in not now and will not hereafter become Subordinate or junior to the
security interest, lien, encumbrance or claim of any person. Other
than the Security interest granted herein, Debtor is the sole owner of
the Collateral and the Collateral is held by Debtor free from any
adverse claim of ownership, lien, security interest or other
encumbrance and Debtor ~hall, at it" own expense, defend the
Collateral and the proceeds thereof against any claim or demand of
another person at any time claiming an interest in the Collateral or
proceeds.
g. Except as expressly permitted in this Agreement, Debtor agrees
that it will not sell, assign, transfer, encumber, grant any other
security interest in, or dispose of the Collateral in any manner
whatsoever, or any portion thereof, or any interest therein, or
attempt to do so, without the prior written consent of Secured Party,
which may be given or withheld in its sole and complete discretion.
many attempt to do so shall be void and of no effect whatsoever, shall
be a default hereunder. Debtor further agrees not to do any act which
shall in any manner impair or invalidate the security interest created
hereunder.
h. All representations and warranties made to Secured Party in
connection with this Agreement are true and correct as of the date
hereof and all other information furnished to Secured Party at any
time by or on behalf of Debtor was and will be when furnished complete
and correct in all material respects.
4.2 Each warranty, representation and agreement contained in this Agreement
shall be conclusively presumed to have been relied upon by Secured Party
regardless of any investigation made or information possessed by Secured Party.
4.3 In the event Debtor at any time becomes aware of a breach of any of the
foregoing representation. or warranties, Debtor shall forthwith give written
notice thereof to Secured Party.
4
<PAGE>
5. Indemnification. Debtor agrees to indemnify Secured Party for, and save
it harmless from, any and all liability arising from any obligation that might
accrue to the Secured Party from this Agreement, and from any claim or action
disputing Secured Party's interest in the Collateral. This Agreement shall not
in any way constitute an assumption by Secured Party of any obligations or
liability of Debtor with respect to the Collateral.
6. Preservation and Maintenance of the Collateral. Debtor shall, at its own
expense, (i) keep and maintain the Collateral in good condition and repair; (ii)
keep it free from all liens, encumbrances and security interests (other than
those created or expressly permitted by this Agreement); and (iii) defend it
against all claims and legal proceedings by persons other than Secured Party.
Debtor shall not (a) commit or permit waste, (b) remove any Collateral from its
present location, (c) use any of the Collateral in violation of any applicable
law, regulation or policy of insurance, or (d) permit the Collateral to become a
fixture or an accession, except as specifically authorized in this Agreement.
Debtor shall immediately notify Secured Party in writing of any loss or damage
to the Collateral.
7. Taxes and Insurance. Debtor shall pay when due all taxes or licenses
imposed by any lawful authority upon the Collateral and will keep the Collateral
insured against such risks, in such amounts and with such insurers as Secured
Party may, from time to time, require. Debtor agrees to deliver to Secured Party
a loss payable endorsement indicating that the policy is payable to Secured
Party in the event of loss and providing for thirty (30) days cancellation
notice to Secured Party. Debtor assigns to Secured Party the proceeds of all
such insurance and authorizes Secured Party, as its attorney in fact, to adjust
or settle any claim under said policy, or cancel the same, and endorse the name
of Debtor on any instrument for said proceeds or refund and, at the option of
Secured Party, to apply said proceeds to any Obligations of Debtor to Secured
Party or to the restoration of the Collateral returning any excess to Debtor. In
the event Debtor fails to (i) pay any taxes when due; (ii) procure and pay for
the required insurance; (iii) discharge any prior lien, encumbrance or claim, or
(iv) take any other action as required by this Agreement; then in such event
Secured Party may, at its option, advance any sum necessary for the protection
or preservation of the Collateral or its security interest therein, and the
amount no paid or incurred by Secured Party, together with interest thereon at
the rate of eighteen percent (18%) per annum shall become due and payable on
demand by Debtor to Secured Party and shall be secured by the Collateral.
8. Inspection of Collateral. Secured Party shall at all reasonable times,
and from time to time, have the right, by or through any of its officers,
agents, employees or attorneys, to enter upon Debtor's premises where it
conducts business or such
5
<PAGE>
other place where the Collateral is located (collectively, the "Premises"), for
the purpose of inspecting, examining or taking possession of the Collateral.
Upon request of Secured Party, a physical listing of the Collateral shall,
without cost to Secured Party, be-prepared by Debtor and delivered to Secured
Party within twenty (20) days following the request.
9. Environmental Laws. Debtor shall maintain the Premises, the operations
conducted thereon and the uses made thereof, and the other Collateral in
compliance with all applicable federal, state or local statute, ordinance, code,
order, requirement, law, rule or regulation relating to environmental,
occupational health or safety or other matters. Without limiting the generality
of the foregoing, Debtor shall generate, store, dispose of and release hazardous
waste, hazardous substances and/or oil on any of the Premises only in full
compliance with all applicable federal, state and local laws, rules, regulations
or ordinances, and Debtor shall permit no generation, storage, disposal or
release of such waste, substances or oil on the Premises by any other person.
For the purposes of this paragraph, "hazardous waste" and "hazardous substance"
shall have the meanings set forth in the Resource Conservation and Recovery Act,
42 U.S.C. (SS) 6901, et seq. (the "Conservation Act"), and the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. SS 9601, et
seq. ("CERCLA"), as such statutes may be amended, or as defined in any federal
or state regulations adopted pursuant to or in furtherance of such Acts. "Oil"
shall be defined as petroleum, or any petroleum products, in any form. Neither
the Collateral nor the Premises shall be used at any time so as to cause a
violation of or to give rise to a removal or restoration obligation under any
statute, ordinance, order, decree or under the common law of any state, federal,
municipal or other governmental body or agency having jurisdiction over the
Premises or the Collateral including, without limitation, the Conservation Act
and CERCLA or any similar law, rule, regulation, order, judgment or decree; nor
shall Debtor permit any such violation or obligation to be created by the
removal of any hazardous waste, hazardous substance and/or oil from the Premises
by the disposition of such-removed hazardous waste, hazardous substance and/or
oil or by reason of the discontinuance of operations of any business conducted
on the Premises. Debtor shall indemnity and hold Secured Party harmless from and
against all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, charges and expenses, including reasonable attorney's
fees which may be imposed upon or incurred by or asserted against Secured Party,
the Collateral or the Premises arising from Debtor's breach or alleged breach of
the covenants contained herein.
10. Authority of secured Party to Perform for Debtor. If Debtor fails to
act as required by this Agreement or the Loan Documents, Secured Party is
authorized, in Debtor's name or otherwise, to take any such action including
without limitation
6
<PAGE>
signing Debtor's name or paying any amount so required, and the cost shall be
one of the Obligations secured by this Agreement and shall be payable by Debtor
upon demand with interest at the rate of eighteen percent (18%) per annum from
the date of payment by Secured Party.
11. Events of Default. The happening of any one or more of the following
events (and the expiration of any applicable cure period) shall constitute an
Event of Default hereunder:
11.1 Debtor fails to pay when due and payable or declared due and payable,
any of Debtor's Obligations (whether of principal, interest, reimbursement of
Secured Party's Costs, or otherwise):
11.2 Debtor fails or neglects to perform, keep or observe any material
term, provision, condition, or covenant contained in this Agreement, or any
other present or future agreement between Debtor and Secured Party;
11.3 The filing of an involuntary petition under the United States
Bankruptcy Code or any other federal or state bankruptcy statute, as now in
effect or as hereafter amended, against Debtor, or if Debtor shall allow the
appointment of a receiver, trustee, conservator or liquidator of all or any part
of the Collateral, or if any of the Collateral be levied upon by virtue of any
execution, attachment, tax levy or other writ, or if liens be filed against the
Collateral, and such involuntary petition, appointment, levy, or filing, as the
case may be, shall not be released, stayed, bonded or insured against in favor
of Secured Party, satisfied or vacated within sixty (60) days after the
occurrence thereof;
11.4 The abandonment of all or any part of the Collateral;
11.5 The breach of any warranty, representation or certification given in
connection herewith, or in connection with any of the Loan Documents;
11.6 The filing by Debtor of a petition under the United States Bankruptcy
Code or any other federal or state bankruptcy statute, as now in effect or as
hereafter amended, or if Debtor shall make an assignment for the benefit of its
creditors or be unable, whether or not admitted, to pay its debts as they become
due:
11.7 The filing of any foreclosure or forfeiture proceeding with respect to
any other lien on the Collateral, whether junior or senior to this Agreement,
which foreclosure or forfeiture proceeding is not dismissed or released within
thirty (30) days;
7
<PAGE>
11.8 The transfer of the Collateral, voluntarily or involuntarily, in
violation of the terms of this Agreement:
ll.9 The failure of Debtor to pay, before delinquent, any taxed,
assessments, fees, charges, expenses or encumbrances created, levied, or
assessed upon or relating to the Collateral (without any requirement for notice
by Secured Party that such payment is due); and
11.10 Any repudiation by Debtor of any Obligation.
12. Default Remedies. In the event of a default by Debtor under this
Agreement, Secured Party may, at its election, without notice of its election
and without demand upon Debtor or any guarantor, do any one or more of the
following, all of which are authorized by Debtor:
12.1 Declare Debtor's Obligations immediately due and payable.
12.2 Exercise any and all of the rights accruing to a secured party under
the Code and any other applicable law.
12.3 Advance any sum or take such action as Secured Party considers
necessary or reasonable to protect and preserve its security interest in the
Collateral.
12.4 Secured Party may, for the account of Debtor and at Debtor's expense:
(a) operate, use, consume, rent, sell, or dispose of the Collateral as Secured
Party deems appropriate for the purpose of performing any and all of the
Obligations secured by this Agreement; (b) enter into any agreement, compromise
or settlement including the settlement of the insurance claims, which Secured
Party may deem desirable or proper with respect to any or all of the Collateral;
(c) endorse, deliver evidences of title for, receive, enforce and collect by
legal action or otherwise, any or all indebtedness and obligations now or
hereafter owed to Debtor in connection with or on account of any or all of the
Collateral; and (d) perform any of the obligations secured by thin Agreement.
12.5 Secured Party shall have the immediate right and Debtor authorizes and
empowers Secured Party or its legal representatives, (without notice or process
of law), to enter upon the Premises and repossess the Collateral. In addition,
Secured Party may require Debtor to assemble the Collateral and make it
available to Secured Party at a place so designated by Secured Party. Further,
Secured Party may remove the Collateral from the Premises and then sell or cause
to be sold all or any part of the Collateral at such time and place as shall be
determined by Secured Party, at public or private sale, at such price as Secured
Party shall deem acceptable, for cash, on credit or future delivery, without
demand of performance or advertisement and after ten (10)
8
<PAGE>
days prior written notice to Debtor of its intention to sell, which notice shall
contain the time and place of sale or the time after which sale or other
disposition is to be made and which period shall constitute reasonable notice
under the Uniform Commercial Code. Such sale may be conducted by Secured Party,
or any of its agents, and Secured Party may become the purchaser at any public
sale of the Collateral. Any such public sale shall be held at such place in Dade
County, Florida is located as Secured Party may fix in the notice of sale.
Secured Party shall not be obligated to make any such sale pursuant to any such
notice. Secured Party may, without notice or publication, adjourn any public
sale or cause the same to be adjourned from time to time by announcement at the
time and place at which the same may be so adjourned. Upon any such sale,
Secured Party shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale shall
hold the property sold, absolutely free from any claim or right of any kind,
including any equity or right of redemption, stay or appraisement which Debtor
has or may have under any rule, law or statute now existing or hereafter
adopted. Secured Party may be the purchaser of any or all of the Collateral sold
and thereafter hold the same, absolutely free from any claim or right of Debtor.
The proceeds of such sale shall first be applied to the payment of any and
all expenses incurred or paid by Secured Party in preserving, protecting,
retaking, holding, preparing, selling, transferring or delivering the
Collateral, including a reasonable attorney's fee, then to the payment of all
Obligations of Debtor hereunder (in whatever order Secured Party elects), paying
over any excess to Debtor who shall remain liable for any deficiency.
12.6 Debtor hereby constitutes and appoints Secured Party and its agents
its true and lawful attorney-in-fact with full power to act for Debtor; to
endorse Debtor's name upon any check, note, draft, money order or other evidence
of payment which may come into the possession of Secured Party as proceeds of
the Collateral; to sign Debtor's name on any other instrument or document and to
do all acts and things necessary or appropriate to protect, preserve, collect or
realize upon Secured Party's security interest hereunder and carry out this
Agreement. Debtor hereby ratifies and approves all such acts of Secured Party
and waives notice of presentment, protest and non-payment of any such instrument
so endorsed. This power, being coupled with an interest, shall be irrevocable no
long as any of the Obligations remains unpaid or outstanding.
12.7 Secured Party has no duty to protect, insure or realize upon the
Collateral. Debtor releases Secured Party from any liability for any act or
omission relating to the Loan, the Collateral or this Agreement, except secured
Party's willful misconduct.
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<PAGE>
12.8 Debtor shall pay all Secured Party's Costs incurred in connection with
Secured Party's enforcement and exercise of any of its rights and remedies as
herein provided, whether or not suit is commenced by Secured Party.
12.9 Secured Party's rights and remedies under this Agreement and all other
agreements shall be cumulative and may be exercised simultaneously or
successively, in such order as Secured Party shall determine. In addition,
Secured Party shall have all other rights and remedies not inconsistent herewith
as provided by law or in equity. No exercise by Secured Party of one right or
remedy shall be deemed an election, and no waiver by Secured Party of any
default on Debtor's part shall be deemed a continuing waiver. No delay by
Secured Party shall constitute a waiver, election or acquiescence by it.
13. Duration of Agreement. This Agreement and the security interest created
hereby shall continue until all Obligations of Debtor to Secured Party are
completely satisfied and discharged.
14. Uniform Commercial Code. It is the intention of the parties hereto that
this Security Agreement is entered into pursuant to the provisions of the
Florida Uniform Commercial Code Secured Transactions. Any provisions of said
Code not specifically included herein shall be deemed a part hereof as if set
forth in their entirety and any provisions of this Agreement that might in any
manner be in conflict with any provision of "aid Code shall be deemed superseded
by said Code and to that extent the provisions of this Agreement shall be
severable and the invalidity of one shall not invalidate another.
15. Financing statements. Debtor agrees to execute and file a WCC-1
Financing Statement and to execute and deliver any and all additional
instruments and documents required to perfect the Secured Party's security
interest in the Collateral.
16. 8ucceasore. This Agreement shall be binding upon the parties, their
executors, administrators, legal and personal representatives, successors and
assigns; however, Debtor may not assign this Agreement or any rights hereunder,
without Secured Party's prior written consent and any assignment in violation of
this Section 16 shall be absolutely void. No consent to any assignment by
Secured Party shall release Debtor or any guarantor of its Obligations to
Secured Party. Secured Party may assign this Agreement and its rights and duties
hereunder.
17. Governing Law. This Agreement and the obligations which it secures and
all rights and liabilities of the parties shall be governed as to validity,
interpretation, enforcement and effect by the laws of the State of Florida.
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<PAGE>
18. Notices. All notices provided for herein shall be in writing and shall
be (a) personally delivered or delivered by courier service (e.g., Federal
Express) to the party being notified if an individual, or (b) transmitted by
certified or registered mail, reborn receipt requested, addressed
If to a Meris: 917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
If to Vitech: 8807 Northwest 23rd Street
Miami, Florida 33172
or at such other address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received upon: (i)
the date of receipt if delivered by courier or by personal delivery, or (ii)
seven (7) days after the deposit of same in a letter box or other means provided
for the posting of mail, postage prepaid as provided above.
19. Time is of the Essence. Time is of the essence of this Agreement and
all terms and provisions hereof.
20. Attorneys' Fees. Should Secure Party find it necessary to employ legal
counsel and bring an action at law or in equity to enforce any of the terms,
covenants or conditions of this Agreement, or because of any breach or default
hereunder, Secured Party shall be entitled to recover from Debtor all reasonable
attorneys' fees incurred by Secured Party and, in the event a judgment is
obtained, all such attorneys' fees shall be determined by the court and not by
jury and shall be included in such judgment.
21. Captions. The titles and headings in this Agreement are for convenience
only and shall in no way affect, limit or control the meaning or application of
any article or section hereof.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which may be executed by one of the parties hereto, with
the same force and effect as though all the parties executing such counterparts
had executed but one instrument.
23. Waivers by Debtor. Debtor waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, documents, instruments,
chattel paper and guaranties at any time held by Secured Party on which Debtor
may in any way be liable.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of the date first set forth above.
DEBTOR:
VITECH AMERICA, INC., a Florida
corporation
By: /s/ William C. St. Laurent
----------------------------------
William C. St. Laurent
President
SECURED PARTY:
MERIS FINANCIAL INCORPORATED, a
Nevada corporation
By: ___________________________
Nicholas S. Meris
President
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<PAGE>
EXHIBIT "A"
COLLATERAL DESCRIPTION
The collateral referred to in this Security Agreement consists of all of
Debtor's right, title and interest in and to the following described property,
together with any other personal property and equipment, of whatever nature or
kind, now owned or subsequently acquired by Debtor, including all additions,
substitutions, accessions, repairs, replacements and additions thereto
(including the proceeds of sales thereof), whether installed, affixed, attached,
kept or situated on, to or at the Premises (as that term is defined in this
Security Agreement) and improvements, or in the construction thereof, and such
collateral includes but is not limited to:
1. All construction materials, supplies, lumber and all other materials or
equipment delivered to any Premises for incorporation or use in any
construction at any time being conducted thereon.
2. All fixtures, fittings, furniture, furnishings, appliances, apparatus,
equipment, and machinery, including without limitation, all gas and
electric fixtures, radiators, heaters, engines and machinery, boilers,
ranges, ovens, elevators and motors, bathtubs, sinks, water closets,
basins, pipes, faucets and other air conditioning, plumbing and heating
fixtures, mirrors, mantles, refrigerating plant, refrigerators, iceboxes,
dishwashers, carpeting, furniture, laundry equipment, cooking apparatus and
appurtenances now or hereafter delivered to the Premises and intended to be
installed therein; all other fixtures and personal property of Debtor of
whatever kind and nature at present.
3. All of Debtor's interest in:
A. All existing and future leases, rents, issues and profits and all
security deposits from tenants, lessees or other space occupiers;
B. All policies of insurance and all proceeds, loss payable clauses and
premium refunds and all claims relating thereto;
C. All operating or management or supervision agreements;
D. All reciprocal easement agreements;
E. All contracts with builders and/or material suppliers; all plans and
specifications;
13
<PAGE>
F. Any balance of the deposit account or accounts of Debtor with Secured
Party existing from time to time and all property of Debtor coming
into the hands of or under the control of Secured Party in any way or
in transit to or from secured Party;
G. Any and all awards or payments including interest thereon which may be
made with respect to the Premises as a result of the exercise of the
right of eminent domain, the alteration of any streets or roads and
any other damage or injury to or decrease in the value of the
Premises;
H. All building and use permits issued by any governmental agency;
I. All income, rents, issues, profits and proceeds from the Premises,
subject however to the right, power and authority conferred upon
Debtor and/or Secured Party to collect and apply such income, rents,
issues, profit" and proceeds as set forth in that certain Deed of
Trust and Assignment of Rents and that certain Assignment of Rents and
Leases between Debtor and Secured Party of even date herewith:
J. All of the estate, interest or other claim or demand which Debtor now
has or may hereafter acquire in and to the property described herein,
including without limitation all deposits made with or other security
given to utility companies by Debtor with respect to the Premises and
the improvements thereon and all advance payments of insurance
premiums made by Debtor with respect thereto and claims or demands
relating to insurance:
K. Insofar as permitted.. by applicable law, all licenses, including but
not limited to any operating license, contracts, management contracts
or agreements, franchise agreements, permits, authorizations or
certificates required or used in connection with the ownership of or
in the operation or maintenance of the Premises and the collateral
described herein and any improvements constructed thereon; and
L. All damages, royalties and revenue of every kind, nature and
description whatsoever that Debtor may be entitled to receive from any
person or entity owning or having or hereafter acquiring a right to
the oil, gas or mineral rights and reservations regarding the
Premises, with the right of Secured Party to receive and apply the
same to the indebtedness secured hereby either before or after any
default hereunder, and Secured Party may demand, sue for and recover
any such payments but shall not be required to do so.
