UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1998
Commission File Number 0-21369
VITECH AMERICA, INC
(Exact name of registrant as specified in its charter)
FLORIDA 65 041 9086
(State of incorporation) (I.R.S. Employer ID No.)
8807 Northwest 23 Street
Miami, Florida 33172-2419
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (305) 477-1161
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
As of May 13 there were 11,070,756 shares of the Common Stock of the
Company, no par value, outstanding.
<PAGE>
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
VITECH AMERICA, INC.
Balance Sheet
Assets
March 31, December 31,
1998 1997
----------------- -----------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 26,666,953 $ 22,704,632
Accounts receivable, net 60,129,181 59,137,869
Inventories, net 35,254,746 34,347,087
Deferred tax asset 756,000 702,000
Due from officers 383,169 370,623
Other current assets 4,887,999 4,676,804
----------------- -----------------
Total current assets 128,078,048 121,939,015
Property and equipment, net 16,125,922 12,946,523
Investments 1,201,257 1,181,632
Goodwill 17,490,624 17,570,705
Deferred tax asset 493,000 493,000
Other assets 1,911,503 1,374,027
----------------- -----------------
Total assets $ 165,300,354 $ 155,504,902
----------------- -----------------
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 15,390,290 $ 15,482,640
Accrued expenses 3,032,481 3,131,670
Current maturities of long-term debt 437,082 350,439
Short-term debt 26,620,767 20,419,169
----------------- -----------------
Total current liabilities 45,480,620 39,383,918
----------------- -----------------
Long-term liabilities
Convertible notes - related party 20,000,000 20,000,000
Convertible notes 38,608,250 38,608,250
Income and sales tax payable 426,000 472,839
Long-term debt 2,616,104 2,004,064
----------------- -----------------
Total long-term liabilities 61,650,354 61,085,153
----------------- -----------------
Commitments and contingencies
Minority interest 1,454,491 1,427,442
----------------- -----------------
Shareholders' equity
Preferred stock, no par value, 3,000,000 shares authorized, no shares issued - -
Common stock, no par value, 30,000,000 shares authorized,
11,068,756 shares issued and outstanding 25,486,848 25,486,848
Retained earnings 31,228,041 28,121,541
----------------- -----------------
Total shareholders' equity 56,714,889 53,608,389
----------------- -----------------
Total liabilities and shareholders' equity $ 165,300,354 $ 155,504,902
----------------- -----------------
</TABLE>
See notes to financial statements
2
<PAGE>
VITECH AMERICA, INC.
Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------
March 31, 1998 March 31, 1997
--------------------- ---------------------
<S> <C> <C>
Net sales $ 33,774,644 $ 16,994,562
Cost of sales 20,707,324 12,026,629
--------------------- ---------------------
Gross profit 13,067,320 4,967,933
Selling, general and administrative expenses 7,137,360 2,441,897
--------------------- ---------------------
Income from operations 5,929,960 2,526,036
--------------------- ---------------------
Other (income) expenses
Interest expense, net 1,057,531 379,282
Discount on sale of receivables 354,648 -
Foreign currency exchange losses 1,125,673 230,991
--------------------- ---------------------
Total other expenses 2,537,852 610,273
--------------------- ---------------------
Income before provision for income taxes and minority interest 3,392,108 1,915,763
Provision for income taxes 258,560 126,609
--------------------- ---------------------
Income before minority interest 3,133,548 1,789,154
Minority interest 27,048 -
--------------------- ---------------------
Net income $ 3,106,500 $ 1,789,154
--------------------- ---------------------
Earnings per common share - Basic:
Net income $ 3,106,500 $ 1,789,154
Weighted common shares 11,068,756 10,726,457
Net income per common share $ 0.28 $ 0.17
--------------------- ---------------------
Earnings per common share - Assuming dilution:
Net income $ 3,106,500 $ 1,789,154
Weighted common shares 11,279,089 10,734,679
Net income per common share $ 0.28 $ 0.17
--------------------- ---------------------
</TABLE>
See notes to financial statements
3
<PAGE>
VITECH AMERICA, INC.
Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
March 31, 1998 March 31, 1997
-------------------- -------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,106,500 $ 1,789,154
Adjustments to reconcile net income to net cash used in
operating activities
Depreciation 410,905 176,424
Amortization of goodwill 219,625 -
Minority interest 27,048 -
Allowance for doubtful accounts (585,444) 206,125
Changes in assets and liabilities
Accounts receivable (405,868) (4,762,503)
Inventories (907,659) (3,930,816)
Deferred tax asset (54,000) (388,122)
Other assets (706,674) (815,652)
Trade accounts payable (92,350) 3,295,665
Accrued expenses (99,189) (137,452)
Due to/from officers (12,546) 600,295
Income and sales taxes payable (41,997) -
-------------------- -------------------
Total adjustments (2,248,149) (5,756,036)
-------------------- -------------------
Net cash from / (used) in operating activities 858,351 (3,966,882)
-------------------- -------------------
Cash flows from investing activities
Purchases of property and equipment (2,413,847) (857,200)
Adjustment to business acquisition valuation (136,000) -
Other investments (19,625) (3,219)
-------------------- -------------------
Net cash used in investing activities (2,569,472) (860,419)
-------------------- -------------------
Cash flows from financing activities
Net proceeds under short-term bank borrowings 7,075,954 4,879,586
Net payments of taxes payable (46,839) (133,479)
Payment of note payable for business acquisition (874,356) -
Net repayment of notes payable (481,317) (46,955)
Net proceeds from sale of common stock - 40,000
-------------------- -------------------
Net cash provided by financing activities 5,673,442 4,739,152
-------------------- -------------------
Net increase / (decrease) in cash and cash equivalents 3,962,321 (88,149)
Cash and cash equivalents - beginning of period 22,704,632 1,757,731
-------------------- -------------------
Cash and cash equivalents - end of period $ 26,666,953 $ 1,669,582
-------------------- -------------------
Supplemental disclosure of cash flow information
Cash paid during the year for
Interest and discount on sale of receivables $ 1,923,044 $ 427,019
--------------------- -------------------
Income taxes $ 80,009 $ 133,479
--------------------- -------------------
Supplemental schedule of non-cash investing and financing activities
Investment in property equipment through financing agreements $ 1,180,000 $ -
--------------------- -------------------
</TABLE>
See notes to financial statements
4
<PAGE>
Vitech America, Inc.
Notes to Financial Statements
March 31, 1998
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 March
31, 1998 should be read in conjunction with the Company's financial statements
as of and for the year ended December 31, 1997, which are included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The financial statements for 1998 and 1997 include the accounts of the Company
and its subsidiaries. All of the Company's sales are concentrated in Brazil. The
Company had no one customer that accounted for in excess of 10% of sales during
three months ended March 31, 1998. During the three months ended March 31, 1997,
approximately 32% of the Company's sales were to one unrelated customer.
Note 2 - Net income per share
- -----------------------------
In 1997, the Financial Accounting Standards Board issued Statement No. 128 (SFAS
128), "Earnings per Share". SFAS 128 replaced the calculation of primary and
fully diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of stock options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the SFAS 128 requirements.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Income Shares Per Share
--------------- --------------- ---------------
<S> <C> <C> <C>
Three months ended March 31, 1998:
Earnings per share - basic $ 3,106,500 11,068,756 $ 0.28
Dilutive securities
Stock options - 165,702 -
Warrants - 44,631 -
--------------- --------------- ---------------
Earnings per share - assuming dilution $ 3,106,500 11,279,089 $ 0.17
--------------- --------------- ---------------
Three months ended March 31, 1997:
Earnings per share - basic $ 1,789,154 10,726,457 $ 0.17
Dilutive securities
Stock options - 4,712 -
Warrants - 3,510 -
--------------- --------------- ---------------
Earnings per share - assuming dilution $ 1,789,154 10,734,679 $ 0.17
--------------- --------------- ---------------
</TABLE>
The effects on earnings per share of the 10% convertible notes, which are
convertible into 3,627,679 shares of common stock, would have been antidilutive
and therefore are not included in the computations.
For the three month period ended March 31, 1998, there were 3,000,000
outstanding stock options not included in the computation of diluted earnings
per share of common stock because the options' exercise prices were greater than
the average market price of the common shares. For the three month period ended
March 31, 1997, there were 3,070,000
5
<PAGE>
outstanding stock options and 211,000 warrants not included in the computation
of diluted earnings per share of common stock because the options and warrants'
exercise prices were greater than the average market price of the common shares
Note 3 - Accounts receivable
- ----------------------------
Accounts receivable consisted of the following:
March 31,
1998
---------------
Consumer receivables - Class I (a) $ 14,730,125
Consumer receivables - Class II (b) 14,701,065
Trade accounts receivables 32,298,257
---------------
61,729,447
Allowance for doubtful accounts 1,600,266
---------------
$ 60,129,181
---------------
Consumer receivables are receivables generated through the Company's 10X plan
which enables customers to enter into a consumer contract with the Company
whereby the customer makes equal monthly payments over a specified term ranging
from 2 to 24 months. Such consumer receivables are categorized as follows:
(a) Class I consumer receivables represent accounts receivable for
which the Company has received post dated checks to be held for
deposit. Such post dated checks are applied against the receivable
and held as a security interest until the maturity of the
receivable.
(b) Class II consumer receivables represent consumer contracts which
specify payment on certain dates over the maturity of the
contract.
Trade accounts receivable represent normal trade receivables generated through
commercial sales at various terms ranging from 0 to 180 days.
Note 5 - Inventories
- --------------------
Inventories are summarized as follows:
March 31,
1998
-----------------
Consigned inventories $ 4,173,954
Finished goods 8,447,635
Work in process 1,090,583
Components in the factory 15,581,608
Components in transit (a) 6,477,420
-----------------
35,771,200
Less allowance for obsolescence 516,454
-----------------
$ 35,254,746
-----------------
(a) Components in transit consist of inventories in the Company's Miami,
Florida facility and inventories in route to the Company's factories in
Brazil.
Note 6 - Stock options
- ----------------------
In January 1998, the Company granted options to purchase 30,000 shares of the
Company's common stock at an exercise price of $15.50 per share to Directors of
the Company. The options were granted pursuant to the provisions of the
Company's 1996 Stock Option Plan.
6
<PAGE>
ITEM 2.
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 report.
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 sales:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Net sales 100% 100%
Cost of sales 61.3 70.8
Gross profit 38.7 29.2
Selling, general and
administrative expenses 21.1 14.4
Income from operations 17.6 14.9
Net interest and financing expense 4.2 2.2
Foreign currency exchange losses 3.3 1.4
Net Income 9.2 10.5
</TABLE>
Net sales increased by $16,780,082, or approximately 99%, to
$33,774,644 for the first quarter ended March 31, 1998 as compared to
$16,994,562 for the quarter ended March 31, 1997. Such increase in sales was
primarily attributable to increased demand by the Company's customers, the
expansion of the Company's direct end-user sales strategy and the expansion of
the Company's sales through new channels and into new markets. The acquisition
of Microtec Sistema Industria e Comercio S.A., which is the oldest PC
manufacturer in Brazil, has enabled the Company to expand into the corporate and
government markets offering complete integrated solutions from high-end network
servers to low-end workstations. Additionally, the acquisitions of two retail
and distribution operations in the fourth quarter of 1997 strengthened the
Company's direct relationship end-users in the consumer market.
Cost of sales during the first quarter ended March 31, 1998 were
$20,707,324, representing 61.3% of the sales during the period, as compared to
$12,026,629 for the quarter ended March 31, 1997, representing 70.8% of sales
for the period. The decrease in cost of sales as a percentage of sales during
the quarter ended March 31, 1998, when compared to the quarter ended March 31,
1997, was attributable to the expansion of the Company's end-user sales strategy
which has provided the Company with better control over its margins through the
elimination of distribution layers and the retention of pricing power. The
decrease was also attributable to the Company's product mix. As the Company has
expanded into the corporate and government markets with integrated network
solutions, there were a higher percentage of networking products which, have a
higher margin, included in its sales mix. Also contributing to the reduction in
cost of sales as a percentage of sales was the Company's reduction of consumer
electronics in its product mix. Contract manufacturing of consumer electronics
represents a lower margin sale than that of the Company's core products,
personal computers. The Company phased out the contract manufacturing in July
1997 and as a result, none of the sales during the quarter ended March 31, 1998
resulted from such business. During the quarter ended March 31, 1997,
approximately 32% of the Company's sales resulted from the contract
manufacturing of consumer electronics.
Selling, general, and administrative expenses increased by $4,695,463,
or approximately 192%, to $7,137,360 for the quarter ended March 31, 1998 as
compared to $2,441,897 for the quarter ended March 31, 1997. The increase was
primarily attributable to the acquisition of Microtec and to the increased costs
associated with expanding the Company's manufacturing capacity as well as the
increase in operating expenses to meet the demands of the Company's growth.
Selling, general, and administrative expense as a percentage of sales was 21.1%
for the quarter ended March 31, 1998, compared to 14.4% for the quarter ended
March 31, 1997. Such increase was primarily attributable to the acquisition of
Microtec and the incorporation of their general and administrative expenses into
the Company's operations which more than offset the Company's increases in
sales. Also contributing to the increase in selling, general, and administrative
expenses as a percentage of sales was the increased marketing expenditures
associated with the Company's direct end-user sales strategy and the increased
operating expenses associated with selling higher end integrated network
systems. While the level of these expenses in future years can not be predicted
and is dependent in large part upon the Company's success in implementing its
7
<PAGE>
business strategy, management anticipates that the increased expenses will be
offset by the increases in revenues resulting from the expansion of distribution
channels.
Income from operations increased by $3,403,924, or approximately 135%,
to $5,929,960 for the quarter ended March 31, 1998 as compared to $2,526,036 for
the quarter ended March 31, 1997. Such increase was primarily attributable to
the aforementioned increase in 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 17.6% for the quarter ended March 31, 1998 from 14.9% for the
quarter ended March 31, 1997. 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.