14
<PAGE>
M. All substitutions, renewals, improvements, attachments, accessions,
additions and replacements to any of the foregoing (whether stated in
this sentence or in the immediately preceding sentence);
N. All collections, proceeds, insurance proceeds and products of any of
the foregoing (whether stated in this sentence or in the immediately
preceding sentence), including, without limitation, proceeds of any
voluntary or involuntary disposition or claim respecting any part
thereof (pursuant to judgment, condemnation award or otherwise);
O. All documents, instruments, general intangibles, chattel paper and
accounts which may arise from the sale or disposition of any of the
foregoing (whether stated in this sentence or in the immediately
preceding sentence);
P. All guaranties of and security for any of the foregoing;
Q. All estates, rights, appurtenances, privileges, water and water
rights, water right applications, shares of stock evidencing water
rights, flumes, ditches, minerals and mineral rights "hereunto
appertaining, which Debtor may now have or hereafter acquire;
R. Any award, payments, damages in consideration which may be paid or
become due by reason of the taking by eminent domain of the whole or
any part of the Premises, or any rights appurtenant thereto, including
any award for change of grade of streets; and
S. All books and records relating to any of the foregoing.
4. All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims.
15
<PAGE>
QUOTAS PLEDGE AGREEMENT
Effective Date: __, October _, 1995
Pledgor: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
Pledgee: Meris Financial Incorporated, a Nevada corporation
911 Tahoe Boulevard
Suite 300H
Incline v$11age, Nevada 89451
Recitals:
A. Contemporaneously with the execution of this Quote Pledge Agreement
(this "Agreement"), Pledgee is making a loan to Pledgor in the original
principal amount or Two Million Dollar ($2,000,000) (the "Loan"), Which loan is
evidenced by a Promissory Note dated of even date herewith executed by Pledgor
to the order of Pledgee. All documents and instruments evidencing or Flouring
the Loan are hereinafter referred to as the Loan Documents.
B. Pledgor is the record and beneficial owners of quotes in BAHIATECH-
BAHIATECH TECNOLOGIA LTDA., a limited liability company formed under the laws of
Bahia, Brazil ("Bahlatoch"], representing 99% ownership interest in Behiatech
(the "quotas").
C. To induce Pledgee to make the Loan, Pledger has agreed to pledge to
Pledgee all of its right, title and interest in and to the Quotas to secure
Pledgor's performance under the Loan Documents.
Agreements:
For good and valuable consideration, the receipt end sufficiency of which
are hereby acknowledged, Pledgor and Pledges do hereby agree as follows:
1. Pledge of Quotas. As security for the payment in full of all amounts
which may at any tine be or become payable by Pledger under the Loan Document.,
Pledger does hereby pledge to Pledgee, for the benefit Pledgee and its
succeasore and assigns, a security interest in all of the Quotes and in all
other ownership interest now or hereafter issued to Pledgor or issuable to
Pledgor upon the exercise of any outstanding option, warrant, contract, grunt or
arrangement to issue or sell any beneficial or legal ownership interest in
Bahiatech, and all cash, securities and its property distributed in exchange or
substitution for or with respect to thereto and all proceeds of the foregoing
(collectively, the "Pledged Collateral").
<PAGE>
2. Perfection of Security Interest: Delivery of Pledged Collateral.
(a) Pledgor agrees to execute any and all instruments reasonably deemed
necessary by Pledgee in order to perfect the pledge of the Pledge Collateral and
the grant of the security interest therein under this Agreement. Pledgor hereby
tenders to Pledgee the certificate evidencing the Quotas and Pledgee covenants
to hold the same in accordance with the terms and provisions of this Agreement.
Pledgor covenants and agrees to tender a11 certificates now or in the future
evidencing a beneficial or legal ownership interest or right in Behiatech owned
by Pledgor.
(b) Pledgor hereby represents and warrants that a11 action required to be
taken by any person to transfer title to the Quotas to Pledgee and/or its
nominee, other than registration of Pledgee and/or its nominee as owner of the
Quota in Bahiatech's records, will be taken and covenants that, until this
Agreement is terminated in accordance with Section 8 hereof, no such action
shall be rescinded or superseded or otherwise cease to remain in full force and
effect.
(c) If Pledgor fails to make payment pursuant to the terms of the Loan
Documents, shall fail to comply with any of the terms and conditions of the Loan
Documents, or if Pledger shall breach one of its covenants contained in Section
3 hereof (collectively, an "Event of Default"), Pledgee shall give Pledgor ten
(10) days' prior written notice of such Event of Default. If Pledgor fails to
cure such Event of Default within the above referenced ten day period, then
Pledgee shall have the right, without further notice to or demand of Pledger,
all of which are hereby waived: (i) to cause its registration as the owner of
the Quotas in the records of Bahiatech (and Pledgor will cooperate fully with
Pledgor in causing such registration to be effective and (ii) to otherwise
foreclose on the Pledged Collateral.
3. Covenants. Pledger covenants to Pledgee that:
(a) All Quotas are, and any additional ownership interest in Bahiatech
acquired by Pledgor will be, duly authorized and validly issued and shall b
fully paid and non-assesable.
(b) Pledgor has record and beneficial ownership of all of the Quotas, free
and clear of all liens, security interests, options and other encumbrances
except for the security interest created by this Agreement.
(c) Pledgor will not sell or offer to sell or otherwise transfer, encumber
the Quotes or any interest thereon, without the prior written consent of
Pledges, which consent say be withheld by Pledged in its sole and absolute
discretion. Pledgor wi11 not permit the Quotas to be Attached or replevined.
-2-
<PAGE>
(d) pledger has the right, title, power and authority to convey the Pledged
Collateral and enter into this Agreement.
(e) Pledgor will defend the Pledged Collateral against all claim and
demands or all persons at any time claiming the same or any interests therein.
(f) The execution and delivery of this Agreement will not violate any 1aw
or agreement to which Pledger is a party.
4. Dividends and Distributions. So long as this Agreement is in effect, and
unless otherwise agreed to between Pledgor and P1edgee, P1edgor shall pay over
to Pledgee any and all dividends, returns of capita1 or other distributions made
on or in respect of the Pledged Collateral and a11 cash received by Pledgor with
respect to any Pledged Collateral.
5. Voting Rights. So long as no event constituting an Event or Default, and
no event which, with the passage of time or the giving of notice or both, would
constitute an Event of Default, has occurred and is continuing, Pledgor shall be
entitled to exercise any and all voting rights relating or pertaining to the
Quotas held by it or any part thereof for any purpose not inconsistent with the
term of this Agreement.
6. Remedies.
(a) If an event constituting an Event of Default, or an event which, with
the passage of time or the giving of notice of both, would constitute an Event
of Default, has occurred and is continuing, all rights of Pledgor to exercise
voting rights pursuant to Section 5 shall cease and all such rights shall,
without prior notice to or demand of Pledgor or any other party (all of which
are hereby waived), thereupon becomes vested in Pledgee.
(b) If an Event of Default shall occur and be continuing, then Pledgee
shall have, in addition to the right to exercise any rights of a secured party
upon default under the law of the state of Florida, the right in its discretion,
upon notice to Pledgor, to se11 the remaining Pledged Collateral, or any part
thereof, at any public or private sale, at which Pledgee may be purchaser, upon
such terms as Pledgee shall deem appropriate. Any purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the part
of Pledgor and Pledgor hereby waive all rights with respect to or in connection
with the sale of the Pledged Collateral which it now has or may in the future
have under any applicable law. As an alternative to exercising the power of sale
herein conferred upon it, Pledgee may institute an action or proceeding in any
court or courts of competent Jurisdiction to foreclosure on and to sell the
Pledged
-3-
<PAGE>
Collateral, or any part thereof, pursuant to a judgment, order or decree or such
court or courts.
(c) The proceeds of any sale of the Pledged Collateral pursuant to
paragraph (b) above shall be applied to amounts due under the Loan Documents,
including without limitation, the costs and expenses of any foreclosure action
or proceeding and of such sale.
7. Further Assurances. P1edgor will do such further acts and things, and
execute and deliver such additional conveyances, assignments, agreements and
instruments, as Pledgee may at any time reasonably request in connection with
the administration or enforcement of this Agreement or related to the Pledged
Collateral or any part thereof or in order to assure and confirm unto Pledgee
its rights, powers and remedies hereunder.
8. Termination. This Agreement and any security interest in the Pledged
Collateral created hereby shall terminate at such time as all obligations of
Pledgor under the Loan Documents shall have been fully satisfied, at which time
Pledgee sha11 release its security interest in, and shall redeliver to Pledgor
to the extent such Pledged Collateral has been delivered to Pledgee, such
portion of the Pledged Collateral as has not been sold or otherwise applied by
or on behalf of Pledgee in satisfaction of the obligations of Pledgor under the
Loan Documents and Pledgee shall promptly execute and deliver to Pledger such
certificates, instruments of the transfer and other documents as may be
necessary in connection therewith.
9. Miscellaneous.
(a) This agreement shall be governed by, and construed and enforced in
accordance with, the law of the State of Florida.
(b) except as otherwise expressly provided herein, all notices pursuant to
this Quotas Pledge Agreement shall be given by notice in writing and shall be
(a) personally delivered or delivered by courier service {e.g., Federal Express
to the party being notified if an individual, or (b) transmitted by certified or
registered mail, return receipt requested, addressed
If to Pledgee: 917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
If to Pledgor: Vitech America, Inc.
B307 Northwest 23rd street
Miami, Florida 33172
-4-
<PAGE>
or at such other address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received upon: (i)
the date of receipt if delivered by courier or by personal delivery, or (ii)
seven (7) days after the deposit of same in a letter box or other means provided
for the posting of mail, postage prepaid as provided above.
(c) No failure or delay on the part of Pledgee in exercising any right
hereunder shall operate as a waiver of, or impair, any such right. No single or
partia1 exercise of any such right shall preclude any other or further exercise
thereof or the exercise of any other right. No waiver of any such right sha11 be
effective unless given in writing. No waiver of any such right shall be deemed a
waiver of any other right hereunder. The rights provided for herein are
cumulative and not exclusive of any other rights, powers, privileges or remedies
provided by law.
(d) This Agreement may be modified or amended only by an instrument or
instruments in writing executed by Pledgor and by Pledgee.
(e) This Agreement shall be binding upon and inure to the benefit of
Pledgor and Pledgee and their respective successors and assigns; provided,
however, that Pledgor may not assign any of its rights or obligations under this
Agreement without the prior written consent of Pledgee, which consent shall not
be unreasonably withheld.
(f) Any provision of this Agreement which is prohibited or enforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(g) This Agreement may be executed in any number of counterparts and all
such counterparts taken together shall be deemed to constitute one and the same
agreement.
10. Termination.
Upon an "IPO Event" this pledge shall extinguish and be of no further force
and effect. For purposes of this Section 10, the term "IPO Event means that
Pledgor has an
-5-
<PAGE>
effective registration statement with the Securities Exchange Commission for the
public sale of voting common stock of Pledgor.
By: /s/ William St. Laurent
----------------------------------
William St. Laurent, President
(PLEDGOR)
MERVIS FINANCIAL INCORPORATED,
a Nevada corporation
BY________________________________
Nicholas S. Meris, President
(PLEDGEE)
-6-
<PAGE>
PROMISSORY NOTE
$2,000,000.00 Miami, Florida
October 28, 1998
1. FOR VALUE RECEIVED, VITECH AMERICA, INC., a Florida corporation ("Maker") ,
promises to pay to the order of MERIS FINANCIA INCORPORATED, a Nevada
corporation ("Holder"), at such address as Holder may from time to time
designate, on or before the Maturity Date as set forth herein, the
principal sum of TWO MILLION AND NO/100THS DOLLARS ($2,000,000.00) (the
"Loan") plus interest from the date hereof as computed below.
2. The Loan term shall commence on he date set forth above (the "Commencement
Date") and shall expire on the second anniversary date following the
Commencement Date (the "Maturity Date").
3. The principal amount from time to time outstanding shall bear simple
interest from the Commencement Date through the Maturity Date at the rate
of twelve percent (12%) per annum. Interest shall be payable in arrears, on
a monthly basis, commencing on the first day of the first month following
the Commencement Date and continuing on the first day of each month
thereafter until the Maturity Date.
After an Event of Default (as hereinafter defined), all past due
principal and, to the extent permitted by applicable law, interest upon this
Note shall bear interest at the rate per annum equal to eighteen percent (18%)
(the "Default Rate").
4. Subject to Section 5 below, and upon the expiration of the Lean term,
whether as a result of maturity, acceleration upon default, permitted
payment of the outstanding balance of this Promissory Note, or otherwise,
but in no event later than the Maturity Date, the outstanding principal
balance under this Promissory Note, together with all accrued and unpaid
interest, shall be due and payable in full.
5. (a) Notwithstanding any provision to the contrary contained in this
Promissory Note, Holder may, at its option, convert the outstanding
principal amount hereof into that number of fully paid and nonassessable
shares (the "Shares") of voting common stock in Maker, as such shares shall
be constituted at the date of conversion (the "Common Stock") , equal to a
percentage (the "Percentage") of the then outstanding Common Stock and all
Common Stock issuable upon the exercise of any outstanding option, warrant,
contract, agreement or agreement or arrangement to issue or sell any Common
Stock or any other security exercisable or convertible into any Common
Stock of the Maker (collectively "Outstanding and Issuable Common Stock"),
which number of Share shall be determined by multiplying a fraction by the
number of shares of then Outstanding Issuable Common Stock (the
"Conversion"). The numerator of the fraction shall be the outstanding
principal balance of the Loan. The denominator of the fraction shall be the
sum of 10 times the net earnings of Maker, but in no event greater ;than
$40,000,000 plus the converted principal amount of the Loan (the
"Denominator"). The net earnings shall be determined based upon an audit of
twelve month period commencing January, 1, 1995. The audit shall be
conducted by Coopers and Lybrand or such other certified public accountant
approved by Holder. Upon surrender of this Promissory Note to Maker, Maker
shall pay to Holder all accrued and unpaid ;interest due hereunder and
issue certificates evidencing the Shares. Holder may elect to convert prior
to the completion of the audits based upon the assumption that the
Denominator is $42,000,000 (representing the maximum $40,000,000 net
earnings plus $2,000,000 such that there was a deficiency in the number of
Shares issued on the Conversion, then Maker shall issue, within 10 days
following the completion of the audit, that number of Shares equal to the
deficiency.
<PAGE>
(b) In the event that there are shares of capital stock of Maker
outstanding as of the date of Conversion in addition to shares of
Common Stock, then, in addition to the Shares of Common Stock
which Holder is entitled to receive under Section 5(a) above, upon
such Conversion and without any additional consideration, ;Holder
shall be entitled to receive a Percentage of all capital stock in
addition to the Common Stock and a Percentage of all capital stock
(other than the Common Stock) issuable upon the exercise of any
outstanding option, warrant contract, agreement or arrangement to
issue or sell any capital stock or any other security of Maker or
any other security exercisable or convertible into any capital
stock or any other security of Maker (except the Common Stock.
(c) In case of any reorganization or recapitalization of Maker (by
reclassification of its outstanding Common Stock , capital stock
or otherwise), or its consolidation or merger with or into another
corporation, Holder shall , upon conversion, be entitled to
receive the shares of stock, cash or other consideration which the
Holder would have received upon such reorganization,
recapitalization, consolidation or merger if immediately prior
thereto the Conversation had occurred and Holder had exchanged the
shares of Common Stock and any shares received under Section (5)
above in accordance with the terms of such reorganization,
recapitalization, consolidation or merger.
6. All payments under this Promissory Note shall be applied in the following
order:
(a) first, to the payment of accrued and unpaid interest one
principal outstanding balance; and
(b) second, to the reduction of the outstanding principal
balance of this Promissory Note.
7. All amounts payable under this Promissory Note are payable in lawful money of
the United States. Except as set forth in the Loan Agreement, dated of even date
herewith, by and between Maker and Holder, Maker shall not be permitted to
prepay any amount due hereunder.
8. It is agreed that time is of the essence in the performance of all
obligations hereunder. An "Event of Default" shall exist hereunder if any
one or more of the following events shall occur and be continuing:
(a) Default in the payment of the indebtedness evidenced by
this Note or any other agreement or instrument evidencing
or securing this Note or otherwise executed and delivered
by Maker in connection with the indebtedness evidenced by
this Note (the "Loan Documents) as and when such payment
shall become due and payable, whether by lapse of time,
declaration acceleration or otherwise;
(b) Default in the due and timely performance of any term,
condition, or covenant contained in the Loan Documents;
(c) The filing of an involuntary petition under the United
States Bankruptcy code or any other federal or state
bankruptcy statute, as now in effect or as hereafter
amended, against Maker, or if Maker shall allow the
appointment of a receiver, trustee, conservator or
liquidator of all or any part of the collateral securing
this Note (the "Collateral"), or if any of the Collateral
be levied upon by virtue of any execution, attachment, tax
levy or other writ, or if liens be filed against the
Collateral and such involuntary petition, appointment,
levy, or filing as the case may be, shall not be release,
stayed, bonded or insured against in favor of Maker,
satisfied or vacated within sixty (60) days after the
occurrence thereof;
(d) The abandonment of all or any part of the Collateral;
(e) The breach of any warranty, representation or
certification given in connection herewith, or any Loan
Documents;
(f) The filing by Maker of a petition under the United States
Bankruptcy Code or any other federal or state bankruptcy
statute, as now in effect or as hereafter amended, or if
Maker shall make an assignment for the benefit of its
creditors or be unable whether or not admitted, to pay its
debts as they become due;
<PAGE>
(g) The filing of any foreclosure or forfeiture proceeding
with respect to any other lien on the Collateral, whether
junior or senior to this Agreement, which foreclosure or
forfeiture proceeding is not dismissed or released within
thirty (30) days;
(h) The transfer of the Collateral, voluntarily or
involuntarily, in violation of the terms of the Loan
Documents;
(i) The failure of Maker to pay, before delinquent, any taxes,
assessments, fees, charges, expenses or encumbrances
created, levied, or assessed upon or relating to the
Collateral (without any requirement for notice by Maker
that such payment is due) ; or
(j) Any repudiation by Maker of any obligation hereunder or
under the Loan Documents.
Upon the occurrence of any Event of Default or other default under any
of the Loan Documents, the holder hereof may, at its option declare the entire
unpaid balance of principal and accrued interest of this Note to be immediately
due and payable, and foreclose all liens and security interests securing payment
hereof or any part hereof; upon the occurrence of any of the Events of Default,
the entire unpaid balance of principal and accrued interest upon this Note
shall, without any action by Maker, immediately become due and payable without
demand for payment, presentment, protest, notice of protest and non-payment, or
other notice of default, notice of acceleration and intention to accelerate or
any other notice, all of which are expressly waived by Maker.
9. All fees, charges, goods, things, in action or any other sums or things of
value, other than the interest resulting from the stated rate or the
Default Rate (collectively, the "Additional Sums"), whether pursuant to
this Note, the Loan Documents, or any other document or instrument in any
way pertaining to this lending transaction, or otherwise with respect to
this lending transaction, under the laws of the State of Florida, may be
deemed to be interest with respect to this lending transaction, for the
purpose of any laws of the State of Florida that may limit the maximum
amount of interest to be charged with respect to this lending transaction ,
shall be payable by Maker as , and shall be deemed to be , additional
interest, and for such purposes only, the agreed upon and "contracted for
rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the Additional Sums. Maker
understands and believes that this lending transaction complies with the
usury laws of the State of Florida.
10. Maker and all endorsers, guarantors and all persons liable on this
Promissory Note, waive presentment, protest and demand, notice of protest,
notice of intent to accelerate, notice of acceleration, and demand and
dishonor and nonpayment of this Promissory Note and any and all other
notices or matter of a like nature, and consent to any and all renewal and
extensions of the time of payment hereof, and agree further that any time
and from time to time without notice, the terms of payment herein may be
modified or increased, changed or exchanged by agreement between Holder and
Maker without in any way affecting the liability of any party to this
Promissory Note or any person liable or to become liable with respect to
any indebtedness evidenced hereby.
11. This Promissory Note will be governed by and construed in accordance with
the law of the State of Florida, except where such law is preempted by the
laws and regulations of the United States, and also except to the extent
otherwise provided in Section 14 below.
12. If any provision hereof shall, for any reason and to any extent, be invalid
or unenforceable, then the remainder of this Promissory Note shall not be
affected thereby but instead shall be enforceable to the maximum extent
permitted by law.
13. All agreement between Maker and Holder are expressly limited so that in no
contingency or event whatsoever, whether by reason of advancement of the
proceeds hereof, acceleration of maturity of the unpaid principal balance
hereof, or otherwise, shall the amount paid or agreed to be paid to Holder
for the use, forbearance or detention of the money to be advanced hereunder
exceed the highest lawful rate permissible under the applicable usury law,
as determined pursuant to Section 14 below. If, from any circumstances
whatsoever, fulfillment of any provision hereof or any other agreement
referred to herein or otherwise relating to this Promissory Note, at the
time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law which a court of competent
jurisdiction may deem applicable thereto, then ipso facto, the obligation
to be fulfilled shall be reduced to the limit of such validity, and if,
from circumstance, Holder shall ever receive as interest and amount which
would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance
due hereunder as of the date such amount is received or deemed to be
received by Holder and not to the payment of interest. This provision shall
control every other provision of all agreements between Maker and Holder.
However, in the event an amount determined to be excessive interest is
applied against the unpaid principal balance, and thereafter the rate of
interest accruing under this Promissory Note decreases, this Promissory
Note shall in fact , accrue interest at the then highest lawful rate until
such time that an amount accrued equal to the amount of excessive interest
previously applied against principal.
<PAGE>
14. Notwithstanding the foregoing, if the provisions of any law or regulation
of the United States or any agency or instrumentality thereof, as amended,
which validly supersedes any restriction of the State of Florida would
permit Holder to charge or receive a rate of interest with respect to the
indebtedness evidenced by this Promissory Note in excess of the maximum
rate of interest (if any) permitted to be charged or received by Holder
under applicable law of the State of Florida, the less restrictive
provisions of any such United States law or regulation shall apply in
determining the rate of interest permitted to be charged or receive.
15. All notices provided for herein shall be in writing and shall be (a)
personally delivered or delivered by courier service (e.g., Federal
Express) to the party being notified if an individual, or (b) transmitted
by certified or registered mail, return receipt requested, addressed to all
parties hereto at the address designated for each party as follows:
To Holder: Meris Financial Incorporated
917 Taho Boulevard
Suite 300H
Incline Village, Nevada 89451
To Maker: Vitech America, Inc.
8806 Northwest 23rd Street
Miami, Florida 33172
or to such other address as either party may designate in writing. Notice shall
be deemed effective and received upon (i) the date of receipt if delivered by
courier or by personal delivery, or (ii) seven (7) days after the deposit of
same in a letter box or other means provided for the posting of mail, postage
prepaid as provided above.
16. As used herein the term "Maker" shall include the undersigned Maker and any
other person or entity, who may subsequent become liable for the payment
hereof. The term "Holder" shall include Holder as well as any other person
or entity to whom this Promissory Note or any interest in this Promissory
Note is conveyed, transferred or assigned with the prior written consent of
Maker.
17. Maker has no redemption rights under this Promissory Note.
VITECH AMERICA, INC., a Florida corporation
Vitech America By: /S/ William S. St Laurent
Coporate Seal --------------------------------
William S. St. Laurent
President
(MAKER)
<PAGE>
STOCK PLEDGE AGREEMENT
EFFECTIVE DATE: OCTOBER 28, 1995
OPTIONOR: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
OPTIONEE: Meris Financial Incorporated
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
RECITALS;
Optionor desires to grant to Optionee an option to purchase certain
shares of capital stock (the "Capital Stock") of Optionor on the terms and
conditions set forth in this Stock Option Agreement (this "Agreement").
AGREEMENT
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, Optionor and Optionee hereby agree as follows:
1. Grant of Option. Optionor hereby grants a stock option to Optionee
to purchase that number of shares of Capital Stock equal to four
percent (4%) (to be determined on the Closing Date, as that term
is defined below), of the shares of Capital issued (beneficially
or otherwise) or issuable (beneficially or otherwise) by Optionor
upon the exercise of any outstanding option, warrant, contract,
agreement or arrangement to issue or sell any capital stock or any
other security of Optionor or any other security exercisable or
convertible into any capital stock or any other security of
Optioneor (the "Option Shares"), subject to the terms and
conditions of this agreement (the "Option").
2. Exercise Price. The price payable by Optionee upon exercise of the
Option (the "Exercise Price") shall be $2,000,000.
3. Exercise of Option. Optionee shall have the right to exercise the
Option subject to following terms and conditions:
(a) Exercise. The Option may be exercised at any time during
the period beginning on the Effective date and ending on
the 18th month anniversary date following the Effective
Date (the "Option Period"). If the period during which
Optionee may exercise the Option has ended, and the Option
has not been exercised, the Option will lapse and any
subsequent attempt to exercise the Option will be of no
effect.
(b) Manner of Exercise. The Option shall be exercisable only
by an Optionee given written notice to the Optionor of its
intention to exercise the Option, which notice shall state
the number of shares of Option Shares as to which this
Option is being exercised.
<PAGE>
(c) The Closing. The consummation of a purchase of Option
Shares pursuant to an exercise of the Option shall take
place at the offices of Optionor on such date as the
parties shall agree upon but in no event later than ten
(10) business days after receipt by Optionor of the notice
referred to in Section 4(b) above (the "Closing Date"). At
the closing, Optionee shall deliver to Optionor (i) cash
or a cashier's check for the Exercise Price. None of the
Option Shares will be issued to Optionee until Optionor
has received the Exercise Price therefor. In exchange
therefor, Optionor shall convey and transfer the Option
Shares. Optionor shall reflect the transfer of such Option
Shares on its books and records.
4. Adjustment to Option Shares. In the event of any reorganization or
recapitalization of Optionor (by reclassification of its
outstanding shares of Capital Stock or otherwise), or its
consolidation or merger with or into another corporation, Optionee
shall, upon exercise of the Option, be entitled to receive, in
lieu of the shares of Capital Stock which the Optionee would
otherwise be entitled to receive upon such exercise and without
any payment in addition to the aggregate Exercise and without any
payment in addition to the aggregate Exercise Price for such
shares assuming that no event specified above had occurred, the
shares of stock, cash or other consideration which the Optionee
would have received upon such reorganization, recapitalization,
consolidation or merger if immediately prior thereto the Optionee
had exercised this Option and had exchanged such Option Shares in
accordance with the terms of such reorganization,
recapitalization, consolidation or merger.
5. Optionor's Covenants. Optionor hereby represents, warrants and
covenants that during the Option Period, Optionor shall reserve
that number of shares necessary to fulfill its obligations
hereunder.
6. Notices. All notices provided for herein shall be in writing and
shall be (a) personally delivered or delivered by courier service
(e.g., Federal Express) to the party being notified if an
individual, or (b) transmitted by certified or registered mail,
return receipt requested, addressed
If to a Meris: 917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
If to Vitech 8807 Northwest 23rd Street
Miami, Florida 33172
or at such address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received
upon: (i) the date of receipt if delivered by courier or by personal
delivery, or (ii) seven (7) days after the deposit of same in a letter
box or other means provided for the posting of mail, postage prepaid as
provided above.
7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors, legal representatives, executors and heirs' provided,
however, that no party hereto shall have the right to assign any
right hereunder or delegate any obligation hereunder, in whole or
in part, without the prior written consent of the other party
hereto, and any attempt to so shall be void.
8. Amendment. Modification or Waiver. No amendment, modification or
waiver of any condition, provision or term of this Agreement shall
be valid or of any effect unless made in writing, signed by the
party to be bound and specifying with particularity the nature and
extent of such amendment, modification or waiver.
<PAGE>
9. Entire Agreement. This agreement contains the entire understanding
and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and
understandings between the parties with respect to such subject
matter.
10. Florida Law to Govern. This Agreement shall be governed by, and
construed and enforced in accordance with, the law of the State of
Florida.
11. Attorney's Fees. In the event any party hereto brings any action
to enforce any provision hereof, or to secure specific performance
hereof or to collect any damages of any kind for any breach of
this Agreement, the prevailing party shall be entitled to all
court costs, all expenses arising out of or incurred by reason of
litigation and any reasonable attorney's fees expended or incurred
for any such proceeding.
12. Severability. Each provision of this Agreement is intended to be
severable, and the invalidity or unenforceability of one or more
provisions of this agreement shall not affect the validity and
enforceability of the other provision. Should any valid federal or
Utah state law or final determination of any administrative agency
or court of competent jurisdiction affect any provision of this
agreement, the provision or provisions so affected shall be;
automatically conformed to the law or determination and otherwise
this agreement shall continue in full force and effect.
13. Counterparts. This agreement may be executed in two (2) or more
counterparts, each of which shall be considered one in the same
agreement and shall become effective when one or more counterparts
have been found by each of the parties hereto and delivered to the
other parties hereto.
14. Withholding. Optionee authorizes Optionor to withhold in
accordance with applicable law from any regular cash compensation
payable to him any taxes required to be withheld by Optionor under
federal, state or local law as a result of its exercise of Option.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
Effective Date.
MERIS FINANCIAL INCORPORATED, a
Nevada limited partnership
By:
--------------------------------
Nicholas S. Meris, President
(Optionee)
VITECH AMERICA, INC., a Florida
Vitech America, Inc. corporation
Corporate Seal
By: /S/ William St. Laurent
--------------------------------
William St. Laurent, President
(Optionor)
<PAGE>
QUOTAS PLEDGE AGREEMENT
Effective Date: October 28, 1995
Pledgor: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
Pledgee: Meris Financial Incorporated, a Nevada corporation
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
Recitals:
A. Contemparaneously with the execution of this Quotas Pledge Agreement
(this "Agreement"), Pledgee is making a loan to Pledgor in the original
principal amount of Two Million Dollar ($2,000,000.00) (the "Loan"), which
loan is evidenced by a Promissory Note dated of even date herewith executed
by Pledgor to the order of Pledgee. All documents and instruments evidencing
or securing the Loan are hereinafter referred to as the "Loan Documents".
B. Pledgor is the record and beneficial owners of 1,000 shares (the
"Shares") of voting common stock, no par value, of the Company representing
all of the issued and outstanding capital stock of the Company.
C. To induce Pledgee to make the Loan, Pledgors hasve agreed to pledge
to Pledgee all their right, title and interest in and to the Shares to
secure the Company's performance under the Loan Documents.
Agreements:
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Pledgors and Pledgee do hereby agree as follows:
1. Pledge of Shares. As security for the payment in full of all amounts
which may at any time be or become payable by the Company under the
Loan Documents, Pledgors do hereby pledge to Pledgee, for the benefit
Pledgee and its successors and assigns, a security interest in all of
the Shares and in all other capital stock now or hereafter issued to
Pledgors or issuable to Pledgors upon the exercise of any outstanding
option, warrant, contract, agreement or arrangement to issue or sell
any capital stock or any other security of the Company or any other
security exercisable or convertible into any capital stock or any
other security of the Company, and all cash, securities and its
property distributed in exchange or substitution for or with respect
to thereto and all proceeds of the foregoing (collectively, the
"Pledged Collateral").
2. Perfection of Security Interest; Delivery of Pledged Collateral.
<PAGE>
(a) Pledgors agree to execute any and all instruments reasonably
deemed necessary by Pledgee in order to perfect the pledge of the Pledge
Collateral and the grant of the security interest therein under this Agreement.
Pledgors hereby tender to Pledgee the certificate evidencing the Shares and
Pledgee covenants to hold the same in accordance with the terms and provisions
of this Agreement. Pledgors covenant and agree to tender all certificates now or
in the future evidencing capital stock of the Company owned by Pledgors.
(b) Pledgors hereby represent and warrant that all action required
to be taken by any person to transfer title to the Shares to Pledgee and/or its
nominee, other than registration of Pledgee and/or its nominee as shareholder
and owner of the Shares in the Company share transfer books, will be taken and
covenants that, until this Agreement is terminated in accordance with Section 8
hereof, no such action shall be rescinded or superseded or otherwise cease to
remain in full force and effect.
(c) If the Company fails to make payment pursuant to the terms of
the Loan documents, shall fail to comply with any of the terms and conditions of
the Loan Documents, or if Pledgors shall breach one of its covenants contained
in Section 3 hereof (collectively, an "Event of Default"), Pledgee shall give
Pledgors ten (10) days' prior written notice of such Event of Default. If
Pledgors fail to cure such Event of Default within the above referenced ten day
period, then Pledgee shall have the right, without further notice to or demand
of Pledgors, all of which are hereby waived: (I) to cause its registration as a
shareholder and the owner of the Shares in the share transfer books of the
Company (and Pledgors will cooperate fully with Pledgee in causing such
registration to be effective); and (ii) to otherwise foreclose on the Pledged
Collateral.
3. Covenants. Pledgors covenant to Pledgee that:
(a) All shares are, and any additional capital stock of the Company
acquired by Pledgors will be, dully authorized and validly issued
and shall be fully paid and non-assessable.
(b) Pledgors have record and beneficial ownership of all of the
Shares, free and clear of all liens, security interests, options
and other encumbrances except for the security interest created by
this Agreement.
(c) Pledgors will not sell or offer to sell or otherwise transfer,
encumber the Shares or any interest therein, without the prior
written consent of Pledgee, which consent may be withheld by
Pledgee in its sole and absolute discretion. Pledgors will not
permit the Shares to be attached or replevined.
(d) Pledgors have the right, title, power and authority to convey the
Collateral and enter into this Agreement.
(e) Pledgors will defend the Shares against all claims and demands of
all persons at any time claiming the same or any interests
therein.
(f) The execution and delivery of this Agreement will not violate any
law or agreement to which Pledgor is a party.
4. Dividends and Distributions. So Long as this Agreement is in effect, and
unless other wise agreed to between Pledgors and Pledgee, Pledgors shall
pay over to Pledgee any and all dividends, returns of capital or other
distributions made on or in respect of the Shares and all cash received by
Pledgors with respect to any Pledged Collateral.
<PAGE>
5. Votings Rights. So long as no event constituting an Event of Default, and
no event which, with the passage of time or the giving of notice or both,
would constitute an Event of Default, shall have occurred and be
continuing, Pledgors shall be entitled to exercise any and all voting
rights relating or pertaining to the Shares held by him or any part thereof
for any purpose not insistent with the terms of this Agreement.
6. Remedies.
(a) If an event constituting an Event of Default, or an event which, with the
passage of time or the giving of notice of both, would constitute an Event
of Default, has occurred and is continuing, all rights of Pledgors to
exercise voting rights shall, without prior notice to or demand of Pledgors
or any other party (all of which are hereby waived), thereupon become
vested in Pledgee.
(b) If an Event of Default shall occur and be continuing, then Pledgee shall
have, in addition to the right to exercise any rights of a secured party
upon default under the law of the state of Florida, the right in its
discretion, upon notice to Pledgors, to sell the remaining Pledged
Collateral, or any part thereof, at any public or private sale at which
Pledgee may be a purchaser upon such terms as Pledgee shall deem
appropriate. Any purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Pledgors and
Pledgors hereby waive all rights with respect to or in connection with the
sale of the Pledged Collateral which he now has or may in the future have
under any applicable law. As an alternative to exercising the power of sale
herein conferred upon it, Pledgee may institute an action or proceeding in
any court or courts of competent jurisdiction to foreclosure on and to sell
the Pledged Collateral, or any part thereof, pursuant to a judgment, order
or decree of such court or courts.
(c) The proceeds of any sale of the Pledged Collateral pursuant to paragraph
(b) above shall be applied to amounts due under the Loan Documents,
including without limitation, the costs and expenses of any foreclosure
action or proceeding and of such sale.
7. Further Assurances. Pledgors will do such further acts and things, and
execute and deliver such additional conveyances ,assignments, agreements
and instruments, as Pledgee may at any time reasonably request in
connection with the administration enforcement of this Agreement or related
to the Pledged Collateral or any part thereof or in order to assure and
confirm unto Pledgee its rights, powers and remedies hereunder.
8. Termination. This Agreement and any security interest in the Pledged
Collateral created hereby shall terminate at such time as all obligations
of Pledgors under the Loan Documents shall have been fully satisfied, at
which time Pledgee shall release its security interest in, and shall
redeliver to Pledgors to the extent such Pledged Collateral has been
delivered to Pledgee, such portion of the Pledged Collateral as has not
been sold or otherwise applied by or on behalf of Pledgee in satisfaction
of the obligations of Pledgors under the Loan Documents and Pledgee shall
promptly execute and deliver to Pledgors such certificates, instruments of
the transfer and other documents as may be necessary in connection
therewith.
9. Miscellaneous.
(a) This Agreement shall be governed by, and construed and enforced in
accordance with , the law of the State Florida.
(b) Except as otherwise expressly provided herein, all notices pursuant to this
Stock Pledge Agreement shall be given by notice in writing and shall be (a)
personally delivered or delivered by courier service (e.g., Federal
Express) to the party being notified if an individual, or (b) transmitted
by certified or registered mail, return receipt requested, addressed.
<PAGE>
If to Pledgee: 917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
If to Pledgor: c/o Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
or at such other address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and receive
upon" ( I) the date or receipt if delivered by courier or by personal
delivery, or (ii) seven (7) days after the deposit of same in a letter
box or other means provided for the posting of mail, postage prepaid as
provided above.
(c) No failure or delay on the part of Pledgee in exercising any right
hereunder shall operate as a waiver of, or impair, any such right. No
single or partial exercise of any such right shall preclude any other
or further exercise thereof or the exercise of any other right. No
waiver of any such right shall be effective unless given in writing. No
waiver of any such right shall be deemed a waiver of any other right
hereunder. The rights provided for herein are cumulative and not
exclusive of any other rights, powers, privileges or remedies by law.
(d) This Agreement may be modified or amended only by an instrument or
instruments in writing executed by Pledgorsand by Pledgee.
(e) This agreement shall be binding upon and inure to the benefit of
Pledgors and Pledgee and their respective successors and assigns;
provided, however, that Pledgors may not assign any of its rights
or obligations under this Agreement without the prior written
consent of Pledgee, which consent shall not be unreasonably
withheld.
(f) Any provision of this Agreement which is prohibited or enforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
(g) This agreement may be executed in any number of counterparts and
all such counterparts taken together shall be deemed to constitute
one and the same agreement.
10. Termination. Upon an "IPO Event" this pledge shall extinguish and be of no
further force and effect. For purposes of this Section 10, the term "IPO Event"
means that the Company has an effective registration statement filed with the
Securities Exchange Commission for the public sale of voting common stock of the
Company.
/S/ William St. Laurent
----------------------------
William St. Laurent,
/S/ George St. Laurent
----------------------------
George St. Laurent, III
/S/ William St. Laurent for Nicholas St. Laurent a minor
----------------------------------------------------------
Nicholas St. Laurent
/S/ William St. Laurent for Alexander St. Laurent a minor
----------------------------------------------------------
Alexander St. Laurent
<PAGE>
(PLEDGORS)
MERIS FINANCIAL INCORPORATED, a
Nevada corporation
By:
----------------------------------------
Nicholas S. Meris, President
(PLEDGEE)
<PAGE>
COLLATERAL ASSIGNMENT OF OPTION AGREEMENTS
Effective Date : October 28, 1995
Assignor: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
Assignee: Meris Financial Incorporated, a Nevada corporation
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
Recitals:
A. Contemporaneously with the execution of this Collateral Assignment
of Option Agreements (this "Agreement), Assignees is making a loan to Assignor
in the original principal amount of Two Million dollar ($2,000,000.00) (the
"Loan"), which loan is evidenced by a Promissory Note dated of even date
herewith executed by Assignor to the order of Assignee. All documents and
instruments evidencing or securing the Loan are hereinafter referred to as the
"Loan Documents".
B. Assignor is the record and beneficial owners of those certain
options described on the attached Exhibit "A" (the "Options").
C. To induce Assignee to make the Loan, Assignor has agreed to grant a
security interest in all of its right, title and interest in and to the Options
to secure Assignor's performance under the Loan Documents.
Agreements:
In consideration of the mutual covenants herein contained, the parties
hereto hereby agree as follows:
1. Assignment. Assignor does hereby assign, convey, transfer, pledge
and grant a security interest to Assignee in and to all of Assignor's right,
title and interest in and to the Options, together with all proceeds, products,
renewals, additions to, substitutions for, replacements and accessions thereof
(collectively to "Collateral") security for the payment and performance of
those obligations under the Loan Documents (the "Obligations"). Assignee hereby
agrees to release the Collateral after the fulfillment of all of the
Obligations.
2. Covenants and Warranties. Assignor does hereby covenant and
warrant that:
(a) It has the right, title, power and authority to convey
the Collateral and enter into this Agreement;
(b) The Collateral is being conveyed free and clear of all
liens, security interests, restrictions, setoffs, adverse claims,
assessments, defaults, defenses and encumbrances of any nature
whatsoever, arising by, through or under the acts or omissions of
Assignor or otherwise by persons claiming all or portion of Collateral
by, Through or under Assignor;
(c) Assignor will defend the Collateral against all claims
and demands of all persons at any time claiming the same or any
interests therein;
(d) The execution and delivery of this Agreement will not
violate any Law or agreement to which Assignor is a party:
<PAGE>
(e) Assignor will not sell or offer to sell or otherwise
transfer, encumber the Collateral or any interest therein, without the
prior written consent of assignee which consent may be withheld by
Assignee in its sole and absolute discretion. Assignor will not permit
the Collateral to be attached or replevined.