Net interest and financing expense increased by $1,032,897, or
approximately 272%, to $1,412,179 for the quarter ended March 31, 1998 as
compared to $379,282 for the quarter ended March 31, 1997. This increase was
primarily attributable to the Company's increased use of debt financing and the
sale of accounts receivable to support its working capital needs.
During the quarter ended March 31, 1998, the Company experienced a
foreign currency exchange loss of $1,125,673 from the settlement of certain
receivables and payables denominated in the Brazilian Real and the translation
of financial statements from the Real to the U.S. Dollar as compared to $230,991
during the quarter ended March 31, 1997. At March 31, 1998, the Commercial
Market Rate for the real was R$1.1374 per US$1.00 as compared to R$1.1164 per
US$1.00 at December 31, 1997.
Net income increased by $1,317,346, or approximately 74%, to $3,106,500
for the quarter ended March 31, 1998 as compared to $1,789,154 for the quarter
ended March 31, 1997. The increase in net income was primarily attributable to
the aforementioned increase in income from operations which more than offset
increases in interest and financing expense and foreign currency exchange
losses. Net income as a percentage of sales decreased to 9.2% for the quarter
ended March 31, 1998 from 10.5% for the quarter ended March 31, 1997. This
decrease was primarily attributable to the increases in interest and financing
expense as a percentage of sales and foreign currency exchange losses as a
percentage of sales which more than offset the increase in income from
operations as a percentage of sales. Net income per common share assuming
dilution increased by $0.11, or 65%, to $0.28 for the quarter ended March 31,
1998 as compared to $0.17 for the quarter ended March 31, 1997.
Hedging Activities
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. Currently, the
Company is not engaged in any hedging activities, however, the Company is
constantly monitoring its exposure to currency risks and plans to use hedging
activities to offset currency risks as it deems appropriate. 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.
Liquidity and Capital Resources
The Company's primary cash requirements have been to fund increased
levels of inventories and accounts receivable. During the quarter ended March
31, 1998, the Company used cash generated from operations and short-term bank
borrowings to finance its working capital needs.
At March 31, 1998, the Company had a working capital surplus of
$82,597,428 compared to $82,555,097 at December 31, 1997. This increase in
working capital was primarily attributable to the increased levels of accounts
receivable and the increased levels of inventory which more than offset the
increases in trade accounts payable and short-term debt.
Net cash generated by operating activities for the quarter ended March
31, 1998 was $858,351 as compared to $3,966,882 in cash used by operating
activities during the quarter ended March 31, 1997. The increase in cash
generated was primarily attributable to the increases in net income which more
than offset the increases in accounts receivable, inventories and other assets.
Net cash used in investing activities was $2,569,472 for the quarter
ended March 31, 1998. Such use of cash was primarily related to the purchase of
production equipment associated with the expansion of the Company's
manufacturing capacity and the acquisition of facilities.
8
<PAGE>
Net cash provided from financing activities was $5,673,442 for the
quarter ended March 31, 1998 and resulted primarily from short-term borrowings
at various banks in Brazil.
The Company has a line of credit in the amount of $1,200,000 with
Eastern National Bank in Miami, Florida, with which the Company maintains its
primary banking relationship. $200,000 of such line is a working capital line
and $1 million is a trade finance line used to support letter of credits which
the Company may issue to secure purchase obligations. The trade finance 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 certain property owned by
the Company. As of March 31, 1998, there was nothing owing under such facility.
As of March 31, 1998, the Company had $26,620,767 in short-term borrowings from
various banks in Brazil with rates of interest ranging from 1% to 2% per month
and maturing on a revolving basis through July 1998.
In March 1998, the Company entered into a capital lease agreement for
$1,180,000 for the purchase of manufacturing equipment. The capital lease has a
term of 60 months and bears an adjustable interest rate (currently 9.9%). In
March 1998, the Company acquired real estate and building valued at
approximately $1,590,000 located in the state of Sao Paulo, Brazil. The Company
intends to use such facilities as a retail and technical support center.
In connection with its acquisition of Microtec, the Company recorded a
provision for costs relating to the involuntary termination and relocation of
Microtec employees in the amount of $1.1 million. Such provision is associated
with the Company's plans to cease certain manufacturing operations at Microtec's
facility and consolidate all of the manufacturing of the Company at its facility
in Bahia. During the quarter ended March 31, 1998, the Company incurred
approximately $50,000 related to such provision.
The Company recognizes the need to insure that its operations will not
be adversely impacted by Year 2000 software failures due to processing errors
potentially arising from calculations using the year 2000. In 1997, the Company
began the development of a plan for the implementation of upgrades to existing
system applications as well as the addition of new system applications. The
Company anticipates that this plan will be completed by the second quarter of
1999. The Company is also in contact with suppliers to assess their compliance
with Year 2000 issues. There can be no assurance that there will not be a
material adverse effect on the Company if third parties do not convert their
systems in a timely manner and in a way that is compatible with the Company's
systems.
The Company believes that the costs of administering its Year 2000
readiness plan, exclusive of customer claims, will not have a material adverse
impact on the Company's operations. Since there is no uniform definition of Year
2000 "compliance" and since all customer situations cannot be anticipated,
particularly those involving third party products, the Company may experience an
increase in warranty and other claims as a result of the Year 2000 transition.
To maintain historical levels of growth, the Company may need to seek
additional funding through public or private financing and may, when attractive
sources of capital become available, elect to obtain capital in anticipation of
such needs. Adequate funds for growth through internal expansion and through
acquisitions may not be available when needed or may not be available on terms
favorable to the Company. If additional funds are raised by issuing equity
securities or related instruments with conversion or warrant features, dilution
to existing shareholders may result. If funding is insufficient, the Company may
be required to delay, reduce the scope of or eliminate some or all of its
expansion programs. In addition, the Company has in the past sought funding
through related third parties to the Company's management and there can be no
assurance that these sources can be relied upon in the future. Based on the
Company's operating plan, the Company believes that the projected cash flows
from operations and the existing and contemplated sources of financing will be
sufficient to satisfy its capital requirements for 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. Also, there can be no assurance that such contemplated sources will
be available at the time they are needed. In any of such events, the Company may
be unable to implement its current plans for expansion.
Statements contained in this report that are not based on historical
fact are "forward-looking statements" within the meaning of the private
securities litigation reform act of 1995. Forward-looking statements may be
identified by the use of forward looking terminology such as "may," "will,"
"expect," "believe," "estimate," "anticipate," "continue," or similar terms or
variations of those terms or the negative of those terms. There are many factors
that affect the Company's business and the results of its operations and may
cause the actual results of operations in future periods to differ materially
from those currently expected or desired. These factors include, but are not
limited to: receipt and fulfillment of expected orders, changes in general
business and economic conditions, the growth of segments in which the Company
operates, market volatility; the effectiveness of price and other competition
faced by the Company; the market acceptance of the Company's
9
<PAGE>
products and the timing of such acceptance; the change in customers' buying
patterns; changes in the Company's sales practice; the raising of capital and
other important factors.
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," 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 has, at times,
used 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 years 1997, 1996 and 1995 were 7.5%, 10.3% and 22%, respectively.
10
<PAGE>
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On April 27, 1998 the Company completed the sale of $25 million of its
accounts receivable to Technology Acceptance Corp. (TAC), a Cayman Islands
special purpose corporation, for $20 million in cash and $5 million in
subordinated notes. TAC, in turn, closed the $20 million first series of a $150
million collateralized global medium term note program which is collateralized
by the purchased accounts receivable.
The first series of Notes were offered by TAC with six month to three
year maturities. The Notes are collateralized by real denominated accounts
receivable arising from the sales of computer equipment and related products in
Brazil by subsidiaries of Vitech America, Inc. There is a repurchase provision
whereby Bahiatech-Bahia Tecnologia Ltda., a subsidiary of Vitech, is required to
repurchase the receivable under certain circumstances such as default under the
program, delinquencies or violations of concentration limits. Vitech America
serves as guarantor of the repurchase obligation which enables the program to
have minimal the over-collateralization requirements and to maximize liquidity
of the Senior Notes.
Unibanco-Uniao de Bancos Brasileiros S.A., the arranger of the sale and
Notes program, is the third largest private bank in Brazil. The Bank of New York
is trustee, paying and transfer agent and registrar for the Notes and Banco
Credibanco S.A. is the Brazilian Collateral Agent. Dealers for the first series
were Unibanco-Uniao de Bancos Brasileiros S.A. and Banco Fibra S.A.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by item 601 of Regulation S-K
The following exhibits are filed as part of this report:
Exhibits:
(10.22) Master Sales and Servicing Agreement among Technology
Acceptance Corp., Technology Trust S.A., Bahia Tecnologia
Ltda., Banco Credibanco S.A., and Vitech America, Inc. dated
April 16, 1998.
(27.1) Financial Data Schedule
(b) Reports on Form 8-K.
None.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Vitech America, Inc.
By: /s/ Edward A. Kelly
- ------------------------------------------------
Edward A. Kelly
Chief Financial Officer
(authorized officer and chief accounting officer)
Date: May 15, 1998
12
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.22 Master Sales and Servicing Agreement among Technology Acceptance Corp.,
Technology Trust S.A., Bahia Tecnologia Ltda., Banco Credibanco S.A.,
and Vitech America, Inc. dated April 16, 1998.
27.1 Financial Data Schedule
================================================================================
MASTER SALES AND SERVICING AGREEMENT
Dated as of April 16, 1998
among
TECHNOLOGY ACCEPTANCE CORP.,
as Issuer
and
TECHNOLOGY TRUST S.A.
and
BAHIA TECNOLOGIA LTDA.,
as Seller and Principal Servicer
and
BANCO CREDIBANCO S.A.,
as Brazilian Collateral Agent
and
VITECH AMERICA, INC.,
as Repurchase Guarantor
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1. Definitions.........................................................................................2
SECTION 1.2. Construction of References, etc.....................................................................2
SECTION 1.3. Calculations........................................................................................2
SECTION 1.4. Section References..................................................................................2
SECTION 1.5. No Recourse.........................................................................................3
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Sale of Initial Designated Receivables..............................................................3
SECTION 2.2. Purchases of Additional Designated
Receivables.......................................................................................4
SECTION 2.3. Repurchase Obligation and Substitutions.............................................................6
SECTION 2.4. Repurchase Guarantee................................................................................6
SECTION 2.5. Maintenance of Minimum Overcollateral Ratio.........................................................7
SECTION 2.6. Concentration Limits................................................................................7
SECTION 2.7. Credit Committee....................................................................................7
SECTION 2.8. Representations, Warranties and Covenants
of the Seller and TTSA............................................................................8
ARTICLE III
ADMINISTRATION AND SERVICING OF DESIGNATED RECEIVABLES
SECTION 3.1. Duties of the Principal Servicer...................................................................13
SECTION 3.2. Collection of Designated Receivable Payments;
Collection Banks.................................................................................16
SECTION 3.3. Notice upon Breach of Covenants....................................................................17
SECTION 3.4. Principal Servicer Fee; Payment of
Certain Expenses By Principal Servicer...........................................................17
SECTION 3.5. Principal Servicer Monthly Certificates............................................................17
SECTION 3.6. Annual Statement of Compliance; Notice
of Principal Servicer Termination Event..........................................................18
SECTION 3.7. Access to Certain Documentation and
Information Regarding Receivables................................................................18
SECTION 3.8. Information Delivery Requirements..................................................................19
SECTION 3.9. Retention and Termination of
Principal Servicer...............................................................................19
SECTION 3.10. Representations, Warranties and
Covenants of the Principal Servicer..............................................................19
i
<PAGE>
ARTICLE IV
THE SELLER
SECTION 4.1. Liability of Seller, Indemnities...................................................................22
SECTION 4.2. Merger or Consolidation of, or Assumption
of the Obligations of, the Seller................................................................22
SECTION 4.3. Additional Covenants of the Seller.................................................................23
ARTICLE V
THE PRINCIPAL SERVICER
SECTION 5.3. Liability of Principal Servicer;
Indemnities......................................................................................25
SECTION 5.4. Merger or Consolidation of, or Assumption of
the Obligations of, the Principal Servicer.......................................................26
SECTION 5.5. Limitation on Liability of Principal
Servicer and Others..............................................................................27
SECTION 5.6. Delegation of Duties...............................................................................27
SECTION 5.7. Principal Servicer Not to Resign...................................................................28
ARTICLE VI
PRINCIPAL SERVICER TERMINATION EVENTS
SECTION 6.1. Principal Servicer Termination Event...............................................................28
SECTION 6.2. Consequences of a Principal Servicer
Termination Event................................................................................29
SECTION 6.3. Appointment of Successor...........................................................................30
SECTION 6.4. Notification to Holders............................................................................31
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Amendment..........................................................................................31
SECTION 7.2. Governing Law......................................................................................32
SECTION 7.3. Submission to Jurisdiction and
Appointment of Process Agent.....................................................................33
SECTION 7.4. Severability of Provisions.........................................................................33
SECTION 7.5. Assignment.........................................................................................33
SECTION 7.6. Third-Party Beneficiaries..........................................................................34
SECTION 7.7. Counterparts.......................................................................................34
SECTION 7.8. Intention of Parties...............................................................................34
SECTION 7.9. Notices............................................................................................34
SECTION 7.10. Nonpetition Covenant...............................................................................35
SECTION 7.11. Seller as Agent of the Issuer and TTSA.............................................................35
ii
<PAGE>
Appendix A - Uniform Definitions
Appendix B - Representations and Warranties of the Seller
and TTSA
Appendix C - Credit Manual
EXHIBITS
- --------
Exhibit A- Form of Debenture
Exhibit B- Form of Assignment of Credit Rights
Exhibit C-1 Form of Principal Servicer Monthly Certificate
Exhibit C-2 Form of Independent Accountants Monthly
Certificate
Exhibit D- Form of Collection Report
Exhibit E- Form of Aging Designated Receivables Report
Exhibit F- Form of Scheduled Monthly Payments Report
Exhibit G- Form of Designated Receivables Pool Report
Exhibit H- Form of Affected Receivables Report
Exhibit I- Agreed-Upon Procedures
</TABLE>
iii
<PAGE>
THIS MASTER SALES AND SERVICING AGREEMENT, dated as of April 16, 1998,
(as amended or modified from time to time after the date hereof, this
"Agreement") is made among TECHNOLOGY ACCEPTANCE CORP., a corporation organized
under the laws of the Cayman Islands (the "Issuer"), TECHNOLOGY TRUST S.A., a
corporation organized under the laws of the Federative Republic of Brazil
("TTSA"), BAHIA TECNOLOGIA LTDA., a corporation organized under the laws of the
Federative Republic of Brazil, as Seller and Principal Servicer (in its capacity
as Seller, the "Seller," and its capacity as Principal Servicer, the "Principal
Servicer"), VITECH AMERICA, INC., a corporation organized under the laws of the
State of Florida (the "Repurchase Guarantor") and BANCO CREDIBANCO S.A., a bank
organized under the laws of the Federative Republic of Brazil, not in its
individual capacity but solely as collateral agent (the "Brazilian Collateral
Agent").