3. Default In the event that Assignor defaults in the performance of
any terms of this Agreement, or there occurs a default in any other
documents securing or relating to the security for the Obligations,
Assignee shall have all the rights and remedies, at law, or in equity,
together with the rights or remedies provided in the Uniform Commercial
Code in force in the State of Arizona to enforce its security interest
in the collateral created hereby, and to retain any and all accrued
interest thereon. Assignee may, upon five (5) days prior notice to
Assignor ( which Assignor agrees in a reasonable notice), sent by
registered or certified mail return receipt requested, postage prepaid,
retain all, or any part of, the Collateral
4. General
(a) No remedy herein conferred upon or reserved to Assignee is
intended to be exclusive of any other remedy herein, or
provided or permitted by law or equity, but each shall be
cumulative with and shall be in addition to every other remedy
given hereunder, now or hereafter existing at law, in equity,
or by statute;
(b) No default shall be waived by Assignee except in writing
and no waiver of any payment or other right under this
Agreement shall operate as a waiver of any other payment or
right;
(c) Assignee may assign, transfer or deliver any of the
Collateral to any of its assignees or transferees and
thereafter shall be fully discharged from any responsibility
with respect to such Collateral.
(d) Any consent, notice or other communication required or
contemplated by this Agreement shall be in writing, and shall
be deemed given when personally delivered or,, if mailed, on
the date that is two (2) days after the notice is deposited in
the United States mail, postage prepaid, addressed to the
party to whom directed at the address given for that party on
the front page of this Agreement or at such other address as
may be designated by either party by notice as herein
provided.
(e) This Agreement shall be construed under and governed by
the laws of the State of Florida.
(f) All of the rights of Assignee under this Agreement shall
be cumulative and shall inure to the benefit of its successors
and assigns. All obligations of Assignor hereunder shall be
binding upon the respective heirs, legal representatives,
successors and assigns of Assignor.
(g) Assignor agrees to execute Uniform Commercial Code
financing statements and other documents perfecting,
evidencing or otherwise relating to the security interests
granted herein as from time to time deemed necessary or
appropriate by Assignee in form and substance satisfactory to
Assignee.
<PAGE>
(h) In the event that any provision or clause of this
Agreement conflicts with applicable laws, such conflict shall
not affect other provisions of this Agreement which can be
given effect without the conflicting provision, and to this
end, the provisions of the Agreement are declared to be
severable. Any such provision held invalid under applicable
laws shall be replaced with a provision which as closely as
possible parallels, the contents and substantive effect of the
invalid provision.
(i) This is a continuing agreement and the grant of security
interest hereunder shall remain in full force and effect and
all rights, powers and remedies of the Trust shall continue to
exist until the Obligations are performed in full.
IN WITNESS WHEREOF, this Agreement is signed on the date of dates
indicated below.
VITECH AMERICA, INC,. a Florida corporation
DATED: October 28, 1995 By: /S/ William St. Laurent
-------------------------
William St. Laurent, President
Vitech America, Inc.
Corporate Seal
<PAGE>
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
Effective Date: October 28, 1995
Borrower: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33132
Lender: Meris Financial Incorporated
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
Grantor: William C. St. Laurent
806 Justison Road
Coconut Grove, Florida 33133
Recitals:
Lender has agreed to advance to Borrower the sum of $2,000,000.00 on the
consideration that Grantor collaterally assign to Lender all of Grantor's right,
title and in interest in and to a certain life insurance policy. Grantor is a
shareholder of Borrower and the financing will be of substantial economic
benefit to Grantor.
Agreement:
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, Grantor hereby pledges, collaterally assigns,
transfers, delivers and set over to and in favor of Lender, its successors and
assigns, in Life Insurance Policy Number W20834 issued by The Midland Mutual
Life Insurance Company (herein called the "Insurer") and any supplement
contracts issued in connection therewith (said policy and contracts herein
called the "Policy") , upon the life of Grantor, and all claims, options,
privileges, rights, title and interest therein and thereunder (except as
provided in Paragraph C hereof), subjects to all the terms and conditions of the
Policy and to all superior liens if any, which the Insurer may have against the
Policy. Grantor by this instrument agrees, and Lender by the acceptance of this
assignment agrees, to the conditions and provisions herein set forth.
A. It is expressly agreed that , without detracting from the generality of the
foregoing, the following specific rights are included in this assignment
and pass by virtue hereof:
1. The sole right to collect from the Insurer the net proceeds of the
Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the surrender
value thereof at any time provided by the terms of the Policy and
at such other times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the
Policy at any time, either from the Insurer or from other persons,
and to pledge or assign the Policy as security for such loans or
advances;
4. The sole right to collect and receive all distributions or shares
of surplus, dividend deposits or additions to the Policy, now or
hereafter made or apportioned thereto, and to exercise any and all
options contained in the Policy with respect thereto; provided
that, unless and until Lender shall notify the Insurer in writing
to the contrary, the distributions or shares of surplus, dividend
deposits and additions shall continue on the plan in force at the
time of this assignment; and
<PAGE>
5. The sole right to exercise all nonforfeiture rights permitted by
the terms of the Policy or allowed by the Insurer and to receive
all benefits and advantages derived therefrom.
B. It is expressly agreed that the foregoing specific rights, so long as the
Policy has not been surrender, and reserved and excluded from this
assignment and do not pass by virtue hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount insurance;
2. The right to designate and change the beneficiary; and
3. The right to elect any optional mode of settlement permitted by
the Policy or allowed by the Insurer;
however, the reservation of these rights shall in no way impair the
right of Lender to surrender the Policy completely with all its incidents or
impair other right of Lender hereunder, and any designation or change of
beneficiary or election of a mode of settlement shall be made subject to this
assignment and to the rights of Lender hereunder.
C. This assignment is made and the Policy is to be held as collateral security
for any and all present and future liabilities of Borrower or grantor or
any of them, to Lender, of every nature and kind, whether now existing or
that may hereafter arise in the ordinary course of business between any of
the above referenced Borrower, Grantor and Lender, together with interest,
costs, expenses, attorney' fees, and other fees and charges (all of which
liabilities secured or to become secured and herein individually,
collectively and interchangeably called "Liabilities").
D. Lender covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer
remaining after payment of the then existing Liabilities, matured
or unmatured, shall be paid by Lender to the persons who would
have been entitled thereto under the terms of the Policy had this
assignment not been executed;
2. That Lender will not exercise either the right to surrender the
Policy or (except for the purpose of paying premiums) the right to
obtain policy loans from the Insurer, until there has been default
in any of the Liabilities or a failure to pay any premium when
due, nor until twenty days after Lender shall have mailed, by
first-class mail, to the undersigned at the address last supplied
in writing to Lender specifically referring to this assignment,
notice of intention to exercise such right; and
3. That Lender will upon request forward the Policy without
unreasonable delay to the Insurer for endorsement of any
designation or change of beneficiary or any election of optional
mode of settlement.
E. The Insurer is hereby authorized to recognize Lender's claims to rights
hereunder without investigating the reason for any action taken by Lender,
or the validity or the amount of the Liabilities or the existence of any
default therein, or the giving of any notice under Paragraph E (2) above or
otherwise, or the application to be made by Lender of any amounts to be
paid to Lender. The sole signature of Lender shall be sufficient for the
exercise of any rights under the Policy assigned hereby and the sole
receipt of Lender for any sums received shall be a full discharge and
release therefor to the Insurer. Checks for all or any part of the sums
payable under the Policy and assigned herein shall be drawn to the
exclusive order of Lender if, when, and in such amounts, as may be
requested by Lender.
<PAGE>
F. Lender shall be under no obligation to pay any premium, or the principal of
or interest on nay loans or advances on the Policy whether or not obtained
by Lender, or any other charges on the Policy, but any such amounts so paid
by Lender from its own funds shall become a part of the Liabilities hereby
secured, shall be due immediately, and shall bear interest at the lower of
(a) the highest interest rate of any promissory note evidencing a liability
from borrower to Lender or (b) the highest rate permitted by applicable
law, from the date of each such advance until is repaid in full.
G. The exercise of any right, option, privilege, or power given herein to
Lender shall be at the option of Lender, but (except as restricted by
Paragraph E (2) above) Lender may exercise any such right, option,
privilege or power without notice to, or assent by, or affecting the
liability of, or releasing any interest hereby assigned by, the
undersigned, or any of them.
H. Lender may take or release other security, may release any party primarily
or secondarily liable for any of the Liabilities, may grant extensions,
renewals or indulgences with respect to the Liabilities, or may apply to
the Liabilities in such order as Lender shall determine, the proceeds of
the Policy assigned or any amount received on account of the Policy by the
exercise of any right permitted under this assignment, without resorting or
regard to other security.
I. In the event of any conflict between the provisions of this assignment and
the provisions of the note or other evidence of any Liability, with respect
to the Policy or rights of collateral security therein, the provisions of
this assignment shall prevail.
J. Grantor declares that no proceedings in bankruptcy are pending against him
and that his property is not subject to any assignment for the benefit or
creditors.
SIGNED AND SEALED THIS 28 DAY OF OCTOBER, 1995
/S/ William C. St. Laurent
-----------------------------
William C. ST. Laurent
STATE OF Florida )
)
County of Dade )
This instrument was acknowledged and executed before me this 28 day
of October, 1995, by William C, St. Laurent.
/S/ Linda Gordon
-----------------------------
Notary Public
<PAGE>
ACKNOWLEDGE OF ASSIGNMENT BY INSURER
The Midland Mutual Life Insurance Company hereby acknowledges receipt of a
duplicate of this Assignment of Life Insurance Police Number W20834, which has
been filed at the home office of Columbus on this 2 day of February 1996.
The Midland Mutual Life Insurance
Company , a corporation
By: /S/ Patricia Haner
-----------------------------
Authorized Officer
<PAGE>
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
Effective Date: October 28, 1995
Borrower: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33132
Lender: Meris Financial Incorporated
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
Grantor: George St. Laurent, III
Av. Manguinnos, L04, Q14
Serra, ES, Brazil 29160
Recitals:
Lender has agreed to advance to Borrower the sum of $2,000,000.00 on the
consideration that Grantor collaterally assign to Lender all of Grantor's right,
title and in interest in and to a certain life insurance policy. Grantor is a
shareholder of Borrower and the financing will be of substantial economic
benefit to Grantor.
Agreement:
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, Grantor hereby pledges, collaterally assigns,
transfers, delivers and set over to and in favor of Lender, its successors and
assigns, in Life Insurance Policy Number _______________ issued by The Midland
Mutual Life Insurance Company (herein called the "Insurer") and any supplement
contracts issued in connection therewith (said policy and contracts herein
called the "Policy") , upon the life of Grantor, and all claims, options,
privileges, rights, title and interest therein and thereunder (except as
provided in Paragraph C hereof), subjects to all the terms and conditions of the
Policy and to all superior liens if any, which the Insurer may have against the
Policy. Grantor by this instrument agrees, and Lender by the acceptance of this
assignment agrees, to the conditions and provisions herein set forth.
A. It is expressly agreed that , without detracting from the generality of the
foregoing, the following specific rights are included in this assignment
and pass by virtue hereof:
1. The sole right to collect from the Insurer the net proceeds of the
Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the surrender
value thereof at any time provided by the terms of the Policy and
at such other times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the
Policy at any time, either from the Insurer or from other persons,
and to pledge or assign the Policy as security for such loans or
advances;
<PAGE>
4. The sole right to collect and receive all distributions or shares
of surplus, dividend deposits or additions to the Policy, now or
hereafter made or apportioned thereto, and to exercise any and all
options contained in the Policy with respect thereto; provided
that, unless and until Lender shall notify the Insurer in writing
to the contrary, the distributions or shares of surplus, dividend
deposits and additions shall continue on the plan in force at the
time of this assignment; and
5. The sole right to exercise all nonforfeiture rights permitted by
the terms of the Policy or allowed by the Insurer and to receive
all benefits and advantages derived therefrom.
B. It is expressly agreed that the foregoing specific rights, so long as the
Policy has not been surrender, and reserved and excluded from this
assignment and do not pass by virtue hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount insurance;
2. The right to designate and change the beneficiary; and
3. The right to elect any optional mode of settlement permitted by
the Policy or allowed by the Insurer;
however, the reservation of these rights shall in no way impair the
right of Lender to surrender the Policy completely with all its incidents or
impair other right of Lender hereunder, and any designation or change of
beneficiary or election of a mode of settlement shall be made subject to this
assignment and to the rights of Lender hereunder.
C. This assignment is made and the Policy is to be held as collateral security
for any and all present and future liabilities of Borrower or grantor or
any of them, to Lender, of every nature and kind, whether now existing or
that may hereafter arise in the ordinary course of business between any of
the above referenced Borrower, Grantor and Lender, together with interest,
costs, expenses, attorney' fees, and other fees and charges (all of which
liabilities secured or to become secured and herein individually,
collectively and interchangeably called "Liabilities").
D. Lender covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer
remaining after payment of the then existing Liabilities, matured
or unmatured, shall be paid by Lender to the persons who would
have been entitled thereto under the terms of the Policy had this
assignment not been executed;
2. That Lender will not exercise either the right to surrender the
Policy or (except for the purpose of paying premiums) the right to
obtain policy loans from the Insurer, until there has been default
in any of the Liabilities or a failure to pay any premium when
due, nor until twenty days after Lender shall have mailed, by
first-class mail, to the undersigned at the address last supplied
in writing to Lender specifically referring to this assignment,
notice of intention to exercise such right; and
3. That Lender will upon request forward the Policy without
unreasonable delay to the Insurer for endorsement of any
designation or change of beneficiary or any election of optional
mode of settlement.
E. The Insurer is hereby authorized to recognize Lender's claims to rights
hereunder without investigating the reason for any action taken by Lender,
or the validity or the amount of the Liabilities or the existence of any
default therein, or the giving of any notice under Paragraph E (2) above or
otherwise, or the application to be made by Lender of any amounts to be
paid to Lender. The sole signature of Lender shall be sufficient for the
exercise of any rights under the Policy assigned hereby and the sole
receipt of Lender for any sums received shall be a full discharge and
release therefor to the Insurer. Checks for all or any part of the sums
payable under the Policy and assigned herein shall be drawn to the
exclusive order of Lender if, when, and in such amounts, as may be
requested by Lender.
<PAGE>
F. Lender shall be under no obligation to pay any premium, or the principal of
or interest on nay loans or advances on the Policy whether or not obtained
by Lender, or any other charges on the Policy, but any such amounts so paid
by Lender from its own funds shall become a part of the Liabilities hereby
secured, shall be due immediately, and shall bear interest at the lower of
(a) the highest interest rate of any promissory note evidencing a liability
from borrower to Lender or (b) the highest rate permitted by applicable
law, from the date of each such advance until is repaid in full.
G. The exercise of any right, option, privilege, or power given herein to
Lender shall be at the option of Lender, but (except as restricted by
Paragraph E (2) above) Lender may exercise any such right, option,
privilege or power without notice to, or assent by, or affecting the
liability of, or releasing any interest hereby assigned by, the
undersigned, or any of them.
H. Lender may take or release other security, may release any party primarily
or secondarily liable for any of the Liabilities, may grant extensions,
renewals or indulgences with respect to the Liabilities, or may apply to
the Liabilities in such order as Lender shall determine, the proceeds of
the Policy assigned or any amount received on account of the Policy by the
exercise of any right permitted under this assignment, without resorting or
regard to other security.
I. In the event of any conflict between the provisions of this assignment and
the provisions of the note or other evidence of any Liability, with respect
to the Policy or rights of collateral security therein, the provisions of
this assignment shall prevail.
J. Grantor declares that no proceedings in bankruptcy are pending against him
and that his property is not subject to any assignment for the benefit or
creditors.
SIGNED AND SEALED THIS 28 DAY OF OCTOBER, 1995
/S/ George. St. Laurent
-----------------------------
George ST. Laurent, III
STATE OF Florida )
)
County of Dade )
This instrument was acknowledged and executed before me this 28 day
of October, 1995, by William C, St. Laurent.
/S/ Linda Gordon
-----------------------------
Notary Public
<PAGE>
OPTION AGREEMENT
EFFECTIVE DATE: October 23, 1995
OPTIONER: GEORGE St. LAURENT
Rua Santa Maria, 49, quadra XV - A, lote XXI
Jacareipe, Vitoria, ES, azil
` Passport # 044215108 USA
OPTIONEE: VITECH AMERICA, INC.
8807 Northwest 23rd Street
Miami, Florida 33172
RECITALS:
Optionor desires to grant to Optionee an option to purchase certain shares of
capital stock (the "Capital Stock") of VITECH - VITORIA TECNOLOGIA S.A., a
Brazilian company, located at Avenida Manguinhos, s/n, lote IV, quadra XIV,
CIVIT II, Laranjeiras, Serra, Espirito Santo (the "Company") on terms and
conditions set forth in this Option Agreement (this "Agreement").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Optionor and Optionee hereby agree as follows:
1. Grant of Option - Optionor hereby grants an option to Optionee to purchase
that number of Shares of Capital Stock equal to 197.391 (the "Option
Shares") subject to the terms and conditions of this Agreement (the
"Option").
2. Exercise Price - The price payable by the Optionee upon exercise the Option
(the "Exercise Price") shall be US$ 10.00.
3. Exercise of Option - Optionee shall have the right to exercise the Option
subject to the following terms and conditions:
(a) Exercise - The Option may be exercised at any time during the
period beginning on the date hereof and ending on the 6 year
anniversary date following hereof (the "Option Period"). If the period
during which Optionee may exercise the Option has ended, and the Option
has not been exercised, the Option will lapse and any subsequent
attempt to exercise the Option will be of no effect.
(b) Manner of Exercise - The Option shall be exercisable only by an
Optionee giving written notice to the Optionor of its intention to
exercise the Option, which notice shall state the number of Option
Shares as to which this Option is being exercised.
(c) The Closing - The consummation of a purchase of the Option shares
pursuant to an exercise of the Option shall take place at the offices
of the Company on such date as the parties shall agree upon, but in no
event later then ten (10) business days after receipt by Optionor the
notice referred to in Section 3 (b) above (the "Closing date"). At the
closing, Optionee shall deliver to Optionor (I) cash or a cashier's
check for the Exercise Price. None of the Option Shares will be issued
to Optionee until Optionor has received the Exercise Price therefor. In
exchange therefor, Optionor shall convey and transfer the Shares of
Capital Stock. The Company shall reflect the transfer of such Shares of
Capital Stock on its books and records.
<PAGE>
4. Adjustment to Shares of Capital Stock - In the event of any reorganization or
recapitalization of the Company (by reclassification of its outstanding shares
of Capital Stock or otherwise), or its consolidation or merger with or into
another corporation, Optionee shall, upon exercise of the Option, be entitled to
receive, in lieu of the shares of Capital Stock which the Optionee would
otherwise be entitled to receive upon such exercise and without any payment in
addition to the aggregate Exercise Price of such shares assuming that no event
specified above had occurred, the shares of stock, cash or other consideration
which the Optionee would have received upon such reorganization,
recapitalization, consolidation or merger if immediately prior thereto to
Optionee had exercised this Option and had exchanged such shares of Capital
Stock in accordance with the terms of such reorganization, recapitalization,
consolidation or merger.
5. Optionor Covenants - Optionor hereby represents, warrants and covenants as
follows:
a. During the Option Period, Optionor will not sell, assign,
transfer, pledge, hypothecate, encumber, alienate of otherwise dispose
of any of the Shares of Capital Stock or make any offer or any attempt
to do any of the foregoing, whether voluntarily, involuntarily or by
operation of law, without first obtaining the written consent of
Optionee. Any disposition or attempted disposition without first
obtaining Optionee"s written consent shall be null and void.
b. During the Option Period, Optionor will not cause the
Company to take any action outside the ordinary course of operations
without the prior written consent of Optionee. Actions which are
deemed to be outside the Company's ordinary course of business and
actions which Optionor covenants no to take or cause the Company take
shall include, but not limited to:
(i) any reorganization, recapitalization, reclassification,
consolidation or merger of the Company;
(ii) any authorization of shares of new capital stock in the
Company or any issuance of capital stock of the Company;
(iii) modification of or amendment to the Articles of
Incorporation or Bylaws of the Company;
(iv) acquisition, sale, lease, exchange, option or other
disposition outside of the ordinary course of business
of any of the company's real or personal (tangible or
intangible) property;
(v) borrowing of money in the Company name from banks, other
lending institutions and other lenders or pledging the
assets of the Company to secure repayment of the
borrowed sums or execute in connection therewith any
notes, deeds of trust or other loan documents required
by any lender;
(vi) obtaining replacements of any loan or encumbrance(s)
related in any way to the Company's assets and/or the
Company business or preparing in whole or in part,
refinancing, recasting, increasing, modifying,
consolidating, waiving any rights with respect to or
extending any loan or encumbrance affecting such
properties and/or the Company business;
<PAGE>
(vii) causing the Company to enter into contracts with
Optionor;
(viii) altering the primary purpose of the Company
6. Notices - All notices provided for herein shall be in writing and shall be
(a) personally delivered or delivered by courier service (e.g., Federal Express)
to the party being notified if an individual, or (b) transmitted by certified or
registered mail, return receipt requested, addressed
If to Optionor: Avenida Brigadeiro Faria Lima, 1544, cj. 51
04152-001 Sao Paulo, SP, Brazil
att: Mr. Jose Roberto Pernomian Rodrigues
If to Optionee: 8807 Northwest 23rd Street
Miami, Florida 33172
or at such other address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received upon (I) the
date of receipt if delivered by courier or by personal deliver, or (ii) seven
(7) days after the deposit of same in a letter box or other meas provided for
the posting of maik, postage prepaid as provided above.