PRELIMINARY STATEMENTS
1. The Seller and the Seller Affiliates generate the
Receivables by entering into Sale Agreements with Obligors,
2. The Seller is the legal and beneficial owner of the Receivables,
3. The Seller desires to sell, and TTSA desires to purchase, the
Initial Designated Receivables on the initial Issue Date,
4. TTSA desires to sell, and the Issuer desires to purchase, the
Initial Designated Receivables purchased by TTSA on the initial Issue Date,
5. Thereafter, the Seller desires to sell, and TTSA desires to
purchase, Additional Designated Receivables from time to time in accordance with
the provisions of this Agreement,
6. TTSA desires to sell, and the Issuer desires to purchase, the
Additional Designated Receivables purchased by TTSA from time to time in
accordance with the provisions of this Agreement,
7. The Issuer owns 99.99% of the issued and outstanding capital stock
of TTSA,
8. The Issuer desires to appoint the Seller as Principal Servicer in
respect of the Designated Receivables,
9. Pursuant to the Indenture:
(a) the Issuer may from time to time issue Senior Notes in
Series;
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(b) the Issuer has appointed the Trustee to act as trustee on behalf of
the Noteholders in respect of the Senior Notes; and
(c) the Issuer has assigned all of its right, title and interest in and
to the Designated Receivables and the other Collateral to the Trustee for the
benefit of the Holders of the Senior Notes.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions. For all purposes of this Agreement, the
capitalized terms used herein which are defined in Appendix A hereto have the
respective meanings assigned in such Appendix A.
SECTION 1.2. Construction of References, etc. All references in this
Agreement to designated Sections and other subdivisions are to such designated
Sections and subdivisions of this Agreement. Except as otherwise indicated, all
the agreements or instruments herein defined or referred to shall mean such
agreements or instruments as the same may be supplemented or amended from time
to time or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof. Each Appendix and Exhibit hereto forms a
part of this Indenture as if set forth in the text hereof.
SECTION 1.3. Calculations. All calculations of the amount of interest
accrued on the Senior Notes shall be made on the basis of a 360-day year
consisting of twelve 30-day months and, in the case of an incomplete month, the
number of days elapsed. In the computation of interest and fees payable from a
specified date to a later specified date, unless otherwise indicated the word
"from" means "from and including" and the words "to" and "until" both mean "to
but excluding." All references to the Outstanding Stated Amount of a Receivable
or Net Present Value of a Receivable or any other calculation as of any day
shall refer to the close of business on such day.
SECTION 1.4. Section References. All references to Articles, Sections,
paragraphs, subsections, Appendices and Exhibits shall be to such portions of
this Agreement unless otherwise specified.
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<PAGE>
SECTION 1.5. No Recourse. The obligations of the Issuer under this
Agreement shall be limited to the proceeds of realization of the Collateral and,
in the case of any Series of Senior Notes, the Series Collateral relating to
that Series and to the extent the proceeds of realization of the Collateral and,
as the case may be, the Series Collateral are insufficient to meet the
obligations of the Issuer under the this Agreement in full, the obligations of
the Issuer in respect of such deficit shall be extinguished and no Person shall
have any further claim against the Issuer. Furthermore, no recourse may be
taken, directly or indirectly, with respect to the obligations of the Issuer,
TTSA, the Repurchase Guarantor (except in connection with the Repurchase
Obligation), the Seller or any Servicer under this Agreement or any certificate
or other writing delivered in connection herewith or therewith, against (i) any
owner of a beneficial interest in the Issuer, TTSA, the Repurchase Guarantor,
the Seller (except against the Repurchase Guarantor in connection with the
Repurchase Obligation) or any Servicer or (ii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of any holder of a beneficial
interest in the Issuer, TTSA, the Repurchase Guarantor, the Seller or any
Servicer except as any such Person may have expressly agreed.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Sale of Initial Designated Receivables.
(a) Subject to the terms and conditions of this Agreement, the Seller,
on the initial Issue Date, agrees to sell, assign and transfer to TTSA, and TTSA
agrees to purchase from the Seller, all of the Seller's right, title and
interest in and to the Initial Designated Receivables.
(b) The sale and purchase referred to in Section 2.1(a) shall be
effected by the Seller executing a Seller Assignment of Credit Rights and the
delivery to TTSA and the Principal Servicer of a computer file containing all
relevant information in respect of the Initial Designated Receivables. It is the
intention of the Seller that the transfer and assignment contemplated by this
Agreement and such Seller Assignment of Credit Rights shall constitute a sale of
the Initial Designated Receivables by the Seller to TTSA and, as a result
thereof, the beneficial interest in and title to the Initial Designated
Receivables shall not be part of the Seller's estate in the event of the filing
of a bankruptcy petition by or against the Seller under any applicable
bankruptcy law.
(c) TTSA shall deliver to the Seller as payment for the Initial
Designated Receivables, and the Seller shall accept as payment therefor, the
following consideration:
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<PAGE>
(i) an amount in Reais equal to the Receivables Purchase
Price; plus
(ii) the Debenture that shall have been issued to TTSA by the
Issuer pursuant to Section 2.1(e)(ii).
(d) Subject to the terms and conditions of this Agreement, TTSA, on the
initial Issue Date, agrees to sell, assign and transfer to the Issuer and the
Issuer agrees to purchase from TTSA, all of TTSA's right, title and interest in
and to the Initial Designated Receivables that TTSA shall have acquired from the
Seller pursuant to Section 2.1(a).
(e) The Issuer shall deliver to TTSA, as payment for the Initial
Designated Receivables the following consideration:
(i) an amount in cash in U.S. Dollars equal to the
Receivables Purchase Price; plus
(ii) a U.S. Dollar-denominated Debenture, issued by the
Issuer, substantially in the form of Exhibit A hereto.
(f) The sale and purchase referred to in Section 2.1(d) shall be
effected by TTSA executing a TTSA Assignment of Credit Rights, without recourse
(but without limitation of TTSA's obligations in this Agreement). It is the
intention of TTSA that the transfer and assignment contemplated by this
Agreement and such TTSA Assignment of Credit Rights shall constitute a sale of
the Initial Designated Receivables by TTSA to the Issuer and that as a result
thereof the beneficial interest in and title to the Initial Designated
Receivables shall not be part of TTSA's estate in the event of the filing of a
bankruptcy petition by or against TTSA under any applicable bankruptcy law.
SECTION 2.2. Purchases of Additional Designated Receivables.
(a) Subject to the terms and conditions of this Agreement, the Seller,
on each Subsequent Purchase Date, agrees to sell, assign and transfer to TTSA,
and TTSA agrees to purchase, Additional Designated Receivables.
(b) Each sale and purchase referred to in Section 2.2(a) shall be
effected by the Seller executing a Seller Assignment of Credit Rights and the
delivery to the Principal Servicer of a computer file containing all relevant
information in respect of such Additional Designated Receivables. It is the
intention of the Seller that the transfer and assignment contemplated by this
Agreement and each such Seller Assignment of Credit Rights shall constitute a
sale of the related Additional Designated Receivables from the Seller to TTSA
and that as a result thereof
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<PAGE>
the beneficial interest in and title to such Additional Designated Receivables
shall not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any applicable bankruptcy
law.
(c) As consideration for each sale of Additional Designated
Receivables, TTSA shall pay the Seller an amount equal to the Receivables
Purchase Price therefor. In connection with each such sale of Additional
Designated Receivables to TTSA, and upon any further sale of such Additional
Designated Receivables by TTSA to the Issuer, the Issuer will effect a Debenture
Adjustment. The amount of the Debenture Adjustment will be determined in
accordance with the terms of the Debenture and this Agreement. The Seller agrees
that a Debenture Adjustment will be the sole consideration in respect of any
Additional Designated Receivables that are transferred to TTSA solely in order
to satisfy the Overcollateral Obligation.
(d) Subject to the terms and conditions of this Agreement, TTSA, on
each Subsequent Purchase Date, agrees to sell, assign and transfer to the
Issuer, and the Issuer agrees to purchase from TTSA, any Additional Designated
Receivables sold, assigned and transferred to TTSA by the Seller pursuant to
Section 2.2(a).
(e) Each sale and purchase referred to in Section 2.2(d) shall also be
effected by TTSA executing a TTSA Assignment of Credit Rights, without recourse
(but without limitation of TTSA's obligations in this Agreement). It is the
intention of TTSA that the transfer and assignment contemplated by this
Agreement and each such TTSA Assignment of Credit Rights shall constitute a sale
of the related Additional Designated Receivables from TTSA to the Issuer and
that as a result thereof the beneficial interest in and title to the Additional
Designated Receivables shall not be part of TTSA's estate in the event of the
filing of a bankruptcy petition by or against TTSA under any applicable
bankruptcy law.
(f) As consideration for the Additional Designated Receivables, the
Issuer shall pay TTSA an amount equal to the Receivables Purchase Price,
provided, however, that the consideration for any Additional Designated
Receivables transferred to the Issuer solely in order to satisfy the
Overcollateral Obligation shall be a Debenture Adjustment.
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<PAGE>
SECTION 2.3. Repurchase Obligation and Substitutions.
(a) Any of the following shall be deemed an "Affected Receivable": (i)
any Designated Receivable that has become a Defaulted Receivable, (ii) any
Designated Receivable that ceases to be, or was not at the time of transfer, an
Eligible Receivable, (iii) any Designated Receivable whose sale to TTSA or the
Issuer is contested or challenged, (iv) any Designated Receivable the Obligor of
which (1) is the Obligor in respect of any Receivable (whether or not a
Designated Receivable) that has become a Defaulted Receivable, (2) is, during
any 12-month period, the Obligor in respect of three Delinquent Receivables
(whether or not Designated Receivables), or (3) has announced its inability or
unwillingness to make payment of such Designated Receivable or has in any way
contested or challenged its obligation to pay such Designated Receivable or the
validity or enforceability of the Sale Agreement that gave rise to such
Designated Receivable, and (v) any Designated Receivable whose inclusion in the
Designated Receivables Pool causes the Designated Receivables Pool to be in
violation of the Concentration Limits.
(b) On any Brazilian Business Day on which the Pool of Designated
Receivables contains Affected Receivables (a "Required Repurchase Date"), the
Seller shall repurchase from the Issuer (such obligation, the "Repurchase
Obligation") any Affected Receivable at a price equal to the Repurchase Price
thereof. If the Seller owns any Additional Designated Receivables, the Seller
shall satisfy the Repurchase Obligation by transferring to the Issuer an
aggregate amount of Additional Designated Receivables (each such transfer, a
"Substitution") the Net Present Value of which is equal to the Repurchase Price.
If the Net Present Value of Additional Designated Receivables available to the
Seller to effect a Substitution is less than the Repurchase Price, then the
Seller must apply such Additional Designated Receivables to effect a
Substitution and pay in cash the excess of the Repurchase Price over the Net
Present Value of the Additional Designated Receivables transferred to the Issuer
pursuant to such Substitution. The Seller shall assume all costs related to its
Repurchase Obligation and any Substitutions. Any Receivables Repurchase Price
paid by the Seller pursuant to this Section 2.3(b) shall be deposited into the
Collection Account.
(c) The Seller shall notify the Brazilian Collateral Agent in advance
of the manner in which it intends to discharge its Repurchase Obligation.
SECTION 2.4. Repurchase Guarantee. If the Seller fails to discharge in
full any portion of its Repurchase Obligation on or prior to any relevant
Required Repurchase Date, the Repurchase Guarantor shall, within 24 hours of
such expired Required Repurchase Date, deposit into the Collection Account an
amount in
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Reais equal to the unpaid portion of the Repurchase Price required to be paid by
the Seller pursuant to Section 2.3(b). If required pursuant to the terms of the
Debenture, a Debenture Adjustment will be effected upon any deposit into the
Collection Account made by the Repurchase Guarantor pursuant to this Section
2.4.
SECTION 2.5. Maintenance of Minimum Overcollateral Ratio. On any
Brazilian Business Day that the Overcollateral Ratio is less than the Minimum
Overcollateral Ratio (an "Additional Collateral Date"), the Seller shall (such
obligation, the "Overcollateral Obligation")sell, assign and transfer to TTSA,
and TTSA shall sell, assign and transfer to the Issuer, a sufficient amount of
Additional Designated Receivables so that, upon such sale and assignment and
after giving effect thereto, the Overcollateral Ratio is at least equal to the
Minimum Overcollateral Ratio. Each sale and purchase required to be made
pursuant to this Section 2.5 shall be made in accordance with the provisions of
Section 2.2. The Seller may also satisfy its Overcollateral Obligation by
depositing a sufficient amount of cash in the Collection Account so that, upon
such deposit and after giving effect thereto, the Overcollateral Ratio is at
least equal to the Minimum Overcollateral Ratio.