7. Successors and Assigns - This Agreement shall be binding upon ind inure to
the benefit to the parties hereto and their rerspective successors, legal
representatives, executors and heirs; provided, however, that no party hereto
shall have the right to assign any right hereunder or delegate any obligation
hereunder, in whole or in part, without the prior written consent of the other
party hereto, and any attempt to to do so shall be Void.
8. Amendment, Modification or Waiver - No amendment, modification or waiver of
any condition, provision or term of thes Agreement shall be valid or of any
effect unless made in writing, signed by the party to be bound and specifying
with particularity the nature and extent of such amendment, modification or
waiver.
9. Entire Agreement - This Agreement contains the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreement and understandings between the parties with
respect to such subject matter.
10. Florida Law to Govern - This Agreement shall be governed by, and construed
and enforced in accordance with, the law of the State of Florida.
11. Attorney's Fees - In the event any party hereto brings any action to enforce
any provision hereof, or to secure specific performance hereof or to collect any
damages of any kind for any breach of this Agreement, the prevailing party shall
be intitled to all courts costs, all expenses arising out of or incurred by
reason of litigation and any reasonable attorney's fees expended or incurred for
any such proceedings.
12. Severability - Each provision of this Agreement is intended to be severable,
and the invalidity or unenforceability of one or more provisions of this
Agreement shall not affect the validity and enforceability of the other
provision. Should any valid federal or Florida state law or final determination
of any administrative agency or court of competent jurisdiction affect any
provision of this Agreement, the provision or provisions so affected shall be
automatically conformed to the law or determination and otherwise this Agreement
shall continue in full force and effect.
<PAGE>
13. Counterterparts - This Agreement may be executed in two (2) or more
counterparts, each of which shall be considered one in the same agreement and
shall become effective when one or more counterparts have been found by each of
the parties hereto and delivered to the other parties hereto.
14. Witholding - Optionee authorizes Optionor to withold in accordance eith
applicable law from any regular cash compensation payable to him any taxes
required bo be witheld by Optionor under federal, state or local law as a result
of its exercise of the Option.
IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective
Date.
VITECH AMERICA, INC., a Florica Corporation
By: /S/ William St. Laurent
--------------------------------
William St. Laurent, President
(Optionee)
/S/ William St. Laurent
---------------------------------
WILLIAM ST. LAURENT, Personally
(Optionor)
<PAGE>
OPTION AGREEMENT
EFFEC TIVE DATE: October 23, 1995
OPTIONER: WILLIAM St. LAURENT
3806 Justison Road
Coconut Grove, Florida, USA
` Passport # __________________
OPTIONEE: VITECH AMERICA, INC.
8807 Northwest 23rd Street
Miami, Florida 33172
RECITALS:
Optionor desires to grant to Optionee an option to purchase certain shares of
capital stock (the "Capital Stock") of VITECH - VITORIA TECNOLOGIA S.A., a
Brazilian company, located at Avenida Manguinhos, s/n, lote IV, quadra XIV,
CIVIT II, Laranjeiras, Serra, Espirito Santo (the "Company") on terms and
conditions set forth in this Option Agreement (this "Agreement").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Optionor and Optionee hereby agree as follows:
1. Grant of Option - Optionor hereby grants an option to Optionee to purchase
that number of Shares of Capital Stock equal to 205,065 (the "Option
Shares"), subject to the terms and conditions of this Agreement (the
"Option).
2. Exercise Price - The price payable by the Optionee upon exercise the Option
(the "Exercise Price") shall be US$ 10.00.
3. Exercise of Option - Optionee shall have the right to exercise the Option
subject to the following terms and conditions:
(a) Exercise - The Option may be exercised at any time during the
period beginning on the date hereof and ending on the 6 year
anniversary date following hereof (the "Option Period"). If the period
during which Optionee may exercise the Option has ended, and the Option
has not been exercised, the Option will lapse and any subsequent
attempt to exercise the Option will be of no effect.
(b) Manner of Exercise - The Option shall be exercisable only by an
Optionee giving written notice to the Optionor of its intention to
exercise the Option, which notice shall state the number of Option
shares as to which this Option is being exercise.
(c) The Closing - The consummation of a purchase of the Option shares
pursuant to an exercise of the Option shall take place at the offices
of the Company on such date as the parties shall agree upon, but in no
event later then ten (10) business days after receipt by Optionor the
notice referred to in Section 3 (b) above (the "Closing date"). At the
closing, Optionee shall deliver to Optionor (I) cash or a cashier's
check for the Exercise Price. None of the Option Shares will be issued
to Optionee until Optionor has received the Exercise Price therefor. In
exchange therefor, Optionor shall convey and transfer the Shares of
Capital Stock. The Company shall reflect the transfer of such Shares of
Capital Stock on its books and records.
<PAGE>
4. Adjustment to Shares of Capital Stock - In the event of any
reorganization or recapitalization of the Company (by reclassification of its
outstanding shares of Capital Stock or otherwise), or its consolidation or
merger with or into another corporation, Optionee shall, upon exercise of the
Option, be entitled to receive, in lieu of the shares of Capital Stock which the
Optionee would otherwise be entitled to receive upon such exercise and without
any payment in addition to the aggregate Exercise Price of such shares assuming
that no event specified above had occurred, the shares of stock, cash or other
consideration which the Optionee would have received upon such reorganization,
recapitalization, consolidation or merger if immediately prior thereto to
Optionee had exercised this Option and had exchanged such shares of Capital
Stock in accordance with the terms of such reorganization, recapitalization,
consolidation or merger.
5. Optionor Covenants _ Optionor hereby represents, warrants and covenants as
follows:
a. During the Option Period, Optionor will not sell, assign,
transfer, pledge, hypothecate, encumber, alienate of otherwise dispose
of any of the Shares of Capital Stock or make any offer or any attempt
to do any of the foregoing, whether voluntarily, involuntarily or by
operation of law, without first obtaining the written consent of
Optionee. Any disposition or attempted disposition without first
obtaining Optionee"s written consent shall be null and void.
b. During the Option Period, Optionor will not cause the
Company to take any action outside the ordinary course of operations
without the prior written consent of Otionee. Actions which are deemed
to be outside the Company's ordinary course of business and actions
which Optionor covenants no to take or cause the Company take shall
include, but not limited to:
(i) any reorganization, recapitalization, reclassification,
consolidation or merger of the Company;
(ii) any authorization of shares of new capital stock in the
Company or any issuance of capital stock of the Company;
(iii) modification of or amendment to the Articles of
Incorporation or Bylaws of the Company;
(iv) acquisition, sale, lease, exchange, option or other
disposition outside of the ordinary course of business
of any of the company's real or personal (tangible or
intangible) property;
(v) borrowing of money in the Company name from banks, other
lending institutions and other lenders or pledging the
assets of the Company to secure repayment of the
borrowed sums or execute in connection therewith any
notes, deeds of trust or other loan documents required
by any lender;
(vi) obtaining replacements of any loan or encumbrance(s)
related in any way to the Company's assets and/or the
Company business or preparing in whole or in part,
refinancing, recasting, increasing, modifying,
consolidating, waiving any rights with respect to or
extending any loan or encumbrance affecting such
properties and/or the Company business;
(vii) causing the Company to enter into contracts with
Optionor;
<PAGE>
(viii) altering the primary purpose of the Company
6. Notices - All notices provided for herein shall be in writing and
shall be (a) personally delivered or delivered by courier service (e.g., Federal
Express) to the party being notified if an individual, or (b) transmitted by
certified or registered mail, return receipt requested, addressed
If to Optionor: Avenida Brigadeiro Faria Lima, 1544, cj. 51
04152-001 Sao Paulo, SP, Brazil
att: Mr. Jose Roberto Pernomian Rodrigues
If to Optionee: 8807 Northwest 23rd Street
Miami, Florida 33172
or at such other address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received upon (I) the
date of receipt if delivered by courier or by personal deliver, or (ii) seven
(7) days after the deposit of same in a letter box or other meas provided for
the posting of maik, postage prepaid as provided above.
7. Successors and Assigns - This Agreement shall be binding upon ind
inure to the benefit to the parties hereto and their rerspective successors,
legal representatives, executors and heirs; provided, however, that no party
hereto shall have the right to assign any right hereunder or delegate any
obligation hereunder, in whole or in part, without the prior written consent of
the other party hereto, and any attempt to to do so shall be boid.
8. Amendment, Modification or Waiver - No amendment, modification or
waiver of any condition, provision or term of thes Agreement shall be valid or
of any effect unless made in writing, signed by the party to be bound and
specifying with particularity the nature and extent of such amendment,
modification or waiver.
9. Entire Agreement - This Agreement contains the entire understanding
and agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreement and understandings between the parties with
respect to such subject matter.
10. Florida Law to Govern - This Agreement shall be governed by, and
construed and enforced in accordance with, the law of the State of Florida.
11. Attorney's Fees - In the event any party hereto brings any action
to enforce any provision hereof, or to secure specific performance hereof or to
collect any damages of any kind for any breach of this Agreement, the prevailing
party shall be intitled to all courts costs, all expenses arising out of or
incurred by reason of litigation and any reasonable attorney's fees expended or
incurred for any such proceedings.
12. Severability - Each provision of this Agreement is intended to be
severable, and the invalidity or unenforceability of one or more provisions of
this Agreement shall not affect the validity and enforceability of the other
provision. Should any valid federal or Florida state law or final determination
of any administrative agency or court of competent jurisdiction affect any
provision of this Agreement, the provision or provisions so affected shall be
automatically conformed to the law or determination and otherwise this Agreement
shall continue in full force and effect.
13. Counterterparts - This Agreement may be executed in two (2) or more
counterparts, each of which shall be considered one in the same agreement and
shall become effective when one or more counterparts have been found by each of
the parties hereto and delivered to the other parties hereto.
<PAGE>
14. Witholding - Optionee authorizes Optionor to withold in accordance
eith applicable law from any regular cash compensation payable to him any taxes
required bo be witheld by Optionor under federal, state or local law as a result
of its exercise of the Option.
IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective
Date.
VITECH AMERICA, INC., a Florica Corporation
By: /S/ William St. Laurent
--------------------------------
William St. Laurent, President
(Optionee)
/S/ William St. Laurent
--------------------------------
WILLIAM ST. LAURENT, Personally
(Optionor)
<PAGE>
REGISTRATION AGREEMENT
Effective Date: October 28, 1995
Parties: MERRIS FINANCIAL INCORPORATED, a Nevada corporation
("Meris")
VITECH AMERICA, INC., a Florida corporation
("Vitech")
Purpose:
Contemporaneously with this Registration Agreement (this "Agreement"),
Meris is making a loan to Vitech in the original principal amount of Two Million
Dollar ($2,000,000.00) (the "Loan") , which loan is evidenced by a Promissory
Note (the "Note") dated of even date herewith executed by Borrower to the order
of Lender. The principal balance under the Note is convertible ("Conversion")
into voting common stock , no par value, of Vitech (the "Common Stock") and
other capital stock, if any. In the event of a Conversion of principal under the
Note, Vitech desires to grant certain rights to Meris with respect to the
registration of capital stock of Vitech (the " Capital Stock").
Agreements:
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, Meris and Vitech hereby agree that in the event
that Meris: (a) secures an underwriter to sell shares of Capital Stock of Vitech
pursuant to a public offering; and (b) the underwriting is based upon a
valuation of $100,000,000 or other valuation acceptable to the Board of
Directors of Vitech,, then Vitech will as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange Commission a registration
statement with respect to the Capital Stock and use its reasonable efforts
to cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments or
supplements thereto, Vitech will furnish to the Meris copies of all such
documents proposed to be filed);
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than sixty (60)
days; and
(c) use its reasonable efforts to register or qualify such Capital Stock under
such other securities or blue sky laws of such jurisdictions as Vitech deems
appropriate.
2. Miscellaneous.
(a) No Inconsistent Agreements. Vitech will not hereafter enter into
any agreement with respect to its securities that is inconsistent
with the rights granted to Meris in this Agreement.
(b) Notices. All notices or communications required or permitted by
this Agreement shall be in writing, and shall be deemed to have
been duly given, made and received when delivered against receipt
or upon actual receipt of United States first class registered or
certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
<PAGE>
If to a Meris: 917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
If to Vitech: 8807 Northwest 23rd Street
Miami, Florida 33172
Any party may alter the person or address to which communications or
copies are to be sent by giving notice of that change in conformity with the
provisions of this paragraph for the giving of notice. Notice shall be deemed
effective and received upon : (I) the date of receipt if delivered by courier or
by personal delivery, or (ii) seven (7) days after the deposit of same in a
letter box or other means provided for the deposit of mail, postage prepaid as
provided above.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended only with the prior
written consent of all of the parties.
(d) Successors and Assigns. The provisions of this Agreement are for
the benefit or Meris and its successors and assigns.
(e) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is
held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such provision
of invalidity, without invalidating the remainder of this
Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, none of which need contain the signature
of the other parties, but all such counterparts taken together
will constitute one and the same Agreement.
(g) Governing Law. This Agreement will be construed in accordance with
Florida Law.
(h) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and superseded all prior agreements and
understandings, oral and written, among the parties hereto and/or
their respective affiliates with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
VITECH AMERICA, INC., a Florida corporation
Vitech America, Inc.
Corporate Seal By: /S/ William St. Laurent
--------------------------------
William St. Laurent, President
MERRIS FINANCIAL INCORPORATED, a
Nevada corporation
By:
--------------------------------
Nicholas S. Meris, President
<PAGE>
STOCK OPTION AGREEMENT
EFFECTIVE DATE: OCTOBER 28, 1995
OPTIONOR: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
OPTIONEE: Meris Financial Incorporated
917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
RECITALS;
Optionor desires to grant to Optionee an option to purchase certain
shares of capital stock (the "Capital Stock") of Optionor on the terms and
conditions set forth in this Stock Option Agreement (this "Agreement").
AGREEMENT
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, Optionor and Optionee hereby agree as follows:
1. Grant of Option. Optionor hereby grants a stock option to
Optionee to purchase that number of shares of Capital Stock equal
to four percent (4%) (to be determined on the Closing Date, as
that term is defined below), of the shares of Capital issued
(beneficially or otherwise) or issuable (beneficially or
otherwise) by Optionor upon the exercise of any outstanding
option, warrant, contract, agreement or arrangement to issue or
sell any capital stock or any other security of Optionor or any
other security exercisable or convertible into any capital stock
or any other security of Optioneor (the "Option Shares"), subject
to the terms and conditions of this agreement (the "Option").
2. Exercise Price. The price payable by Optionee upon exercise of
the Option (the "Exercise Price") shall be $2,000,000.
3. Exercise of Option. Optionee shall have the right to exercise the
Option subject to following terms and conditions:
(a) Exercise. The Option may be exercised at any time during
the period beginning on the Effective date and ending on
the 18th month anniversary date following the Effective
Date (the "Option Period"). If the period during which
Optionee may exercise the Option has ended, and the Option
has not been exercised, the Option will lapse and any
subsequent attempt to exercise the Option will be of no
effect.
(b) Manner of Exercise. The Option shall be exercisable only
by an Optionee given written notice to the Optionor of its
intention to exercise the Option, which notice shall state
the number of shares of Option Shares as to which this
Option is being exercised.
<PAGE>
(c) The Closing. The consummation of a purchase of Option
Shares pursuant to an exercise of the Option shall take
place at the offices of Optionor on such date as the
parties shall agree upon but in no event later than ten
(10) business days after receipt by Optionor of the notice
referred to in Section 4(b) above (the "Closing Date"). At
the closing, Optionee shall deliver to Optionor (i) cash
or a cashier's check for the Exercise Price. None of the
Option Shares will be issued to Optionee until Optionor
has received the Exercise Price therefor. In exchange
therefor, Optionor shall convey and transfer the Option
Shares. Optionor shall reflect the transfer of such Option
Shares on its books and records.
1. Adjustment to Option Shares. In the event of any reorganization
or recapitalization of Optionor (by reclassification of its
outstanding shares of Capital Stock or otherwise), or its
consolidation or merger with or into another corporation,
Optionee shall, upon exercise of the Option, be entitled to
receive, in lieu of the shares of Capital Stock which the
Optionee would otherwise be entitled to receive upon such
exercise and without any payment in addition to the aggregate
Exercise and without any payment in addition to the aggregate
Exercise Price for such shares assuming that no event specified
above had occurred, the shares of stock, cash or other
consideration which the Optionee would have received upon such
reorganization, recapitalization, consolidation or merger if
immediately prior thereto the Optionee had exercised this Option
and had exchanged such Option Shares in accordance with the terms
of such reorganization, recapitalization, consolidation or
merger.
2. Optionor's Covenants. Optionor hereby represents, warrants and
covenants that during the Option Period, Optionor shall reserve
that number of shares necessary to fulfill its obligations
hereunder.
3. Notices. All notices provided for herein shall be in writing and
shall be (a) personally delivered or delivered by courier service
(e.g., Federal Express) to the party being notified if an
individual, or (b) transmitted by certified or registered mail,
return receipt requested, addressed
If to a Meris: 917 Tahoe Boulevard
Suite 300H
Incline Village, Nevada 89451
If to Vitech 8807 Northwest 23rd Street
Miami, Florida 33172
or at such address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received
upon: (i) the date of receipt if delivered by courier or by personal
delivery, or (ii) seven (7) days after the deposit of same in a letter
box or other means provided for the posting of mail, postage prepaid as
provided above.
7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors, legal representatives, executors and heirs' provided,
however, that no party hereto shall have the right to assign any
right hereunder or delegate any obligation hereunder, in whole or
in part, without the prior written consent of the other party
hereto, and any attempt to so shall be void.
8. Amendment. Modification or Waiver. No amendment, modification or
waiver of any condition, provision or term of this Agreement
shall be valid or of any effect unless made in writing, signed by
the party to be bound and specifying with particularity the
nature and extent of such amendment, modification or waiver.
<PAGE>
9. Entire Agreement. This agreement contains the entire
understanding and agreement of the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings between the parties with respect to such subject
matter.
10. Florida Law to Govern. This Agreement shall be governed by, and
construed and enforced in accordance with, the law of the State
of Florida.
11. Attorney's Fees. In the event any party hereto brings any action
to enforce any provision hereof, or to secure specific
performance hereof or to collect any damages of any kind for any
breach of this Agreement, the prevailing party shall be entitled
to all court costs, all expenses arising out of or incurred by
reason of litigation and any reasonable attorney's fees expended
or incurred for any such proceeding.
12. Severability. Each provision of this Agreement is intended to be
severable, and the invalidity or unenforceability of one or more
provisions of this agreement shall not affect the validity and
enforceability of the other provision. Should any valid federal
or Utah state law or final determination of any administrative
agency or court of competent jurisdiction affect any provision of
this agreement, the provision or provisions so affected shall be;
automatically conformed to the law or determination and
otherwise this agreement shall continue in full force and effect.
13. Counterparts. This agreement may be executed in two (2) or more
counterparts, each of which shall be considered one in the same
agreement and shall become effective when one or more
counterparts have been found by each of the parties hereto and
delivered to the other parties hereto.
14. Withholding. Optionee authorizes Optionor to withhold in
accordance with applicable law from any regular cash compensation
payable to him any taxes required to be withheld by Optionor
under federal, state or local law as a result of its exercise of
Option.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
Effective Date.
MERIS FINANCIAL INCORPORATED, a
Nevada limited partnership
By:
--------------------------------
Nicholas S. Meris, President
(Optionee)
VITECH AMERICA, INC., a Florida
corporation
Vitech America, Inc. By: /S/ William St. Laurent
Corporate Seal --------------------------------
William St. Laurent, President
(Optionor)
<PAGE>
STOCK OPTION AGREEMENT
EFFECTIVE DATE: OCTOBER 28, 1995
OPTIONOR: Vitech America, Inc.
8807 Northwest 23rd Street
Miami, Florida 33172
OPTIONEE: Monolith Limited Partnership
2675 Windmill Parkway
Suite 1521
Henderson, Nevada 89104
RECITALS:
Optionor desires to grant to Optionee an option to purchase certain
shares of capital stock (the "Capital Stock") of Optionor on the terms and
conditions set forth in this Stock Option Agreement (this "Agreement").