SECTION 2.6. Concentration Limits. The Seller hereby covenant and agree
that (a) the sum of the Outstanding Stated Amounts of Designated Receivables in
the Designated Receivables Pool due from any one individual may not exceed
U.S.$5,000 (using for purposes of any required currency conversions the
Reference Rate), (b) the sum of the Outstanding Stated Amounts of Designated
Receivables in the Designated Receivables Pool due from any single corporation,
partnership or governmental entity may not exceed 5% of the Aggregate
Outstanding Stated Amount, and (c) the sum of the Outstanding Stated Amounts of
Designated Receivables in the Designated Receivables Pool due from corporate,
partnership and governmental entities may not exceed 50% of the Aggregate
Outstanding Stated Amount. The limitations set forth in this Section 2.6 shall
be referred to as the "Concentration Limits."
SECTION 2.7. Credit Committee. The Seller's credit committee (the
"Credit Committee") shall be composed of one member appointed by the Seller and
one member appointed by Unibanco. Any amendment to the Credit Manual shall
require the written approval of the Credit Committee. All decisions by the
Credit Committee require the unanimous vote of the Credit Committee. The Credit
Committee may consult with any relevant rating agency regarding any matter
related to a rated Series of Notes.
SECTION 2.8. Representations, Warranties and Covenants of the Seller
and TTSA. By its execution of this Agreement and each
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Seller Assignment of Credit Rights, the Seller makes, and by its execution of
this Agreement and each TTSA Assignment of Credit Rights, TTSA makes, the
following representations and warranties and agrees to comply with the following
covenants, on which the Issuer relies in purchasing the Designated Receivables
and in issuing the Senior Notes. Unless otherwise specified, such
representations and warranties shall be true and correct as of each Issue Date
and each Subsequent Purchase Date, as appropriate, and shall survive the sale,
transfer, and assignment of the Designated Receivables to the Issuer.
(a) Affirmative Covenants. Each of the Seller and TTSA agrees that
until all obligations incurred by the Issuer in relation to the Senior Notes
have been fully paid and performed in full, it shall perform the obligations set
forth in this Section 2.8(a).
(i) Necessary action. Each of the Seller and TTSA shall, as
appropriate, take all necessary action to maintain the validity and
enforceability of the relevant Sale Agreements, each Seller Assignment
of Credit Rights and each TTSA Assignment of Credit Rights.
(ii) No claims. (A) The Seller agrees that any claim it may
have against TTSA or the Issuer for monies or assets is, and shall be,
subordinate to the claims of the Noteholders, and that it will not
assert any rights to or against monies owed to it by TTSA or the Issuer
so long as any amount payable in respect of the Senior Notes remains
unpaid, including but not limited to any right to receive payments
(other than amounts payable under the Debenture on any Excess
Overcollateral Date) in respect of the Debenture. (B) TTSA agrees that
any claim it may have against the Issuer for monies or assets is, and
shall be, subordinate to the claims of the Noteholders, and that it
will not assert any rights to or against monies owed to it by the
Issuer so long as any amount payable in respect of the Senior Notes
remains unpaid, including but not limited to any right to receive
payments (other than amounts payable under the Debenture or any Excess
Overcollateral Date) in respect of the Debenture.
(iii) Credit Policy, Origination of Receivables. The Seller
shall at all times maintain, and cause the Seller Affiliates at all
times to maintain, credit policies that are at least as stringent as
its current credit policies set forth in the Credit Manual. The Seller
shall only originate, and cause the Seller Affiliates only to
originate, Receivables in accordance with the credit policies set forth
in the Credit Manual.
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(iv) Insurance. The Seller shall maintain or cause to be
maintained, and cause the Seller Affiliates to maintain or cause to be
maintained, insurance with responsible insurance companies with respect
to its and their properties and business against such casualties and
contingencies and of such types and in such amounts as is customary in
the case of similar businesses.
(v) Arm's Length Transactions. In dealing with affiliates or
related parties, each of the Seller and TTSA shall negotiate and deal
with such affiliates or related parties on an arm's length basis.
(vi) Custody of Delivered Checks. The Seller shall maintain
safe and secure custody of all checks delivered by Obligors under Class
1 Receivables.
(b) Schedule of Representations. Each of the Seller and TTSA represents
and warrants, as of each Issue Date and each Subsequent Purchase Date, that the
representations and warranties set forth in respect of it on Appendix B are true
and correct.
(c) Seller Representations and Warranties. The Seller represents and
warrants, as of each Issue Date and each Subsequent Purchase Date, as to itself:
(i) Organization. The Seller has been duly organized and is
validly existing as a corporation in good standing under the laws of
Brazil, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business
is currently conducted, and had at all relevant times, and now has,
full power, authority and legal right to acquire, own and sell the
Designated Receivables and the other property transferred to TTSA.
(ii) Due Qualification. The Seller is duly qualified and in
good standing in all jurisdictions in which the ownership or lease of
its property or the conduct of its business requires such
qualification, and has obtained and is maintaining in effect all
licenses and approvals required to conduct its business as currently
conducted and to perform its obligations hereunder and under the other
Transaction Documents to which it is a party.
(iii) Power and Authority. The Seller has the corporate power
and authority to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to carry out its terms
and their terms, respectively; the Seller has full corporate power and
authority to sell and assign the Designated Receivables to be sold and
assigned to TTSA by it, and has duly authorized
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such sale and assignment to TTSA by all necessary corporate action; and
the execution, delivery and performance of this Agreement and the
Transaction Documents to which it is a party have been duly authorized
by the Seller by all necessary corporate action.
(iv) Valid Sale; Binding Obligations. This Agreement and each
Seller Assignment of Credit Rights effects, or will effect, a valid
sale, transfer and assignment of the Designated Receivables,
enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement, each Seller Assignment of Credit Rights and
the other Transaction Documents to which the Seller is a party, when
duly executed and delivered, will constitute legal, valid and binding
obligations of the Seller enforceable against the Seller in accordance
with their respective terms.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement, each Seller Assignment of Credit Rights
and the other Transaction Documents to which the Seller is a party and
the fulfillment of the terms of this Agreement, each Seller Assignment
of Credit Rights, and the other Transaction Documents to which the
Seller is a party shall not conflict with, result in any breach of any
of the terms and provisions of, or constitute (with or without notice,
lapse of time or both) a default under the bylaws of the Seller, or any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Seller is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement and the Indenture, or
violate any law, order, rule or regulation applicable to the Seller of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Seller or any of its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending or, to the Seller's knowledge, threatened
against the Seller before any court, regulatory body, administrative
agency or other tribunal or governmental instrumentality having
jurisdiction over the Seller or its properties (A) asserting the
invalidity of this Agreement or any of the other Transaction Documents
to which the Seller is a party, (B) seeking to prevent the issuance of
the Senior Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the other Transaction
Documents to which the Seller is a party, or (C) seeking any
determination or ruling that might
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materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement
or any of the other Transaction Documents to which it is a party.
(vii) Chief Executive Office. The registered office of the
Seller is at Rua E, Quadra Industrial Q, Lotes 05/06, 45600-000,
Ilheus, Bahia, Brazil.
(d) TTSA Representations and Warranties. TTSA represents and warrants,
as of each Issue Date, as to itself:
(i) Organization. TTSA has been duly organized and is validly
existing as a corporation in good standing under the laws of Brazil,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, full
power, authority and legal right to acquire, own and sell the
Designated Receivables and the other property transferred to TTSA.
(ii) Due Qualification. TTSA is duly qualified and in good
standing, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualification,
and has obtained and is maintaining in effect all licenses and
approvals required to conduct its business as currently conducted and
to perform its obligations hereunder and under the other Transaction
Documents to which it is a party.
(iii) Power and Authority. TTSA has the corporate power and
authority to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to carry out its terms
and their terms, respectively; TTSA has full power and authority to
sell and assign the Designated Receivables to be sold and assigned to
the Issuer by it, and has duly authorized such sale and assignment to
the Issuer by all necessary corporate action; and the execution,
delivery and performance of this Agreement and the other Transaction
Documents to which it is a party have been duly authorized by TTSA by
all necessary corporate action.
(iv) Valid Sale; Binding Obligations. This Agreement and each
TTSA Assignment of Credit Rights effects, or will effect, a valid sale,
transfer and assignment of the Designated Receivables, enforceable
against TTSA and creditors of TTSA; and this Agreement, each TTSA
Assignment of Credit Rights and the other Transaction Documents to
which TTSA is a party, when duly executed and delivered, will
constitute legal, valid and binding obligations of TTSA
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enforceable against TTSA in accordance with their respective terms.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement, each TTSA Assignment of Credit Rights
and the other Transaction Documents to which TTSA is a party and the
fulfillment of the terms of this Agreement, each TTSA Assignment of
Credit Rights and the other Transaction Documents to which TTSA is a
party shall not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice, lapse of time
or both) a default under the bylaws of TTSA, or any indenture,
agreement, mortgage, deed of trust or other instrument to which TTSA is
a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement and the Indenture, or violate any
law, order, rule or regulation applicable to TTSA of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over TTSA or any of
its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending or, to TTSA's knowledge, threatened against
TTSA, before any court, regulatory body; administrative agency or other
tribunal or governmental instrumentality having jurisdiction over TTSA
or its properties (A) asserting the invalidity of this Agreement or any
of the other Transaction Documents to which the TTSA is a party, (B)
seeking to prevent the issuance of the Senior Notes or the consummation
of any of the transactions contemplated by this Agreement or any of the
Transaction Documents to which TTSA is a party, or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by TTSA of its obligations under, or the validity or
enforceability of, this Agreement or any of the Transaction Documents
to which it is a party.
(vii) Chief Executive Office. The registered office of TTSA is
at Rua Ribeiro de Brito, no. 1111, sala 6, Bairro de Boa Viagem,
51021-310 Recife, Pernambuco, Brazil.
SECTION 2.9. Notice upon Breach of Warranty. Upon discovery by any of
the Seller, TTSA, any Servicer, the Brazilian Collateral Agent or the Issuer of
a breach of any of the representations and warranties set forth on Appendix B
that materially and adversely affects the interests of the Holders in any
Designated Receivable, the party discovering such breach shall give prompt
written notice to the others and the Trustee;
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provided, however, that the failure to give any such notice shall not affect any
obligation of the Seller or TTSA.
SECTION 2.10. Agreed-Upon Procedures. Within 30 days of the date of any
Seller Assignment of Credit Rights, the Seller shall cause the Independent
Accountants (a) to perform, with respect to the Designated Receivables covered
by such Seller Assignment of Credit Rights, the procedures set forth in Exhibit
I hereto and (b) to deliver to the Brazilian Collateral Agent and the Trustee a
report thereon.
ARTICLE III
ADMINISTRATION AND SERVICING OF DESIGNATED RECEIVABLES
SECTION 3.1. Duties of the Principal Servicer.
(a) The Principal Servicer is hereby authorized by the Issuer to act as
agent for the Issuer and in such capacity shall manage, service, administer, and
arrange for Eligible Obligors to make payments on the Designated Receivables in
accordance with the provisions hereof, and perform the other actions required by
the Principal Servicer under this Agreement. The Principal Servicer agrees that
its servicing of the Designated Receivables shall be carried out in accordance
with customary and usual procedures of institutions which service consumer goods
financing and, to the extent more exacting, the degree of skill and attention
that the Principal Servicer exercises from time to time with respect to all
Receivables that it services for itself or others.
(b) The Principal Servicer's duties shall include, without limitation,
responding to inquiries of Eligible Obligors with respect to the Designated
Receivables, investigating delinquencies, engaging in all necessary and
appropriate collection efforts in respect of Delinquent Receivables and
performing the other duties specified herein. The Principal Servicer shall at
all times maintain at its own expense adequate records and computer and
accounting systems and controls to satisfy its duties hereunder.
(c) Consistent with the standards, policies and procedures required by
this Agreement and the Credit Manual, the Principal Servicer shall make all
reasonable efforts to collect all payments called for under the terms and
provisions of the Designated Receivables as and when the same shall become due,
and shall follow such collection procedures as it follows with respect to all
Receivables that it services for itself or others and otherwise act with respect
to the Designated Receivables in such manner as will, in the reasonable judgment
of the Principal Servicer, maximize the amount to be received by the Issuer with
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respect thereto. The Principal Servicer is authorized in its discretion to waive
any late payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Designated Receivable.
(d) Without limiting the generality of the foregoing, the Principal
Servicer is hereby authorized and empowered by the Issuer to execute and
deliver, on behalf of the Issuer, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Designated Receivables; provided,
however, that notwithstanding the foregoing, the Principal Servicer shall not,
except pursuant to an order from a court of competent jurisdiction, release an
Eligible Obligor from payment of any unpaid amount under any Designated
Receivable or waive the right to collect the unpaid balance of any Designated
Receivable from the Eligible Obligor, except that the Principal Servicer may
forego collection efforts if the amount subject to collection is de minimis and
if it would forego collection in accordance with its customary procedures. The
Principal Servicer is hereby authorized to commence, in its own name or in the
name of the Issuer, a legal proceeding to enforce a Designated Receivable or to
commence or participate in any other legal proceeding (including, without
limitation, a bankruptcy proceeding) relating to or involving a Designated
Receivable or an Eligible Obligor. If the Principal Servicer commences or
participates in such a legal proceeding in its own name, the Issuer shall
thereupon be deemed to have automatically assigned such Designated Receivable to
the Principal Servicer solely for purposes of commencing or participating in any
such proceeding as a party or claimant, and the Principal Servicer is authorized
and empowered by the Issuer to execute and deliver in the Principal Servicer's
name any notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceeding. The Issuer
shall furnish the Principal Servicer with any powers of attorney and other
documents which the Principal Servicer may reasonably request and which the
Principal Servicer deems necessary or appropriate and take any other steps which
the Principal Servicer may deem necessary or appropriate to enable the Principal
Servicer to carry out its servicing and administrative duties under this
Agreement.
(e) The Principal Servicer shall take all actions reasonably suggested
by the Independent Accountants, the Collection Banks, the Trustee or the
Brazilian Collateral Agent and the Credit Committee with regard to the
Designated Receivables in order to improve the control and efficient
processing of the collections.
(f) In the event the Principal Servicer shall for any reason no longer
be acting as such, the successor Principal Servicer shall thereupon assume all
of the rights and obligations
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of the outgoing Principal Servicer. The outgoing Principal Servicer shall, upon
request of the Issuer but at the expense of the outgoing Principal Servicer,
deliver to the successor Principal Servicer all documents and records relating
to the Designated Receivables serviced by the outgoing Principal Servicer and an
accounting of amounts collected and held on behalf of the Issuer.
(g) The Principal Servicer shall maintain accounts and records as to
each Designated Receivable accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Designated Receivable,
including payments and recoveries made and payments owing (and the nature of
each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Designated Receivable and the amounts from time to time deposited in
the Collection Account in respect of such Designated Receivable.
(h) The Principal Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Designated
Receivables to the Issuer, the Principal Servicer's master computer records
(including any backup archives) that refer to any Designated Receivable indicate
clearly that such Designated Receivable is owned by the Issuer. Indication of
the Issuer's ownership of a Designated Receivable shall be deleted from or
modified on the Principal Servicer's computer systems when, and only when, the
Designated Receivable has been paid in full or repurchased by the Seller or the
Repurchase Guarantor.
(i) The Principal Servicer shall permit the Trustee or the Brazilian
Collateral Agent at any time to inspect, audit and make copies of and abstracts
from the Principal Servicer's records regarding any Designated Receivables or
any other portion of the Collateral.
(j) The Principal Servicer shall give the Issuer, the Trustee and the
Brazilian Collateral Agent at least 60 days' prior written notice of any
relocation of its principal executive office.
SECTION 3.2. Collection of Designated Receivable Payments;
Collection Banks.
(a) The Principal Servicer shall cause each Check to be deposited in
the Collection Account on the respective Installment Sale Agreement Payment Date
under the Installment Sale Agreement in respect of which such Check was
delivered. The Seller shall pay any fees charged by the Brazilian Collateral
Agent in respect of any returned Checks.
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(b) The Principal Servicer will from time to time appoint Collection
Banks to receive payments on behalf of the Noteholders made in respect of Class
2 Receivables and Class 3 Receivables; provided, however, that the Principal
Servicer will at all times maintain at least one Collection Bank to receive
payments made on Class 2 Receivables and Class 3 Receivables. The Principal
Servicer shall use its best efforts to cause Eligible Obligors to make all
payments in respect of the Class 2 Receivables and Class 3 Receivables directly
to one of the Collection Banks. The Principal Servicer will cause each
Collection Bank to transfer all such payments, with all the pertinent
information relating thereto, to the Brazilian Collateral Agent for credit to
the Collection Account. Each such transfer will occur on the same day that the
payment has been received by the relevant Collection Bank.
(c) The Principal Servicer shall cause each Collection Bank to send, in
a timely manner, carnes to each Class 2 Eligible Obligor identified on a list
electronically delivered by the Principal Servicer. The carnes will provide that
a Class 2 Eligible Obligor may pay the amount reflected on the carne at any
Collection Bank.
(d) Prior to the initial Issue Date and each Subsequent Purchase Date,
as applicable, the Principal Servicer shall send written notice to each
Applicable Class 2 Eligible Obligor of the sale of the related Class 2
Designated Receivable to the Issuer and the name of each Collection Bank at
which the Eligible Obligor shall make payments in respect of the Applicable
Class 2 Designated Receivable. The Principal Servicer will continue, not less
often than every month, to so notify those Eligible Obligors who have failed to
make payments to one of the Collection Banks.
(e) Any payment made by any Eligible Obligors directly to the Principal
Servicer shall be delivered by the Principal Servicer to the Brazilian
Collateral Agent for credit to the Collection Account, in each case as soon as
practicable, but in no event later than the Brazilian Business Day after receipt
thereof by the Principal Servicer.
SECTION 3.3. Notice upon Breach of Covenants. Upon discovery by any
party of a breach of any of the covenants set forth in Section 2.8, the party
discovering such breach shall give prompt written notice to the others and the
Trustee; provided, however, that the failure to give any such notice shall not
affect any obligation of the Principal Servicer.
SECTION 3.4. Principal Servicer Fee; Payment of Certain Expenses By
Principal Servicer. The Issuer shall pay to the Principal Servicer a fee in
Reais equivalent to U.S.$2.00 per Designated Receivable collected on a given
month (the "Principal Servicer Fee"). Acting at the direction of the Principal
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Servicer, the Brazilian Collateral Agent shall transfer to the Principal
Servicer, on a monthly basis, the full amount of the Principal Servicer Fee
owing to the Principal Servicer on the date the Principal Servicer delivers the
Principal Servicer Monthly Certificate. The Principal Servicer shall be required
to pay all expenses incurred by it in connection with its activities under this
Agreement (including taxes imposed on the Principal Servicer Fees).
SECTION 3.5. Principal Servicer Monthly Certificates. By no later than
10:00 a.m., Sao Paulo time, on the fifth Brazilian Business Day of each month
(such day, the "Principal Servicer Report Date"), the Principal Servicer shall
deliver to the Brazilian Collateral Agent and the Trustee a certificate
(substantially in the form of Exhibit C-1) signed by a Responsible Officer of
the Principal Servicer (the "Principal Servicer Monthly Certificate") and
accompanied by a certificate of the Independent Accountants (substantially in
the form of Exhibit C-2) signed by the Independent Accountants(the "Independent
Accountants Monthly Certificate"). The Brazilian Collateral Agent shall review
the information in each Principal Servicer Monthly Certificate to determine
whether a Trigger Event or Event of Default has occurred. The Principal Servicer
Monthly Certificate shall include the following information as of the Accounting
Date preceding the Principal Servicer Report Date:
(i) a Collection Report (substantially in the form of
Exhibit D) with respect to the preceding monthly period;
(ii) an Aging Report (substantially in the form of Exhibit E)
with respect to the aging of past due Designated Receivables as of the
preceding Accounting Date;
(iii) a Scheduled Monthly Payments Report (substantially in
the form of Exhibit F) with respect to past due payments and the
scheduled future monthly payments for the Designated Receivables;
(iv) a Designated Receivables Pool Report (substantially in
the form of Exhibit G) including a calculation of the Overcollateral
Amount and the Overcollateral Ratio as of the preceding Accounting
Date;
(v) an Affected Receivables Report (substantially in the form
of Exhibit H) with respect to the Outstanding Stated Amount and
classification of Affected Receivables as of the preceding Accounting
Date;
SECTION 3.6. Annual Statement of Compliance; Notice of Principal
Servicer Termination Event.
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(a) The Principal Servicer shall deliver to the Brazilian Collateral
Agent and the Trustee on or before November 30 of each year an Officer's
Certificate signed by any Responsible Officer of the Principal Servicer dated as
of October 31 of the current year, stating that (i) a review of the activities
of each of the Principal Servicer and each Subservicer during the preceding 12-
month period (or such other period as shall have elapsed from the initial Issue
Date to the date of the first such certificate) and of its performance under
this Agreement has been made under such Responsible Officer's supervision, and
(ii) to such Responsible Officer's knowledge, based on such review, the
Principal Servicer and each Subservicer has fulfilled all its obligations under
this Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
Responsible Officer and the nature and status thereof.
(b) The Principal Servicer shall deliver to the Issuer, the Brazilian
Collateral Agent and the Trustee, promptly after having obtained Actual
Knowledge thereof, but in no event later than two Brazilian Business Days
thereafter, an Officer's Certificate signed by a Responsible Officer of the
Principal Servicer notifying the Brazilian Collateral Agent and the Trustee of
any event which with the giving of notice or lapse of time, or both, would
become a Principal Servicer Termination Event under Section 6.1. The Brazilian
Collateral Agent shall deliver to the Issuer and the Trustee promptly after
having obtained Actual Knowledge thereof, but in no event later than two
Brazilian Business Days thereafter, an Officer's Certificate notifying the
Issuer and the Trustee of any event which with the giving of notice or lapse of
time, or both, would become a Principal Servicer Termination Event under any
other clause of Section 6.1.
SECTION 3.7. Access to Certain Documentation and Information Regarding
Receivables. The Principal Servicer shall provide to representatives of the
Independent Accountants and the Holders reasonable access to the documentation
regarding the Designated Receivables and to its servicing operations. In each
case, such access shall be afforded without charge but only upon reasonable
request and during normal business hours. Nothing in this Section shall derogate
from the obligation of the Principal Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure of
the Principal Servicer to provide access as provided in this Section as a result
of such obligation shall not constitute a breach of this Section. Any Holder, by
its acceptance of any Senior Note, shall be deemed to have agreed to keep
confidential and not to use for its own benefit any information obtained by it
pursuant to this Section, except as may be required by applicable law.
SECTION 3.8. Information Delivery Requirements. On or before the
twenty-second day of each month, the Principal
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Servicer will deliver to each Collection Bank a computer tape and a diskette (or
any other electronic transmission acceptable to each Collection Bank) in a
format acceptable to the Collection Bank and containing the information with
respect to the Designated Receivables necessary for preparation of the carnes
required to be sent and paid by each Eligible Obligor on the following month in
accordance with the terms of the corresponding Sale Agreement.
SECTION 3.9. Retention and Termination of Principal Servicer. The
Principal Servicer hereby covenants and agrees to act as such until terminated
in accordance with the terms of this Agreement.
SECTION 3.10. Representations, Warranties and Covenants of the
Principal Servicer. By its execution and delivery of this Agreement, the
Principal Servicer makes the following representations and warranties, and
agrees to comply with the following covenants:
(a) The Principal Servicer covenants as follows:
(i) No Impairment. The Principal Servicer shall
do nothing to impair the rights of the Issuer or the
Holders in respect of the Designated Receivables;
(ii) No Amendments. Except as expressly permitted
herein, the Principal Servicer shall not extend, modify, grant
a waiver with respect to, or otherwise amend or permit
exercise of rescission with respect to any Sale Agreement
related to any Designated Receivable; and
(iii) Separation. The Principal Servicer shall
maintain segregated and separate financial books for the
Designated Receivables. The Principal Servicer shall not
create nor distribute any report which includes the Designated
Receivables without segregating the Designated Receivables and
prominently indicating that the Designated Receivables are
owned by the Issuer.
(b) The Principal Servicer represents, warrants and covenants
as of the initial Issue Date and each Subsequent Purchase Date as to
itself:
(i) Organization. The Principal Servicer has been
duly organized and is validly existing and in good standing
under the laws of its jurisdiction of organization, with
power, authority and legal right to own its properties and to
conduct its business as such properties are currently owned
and such business is
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currently conducted, and had at all relevant times, and now
has, full power, authority and legal right to enter into and
perform its obligations under this Agreement;
(ii) Due Qualification. The Principal Servicer is
duly qualified to do business and in good standing in all
jurisdictions in which the ownership or lease of property or
the conduct of its business (including the servicing of the
Designated Receivables as required by this Agreement) requires
or shall require such qualification, and has obtained and
maintains all licenses and approvals required to conduct its
business as currently conducted and to perform its obligations
hereunder and under the Transaction Documents to which it is a
party;
(iii) Power and Authority. The Principal Servicer has
the power and authority to execute and deliver this Agreement
and the Transaction Documents to which it is a party and to
carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the
Transaction Documents to which it is a party have been duly
authorized by the Principal Servicer by all necessary
corporate action;
(iv) Binding Obligation. This Agreement and the
Transaction Documents to which it is a party shall constitute
legal, valid and binding obligations of the Principal Servicer
enforceable in accordance with their respective terms;
(v) No Violation. The consummation of the
transactions contemplated by this Agreement and the
Transaction Documents to which it is a party, and the
fulfillment of the terms of this Agreement and the Transaction
Documents to which it is a party, shall not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default
under, the bylaws of the Principal Servicer, or any indenture,
agreement, mortgage, deed of trust or other instrument to
which the Principal Servicer is a party or by which it is
bound, or result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement and the Indenture, or
violate any law, order, rule or regulation applicable to the
Principal Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental
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instrumentality having jurisdiction over the Principal
Servicer or any of its properties;
(vi) No Proceedings. There are no proceedings or
investigations pending or, to the Principal Servicer's
knowledge, threatened against the Principal Servicer, before
any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction
over the Principal Servicer or its properties (A) asserting
the invalidity of this Agreement or any of the Transaction
Documents to which it is a party, (B) seeking to prevent the
issuance of the Senior Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the
Transaction Documents to which it is a party, or (C) seeking
any determination or ruling that might materially and
adversely affect the performance by the Principal Servicer of
its obligations under, or the validity or enforceability of,
this Agreement or any of the Transaction Documents to which it
is a party;
(vii) No Consents. The Principal Servicer is not
required to obtain the consent of any other party or any
consent, license, approval or authorization, or registration
or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement; and
(viii) Adequate Systems. The Principal Servicer
maintains adequate systems and controls to monitor collections
and delinquencies, provide the reports required hereunder on a
timely basis and perform its duties as Principal Servicer.
ARTICLE IV
THE SELLER
SECTION 4.1. Liability of Seller, Indemnities.
(a) The Seller (in its capacity as such) shall be liable hereunder only
to the extent of the obligations in this Agreement specifically undertaken by
the Seller and the representations made by the Seller.