AGREEMENT
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, Optionor and Optionee hereby agree as follows:
1. Grant of Option. Optionor hereby grants a stock option to Optionee
to purchase that number of shares of Capital Stock equal to one
percent (1%) (to be determined on the Closing Date, as that term
is defined below), of the shares of Capital issued (beneficially
or otherwise) or issuable (beneficially or otherwise) by Optionor
upon the exercise of any outstanding option, warrant contract,
agreement or arrangement to issue or sell any capital stock or any
other security of Optionor or any other security exercisable or
convertible into any capital stock or any other security of
Optioneor (the "Option Shares"), subject to the terms and
conditions of this agreement.
2. Exercise Price. The price payable by Optionee upon exercise of
the Option (the "Exercise Price") shall be $2,000,000.
3. Exercise of Option. Optionee shall have the right to exercise the
Option subject to following terms and conditions:
(a) Exercise. The Option may be exercised at any time during
the period beginning on the Effective date and ending on
the 18th month anniversary date following the Effective
Date (the "Option Period"). If the period during which
Optionee may exercise the Option has ended, and the Option
has not been exercised, the Option will lapse and any
subsequent attempt to exercise the Option will be of no
effect.
(b) Manner of Exercise. The Option shall be exercisable only
by an Optionee given written notice to Optionor of its
intention to exercise the Option, which notice shall state
the number of shares of Option Shares as to which this
Option is being exercised.
(c) The Closing. The consummation of a purchase of Option
Shares pursuant to an exercise of the Option shall take
place at the offices of Optionor on such date as the
parties shall agree upon but in no event later than ten
(10) business days after receipt by Optionor of the notice
referred to in Section 4(b) above (the "Closing Date"). At
the closing, Optionee shall deliver to Optionor (i) cash
or a cashier's check for the Exercise Price. None of the
Option Shares will be issued to Optionee until Optionor
has received the Exercise Price therefor. In exchange
therefor, Optionor shall convey and transfer the Option
Shares. Optionor shall reflect the transfer of such Option
Shares on its books and records.
<PAGE>
1. Adjustment to Option Shares. In the event of any reorganization
or recapitalization of Optionor (by reclassification of its
outstanding shares of Capital Stock or otherwise), or its
consolidation or merger with or into another corporation,
Optionee shall, upon exercise of the Option, be entitled to
receive, in lieu of the shares of Capital Stock which the
Optionee would otherwise be entitled to receive upon such
exercise and without any payment in addition to the aggregate
Exercise and without any payment in addition to the aggregate
Exercise Price for such shares assuming that no event specified
above had occurred, the shares of stock, cash or other
consideration which the Optionee would have received upon such
reorganization, recapitalization, consolidation or merger if
immediately prior thereto the Optionee had exercised this Option
and had exchanged such Option Shares in accordance with the terms
of such reorganization, recapitalization, consolidation or
merger.
2. Optionor's Covenants. Optionor hereby represents, warrants and
covenants that during the Option Period, Optionor shall reserve
that number of shares necessary to fulfill its obligations
hereunder.
3. Notices. All notices provided for herein shall be in writing and
shall be (a) personally delivered or delivered by courier service
(e.g., Federal Express) to the party being notified if an
individual, or (b) transmitted by certified or registered mail,
return receipt requested, addressed
If to a Monolith: 2675 Windmill Parkway
Suite 1521
Henderson, Nevada 89104
If to Vitech 8807 Northwest 23rd Street
Miami, Florida 33172
or at such address as the party who is to receive such notice may
designate in writing. Notice shall be deemed effective and received
upon: (I) the date of receipt if delivered by courier or by personal
delivery, or (ii) seven (7) days after the deposit of same in a letter
box or other means provided for the posting of mail, postage prepaid as
provided above.
7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors, legal representatives, executors and heirs' provided,
however, that no party hereto shall have the right to assign any
right hereunder or delegate any obligation hereunder, in whole or
in part, without the prior written consent of the other party
hereto, and any attempt to so shall be void.
8. Amendment. Modification or Waiver. No amendment, modification or
waiver of any condition, provision or term of this Agreement
shall be valid or of any effect unless made in writing, signed by
the party to be bound and specifying with particularity the
nature and extent of such amendment, modification or waiver.
<PAGE>
9. Entire Agreement. This agreement contains the entire
understanding and agreement of the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings between the parties with respect to such subject
matter.
10. Florida Law to Govern. This Agreement shall be governed by, and
construed and enforced in accordance with, the law of the State
of Florida.
11. Attorney's Fees. In the event any party hereto brings any action
to enforce any provision hereof, or to secure specific
performance hereof or to collect any damages of any kind for any
breach of this Agreement, the prevailing party shall be entitled
to all court costs, all expenses arising out of or incurred by
reason of litigation and any reasonable attorney's fees expended
or incurred for any such proceeding.
12. Severability. Each provision of this Agreement is intended to be
severable, and the invalidity or unenforceability of one or more
provisions of this agreement shall not affect the validity and
enforceability of the other provision. Should any valid federal
or Utah state law or final determination of any administrative
agency or court of competent jurisdiction affect any provision of
this agreement, the provision or provisions so affected shall be;
automatically conformed to the law or determination and otherwise
this agreement shall continue in full force and effect.
13. Counterparts. This agreement may be executed in two (2) or more
counterparts, each of which shall be considered one in the same
agreement and shall become effective when one or more
counterparts have been found by each of the parties hereto and
delivered to the other parties hereto.
14. Withholding. Optionee authorizes Optionor to withhold in
accordance with applicable law from any regular cash compensation
payable to him any taxes required to be withheld by Optionor
under federal, state or local law as a result of its exercise of
Option.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the Effective Date.
MONOLITH LIMITED PARTNERSHIP, a
Delaware limited partnership
By: WGM Corporation , a Delaware
corporation
The General Partner
By:
------------------------------
William G. Meris, President
(Optionee)
VITECH AMERICA, INC., a Florida
corporation
Vitech America, Inc By: /S/ William St. Laurent
Corporate Seal ---------------------------------
William St. Laurent,
President
(Optionor)
<PAGE>
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (this "Modification Agreement"), is made and entered
into this 20th day of July, 1996 by and between MERIS FINANCIAL INCORPORATED, a
Nevada corporation ("Lender"), and VITECH AMERICA, INC., a Florida corporation
("Borrower").
RECITALS:
WHEREAS, Lender and Borrower made and entered into a Loan Agreement as
of October 28, 1995 (the "Loan Agreement"), pursuant to which Lender made
available a loan to the Borrower in the principal amount of $2,000,000 (the
"Loan") which was evidenced by a certain Promissory Note dated October 28, 1995
(the "Note") and secured by various documents and instruments provided in,
attached to or referred to in the Agreement and related documents, including,
but not limited to, a Security Agreement, and Unconditional Guaranty by William
and Wendy St. Laurent, and Unconditional Guaranty by Georges St. Laurent, III,
Stock Pledge Agreements, a Quotas Pledge Agreement, a Collateral Assignment of
Option Agreements, and Assignments of Life Insurance Policy, all executed and
delivered by Borrower and/or its principals and/or Lender as of October 28, 1995
(collectively, the "Collateral Documents");
WHEREAS, further in connection with the Loan, Borrower and/or its
principals executed and delivered as of October 28, 1995 that certain Stock
Option Agreement for the purchase of 4% capital stock interest in Borrower, that
certain Stock Option Agreement for the purchase of 1% capital stock interest in
Borrower, and that certain Registration Agreement )collectively, the "Stock
Rights Documents");
WHEREAS, as provided in the Loan Agreement and the Note, the Loan of
$2,000,000 and any unpaid interest is due and payable on October 28, 1997;
WHEREAS, certain understandings and certain potential financings to be
undertaken with the assistance of the Borrower cannot be consummated on terms
satisfactory to the parties and, as a consequence thereof, the parties wish to
restructure the terms of the Loan Agreement, the Note and related documents in
order to effectuate an orderly termination of the relationship between the
parties.
NOW, THEREFORE, in consideration of the mutual convenants, agreements
and undertakings contained in this Modification Agreement, the parties hereto
agree as follows:
1. In lieu of payment of the entire principal amount of the Loan of
$2,000,000 on October 28, 1997, the Borrower shall make payments
in accordance with the attached Schedule 1. Section 7 of the Note
is hereby amended to provide that Borrower may prepay the Loan in
either the installments provided for in Section 1 above or in such
greater installments or amounts in the discretion of Borrower.
2. Section 5 of the Note provides for the conversation of the
principal amount of the Note into common stock of the Borrower in
accordance with the provisions of Section 5 of the Note. So long
as the Borrower makes the payments required by Section 1 above
when due, Lender agrees not to exercise any conversion right
granted under Section 5 of the Note and agrees that if, on or
before November 1, 1996, the Borrower has paid to lender the
outstanding principal balance under the Note, together with all
accrued and unpaid interest thereon, then the conversion rights
will be null and void and of no force or effect.
3. So long as the Borrower makes the payments required by Section 1
above when due, Lender agrees not to exercise any right or
privilege under the Stock Rights Documents and agrees if, on or
before November 1, 1996, the Borrower has paid to Lender the
outstanding principal balance under the Note, together with all
accrued ;and unpaid interest thereon, then the Stock Rights
Documents will be null and void and of no force or effect.
<PAGE>
4. As provided under the terms of the Loan Agreement and Collateral
Documents, upon payment of the principal amount and accrued and
unpaid interest due and owing under the Loan, the various
instruments, security, assignments and collateral made available
and provided by the Borrower shall be terminated and/or reassigned
to the Borrower.
5. Except as modified or amended herein, the terms and conditions of
the Loan Agreement, the Note, the Collateral Documents and the
Stock Rights Documents shall remain in full force and effect.
6. Lender's acceptance of this Modification Agreement is contingent
upon:
a. delivery by Borrower of the stock certificates issued by
Borrower to William C. St. Laurent, Georges St. Laurent,
III, Nicholas St. Laurent , and Alexander St. Laurent,
to be tendered and held in accordance with that certain
Stock Pledge Agreement dated October 28, 1995; and
b. delivery by Borrower of a duplicate copy of this
Modification Agreement, originally executed by Borrower,
together with a check made payable to Lender, dated no
later than July 20, 1996, in the amount of $20,000 and a
check made payable to Lender, dated no later than August
1, 1996, in the amount of $100,000 (as and for the first
two payments set forth on the attached Schedule 1),
and if the same are not delivered to Lender at 7328 East Stetson, Suite 103,
Scottsdale, Arizona 85251, by federal express delivery on July 22, 1996, then
this Agreement shall be null and void.
7. In the event that Borrower fails to perform as required hereunder
and such failure is not cured by 5:00 Phoenix, Arizona time on the
next business day after performance was required then Lender shall
have the absolute right, without notice to Borrower, at Lender's
option and election and in its sole discretion, to exercise any
and all remedies at law, in equity or under the Note, the Loan
Agreement and The Collateral Documents.
IN WITNESS WHEREOF, the parties hereto have executed this Modification
Agreement as of the day and year first above written
VITECH AMERICA, INC., a Florida corporation
By: /S/ Mitchell E. Asher
-----------------------------------------
Mitchell E. Asher, Vice-President
MERIS FINANCIAL INCORPORATED,
a Nevada corporation
By: /S/ Nicholas S. Meris
------------------------------------------
Nicholas S. Meris, President
<PAGE>
Schedule 1
Repayment Schedule
Date Payment*
- ---- --------
July 20, 1996 $ 20,000
August 1, 1996 $100,000
August 15, 1996 $ 25,000
August 22, 1996 $ 25,000
August 29, 1996 $ 50,000
September 5, 1996 $ 25,000
September 12, 1996 $ 25,000
September 19, 1996 $ 25,000
September 26, 1996 $ 50,000
October 3, 1996 $ 25,000
October 10, 1996 $ 25,000
October 17, 1996 $ 25,000
October 24, 1996 $ 25,000
November 1, 1996 $ **
Each payment (except the first two) shall be made by wire
transfer to the following account and shall be applied first
to accrued interest and then to principal outstanding:
Bank of America
2597 Mill Street
Reno, Nevada 89502
(702) 688 8354
ABA Routing Number: 122400724
Account Number: 961014123
an amount equal to the outstanding principal balance together
with all accrued and unpaid interest and other charges due and
owing under the Collateral Documents
<PAGE>
EXHIBIT 10.9
CONTRACT DATE SEPTEMBER 1, 1995
BETWEEN THE COMPANY AND CASA BAHIA
<PAGE>
PRIVATE DEED OF AGREEMENT FOR PURCHASE AND SALE OF GOODS, ASSEMBLY
SERVICE RENDERING AND TECHNICAL SUPPORT
Through this Private Deed of Agreement for Purchase and Sale, Assembly
Service Rendering and Technical Support, CASA BAHIA COMERCIAL LTDA., a company
headquartered in the city of Sao Caetano do Sul, State of Sao Paulo, Av. Conde
Francisco Matarazzo, 100, Taxpayer under C.G.C. No 59,291,534/0001-67, herein
represented by its attorney, Mr. Michael Klein, Brazilian, divorced, financial
manager, bearer of the ID Card RG No 4,697,446 and taxpayer under CPF No
498,139,868-91, hereinafter called CASA BAHIA; BAHIATECH - BAHIA TECNOLOGIA
LTDA., a company headquartered in the city of Ilheus, State of Bahia, Rua E,
Quadra D, Industrial District, Taxpayer under C.G.C. No 00,588,216/0001-10,
herein represented by its attorney, Mr. GEORGES CAMPBELL SAINT LAURENT III,
American, single. Bearer of the passport No 044215108 and taxpayer under CPF No
051,541,497-26, resident and domiciled at Rua Santa Maria No 49, Quadra 15, Lote
21, Jacaraipe - Serra - ES, hereinafter called BAHIATECH; PROEX TRADING INC.,
headquartered in the city of Miami, Florida, United States of America, herein
represented by its attorney, Mr. ABBOS ABRARPOUR, Brazilian, married,
hereinafter called PROEX, have decided, under mutual agreement, to agree as
follows:
OBJECT:
I - The purchase of the goods identified below, by BAHIATECH, from PROEX;
(a) 14 and 20 inches Color TV parts and assemblies, models CB14 and CB20, from
sundry manufactures;
(b) 2- and 4-head videocassette parts and assemblies, models CB201 AND CB401,
manufactured by FUNAI.
II - The assembly, by BAHIATECH, of the goods listed below with the parts and
assemblies described under item "I" above:
(a) 14- and 20-inch color TV sets, models CB14 and CB20
(b) 2- and 4-head videocassettes, models CB210 and CB401
III - The purchase of products assembled by BAHIATECH, as listed under item "II"
above, by CASA BAHIA.
IV - The technical support services to be rendered by BAHIATECH to CASA BAHIA
and its customers, in respect to the products assembled by BAHIATECH, under item
"II" above.
2. PROEX's obligations comprise to send the parts and assemblies identified
under the first clause of item "I", to BAHIATECH'S headquarters, at the
address appearing in the preamble hereof.
PRICE
3. The total prices to be paid by BAHIATECH to PROEX for the part and
assemblies to be purchased are:
14' color TV set.....................R$ 115.57 per kit
20' color TV set.....................R$ 143.78 per kit
2- or 4-head videocassette...........R$ 136.05 per kit
<PAGE>
3.1 Since these are imported goods, said prices in "reais" must be
correspondent to the following prices in U.S. dollars, along the term this
agreement is in force:
14' color TV set....................US$ 127.00 per unit
20' color TV set....................US$ 158.00 per unit
2- or 4-head videocassette..........US$ 149.50 per unit
4. The prices to be paid by CASA BAHIA to BAHIATECH, for finished products,
are:
14' color TV set..................R$ 213.60 per unit
20' color TV set..................R$ 270.92 per unit
2- or 4-head videocassette........R$ 247.15 per unit.
4.1 The prices are liable to be adjusted, as long as an effective price raise
is made by BAHIATECH, and eventual adjustments will conform the cost
structure described below, as in force on the date this agreement is
signed:
FOB PRICE ASSEMBLY +
PRODUCT US$ TAXES -US$ TOTAL US$
- ------- --- ------------------------------------
14' color TV US$ 127.00 US$ 95.50 US$ 222.50
20" color TV US$ 158.00 US$ 124.21 US$ 282.21
2/4 H video US$ 149.50 US$ 111.95% US$ 257.45
(-4.00)
* BAHIATECH will provide a US$ 4.00 (four dollars) discount to CASA BAHIA on
each videocassette, in respect to the disassembly cost of devices, by
manufacturer FUNAI Said discount will be valid solely and exclusively to parts
effectively disassembled and as long as FUNAI's disassembly work is necessary.
4.2 The prices set forth under the heading of this clause will have added the
cost related to the products warranty, for an amount equivalent to 2% (two
percent) of each product's unit price, as per item 5.
4.2.1 The collection of the warranty cost will be made by means of a service
rendering fiscal note issued by BAHIATECH, once a month, to be paid by CASA
BAHIA under the same terms and conditions as the products prices.
PAYMENT TERM
5. The payment of products prices received by CASA BAHIA from BAHIATECH will be
made by the first to this latter within a 15 (fifteen) days term as of the
products receipt, upon signature in the voucher of the fiscal note to be issued
by BAHIATECH.
5.1 The payment for the amount corresponding to the warranty price will be made
under the same conditions as the products prices, as per the heading of this
clause.
6. The payment of parts and assemblies prices received by BAHIATECH from PROEX
will be made the first to this latter within a term up to 72 (seventy-two) hours
as of the payment is received from CASA BAHIA.
<PAGE>
TERM OF DURATION OF THIS AGREEMENT
7. This AGREEMENT will be in force for a determined period of 01 (one) year, as
of September 1st, 1995 to be concluded on August 31, 1996.
7.1 This AGREEMENT is liable to be extended upon mutual agreement between the
parties, upon a written notice confirming so, within a term of up to 30 (thirty)
days preceding the term of duration foreseen for this instrument.
TECHNICAL SUPPORT
8. BAHIATECH will render technical support for all products it manufactures and
sells to CASA BAHIA.
8.1 BAHIATECH will collect the damaged products once a week, at CASA BAHIA's
warehouse indicated under clause third hereof, and will return them duly
repaired within a 30 (thirty) day term after the collection, at the same place
they were collected from.
9. The term of warranty for the products assembled by BAHIATECH and sold to CASA
BAHIA will be 15 (fifteen) months as of the date the fiscal sale note for the
products is issued, by the first to the latter.
9.1 Defective products will be collected once a week at CASA BAHIA's warehouse
indicated under clause third hereof, and will be returned repaired within a term
up to 30 (thirty) days after the collection, at the same site they were taken
from.
GOALS TO BE FULFILLED BY BAHIATECH
10. Since it is regularly supplied with parts and assemblies to be provided by
PROEX, BAHIATECH commits itself to assemble up to the following amounts
products:
70,000 14' color TV sets (model CB-14)
20,000 20' color TV sets (model CB-20)
15,000 2-head videocassettes (model CB-201)
15,000 4-head videocassettes (model CB-401).
10.1 CASA BAHIA will program the assemblies to the monthly made by BAHIATECH,
under the following time chart:
TV CB14' a minimum of 3,000 units - maximum of 10,000 units
TV CB20 an average of 2,000 units.
Video CB201 a minimum of 2,500 units - Maximum of 5,000 units
Video CB401 a minimum of 2,500 units - maximum of 5,000 units.
GENERAL
11. The taxes burdens (Import Tax, IPI,ICMS) DTA costs, containers release and
Customs broker, will run on BAHIATECH's accounts.
12. The costs arising from parts and assemblies remittances to made by PROEX to
BAHIATECH will run on the PROEX's account, including the international freight,
merchant marine and the warehousing seaport and foremanship fees.
<PAGE>
13. The unloading ports for the parts and assemblies will be as determined by
BAHIATECH, out of the following ones: Santos, Vitoria, Ilheus or Salvador.
13.2 BAHIATECH grants to CASA BAHIA the right to send a representative to
follow-u[ the Customs release of parts and assemblies.
14. BAHIATECH stands responsible for the finished product's quality and its
perfect operation, and will maintain a proper inventory of parts and spare parts
most liable to prevent defects, in order to meet the manufacturing defect events
and the repair orders relating the technical support
FINAL COMMITMENT
15. BAHIATECH commits itself to refrain from rendering the same type of assembly
service as those intended for the equipment subject hereof, to any other public
or private right individual or corporation, while this Agreement is in force,
other than the exceptions under this clause.
15.1 This limitation applies only to the territory comprised by CASA BAHIA
stores, within Brazil.
15.2 BAHIATECH may render the same type of assembly service to another public or
private right individual or corporation, provided the price charged from the
third parties is 15% above the total price charged by BAHIATECH to CASA BAHIA,
for the finished products set forth under item 5.