(b) The Seller agrees to pay, indemnify, and hold the Brazilian
Collateral Agent and the Trustee and each of their directors, officers,
employees and agents harmless, on an after-tax basis, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements (including reasonable fees and
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disbursements of counsel) of any kind or nature whatsoever actually incurred by
the Brazilian Collateral Agent or the Trustee or any such Person in connection
with or arising out of the execution, delivery, enforcement, performance and
administration of this Agreement, unless arising from the bad faith, gross
negligence or willful misconduct of the Brazilian Collateral Agent or the
Trustee, or such of its directors, officers, employees or agents as are seeking
indemnification. The obligations of the Seller under this Section 4.2 shall
survive the termination of this Agreement and the Indenture.
SECTION 4.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller. The Seller shall not merge or consolidate with any
other Person, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the successor
to the Seller's business unless, after the merger, consolidation, conveyance,
transfer, lease or succession, the successor or surviving entity shall be
capable of fulfilling the duties of the Seller contained in this Agreement. Any
corporation (i) into which the Seller may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Seller shall be a party,
(iii) which acquires by conveyance, transfer, or lease substantially all of the
assets of the Seller, or (iv) succeeding to the business of the Seller, in any
of the foregoing cases shall execute an agreement of assumption to perform every
obligation of the Seller under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Seller under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this Agreement
to the contrary notwithstanding; provided, however, that nothing contained
herein shall be deemed to release the Seller from any obligation. The Seller
shall provide notice of any merger, consolidation or succession pursuant to this
Section 4.3 to the Brazilian Collateral Agent and the Trustee. Notwithstanding
the foregoing, the Seller shall not merge or consolidate with any other Person
or permit any other Person to become a successor to the Seller's business,
unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 2.8 shall have been breached
(for purposes hereof, such representations and warranties shall speak as of the
date of the consummation of such transaction), (y) the Seller shall have
delivered to the Issuer and the Brazilian Collateral Agent and the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section 4.3 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and (z) the
Seller shall have delivered to the Brazilian Collateral Agent and the Trustee an
Opinion of Counsel, stating that, in the opinion of such counsel, either (A) all
actions
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necessary to preserve and protect the interest of the Issuer in the
Collateral have been taken or (B) no such action shall be necessary to preserve
and protect such interest.
SECTION 4.3. Additional Covenants of the Seller.
(a) Except as expressly provided under the Indenture, the Seller shall
not create or permit to exist any Lien on the Collateral or the Series
Collateral.
(b) The Seller will continue to engage in activities of the same
general type as described in the Offering Circular.
(c) The Seller shall maintain its existence at all times as a Brazilian
sociedade por quotas de responsibilidade limitada.
(d) Except as permitted hereunder, the Seller will not take any
corporate action for its winding-up, dissolution, reconstruction or
reorganization.
(e) The Seller shall comply in all material respects with all
applicable laws, rules, regulations and orders with respect to it and which may
affect its business and properties, and obtain and keep in force all
authorizations, approvals, licenses, consents or registrations required to
enable it to maintain its business and properties.
(f) The Seller shall notify the Trustee promptly of any material change
affecting any of its representations, warranties, agreements and indemnities in
this Agreement at any time and will take such steps as may reasonably be
requested by the Trustee to remedy the same.
(g) The Seller shall take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable law, and execute or cause to be executed such other documents and
instruments, as may be required to carry out the provisions of this Agreement or
the other Transaction Documents and make effective the transactions contemplated
hereby and thereby.
(h) The Seller shall execute all such other documents and take all such
other steps as may be necessary or advisable for the Trustee, for the benefit of
itself and the Noteholders, to have a first priority security interest in the
Collateral and for the holders of each Series of Notes to have a first priority
security interest in the relevant Series Collateral.
(i) The Seller shall not deposit or otherwise credit, or cause or
permit to be so deposited or credited, to the Collection Account or any Sinking
Fund Account any amount other than any amount that may be required to be
credited to and deposited into
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the Collection Account or any Sinking Fund Account pursuant to the Transaction
Documents.
(j) The Seller shall not cancel or terminate, or purport to cancel or
terminate, any of the Transaction Documents; or amend, modify, supplement or
change in any manner any term or condition of any of the Transaction Documents,
or consent to or waive any violation of a covenant or agreement or breach of
representation or warranty in any of the Transaction Documents or any departure
therefrom, except as expressly allowed under this Agreement and the Indenture.
(k) The Seller shall not take any action or cause any Person to take
any action that would impair in any respect the rights and interests of the
Trustee or any Noteholder in the Collateral or any Series Collateral (except as
expressly authorized by the Transaction Documents), including, without
limitation, granting, or consenting to the exercise by any Person of, any right
of withdrawal, deduction or set-off in respect of or against the Designated
Receivables, the Collection Account or any Sinking Fund Account.
(l) Any payment made by any Eligible Obligors directly to the Seller or
any Seller Affiliate shall be delivered by the Seller to the Brazilian
Collateral Agent for credit to the Collection Account, in each case, as soon as
practicable, but in no event later than the Brazilian Business Day after receipt
thereof by the Seller or any Seller Affiliate.
(m) The Seller shall give the Principal Servicer, the Trustee and the
Brazilian Collateral Agent at least 60 days' prior written notice of any
relocation of its principal executive office.
ARTICLE V
THE PRINCIPAL SERVICER
SECTION 5.1. Audits by Independent Accountants.
(a) The Principal Servicer shall cause the Independent Accountants, who
may also render other services to the Principal Servicer or to the Seller, to
deliver to the Brazilian Collateral Agent and the Trustee, on or before December
15 with respect to the twelve months ended the immediately preceding October 31
(or such other period as shall have elapsed from the initial Issue Date to the
date of such certificate), a statement (the "Accountants' Report") addressed to
the Board of Directors of the Issuer, to the effect that such firm has audited
the financial statements of the Issuer and issued its report thereon and that
such audit was made in accordance with generally accepted auditing standards,
and accordingly included such tests of the
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accounting records and such other auditing procedures as such firm considered
necessary in the circumstances. The Accountants' Report shall also indicate that
the firm is independent of the Issuer, the Seller and the Principal Servicer.
(b) A copy of the Accountants' Report may be obtained by any Holders by
a request in writing to the Trustee addressed to the Corporate Trust Office.
SECTION 5.2. Audited Financial Statements of the Repurchase
Guarantor.
(a) The Principal Servicer shall cause the Repurchase Guarantor to
deliver to the Trustee, for each fiscal year, a copy of the Repurchase
Guarantor's annual report on Form 10-K for such fiscal year, on the date on
which such Form 10-K is filed with the U.S. Securities and Exchange Commission.
(b) A copy of the annual report of the Repurchase Guarantor on Form
10-K may be obtained by any Holders by a request in writing to the Trustee
addressed to the Corporate Trust Office.
SECTION 5.3. Liability of Principal Servicer; Indemnities.
(a) The Principal Servicer shall be liable hereunder only to the extent
of the obligations in this Agreement specifically undertaken by the Principal
Servicer and the representations made by the Principal Servicer.
(b) The Principal Servicer agrees to pay, indemnify, and hold the
Issuer, TTSA, the Brazilian Collateral Agent and the Trustee and each of their
directors, officers, employees and agents harmless, on an after-tax basis, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements (including
reasonable fees and disbursements of counsel) of any kind or nature whatsoever
actually incurred by the Issuer, TTSA, Brazilian Collateral Agent or the Trustee
or any such Person in connection with or arising out of the execution, delivery,
enforcement, performance and administration of this Agreement, unless arising
from the bad faith, gross negligence or willful misconduct of the Issuer, TTSA,
the Brazilian Collateral Agent or the Trustee, or such of its directors,
officers, employees or agents as are seeking indemnification. The obligations of
the Principal Servicer under this Section 5.1 shall survive the termination of
this Agreement and the Indenture.
SECTION 5.4. Merger or Consolidation of, or Assumption of the
Obligations of, the Principal Servicer. The Principal Servicer shall not merge
or consolidate with any other person, convey, transfer or lease substantially
all its assets as an entirety to another Person, or permit any other Person to
become
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the successor to the Principal Servicer's business unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the successor or
surviving entity shall be an Eligible Principal Servicer and shall be capable of
fulfilling the duties of the Principal Servicer contained in this Agreement. Any
corporation (i) into which the Principal Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Principal Servicer
shall be a party, (iii) which acquires by conveyance, transfer, or lease
substantially all of the assets of the Principal Servicer, or (iv) succeeding to
the business of the Principal Servicer, in any of the foregoing cases shall
execute an agreement of assumption to perform every obligation of the Principal
Servicer under this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Principal Servicer under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release the Principal Servicer from any obligation. The Principal
Servicer shall provide notice of any merger, consolidation or succession
pursuant to this Section 5.4 to the Issuer. Notwithstanding the foregoing, the
Principal Servicer shall not merge or consolidate with any other Person or
permit any other Person to become a successor to the Principal Servicer's
business, unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.10 shall have been
breached (for purposes hereof, such representations and warranties shall speak
as of the date of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become a Principal Servicer Termination
Event shall have occurred and be continuing, (y) the Principal Servicer shall
have delivered to the Issuer and the Trustee an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 5.4 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Principal Servicer shall have
delivered to the Issuer and the Trustee an Opinion of Counsel, stating that, in
the opinion of such counsel, either (A) all actions necessary to preserve and
protect the interest of the Issuer in the Collateral have been taken or (B) no
such action shall be necessary to preserve and protect such interest.
SECTION 5.5. Limitation on Liability of Principal Servicer and Others.
Neither the Principal Servicer, nor any of the directors or officers or
employees or agents of the Principal Servicer shall be under any liability to
the Issuer, the Holders, the Brazilian Collateral Agent or the Trustee except as
provided in this Agreement, for any action taken or for refraining from the
taking of any action pursuant to this Agreement; provided,
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however, that this provision shall not protect the Principal Servicer or any
such person against any liability that would otherwise be imposed by reason of a
breach of this Agreement or willful misfeasance, bad faith or negligence in the
performance of duties, by reason of reckless disregard of obligations and duties
under this Agreement or any violation of law by the Principal Servicer, or such
person, as the case may be; provided, further, that this provision shall not
affect any liability to indemnify the Issuer, the Trustee and the Brazilian
Collateral Agent for costs, taxes, expenses, claims, liabilities, losses or
damages paid by the Issuer, the Trustee or the Brazilian Collateral Agent, each
in its individual capacity. The Principal Servicer, and any director, officer,
employee or agent of the Principal Servicer may rely in good faith on the advice
of counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
SECTION 5.6. Delegation of Duties. The Principal Servicer may delegate
duties under this Agreement to an Affiliate of the Principal Servicer or to an
unaffiliated entity(each, a "Subservicer"), provided, however, that no such
delegation or sub-contracting duties by the Principal Servicer shall relieve the
Principal Servicer of its responsibility with respect to such duties.
SECTION 5.7. Principal Servicer Not to Resign. Subject to the
provisions of Section 6.2, the Principal Servicer shall not resign from the
obligations and duties imposed on it by this Agreement as Principal Servicer
except upon a determination that by reason of a change in legal requirements the
performance of its duties under this Agreement would cause it to be in violation
of such legal requirements, and the Majority Noteholders do not elect to waive
the obligations of the Principal Servicer to perform the duties which render it
legally unable to act or to delegate those duties to another Person. Any such
determination permitting the resignation of the Principal Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered and acceptable to
the Issuer and the Trustee. No resignation of the Principal Servicer shall
become effective until a successor Principal Servicer that is an Eligible
Principal Servicer acceptable to the Majority Noteholders shall have assumed the
responsibilities and obligations of the Principal Servicer.
ARTICLE VI
PRINCIPAL SERVICER TERMINATION EVENTS
SECTION 6.1. Principal Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Principal Servicer
Termination Event":
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(a) Any failure by the Principal Servicer to deposit into the
Collection Account any proceeds or payment (including Checks) required
to be so delivered under the terms of this Agreement that continues
unremedied for a period of five Brazilian Business Days; or
(b) Any failure by the Principal Servicer to deliver to the
Brazilian Collateral Agent and the Trustee a Principal Servicer Monthly
Certificate by the fifth Brazilian Business Day following the
Accounting Date, or any failure on the part of the Principal Servicer
to observe its covenants and agreements hereunder; or
(c) A court having jurisdiction in the premises shall enter a
decree or order or relief in respect of the Principal Servicer in an
involuntary case under any applicable bankruptcy, suspension of
payments, insolvency or other similar law now or hereafter in effect,
or appoint a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Principal Servicer for any
substantial part of the property of the Principal Servicer ordering the
winding up or liquidation of the affairs of the Principal Servicer, and
such decree or order shall remain unstayed in effect for a period of 60
consecutive days; or
(d) The Principal Servicer shall commence a voluntary case
under any applicable bankruptcy, suspension of payments, insolvency or
other similar law now or hereafter in effect, or consent to the entry
of an order for relief in an involuntary case under any such law, or
consent to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the Principal Servicer or for any substantial part of the
property of the Principal Servicer, or make any general assignment for
the benefit of creditors; or
(e) Any of the representations and warranties made or deemed
made by the Principal Servicer, or any statement made by it in this
Agreement or any report, certificate or other document delivered by it
pursuant hereto or any other Transaction Document to which it is a
party or in connection therewith or deemed made thereunder, is or
proves to have been incorrect or misleading in any material respect
when made or deemed made; or
(f) The Principal Servicer fails to perform or observe any
term, covenant, agreement, or obligation hereunder on its part to be
performed or observed and, if capable of remedy, such failure remains
unremedied for ten days after the date on which a Responsible Officer
of the Principal Servicer has Actual Knowledge of such failure; or
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(g) Any action or administrative proceeding of or before any
court, arbitrator or governmental agency or authority is commenced, or
any judgment or order is rendered which has or which is reasonably
likely to have a material adverse effect on (A) the Principal
Servicer's business, properties, results of operations or prospects, or
(B) the ability of the Principal Servicer to perform its obligations
hereunder.
SECTION 6.2. Consequences of a Principal Servicer Termination Event. If
a Principal Servicer Termination Event shall occur and be continuing, either the
Issuer or the Majority Noteholders by notice given in writing to the Principal
Servicer (and to the Issuer if given by the Holders) may terminate all of the
rights and obligations of the Principal Servicer under this Agreement. On or
after the receipt by the Principal Servicer of such written notice, all
authority, power, obligations and responsibilities of the Principal Servicer
under this Agreement, whether with respect to the Senior Notes or the Collateral
or otherwise, shall be terminated and automatically shall pass to, be vested in
and become obligations and responsibilities of the successor Principal Servicer
appointed by the Trustee; provided, however, that until a successor Principal
Servicer has been appointed and assumed the responsibilities of the Principal
Servicer hereunder, the outgoing Principal Servicer shall retain all obligations
and responsibilities hereunder and the successor Principal Servicer shall have
no liability with respect to any obligation which was required to be performed
by the terminated Principal Servicer prior to the date that the successor
Principal Servicer becomes the Principal Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Principal Servicer.
The successor Principal Servicer is irrevocably authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Principal
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and the other
Collateral and related documents, to show the Holders as lienholders or secured
party on the related lien certificates, or otherwise. The terminated Principal
Servicer agrees to cooperate with the successor Principal Servicer in effecting
the termination of the responsibilities and rights of the terminated Principal
Servicer under this Agreement, including, without limitation, the transfer to
the successor Principal Servicer for administration by it of all cash amounts
that shall at the time be held by the terminated Principal Servicer for deposit,
or have been deposited by the terminated Principal Servicer in the Collection
Account or thereafter received with respect to the Receivables and the delivery
to the successor Principal Servicer of all Receivable
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Files, Monthly Records and Collection Records and a computer tape in readable
form and on a widely used type of software as of the most recent Brazilian
Business Day containing all information necessary to enable the successor
Principal Servicer to service the Receivables and the other Collateral. The
Issuer and the successor Principal Servicer may set off and deduct any amounts
owed by the terminated Principal Servicer from any amounts payable to the
terminated Principal Servicer. The terminated Principal Servicer shall grant the
Issuer and the successor Principal Servicer reasonable access to the terminated
Principal Servicer's premises at the terminated Principal Servicer's expense.
SECTION 6.3. Appointment of Successor.
(a) On and after (i) the time the Principal Servicer receives a notice
of the election to terminate the Principal Servicer pursuant to Section 6.2, or
(ii) the resignation of the Principal Servicer pursuant to Section 5.5, the
successor Principal Servicer appointed by the Trustee with the consent of the
Majority Noteholders shall be the successor in all respects to the Principal
Servicer in its capacity as Principal Servicer under this Agreement and the
transactions set forth or provided for in this Agreement, and shall be subject
to all the responsibilities, restrictions, duties, liabilities and termination
provisions relating thereto placed on the Principal Servicer by the terms and
provisions of this Agreement. The Issuer and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. If a successor Principal Servicer is acting as Principal
Servicer hereunder, it shall be subject to termination under Section 6.2 upon
the occurrence of any Principal Servicer Termination Event applicable to it as
Principal Servicer.
(b) Any successor Principal Servicer shall be entitled to such
compensation as the Principal Servicer would have been entitled to under this
Agreement if the Principal Servicer had not resigned or been terminated
hereunder.
SECTION 6.4. Notification to Holders. Upon any termination of, or
appointment of a successor to, the Principal Servicer pursuant hereto, the
Issuer shall give prompt written notice thereof to the Trustee who shall give
prompt written notice thereof to the Holders.
SECTION 6.5. Waiver of Past Defaults. The Majority Noteholders may, on
behalf of all Holders of Senior Notes, waive any default by the Principal
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Principal Servicer Termination Event arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement.
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No such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Amendment.
(a) This Agreement may be amended by the Seller, the Principal
Servicer, the Brazilian Collateral Agent, TTSA and the Issuer, with the prior
written consent of the Trustee but without the consent of any of the Holders,
(i) to cure any ambiguity or (ii) to correct or supplement any provisions in
this Agreement; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel, adversely affect in any material respect the interests of
the Holders.
(b) This Agreement may also be amended from time to time by the Seller,
the Principal Servicer, the Brazilian Collateral Agent, TTSA and the Issuer with
the prior written consent of the Trustee and with the consent of the Majority
Noteholders (which consent of any Holder of a Senior Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Senior Note and of
any Senior Notes issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the Senior
Note) for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Senior Notes; provided, however, that no
such amendment shall (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions required to be made on any Senior Note, or (ii) reduce the
aforesaid percentage required to consent to any such amendment or any waiver
hereunder, without the consent of the Holders of all Senior Notes then
outstanding.
(c) Promptly after the execution of any such amendment or consent, the
Issuer shall furnish written notification of the substance of such amendment or
consent to each Holder.
(d) It shall not be necessary for the consent of the Holders pursuant
to Section 7.1(b) to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of the
Holders provided for in this Agreement) and of evidencing the authorization of
the execution thereof by the Holders shall be subject to such reasonable
requirements as the Issuer or the
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Brazilian Collateral Agent, as applicable, may prescribe, including the
establishment of record dates.
(e) Prior to the execution of any amendment to this Agreement, the
Issuer and the Brazilian Collateral Agent shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement, in addition to the Opinion of Counsel
referred to in this Section 7.1(a). The Issuer and the Brazilian Collateral
Agent may, but shall not be obligated to, enter into any such amendment which
affects the Issuer's or the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
SECTION 7.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Brazil, without regard to the
principles of choice of law or conflicts of law thereof and the obligations,
rights and remedies of the parties under this Agreement shall be determined in
accordance with such laws.
SECTION 7.3. Submission to Jurisdiction and Appointment of Process
Agent. Each of the parties hereto irrevocably submits to the non-exclusive
jurisdiction of the Supreme Court of the State of New York, New York County, and
the United States District Court for the Southern District of New York
(including, in each case any appellate courts therefrom), in any suit or
proceeding based on or arising under this Agreement, and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in any such
court. Each of the parties hereto to the extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Each of the parties hereto hereby
irrevocably designates and appoints CT Corporation System, which on the date
hereof has an office located at 1633 Broadway, New York, New York 10019 (the
"Process Agent"), as its authorized agent upon whom process may be served in any
such suit or proceeding. The Repurchase Guarantor shall bear the cost of each
such appointment. Each of the parties hereto further agrees that, to the extent
permitted by applicable law, service of process upon the Process Agent shall be
deemed in every respect effective service of process upon each such party in any
such suit or proceeding. Each of the parties hereto agrees that a final action
in any such suit or proceeding shall be conclusive and to the extent permitted
under applicable law may be enforced in other jurisdictions by suit on the
judgment or in any other lawful manner. If any party hereto has or may hereafter
acquire immunity from jurisdiction or legal process with respect to itself or
its property, such party hereby irrevocably waives to the fullest extent
permitted under applicable law such immunity in respect of its obligations
hereunder in any action which may be instituted in any New York
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State or United States federal court sitting in the Borough of Manhattan, The
City of New York, or in any competent court in Brazil. This waiver is intended
to be effective upon the execution of this Agreement without any further act by
any party hereto, before any such court, and the introduction of a true copy of
this Agreement into evidence in any such court shall, to the fullest extent
permitted by applicable law, be conclusive and final evidence of such waiver.
SECTION 7.4. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Senior Notes
or the respective rights of the Holders thereof.
SECTION 7.5. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 6.2 (and as provided
in the provisions of the Indenture concerning the resignation of the Principal
Servicer), this Agreement may not be assigned by the Seller or the Principal
Servicer without the prior written consent of the Trustee and the Majority
Noteholders.
SECTION 7.6. Third-Party Beneficiaries. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
SECTION 7.7. Counterparts. For the purpose of facilitating its
execution and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
SECTION 7.8. Intention of Parties. The execution and delivery of this
Agreement shall constitute an acknowledgment by the Seller and TTSA that it is
intended that the assignment and transfer herein contemplated constitute a sale
and assignment outright, and not an assignment for security, of the Designated
Receivables and the other Collateral, conveying good title thereto free and
clear of any Liens, from the Seller to TTSA and from TTSA to the Issuer, and
that the Designated Receivables and the other Collateral shall not be a part of
either the Seller's or TTSA's estate in the event of the insolvency,
receivership,
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conservatorship or the occurrence of another similar event, of, or with respect
to, the Seller or TTSA.
SECTION 7.9. Notices. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by certified
mail-return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Seller or the Principal Servicer, at the
following address: c/o Vitech America, Inc., 8807 Northwest 23rd Street, Miami,
Florida, 33172, United States of America; telephone: 305-477-1161 and facsimile:
305-477-7733, (b) in the case of the Trustee at 101 Barclay Street, 12 East, New
York, New York 10284, Attention: Corporate Trust Administration - International
Asset Backed Unit; telephone: 212-815-5120 and facsimile: 212-815-7157, (c) in
the case of the Brazilian Collateral Agent, at Av. Paulista, 1294 - 21 Andar,
01310-100 Sao Paulo, Brazil; telephone: 011-55-11-281-4765, facsimile: 011-55-
11-284-3593, (d) in the case of TTSA: c/o Vitech America, Inc., 8807 Northwest
23rd Street, Miami, Florida, 33172, United States of America; telephone:
305-477-1161, facsimile: (305) 477-1379, and (e) in the case of the Repurchase
Guarantor, at the following address: 8807 Northwest 23rd Street, Miami, Florida,
33172, United States of America; telephone: 305-477-1161, facsimile: (305)
477-1379, or at such other address as shall be designated by any such party in a
written notice to the other parties. Any notice required or permitted to be
mailed to the Holders shall be given by first class mail, postage prepaid, at
the address of each Holder as shown in the Note Register and any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Holders receive such
notice.
SECTION 7.10. Nonpetition Covenant. Neither the Seller, the Principal
Servicer, TTSA or the Repurchase Guarantor shall petition or otherwise invoke
the process of any court or governmental authority for the purpose of commencing
or sustaining a case against the Issuer under any bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Issuer.
SECTION 7.11. Seller as Agent of the Issuer and TTSA. The Seller will
act as the agent for the Issuer and TTSA in respect of any action (including
executing any documents on behalf of the Issuer or TTSA) to be taken by the
Issuer or TTSA pursuant to the terms of this Agreement, subject to the right of
the Issuer or TTSA to terminate such appointment by notice to the Repurchase
Guarantor.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
TECHNOLOGY ACCEPTANCE CORP.,
as Issuer,
By_________________________
Name:
Title:
TECHNOLOGY TRUST S.A.
By_________________________
Name:
Title:
By_________________________
Name:
Title:
BAHIA TECNOLOGIA LTDA.,
as Seller and Principal
Servicer,
By_________________________
Name:
Title:
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BANCO CREDIBANCO S.A.,
as Brazilian Collateral Agent,
By_________________________
Name:
Title:
By_________________________
Name:
Title:
VITECH AMERICA, INC.,
as Repurchase Guarantor,
By_________________________
Name:
Title:
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APPENDIX A
UNIFORM DEFINITIONS
Unless the context otherwise requires, all capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in
this Appendix A for all purposes of the Transaction Documents.
"Acceleration Amount" means the sum of: (i) the outstanding principal
amount of all Series of Senior Notes Outstanding, (ii) all accrued and unpaid
interest on such Senior Notes, and all interest on such Senior Notes to accrue
through the date such Acceleration Amount is scheduled to be paid and (iii) any
and all Additional Amounts with respect to such Senior Notes then payable by the
Issuer and any and all Additional Amounts with respect to the Senior Notes to
accrue through the date on which such Acceleration Amount is scheduled to be
paid, less the amount on deposit in the Sinking Fund Accounts allocable for
payment on the Senior Notes.
"Acceleration Date" has the meaning specified in Section 5.3
of the Indenture.
"Accountants' Report" has the meaning specified in Section 5.1 of the
Master Sales and Servicing Agreement.
"Accounting Date" means the last Brazilian Business Day of each
calendar month.
"Act", when used with respect to any Noteholder, means any request,
demand, authorization, direction, notice or consent, waiver or other action
permitted or required to be given or taken by any Noteholder pursuant to the
Transaction Documents.
"Actual Knowledge" with respect to any Person, means the actual
knowledge, information or belief of a Responsible Officer of such Person, or
information contained in the files, records, books or documents actually
maintained by such Person.
"Additional Amounts" means, with respect to any Series of Senior Notes,
all costs, expenses, taxes, fees and indemnities payable by the Trustee to any
Person in respect of such Series of Senior Notes (or attributable to such Series
of Senior Notes as provided in the next-following sentence) under or with
respect to the Indenture, including, without limitation, to the extent allocable
to such Series:
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(a) all indemnities or other amounts payable under
Section 4.5 of the Indenture,
(b) all interest payable pursuant to Section 5.9 of the
Indenture,
(c) the costs and expenses payable under Section 12.5 of the
Indenture, and
(d) all costs and expenses of the Trustee and the Brazilian
Collateral Agent under the Indenture,
but excluding the principal of and interest on such Series of Senior Notes. For
any Additional Amount described in clauses (a) through (d) above that is
attributable to the Senior Notes generally, the portion thereof attributable to
such Series of Senior Notes will equal such Additional Amount, multiplied by a
fraction, the numerator of which is the aggregate principal amount of such
Series of Senior Notes outstanding as of the Payment Date on which such
Additional Amount first became due and payable and the denominator of which is
the aggregate principal amount of all Senior Notes Outstanding as of such date.