16. BAHIATECH is expressly prohibited to sell, donate, loan, assign, rent or by
whatever similar act to dispose of the same finished product, or even the parts
and assemblies received for assembly, to any public or private right individual
or corporation, under the penalty of incurring the fine foreseen under clause 18
hereof.
PENALTIES
17. In addition to indemnifying the innocent party for the damages it suffers
out of a default, the party violating whatever clause hereof will be obliged to
pay the other a fine, for the amount of R$ 500,000.00 (five hundred thousand
reais), irrespective of when the violation is committed, provided it is along
the contractual term.
TERMINATION
18. This agreement is liable to be terminated at any time, by any of the
parties, through a written notice, with a minimum antecedence of sixty (60) days
as of its receipt by the other party.
18.1 In any event, the termination will occur only after the assembly of all
equipment whose parts and assemblies already purchased have been assembled, even
though they have not been shipped yet.
19. This agreement may be also terminated by the party damaged by the other
part's default, with no prejudice to the provisions under the clause eighteenth
above.
20. It is hereby agreed that the obligation of rendering the technical support,
by BAHIATECH, is irrevocable.
LAYING OF VENUE
21. The Forum of the County of Sao Paulo is hereby elected for the settlement of
whatever disputes or litigations arising from this agreement, with express
renouncement to any other one, the most privileged it might be.
<PAGE>
And being thus agreed, binding the parties and their successors at any title,
the parties hereto caused these presents to be signed in four (04) copies of
same text and for a single effect, before the undersigned witnesses
Sao Caetano do Sul, September 1st, 1995.
/S/ Michael Klein
------------------
CASA BAHIA COMMERCIAL LTDA.
Michael Klein.
/S/ Georges Campbell St. Laurent III
-------------------------------------
BAHIATECH-BAHIA TECHNOLOGIA LTDA.
Georges Campbell St. Laurent III
/S/ Abbos Abrarpour
--------------------
PROEX TRADING INC.
Abbos Abrarpour.
WITNESSES:
5TH. Notary, Sao Caetano do Sul, State of Sao Paulo. Rua Daraldi No 997, Edgard
Leme da Silva, Notary. I hereby certify the above signature of Michael Klein.
S.C. Sul, January 11, 1996. In witness whereof
/S/ Edgard Leme da Silva
Notarial stamp and seal.
30th. Civil registry, Ibirapuera - Av. Nova Independencia 51, Phone No 533.5744
- - I hereby certify the signature of Georges Campbell Saint Laurent III. Sao
Paulo, February 5, 1996. In witn4ss whereof
/S/ Alcides Batista Correia,
Officer.
Norarial Stamp and Seal.
1st. Notary - Julio Guilger Sioes, 30th. Subdistrict, Ibirapuera. Av. Nova
Independencia, 51, Sao Paulo, Capital Phone 533.5762. LEGALIZATION. I hereby
certify this copy was checked against the original I was presented. Sao Paulo,
Feb. 05, 1996.
/S/ Julio Guilger Sioes
Notarial stamp and seal.
<PAGE>
EXHIBIT 10.10
CONTRACT DATED AUGUST 2, 1996
BETWEEN BAHIA AND DESENBANCO
<PAGE>
2
Credit Opening Contract entered into by the BANCO DE DESENVOLVIMENTO DO ESTADO
DA BAHIA (Development Bank of the State of Bahia) S/A - DESENBANCO and BAHIATECH
- - BAHIA TECNOLOGIA LTDA., with a mortgage and fide-jussio guarantee as follows:
To whom it may concern...
The BANCO DE DESENVOLVIMENTO DO ESTADO DA BAHIA S/A, CGC No. 15.163.587/0001-27,
with its headquarters in this Capital, at Av. Tancredo Neves, 776, Pituba,
hereinafter designated simply DESENBANCO, being represented in this act by its
Director and by the legal representative constituted by public instrument
written on pages 082 of book No. 070, under order No. 7582, of the notes of the
Notary Public of the 1st Office of this Capital, on May 14, 1996, and, the other
party, BAHIATECH - BAHIA TECNOLOGIA LTDA., CGC/MF No. 00.588.216/001-10, with
its headquarters and central office in the City of Ilheus, in this State, on Rua
E. Quadra Industrial Q, lots 05 and 06, Industrial District, hereinafter
designated simply the CREDIT RECIPIENT, represented in this act by its partners
Mr. JOSE HAROLDO CASTRO VIEIRA, and the company VITECH AMERCIA, INC.,
hereinafter identified as GUARANTORS AND PRINCIPAL PAYERS, Mr. JOSE HAROLDO
CASTRO VIEIRA, CPF No. 042.501.417-72, RG No. 268.177, BSP/BA, and his wife,
Mrs. HERAMIDA GUEDES PEREIRA VIEIRA, CPF No. 043.011.375-72, RG No.
00926168-SSP/Ba, Brazilians, he, a business administrator, she, a professor,
both residing in this Capital on Praca Dois de Julho, Edf. Dois de Julho, apto.
404; Mr. GEORGES CAMPBELL ST. LAURENT ITI, American, single, business
administrator, bearer of passport No. 044.215.108-USA and of the Record of
Definitive Stay for a Foreigner granted on December 4, 1995, CPF No.
051.541.497-26, residing in the Capital of the State of Sao Paulo, on Rua
Antonio Chagas, at 1612, Chacara Santo Antonio; Mr. WILLIAM CRANE ST. LAURENT,
American, hotel administrator, passport No. 044263916-USA, RNE V148583-1, CPF
No. 030.893.877-19, and his wife, Mrs. WENDY ANN MOORE, American, architect,
passport No. 150183821, RNE no. V148984-0, CPF No. 030.891.797-92, both residing
in the Capital of the State of Sao Paulo, at Rua Visconde de Porto Seguro, No.
759; and the company VITECH AMERICA, INC., a society constituted under the laws
of the State of Florida, in the United States of America, under No.
P93000045800, with its headquarters at 8807 N.W. 23rd Street, Miami, Florida,
USA, represented by Mr. GEORGES CAMPBELL ST. LAURENT III, previously qualified;
which have settled and contracted the financing of the project submitted by the
CREDIT RECIPIENT, which in the files of DESENBANCO, took No. 96/37, on the BNDES
/ AUTOMATICO / INDUSTRIA line, with the following clauses and conditions:
FIRST CLAUSE - NATURE, AMOUNT AND PURPOSE OF THE CREDIT: DESENBANCO, by means of
this instrument [illegible word] to the CREDIT RECIPIENT a credit in the amount
of R$ 3,431,891.00 (three million, four hundred thirty-one thousand, eight
hundred ninety Reais) to be provided with resources from an internal source,
pursuant to Credit Opening Contract No. 91.2.149.671.013, entered into on
7/19/91 by the BANCO NACIONAL DE DESENVOLVIMENTO
<PAGE>
3
ECONOMICO E SOCIAL, hereinafter called simply BNDES; subdivided into 02 (two)
subcredits in the following amounts:
a) SUBCREDIT "A": R$ 791,975.00 (seven hundred ninety-one thousand, nine hundred
seventy-five Reais), for the purpose of commercial capital that will be used in
a single draft.
b) SUBCREDIT "B": R$ 2,639,916.00 (two million, six hundred thirty-nine
thousand, nine hundred sixteen Reais), for the purpose of fixed investments that
will be used in 04 (four) quarterly and consecutive drafts with the first in the
amount of [illegible number], the second in the amount of R$ 44,773.12, the
third in the amount of R$ 897,571.44, and the fourth and last draft in the
amount of R$ 52,298.52.
FIRST PARAGRAPH: The resources arising from this operation must be used and
applied according to the Timetable of Uses and Sources attached hereto,
exclusively in the investments earmarked for installment of a manufacturing unit
of computer and telecommunications electronic equipment with its own technology.
During the first year, the CREDIT RECIPIENT shall produce 70,721 video
cassettes, 12,802 multimedia, 5,976 microcomputers and 12,358 cellular
telephones. The total area constructed will be 6,670.66 square meters,
consisting of a storage building, shop, dining hall and laser area.
SECOND PARAGRAPH: The credit opened in the form of the present clause shall be
placed in stages at the disposal of the CREDIT RECIPIENT in accordance with the
necessities for carrying out the project, with the financial scheduling of BNDES
and the availability of the resources coming from the Credit Opening Contract
No. 91.2.149.6.1.013 referred to in the paragraph of this clause.
THIRD PARAGRAPH: The value of each share of credit to placed at the CREDIT
RECIPIENT's disposal shall be calculated according to the criterion established
in the institution law on Long Term Interest Rate - TJLP (Taxa de Juros de Longo
Prazo) to determine the balances owed on the financings contracted by the BNDES
System by November 30, [illegible line] between the date of this Contract and
the release date.
SECOND CLAUSE - CREDIT USE: The credit referred to in the FIRST CLAUSE will be
used by the CREDIT RECIPIENT during a period of at most 10 (ten) months counting
from the date this document is signed, in a single draft, for Subcredit "A" and
04 (four) quarterly drafts for Subcredit "B," with the Timetable of Investments
and Disbursements of the project and the pending conditions listed below, in
addition to the lack of a fact of an economic-financial nature which, in the
judgement of the BNDES and/or DESENBANCO, may compromise the execution of the
undertaking that is now being financed in such a way as to alter it or make its
realization impossible under the terms stipulated in the approved project:
I - To use the FIRST DRAFT of Subcredit "B," in the amount of R$ 844.773.12, the
CREDIT
<PAGE>
4
RECIPIENT must:
a) Submit this duly registered contractual instrument to the appropriate
register office.
b) Submit a contractual alteration that is registered in the JUCES and that
refers to the increase in capital stock beginning in December of 1995, in
addition [?], of at least R$ 3,170,843.80 and the formation of, at least R$
3,170,845.80 with new resources in money.
c) Submit a Construction Permit issued by the Ilheus City Hall.
d) Submit a fire insurance policy protecting the properties offered as a
guarantee (buildings on the Fazenda Oregon) in the amount of at least R$
114,300.00 with a clause benefitting DESENBANCO.
e) Submit a Security Letter by which, as the principal payer, VITECH AMERICA,
INC., on behalf of the others, fully guarantees the payment of the debt and
expressly waives the benefits of Articles 1491, 1499 and 1503 of the Brazilian
Civil Code, and Articles 261 and 262 of the Brazilian Commercial Code and
similar provisions of American Laws, the letter having been issued in accordance
with the model provided by DESENBANCO, accompanied by a Legal Opinion of an
American attorney that does not have an employment relationship with VITECH
AMERICA, INC, and that is indicated by the Guarantor and accepted by DESENBANCO,
with the legality of the Guarantor and the provided security, the scope of the
security and the ability of the Guarantor to do so being attested, in both the
Portuguese and English languages and being notarized and having consular
approval, as well as the opinion of the law office indicated by the CREDIT
RECIPIENT and approved by DESENBANCO which ratify the terms of the Legal
Opinion.
f) Verify, by means of a signed statement by its legal representatives, that it
carried out the collections of the contributions relating to the FINSOCIAL /
COFINS and the Programs of Social Integration and of the Formation of Public
Server Patrimony - PIS / PASEP, and with it being settled up with the Federal
Treasury, as well as submitting Negative Certificates of Debts provided by the
INSS and by the FGTS / CEF.
II - To use the SECOND DRAFT of Subcredit "B" in the amount of R$ 544,773.12,
the CREDIT RECIPIENT must:
a) Submit a contractual alteration that is registered in the JUCES and that, in
addition, has been verified and is made up of at least R$ 2,113,897.20 with new
resources.
b) In accordance with the Timetable of Investments and Disbursements, and based
on what was done in December of 1995, verify the application on additional items
of the project of at least $R 1,576,820.00 (base: December of 1995), with R$
851,862.00 corresponding to the 1st draft of the
<PAGE>
5
BNDES / AUTOMATICO / INDUSTRY financing, R$ 732,046.88, referring to the book
entry of resources pertaining to the first and second drafts to be contributed
to the project.
c) Verify, by means of a statement that is signed by its legal representatives,
that it carried out the collections of the contributions relating to the
FINSOCIAL / COFINS and to the Programs of Social Integration and of Formation of
Public Server Patrimony - PIS / PASEP, and with it being settled up with the
Federal Treasury, as well as submitting Negative Certificates of Debts provided
by the INSS and by the FGTS / CEF.
d) Submit a registration certificate to the Department of Civil Aviation
relating to the CESSNA C-500 type plane, with a 1992 manufacture year and
constitute a real guarantee issued to DESENBANCO.
e) Submit a fire insurance policy protecting the civil constructions carried out
after the release of the first draft and of the airplane offered as a financing
guarantee in the amount of at least R$ 2,042,448.00 with a clause indicating
DESENBANCO as the beneficiary.
III - To use the THIRD DRAFT of Subcredit "B" in the amount of R$ 897,571.44 the
CREDIT RECIPIENT must:
a) In accordance with the Timetable of Investments and Disbursements, verify,
based on the first draft, the application on additional items of the project of
at least R$ 1,222,706.00 (base: December of 1995), with: R$ 844,773.12 referring
to the second draft of the BNDES / AUTOMATICO / INDUSTRIA financing, and R$
377,932.88 corresponding to the book entry of resources pertaining to the third
draft to be contributed in the project.
b) Verify, by means of a statement that is signed by its legal representatives,
that it carried out the collections of the contributions relating to the
FINSOCIAL / COFINS and to the Programs of Social Integration and of Formation of
the Public Server Patrimony PIS / PASEP, and with it being settled up with the
Federal Treasury, as well as submitting Negative Certificates of Debts provided
by the INSS and by the FGTS / CEF.
c) Submit a fire insurance policy protecting the civil constructions carried out
after the release of the second draft in the amount of at least R$ 1,199,581.00
with a clause indicating DESENBANCO as the beneficiary.
IV - To use the FOURTH AND LAST DRAFT of Subcredit "B" in the amount of R$
32,798.32 and of the only draft of Subcredit "A" in the amount of R$ 791,975.00,
the CREDIT RECIPIENT must verify:
a) Submit a definitive document, on behalf of the CREDIT RECIPIENT, of the
property located in the
<PAGE>
6
Industrial District of Ilheus where the undertakings will be located, and other
documents relating to the property and constituting a mortgage made out to
DESENBANCO.
b) In accordance with the Timetable of Investments and Disbursements, it must
verify based on the second draft, the application on additional items of the
project of at least R$ 5,070,449.00 (base: December of 1995), with: R$
897,571.44 corresponding to the third draft of the BNDES / AUTOMATICO /
INDUSTRIA financing, and R$ 4,172,877.56 referring to the book entry of
resources pertaining to the fourth draft to be contributed in the project.
c) Verify, by means of a statement that is signed by its legal representatives,
that it carried out the collections of the contributions relating to the
FINSOCIAL / COFINS and to the Programs of Social Integration and of Formation of
the Public Server's Patrimony - PIS/PASEP, with it being settled up with the
Federal Treasury as well as submitting Negative Certificates of Debts provided
by the INSS and by the FGTS / CEF.
d) Submit a fire insurance policy protecting the civil constructions carried out
after the release of the third draft in the amount of at least R$ 1,276,662.00
with a clause indicating DESENBANCO as the beneficiary.
e) Verify the formation of the capital stock based on December of 1995, in
addition [?], of at least R$ 23,100.00 referring to the acquisition of the
property where the undertaking will be set up.
SINGLE PARAGRAPH - SPECIAL CONDITIONS: a) After 60 (sixty) days have passed
following the release of the last draft, the CREDIT RECIPIENT must fully verify
its application on the project's items, and at least R$ 844,773.32 in accordance
with the Timetable of Investments and Disbursements in the appendix: b) In the
event the resources that come from the present financing are not sufficient to
complete the project, the CREDIT RECIPIENT covenants to provide the resources
that need to be added.
THIRD CLAUSE - INTERESTS: Interests will be owed at the rates determined below,
above the Long Term Interest Rate - TJLP that is announced by Brazil's Central
Bank, with the system established in the following conditions being observed:
a) Subcredit "A": The rate of 7.0% (seven percent) per year as a "spread," above
the Long Term Interest Rate -TJLP that is announced by Brazil's Central Bank.
b) Subcredit "B": The rate of 4.0% (four percent) per year as a "spread," above
the Long Term Interest Rate -TJLP that is announced by Brazil's Central Bank.
I) When the TJLP is above 6.0% (six percent) per year:
<PAGE>
7
a) The amount corresponding to the part of the TJLP that may exceed 6% (six
percent) per year will be converted to capital on the 15th (fifteenth) of each
month in which this contract is effective and upon its expiration or
liquidation, with what was stipulated in the SIXTH clause - EXPIRATION ON
HOLIDAYS being observed and settled by means of the incidence of the following
term of conversion to capital over the balance owed, with all of the financial
events that occurred during the period being considered therein.
TC = (1 + TJLP) divided by 1.06, with the result raised to (n divided by 360)
subtracting 1 (one) from that result and with:
TC - Capitalization Term
TJLP - Long Term Interest Rate that is announced by Brazil's Central Bank and
expressed as a decimal number and,
n - The number of days between the date of the financial event and the date of
conversion to capital, expiration or liquidation of the obligation, with a
financial event being considered to be any and all facts of a financial nature
from which a change in the balance owed of this contract results or may result.
b) The yearly percentages above the TJLP ("spread") that are referred to in
points a and b of the "section" of this Clause, increased from the portion that
is not converted to capital of the TJLP of 6% (six percent) per year, will
affect the balance owed on the dates in which the interests mentioned in item IV
are required or on the expiration or liquidation date of this contract, with
what is stipulated in point "a" of item 1 being observed and with the number of
days that have passed between the date of each financial event and the above
mentioned dates on which interest is required being considered for the daily
calculation of interest.
II) When the TJLP is less than or equal to 6.0% (six percent) per year:
The yearly percentages above the TJLP ("spread") that are referred to in points
a and b of the "section" of this clause, increased from the TJLP itself will
affect the balance owed on the dates in which the interests mentioned in item IV
of this clause are required or on the expiration or liquidation date of this
contract, with the number of days that have passed between the date of each
financial event and the above mentioned dates on which interest is required
being considered for the daily calculation of interest.
III) The amount referred to in item I-a, which will be converted to capital and
incorporated into the debt's principal, will be collectable under the terms of
the FIFTH Clause - FORM OF PAYMENT.
IV) The amount settled under the terms of items I, point b or II will be
collectable each quarter on the 15th (fifteenth) of the months of November,
February, May and August of each year during the period
<PAGE>
8
of shortage, and on a monthly basis during the amortization period beginning on
March 15, 1998, and in addition, together with the loans on the principal and
upon the expiration or liquidation of this Contract, and with what is stipulated
in the SIXTH clause - EXPIRATION ON HOLIDAYS being observed.
V) ALTERING THE LEGAL CRITERION FOR THE REMUNERATION OF RESOURCES ORIGINATING
FROM THE FAT AND PTS / PASEP PARTICIPATION FUND. In the event the legal
criterion for the remuneration of resources that have been sent back to the
BNDES and that originate from the Fundo de Participacao (Participation Fund)
PIS-PASEP and from the Fundo de Amparo ao Trabalhador (FAT - Worker Support
Fund) is replaced, the remuneration provided for in this clause may, at the
BNDES's discretion, be carried out by using a new criterion for the remuneration
of the aforementioned resources, or some other that is indicated by the BNDES,
which in addition to preserving the real value of the operation, remunerates it
at the same previous levels. In this case, DESENBANCO will provide the CREDIT
RECIPIENT with written notice of the change.
FOURTH CLAUSE - CREDIT RESERVE COMMISSION: I) The Credit Reserve Commission at
the rate of 0.1% (one tenth of a percent) will be owed and can be charged for a
period of 30 (thirty) days or a fraction affecting: a) the unused balance of
each part of the credit, beginning on closest day to the day it is available up
until the day it is used, at which point its payment will be collectable. b) The
unused balance of the credit, beginning on the closest day to the day it is
available up until the date of cancellation, with it being done at the request
of the CREDIT RECIPIENT or through the initiative of DESENBANCO or the BNDES and
whose payment will be collectable on the request date or the decision date,
whichever is applicable. II) In the preceding cases, the incidence of the Credit
Reserve Commission depends on the BNDES establishing the availability of
resources scheme.
FIFTH CLAUSE - FORM OF PAYMENT: The principal of the debt arising from this
Contract, without prejudice to what is stipulated in the INTEREST clause, will
be paid to DESENBANCO in 42 (forty-two) monthly and successive installments,
each in the amount of the principal with the debt expired, divided by the number
of installments of the not yet expired amortizations, with the FIRST installment
expiring on March 15, 1998, and with the CREDIT RECIPIENT covenanting to
liquidate all obligations originating from this Contract with the LAST
installment, whose expiration will occur on February 15, 2002, and with what is
stipulated in the following clause being observed.
SINGLE PARAGRAPH: In the event of an amortization installment advance, an
advance liquidation of the entire amount of the debt, or of an expired debt
payment in arrears occurring during periods in which prices are frozen, the
amount of the obligation will be settled from the date of the price freeze until
the date of the advance or regularization of this Contract, pursuant to what is
stipulated in the INTEREST Clause, or any other index that the Public Authority
may establish to preserve the currency's real value.
<PAGE>
9
SIXTH CLAUSE - EXPIRATION ON HOLIDAYS: Any expiration of a principal
amortization installment and obligations that occur on Saturdays, Sundays or
national holidays, including banking holidays, shall be for all purposes and
effects moved to the first subsequent business day, with the obligations
calculated up until that date and with the following regular period of
settlement and calculation of the operation's obligations also beginning on that
date.
SEVENTH CLAUSE - PLACE OF PAYMENT: The debt resulting from this Contract or the
parts of its amortization will be liquidated by collecting from the reserves of
DESENBANCO or a checking account that it maintains in the Banco do Brasil S/A
and in the Banco do Estado da Bahia (Bank of the State of Bahia) S/A - BANEB, of
amounts that are equivalent and made available by the creditor, in Salvador, on
the expiration date of the obligation.
EIGHTH CLAUSE - FAILURE TO COMPLY: In the event of a failure to comply or of a
delay in the payment of any of the installments of the principal and/or
accessories, from the expiration date of the unfulfilled obligation until the
date of effective payment, a 12% (twelve percent) per year Permanent Commission
will be assessed on the expired parts, without prejudice to what is stipulated
in the INTEREST Clause, in addition to moratory interest of 1% (one percent) per
year being adopted when the business day "pro-rated" criterion is necessary.
SINGLE PARAGRAPH - FINE: In addition to the responsibilities for failure to
comply specified herein, a 10% (ten percent) fine will be charged that will be
assessed on the amount of the expired debt, including the principal, the
monetary updating, the Permanent Commission and the moratory interest.
NINTH CLAUSE - EXTRAORDINARY EXPIRATION AND ADVANCE COLLECTABILITY: Failure to
comply with any of the obligations of the CREDIT RECIPIENT and/or PARTIES that
are assumed not only because of this instrument but because of any other that it
has signed or may sign with DESENBANCO, the latter may by rights consider the
existing contracts or contract to be rescinded or concomitantly rescinded or
require the total amount of the debt that results from them, independently of
the extra-judicial notice or judicial summons, and with the penalties provided
for in the FAILURE TO COMPLY Clause also being applied.
SINGLE PARAGRAPH: The advance expiration of this Contract, with the
collectability of the credit and the immediate halt of any release will still
occur if the following are verified: a) The application of the financing
resources for a purpose that is other than the one stipulated in this Contract,
without prejudice to the communication of this fact by DESENBANCO to the Federal
Public Ministry for the purposes and effects of Law No. 7.492 of June 16, 1986.
b) The falsity of the declaration that the first article alludes to, first
paragraph, point "c" of Decree No. 99.476 of August 24, 1990. c) The inclusion,
in a society agreement, Statute or Social Contract of the CREDIT RECIPIENT, or
of the companies that control it or in any other instrument that establishes
obligations between shareholders or stockholders or between the latter and the
CREDIT RECIPIENT of a mechanism by means of which a
<PAGE>
10
special quorum is required for deliberation or approval of matters that limit or
restrict the control of any of these companies by the respective controllers,
or, even, the inclusion in those documents of mechanisms that affect: c1 -
restrictions on the growth ability of the CREDIT RECIPIENT or its technological
development; c2 - access restrictions of the CREDIT RECIPIENT to new markets; c3
- - restrictions or prejudice to the ability to pay the financial obligations
resulting from this operation.
TENTH CLAUSE - FAILURE TO EXERCISE RIGHTS: It is hereby established that, if
DESENBANCO abstains from exercising rights or powers that are afforded it by
this contract or under the law, and/or agrees to a delay in the fulfillment or
to the CREDIT RECIPIENT's failure to fulfill its obligations, those rights or
powers of DESENBANCO will not be affected nor will the agreed upon conditions be
in any way altered, nor will DESENBANCO be obligated with regard to the
expiration.
ELEVENTH CLAUSE - ACKNOWLEDGING THE DEBT: THE CREDIT RECIPIENT will acknowledge
as proof of its debt the checks, drafts, receipts or payment orders that it
signs or issues, as well as the entries that were made in its account by
DESENBANCO referring to the obligations assumed herein, with the certainty and
liquidity of the debt thereby being expressly and fully insured, and including
the calculation of interest, taxes and other expenses that together with the
principal will form the debt, and with it being established that the CREDIT
RECIPIENT will not be able to require a special verification process, or under
any pretext delay payment of the balance owed.
TWELFTH CLAUSE - PROCESSING AND COLLECTION OF THE DEBT: Collection of the
principal and obligations will be done by means of a Notice of Collection issued
by DESENBANCO in advance or by any other procedure adopted by it by means of
which DESENBANCO will inform the CREDIT RECIPIENT of the amount that is needed
for the liquidation of its obligations on the expiration dates.
SINGLE PARAGRAPH: Not receiving the Collection Notice will not exempt the CREDIT
RECIPIENT from the obligation of paying DESENBANCO the installments of the
principal and the obligations on the dates that are established in this
Contract.
THIRTEENTH CLAUSE - REIMBURSEMENT OF EXPENSES: If DESENBANCO has to resort to
legal means, even if in an administrative process, to obtain the payment of its
credit, it will be assured of receiving the total reimbursement of the expenses
incurred for such purpose, aside from attorneys fees and honoraria, and in
addition to the irreducible contractual fine of 10% (ten percent) on the total
amount of the debt on its liquidation date.
FOURTEENTH CLAUSE - GUARANTEE: For a security and guaranty of the payment of the
debt formed by the principal and accessories, the CREDIT RECIPIENT offers and
gives as a FIRST AND ONLY degree mortgage the rural property called "FAZENDA
OREGON," registered in the INCRA under No. 324.140.030.848-7, with an area of
659 hectares, 05 ares and 10 centiares, located at the
<PAGE>
11
place called Ponta de Remo. District of Aritaga, Municipality of Ilheus, with
the following boundaries and adjacent areas: to the north, Jovianiano Oliveira,
to the northwest, Manoel Caemamu, to the west bordering Angelo Rimeida and Jose
Joaquim dos Santos, Martinho Santos and Jose Silveira Silva, to the southwest,
bordering Oscar Oliveira, Joao Basilio and Jose Valerio, to the south, bordering
Joao Batista, Antonio Batista, Manoel Nascimento, Luiz Gonzaga de Castro and
Argeu Fernando dos Santos, to the west, bordering Cleide Teixeira Luz and to the
northwest bordering Isidro Estevam do Nascimento or whoever has the rights. In
the area described herein there are 60 hectares of cacao being produced, 42
hectares of hay, 12 hectares of rubber trees and fruit trees and 560 hectares of
forest, containing as added structures 08 workers houses built out of stone
masonry, bricks and coverings with normal roofs, and having electric power and
running water, a drying bin built out of masonry, a storage building made of
wood that is earmarked for storing materials, and a complete flour building.
Acquired by buy-sell document written in the notes of the Notary Office of the
8th Office of Notes of this Capital, on pages 109 of book No. 358, under Order
No. 081, on January 22, 1966, registered in the Real Estate Register Office of
the Second Office of the Region of Ilheus, under No. R-06, under register No.
1818, on February 27, 1966. Valued at R$ 622,250.00 (six hundred twenty-two
thousand, two hundred fifty Reais), according to the Assessment Report dated
February 7, 1996.
II - An agricultural property called "ELIANOR" located at the place Tijuipinho,
in the Municipality of Urucuta, in this State, having an area of 161 hectares,
30 ares and 88 centiares, broken up with the largest part being called "Fazenda
Consciencia," registered in the INCRA under No. 324.272.006.753, to the north
having its border with the real estate property of Roberto Menezes Marques, to
the south bordering Manoel Apolinario Bonfim, Natanael Araujo and Otavio
Rodrigues dos Santos, to the west bordering the Tijuipe River and INCRA and to
the east bordering the Atlantic Ocean; with the estate of Rodolfo de Queiroz
Jr., by means of buy-sell document written in the notes of the Notary Office of
the 3rd Office of Notes of this Capital, on pages 002, book No. 939, under Order
No. 23.495, on May 8, 1996, registered under No. R-06, in register No. 134, of
the General Register of the Real Estate Register Office of the Region of
Urucuca, on May 9, 1996. The property in question is currently registered under
No. 639, in the General Register of the Same Notary Office. Valued at R$
773,025.00 (seven hundred seventy-three thousand, twenty-five Reais), according
to the Assessment Report dated February 8, 1996.
SINGLE PARAGRAPH: All constructions, installations and any other additions that
during the effective period of this Contract may exist on the previously
described property shall also be incorporated into the mortgage that is
constituted herein.
FIFTEENTH CLAUSE - ASSESSMENT: For the purposes of rights, including those of
Article 818 of the Brazilian Civil Code, the properties that make up the
GUARANTEE described in the preceding clause are assessed at R$ 1,395,275.00 (one
million, three hundred ninety-five thousand, two hundred seventy-five Reais),
(base: February of 1996), and, expressly declared by the CREDIT RECIPIENT, with
them being free and clear of any burden, including fiscal, prohibitions or
lawsuits, under the
<PAGE>
12
penalties of Article 171, Paragraph 2, Section II, of the Penal Code.
SINGLE PARAGRAPH: DESENBANCO reserves the right to require a new assessment of
the recorded property provided there are indications that the value of the
guarantee has been reduced. In the event the settled amount does not reach the
existing guarantee / financing index at the time of contracting, the CREDIT
RECIPIENT covenants to add to the guarantee with properties of the same type to
meet this minimal index, with the competent contractual addition being
formalized within 30 (thirty) days of it being requested by DESENBANCO.
SIXTEENTH CLAUSE - INSURANCE: During the effective period of the present
contract, the property described in the GUARANTEE clause shall be, to the extent
applicable, insured by the CREDIT RECIPIENT against any risks it is subject to,
in the minimal amount stipulated in the GUARANTEE clause, on the base date of
February of 1996, with DESENBANCO appearing as the beneficiary and trustee of
the respective policies.
SEVENTEENTH CLAUSE - SECURITY: With the payment of the debt formed by the
principal and accessories still being guaranteed, Mr. JOSE HAROLDO CASTRO VIEIRA
and his wife, Mrs. HORSMIDA GUEDES PEREIRA VIEIRA, Mr. WILLIAM CRANE ST. LAURENT
and his wife Mrs. WENDY ANN MOORE, Mr. GEORGES CAMPBELL ST. LAURENT III and the
company VITECH AMERICA, INC. which were qualified in the preamble, assume unto
themselves and their heirs for DESENBANCO, the role of GUARANTORS AND PRINCIPAL
PAYERS of the CREDIT RECIPIENT, with the express waiver of the benefits of
Articles 1.491, 1.493, 1.499, 1.500 and 1.503 of the Brazilian Civil Code and
261 and 262 of the Brazilian Commercial Code, jointly obligating themselves for
the faithful and exact fulfillment of the assumed obligations until the final
liquidation of the debt.
SINGLE PARAGRAPH: Prior to the release of the first draft, VITECH AMERICA, INC.
hereby covenants to submit a notarized and consular approved Letter of Security
as well as a LEGAL OPINION as established in point "a" of the SECOND Clause of
this instrument.
EIGHTEENTH CLAUSE - SURETY: Furthermore, the CREDIT RECIPIENT and the GUARANTORS
AND PRINCIPAL PAYERS hereby nominate each other and designate each other legal
representatives, with sufficient and special powers being conferred on them so
that any of them may receive a judicial summons on behalf of the others in any
suit relating to the present contract.
NINETEENTH CLAUSE - GENERAL OBLIGATIONS OF THE CREDIT RECIPIENT: THE CREDIT
RECIPIENT further covenants to: a) Apply the financing solely and exclusively on
the undertakings that have been approved by the Board of Directors of DESENBANCO
and in accordance with the Timetable of Investments and Disbursements (Appendix
II), with the proper application of the previously used part being verified
prior to the release of each part of the credit after
<PAGE>
13
the first part, in addition to the corresponding book entry of its own
resources, in the constant values of the Timetable of Investments and
Disbursements project [?]. b) Facilitate free and total access to its
installations to DESENBANCO and/or BNDES for the technicians and experts they
indicate and written [?], so that the correct application of its own resources
and of the financing resources are subject to fiscal inspection in the execution
of the project, paying the taxes and fees on all legal accounting records and
documents or ones of any type, all dependencies of its establishment, keeping
documents that are proof of the expenses incurred with resources from the
financing available for future verification and the book entry of its own
resources under penalty of advance expiration of this title. c) Reimburse
DESENBANCO for the expenses that same is obligated to incur in order to be
informed of the company's situation, whenever said expenses were not duly
provided and within the period that DESENBANCO stipulates. d) Supply with its
own resources the additional needs to cover possible insufficiencies in the
overall budget of the project that is established in the Timetable of
Investments and Disbursements. e) Meet the requirements that were imposed on it
by DESENBANCO'S agents in order to fulfill all of the clauses of this title. f)
Place in its establishment, in a location that is visible to the public, at its
own expense, a plaque that highlights the financial collaboration of DESENBANCO
and of BNDES, following the models that the former provided, and make express
reference to said collaboration whenever it does publicity for its undertaking.
g) Observe and accept as an integral part of the present instrument the Norms
Common to the Operations of DESENBANCO, which it states it knows, as well as the
"Applicable Provisions to the Contracts of the BNDES," that have been approved
by Resolution No. 665/87, of December 10, 1987, partially altered by Resolution
No. 775 of December 16, 1991, by Resolution No. 842 of June 29, 1995, and by
Resolution No. 847 of October 1, 1995, all of these by the Board of Directors of
the BNDES, which were published in the Diario Oficial (Official Diary) of the
Union, Section I of December 29, 1987, December 27, 1991, August 7, 1995 and
October 18, 1995, respectively, and furthermore, the other obligations
stipulated for operations in the area of the BNDES / AUTOMATICO. h) If and
whenever necessary, sign with DESENBANCO added terms to the present instrument,
to adapt it to new conditions to be set by the Public Authority, especially by
the National Monetary Council that may come to inspect operations of the type
contracted herein. i) Reimburse DESENBANCO for payments made to the BNDES in the
quality of a Credit Reserve Commission whenever the CREDIT RECIPIENT has given
grounds for said payment. j) Keep the payment of all obligations of a tax,
worker, social security and social welfare nature current, including the
collection of contributions for the Program of Social Integration - PIS, and
showing the BNDES or DESENBANCO the respective verifying documents, whenever
they are required of them, as well as submitting, if requested, proper proof of
compliance with the obligation of any type that it is subject to by legal or
regulatory stipulation. l) Give prompt notice to DESENBANCO of any occurrence
that modifies the project or the Timetable of Investments and Disbursements,
indicating the measures that it deems must be taken. m) Keep separate records of
all applications of resources in the project, including all of the sources that
have been used. n) Fulfill, upon signing this Contract, what is stipulated in
the legislation referring to the National Policy of the Environment (Law No.
6938 of August 31, 1981 and Complementary Norms), taking the measures and
actions that are appropriate to avoid or remedy damages caused by
<PAGE>
14
the financed project. o) Verify the proper application of the project as well as
compliance with the legislation on the Environment mentioned in the previous
point within a period of up to 240 (two hundred forty) days after the release of
the credit.
TWENTIETH CLAUSE - SURETY: Provided that it is requested by the BNDES,
DESENBANCO covenants to provide the former with a surety of the guarantees that
are constituted by means of this Contract.
TWENTY-FIRST CLAUSE - DISTRICT: The contracting parties elect the district of
the Region of Salvador to resolve any lawsuit arising from the execution of the
present instrument.
TWENTY-SECOND CLAUSE: The CREDIT RECIPIENT shall have sole responsibility for
payment of the tax on Financial Operations.
So said they...
D E C L A R A T I O N
We declare, for the purposes of what is stipulated in Article 1, clause V and
paragraph 1, point "c" of Decree No. 99.476 of 8/24/90 that the company
BAHIATECH - BAHIA TECNOLOGIA LTDA., CGC/MF No.00.588.216/0001-10, with its
headquarters and central office in the city of Ilheus, in this State, at Rua E
Quadra Industrial Q, [illegible lines] HAROLDO CASTRO VIEIRA, CPF No.
042.501.417-72, and the company VITECH AMERICA, INC., a society constituted
under the laws of the State of Florida, in the United States of America, under
No. P93000045800, with its headquarters at 8807 N.W. 23rd Street, Miami,
Florida, USA, represented, in turn, by Mr. GEORGES CAMPBELL ST. LAURENT III, CPF
No. 051.541.497-26, is settled up with the Federal Treasury, including
obligations relating to the FINSOCIAL / COFINS and PIS / PASEP, as well as fines
and other mandatory pecuniary taxes.
We are aware that paragraph 2 of Article 1 of the aforementioned Decree
determines the application of the applicable Civil, Administrative and Criminal
Sanctions in the event of a false declaration.
Salvador, this 2 day of August , 1996
/s/ JOSE HAROLDO CASTRO VIEIRA
CPF No. 042.501.417-72
/s/ GEORGES CAMPBELL ST. LAURENT III
CPF No. 051.541.497-26
<PAGE>
EXHIBIT 11
Vitech America, Inc.
Computation of Earnings Per Common Share
(Unaudited)
Six months ended June 30,
---------------------------------
1996 1995
---------------------------------
Primary earnings per common share:
Net Income $2,704,140 $397,721
Add interest on $2,000,000 convertible
note payable, net of tax 59,400 4,950
---------------------------------
Net income as adjusted for calculation of
primary earnings per share $2,763,540 $402,671
=================================
Weighted average number of common
shares outstanding 8,000,000 8,000,000
Weighted average shares issuable from
assumed exercise of $2,000,000
convertible note payable (A) 503,853 41,988
---------------------------------
Weighted average number of shares, as
adjusted for calculation of primary
earnings per common share 8,503,853 8,041,988
---------------------------------
Primary earnings per common share $0.32 $0.05
---------------------------------
(A) Represents the weighted average of 503,853 shares of common shares from
the assumed conversion of the 2,000,000 convertible note payable on
May 26, 1995.
<PAGE>
EXHIBIT 11
Vitech America, Inc.
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
For Period
June 24, 1993
For the year ended December 31, (inception) to
---------------------------------- December
1995 1994 31, 1993
-------------------------------------------------
<S> <C> <C> <C>
Primary earnings per common share:
Net Income $6,904,834 $149,570 $44,288
Add interest on $2,000,000 convertible
note payable, net of tax 69,300 - -
-----------------------------------------------
Net income as adjusted for calculation of
primary earnings per share $6,974,134 $149,570 $44,288
===============================================
Weighted average number of common
shares outstanding 8,000,000 8,000,000 8,000,000
Weighted average shares issuable from
assumed exercise of $2,000,000
convertible note payable (A) 293,914 - -
-----------------------------------------------
Weighted average number of shares, as
adjusted for calculation of primary
earnings per common share 8,293,914 8,000,000 8,000,000
-----------------------------------------------
Primary earnings per common share $0.84 $0.02 $0.00
-----------------------------------------------
</TABLE>
(A) Represents the weighted average of 503,853 shares of common shares from the
assumed conversion of the 2,000,000 convertible note payable on May 26, 1995.
<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
New York, New York
October 15, 1996
<PAGE>
EXHIBIT 99.1
CONSENT OF JOSEPH K. MEYER
<PAGE>
CONSENT
OF
DIRECTOR
OF
VITECH AMERICA, INC.
The undersigned Director of Vitech America, Inc. (the "Company"), a Florida
corporation, hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
director consents to the inclusion of his name and references to him in the
Registration Statement on Form S-1 filed by Vitech America, Inc., with regard to
becoming a director of the Company upon closing of the Company's initial public
offering.
Dated October 10, 1996.
/s/ Joseph K. Meyer
---------------------------
Joseph K. Meyer
<PAGE>
EXHIBIT 99.2
CONSENT OF H.R. SHEPHERD
<PAGE>
CONSENT
OF
DIRECTOR
OF
VITECH AMERICA, INC.
The undersigned Director of Vitech America, Inc. (the "Company"), a Florida
corporation, hereby consents to the following:
Pursuant to Rule 438 of the Securities Act of 1933, the undersigned
director consents to the inclusion of his name and references to him in the
Registration Statement on Form S-1 filed by Vitech America, Inc., with regard to
becoming a director of the Company upon closing of the Company's initial public
offering.
Dated October 10, 1996.
/s/ H.R. Shepherd
---------------------------
H.R. Shepherd