"Additional Collateral Date" has the meaning set forth in Section 2.5
of the Master Sales and Servicing Agreement.
"Additional Designated Receivables" means any additional Eligible
Receivables sold, assigned and transferred by the Seller to TTSA, and,
contemporaneously therewith, sold, assigned and transferred by TTSA to the
Issuer, after the initial Issue Date, pursuant to the terms of the Master Sales
and Servicing Agreement.
"Affected Receivable" has the meaning set forth in Section 2.3(a) of
the Master Sales and Servicing Agreement.
"Affiliate" of any specified Person shall mean any other Person which
directly or indirectly controls, or is controlled by, or is under common control
with, such Person. For the purpose of this definition, the term "control" when
used with respect to any specified Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing.
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"Aggregate Account Balance" means, on any day, the sum of the
Collection Account Balance and each Sinking Fund Account Balance.
"Aggregate Interest Payment Amount" means, with respect to any Interest
Payment Date, the sum of each Interest Payment Amount payable in respect of each
Series of Senior Notes.
"Aggregate Note Payment Amount" means, with respect to any Payment
Date, the sum of each Note Payment Amount due and payable on such Payment Date
in respect of any Series of Senior Notes.
"Aggregate Outstanding Stated Amount" means, on any day, the sum of the
Outstanding Stated Amounts of all Designated Receivables that comprise the
Designated Receivables Pool.
"Aggregate Principal Payment Amount" means, with respect to any
Maturity Date, the sum of each Principal Payment Amount payable in respect of
each Series of Senior Notes.
"Applicable Class 2 Eligible Obligor" means any Eligible Obligor in
respect of Class 2 Receivables whose Installment Sale Agreement was entered into
prior to March, 1998 and does not expressly provide for the transfer of the
related Class 2 Receivables to TTSA.
"Arranger" means Unibanco - Uniao de Bancos Brasileiros S.A. and any
additional arrangers appointed in accordance with the terms of the Dealer
Agreement.
"Assign" has the meaning specified in Section 2.1(a) of the Indenture
and the terms "Assignment" and "Assigned" have correlative meanings.
"Average Dilution Rate" means, on any date, the average of the Monthly
Dilution Rate for the three most recent full months.
"Average Monthly Foreign Exchange Variation" means, on any date, the
average of the Monthly Foreign Exchange Variations for the three most recent
full months whose Monthly Foreign Exchange Variation has reflected a decline in
the value of the Real in relation to the U.S. Dollar.
"Average Loss" means, on any date, the average of the Monthly Losses
for the three most recent full months (the term Loss, used as defined herein, is
not meant to refer to any actual loss).
"Average Yield" means the sum of each Series Weighted Yield.
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"Board of Directors" means either the board of directors of any Person
or any duly authorized committee of that board.
"Brazil" means the Federative Republic of Brazil and any agency,
instrumentality, authority or political subdivision thereof.
"Brazilian Business Day" means each day which is a day on which banks
are not required or authorized to close in Sao Paulo, Brazil.
"Brazilian Collateral Agent" means Banco Credibanco S.A., a bank
organized under the laws of Brazil, or any successor Brazilian Collateral Agent
appointed pursuant to Section 6.11 of the Indenture.
"Brazilian Sinking Fund Account" has the meaning specified
in Section 4.1(b) of the Indenture.
"Business Day" means each day which is a day on which banks are not
required or authorized to close in New York City, New York, London, England or
Sao Paulo, Brazil.
"Carne" means any payment coupon issued by any Collection Bank to any
Eligible Obligor in respect of any Class 2 Receivables.
"Cayman Islands" means the British Dependent Territory of the Cayman
Islands.
"Cedel" means Cedel Bank, Societe Anonyme.
"Check" means any post-dated check given by any Eligible Obligor as
payment for a Class 1 Receivable.
"Class 1 Receivable" means any Eligible Receivable arising under any
Installment Sale Agreement that requires payments to be made by means of
post-dated checks delivered by the Eligible Obligor on the date of such
Installment Sale Agreement.
"Class 2 Receivable" means any Eligible Receivable arising under any
Installment Sale Agreement that requires (a) a promissory note to be delivered
by the Eligible Obligor thereunder on the date of such Installment Sale
Agreement and (b) carnes to be issued to such Eligible Obligor by any relevant
Collection Bank.
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"Class 3 Receivable" means any Eligible Receivable arising under a
duplicata (trade acceptance bill) executed by the Eligible Obligor on the date
of sale.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time, and United States Treasury Regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 2.1(a) of the
Indenture.
"Collection Account" has the meaning specified in Section 4.1(a)(i) of
the Indenture.
"Collection Account Balance" means, on any day, the amount of cash on
deposit in the Collection Account.
"Collection Bank" means any Eligible Bank appointed by the Principal
Servicer to receive payments in respect of Class 2 Designated Receivables or
Class 3 Designated Receivables pursuant to Section 3.2(b) of the Master Sales
and Servicing Agreement.
"Collection Records" means all manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
"Collections" means any payment made in respect of a Designated
Receivable and deposited into the Collection Account.
"Commission" means the United States Securities and Exchange
Commission.
"Common Depositary" has the meaning specified in Section 3.2(a) of the
Indenture.
"Concentration Limits" has the meaning set forth in Section 2.6 of the
Master Sales and Servicing Agreement.
"Consolidated Net Worth" shall mean the consolidated net worth of the
Repurchase Guarantor reflected on its December 31, 1997 balance sheet.
"Corporate Trust Office" means the principal office in the City of New
York of the Trustee from which its trust business shall be administered.
"Credit Committee" has the meaning set forth in Section 2.7 of the
Master Sales and Servicing Agreement.
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"Credit Manual" is the credit manual and procedures of the Seller and
the Seller Affiliates set forth as Appendix C of the Master Sales and Servicing
Agreement.
"Dealer Agreement" means the Dealer Agreement, dated as of April 9,
1998, among the Issuer, the Repurchase Guarantor, the Arranger and the Dealers.
"Dealers" means Unibanco - Uniao de Bancos Brasileiros S.A., Grand
Cayman Branch, Banco Fibra S.A., Nassau Branch and any additional dealers
appointed in accordance with the terms of the Dealer Agreement.
"Debenture" means a U.S. Dollar denominated revolving, bearer debt
instrument, substantially in the form of Exhibit A to the Master Sales and
Servicing Agreement, issued by the Issuer to TTSA, and assigned and transferred
by TTSA to the Seller, the bearer of which is entitled to receive, after the
Final Termination Date, an amount equal to the Overcollateral Amount.
"Debenture Adjustment" means an adjustment to the principal balance of
the Debenture by an amount such that, giving effect to such adjustment, the
principal balance of the Debenture equals the Overcollateral Amount.
"Defaulted Receivable" means any Receivable that, by its terms, is more
than 60 days overdue.
"Definitive Regulation S Notes" has the meaning specified in Section
3.3(e)(i) of the Indenture.
"Delinquent Receivable" means any Receivable that, by its terms, is
more than 30 days overdue.
"Designated Receivable" means any Eligible Receivable that has been
validly transferred by the Seller to TTSA and further validly transferred by
TTSA to the Issuer.
"Designated Receivables Pool" means, on any day, all outstanding
Designated Receivables and excludes any Affected Receivables.
"Dollars" or "U.S. Dollars" or "U.S.$" shall mean the lawful currency
of the United States of America.
"Earnings" means , collectively, all interest, cash, instruments and
other property from time to time received,
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receivable or otherwise distributed in respect of or in exchange for or on
account of any Eligible Investment.
"Eligible Bank" means any Brazilian financial institution having a
long-term unsecured debt rating that is equivalent to a rating of B1 by Moody's
or B+ of Standard & Poor's or Duff & Phelps or any other Brazilian financial
institution that is included in the definition of "Eligible Bank" by the Credit
Committee.
"Eligible Investments" means (i) a certificate of deposit issued by an
Eligible Bank, or (ii) a mutual fund managed by an Eligible Bank that at the
time of the investment would have less than 10% of variable income assets in its
portfolio.
"Eligible Obligor" means any Obligor that complies with the eligibility
requirements set forth in the Credit Manual and (i) if an individual consumer,
is a Brazilian resident; (ii) if a corporate entity, is incorporated under the
laws of Brazil and is not an Affiliate of the Repurchase Guarantor, the Seller,
any Seller Affiliate or any subsidiary of the Repurchase Guarantor; (iii) if a
governmental entity, is a Brazilian governmental entity or any agency,
instrumentality, authority or political subdivision thereof; and (iv) is not the
Obligor under any Delinquent Receivable or Defaulted Receivable.
"Eligible Receivable" means any Receivable (i) arising under a Sale
Agreement under which the Obligor is an Eligible Obligor, (ii) arising in the
ordinary course of business of the Seller or a Seller Affiliate, (iii) that is
not an overdue Receivable, (iv) arising under a Sale Agreement that constitutes
the legal, valid and binding obligation of an Eligible Obligor, (v) that is not
subject to any dispute, offset, counterclaim or defense whatsoever, (vi) that is
not subject to any restriction on the sale or assignment thereof, (vii) that
itself does not, and the Sale Agreement under which it arises does not,
contravene in any material respect any laws, rules or regulations applicable
thereto, and no party to such Sale Agreement, with respect to such Receivable,
is in violation of any such law, rule or regulation, (viii) that satisfies all
applicable material requirements of the Credit Manual, and (ix) in the case of
governmental Receivables arising under duplicatas, has been accepted by such
governmental Obligor.
"Event of Default" has the meaning specified in Section 5.1(b) of the
Indenture.
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"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Exchange Date" has the meaning specified in Section 3.3(d) (ii) of the
Indenture.
"Excess Overcollateral Date" means any Brazilian Business Day on which
the Overcollateral Ratio is equal to or greater than 140%.
"Extra Amounts" has the meaning specified in Section 4.5(a) of the
Indenture.
"Final Termination Date" means the last to occur of any Series
Termination Date with respect to any Series of Senior Notes.
"Holder" or "Noteholder" means the person in whose name such Senior
Note is registered in either the U.S. Register or the Offshore Register.
"Indenture" means the Indenture dated as of April[ ], 1998 among the
Issuer, TTSA, the Repurchase Guarantor, the Brazilian Collateral Agent, the
Trustee and the London Issuing and Paying Agent, as amended, supplemented or
otherwise modified from time to time.
"Independent Accountants" means initially Arthur Andersen or any other
internationally recognized firm of certified public accountants selected by the
Issuer, independent of the Seller and the Repurchase Guarantor and approved by
the Trustee.
"Independent Accountants Monthly Certificate" has the meaning set forth
in Section 3.5 of the Master Sales and Servicing Agreement.
"Initial Designated Receivables" means the Designated Receivables sold
by the Seller to TTSA and further sold by TTSA to the Issuer, in both cases on
the initial Issue Date.
"Installment Sale Agreement" means any Sale Agreement that calls for
payments thereunder to be made in installments.
"Installment Sale Agreement Payment Date" means the date specified in
any Installment Sale Agreement for any payment to be made thereunder.
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"Interest Payment Amount" means, in respect of any Interest Payment
Date for any Series of Senior Notes, the amount of interest in respect of the
outstanding principal amount of such Series of Senior Notes payable on such
Payment Date.
"Interest Payment Date" means any date on which an Interest Payment
Amount in respect of any Series of Senior Notes is payable, as set forth in the
relevant Series Supplement.
"Interest Rate" means, with respect to the Senior Notes of any Series,
the rate of interest specified in the relevant Series Supplement.
"Investment Company Act" means the United States Investment Company Act
of 1940, as amended.
"Issue Date" means, with respect to any Series of Senior Notes, the
date on which such Series of Senior Notes is issued pursuant to the Indenture.
"Issuer" means Technology Acceptance Corp., an exempted company
incorporated under the laws of the Cayman Islands.
"Issuer Order" means a written request or order in the name of the
Issuer by the Seller as agent for the Issuer signed by a Responsible Officer of
the Seller and delivered to a Responsible Officer of the Trustee or the
Brazilian Collateral Agent.
"Legend" has the meaning specified in Section 3.3(h) of the Indenture.
"Lien" means any mortgage, pledge, lien, hypothecation, security
interest or other charge or encumbrance including, without limitation, any
equivalent created or arising under the laws of the United States, Brazil or the
Cayman Islands.
"London Issuing and Paying Agent" means The Bank of New York, London
Branch and any other Issuing and Paying Agent and any successor thereto
appointed pursuant to the Preamble of the Indenture.
"Majority Noteholders" means one or more Noteholder holding at least
51% of the aggregate unpaid principal amount of the Senior Notes of a Series or
of all Series, as the context requires, Outstanding at any time.
"Master Sales and Servicing Agreement" means the Master Sales and
Servicing Agreement, dated as of April 16, 1998, among
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the Issuer, the Repurchase Guarantor, the Seller, TTSA, the Principal Servicer
and the Brazilian Collateral Agent.
"Maturity Date" means, as specified in the relevant Series Supplement,
the maturity date in respect of any Series of Senior Notes.
"Minimum Overcollateral Ratio" means an Overcollateral Ratio
equal to 125%.
"Monthly Dilution Rate" means, with respect to any month, the
percentage determined by dividing (a) the purchase price of any Product returned
within 60 days of the sale thereof by (b) the total amount of revenues generated
by sales of Products by the Seller and the Seller Affiliates in such month.
"Monthly Foreign Exchange Variation" means, with respect to any month,
the percentage increase or decrease in the rate of exchange of the Real to the
U.S. Dollar measured by dividing (a) the rate of exchange announced by the
Central Bank of Brazil on the PCOT 390 screen at the end of the last Brazilian
Business Day of such month by (b) the rate of exchange announced by the Central
Bank of Brazil on the PCOT 390 screen at the end of the last Brazilian Business
Day of the month preceding such month.
"Monthly Loss" means, with respect to any month, the percentage
determined by dividing (a) the sum of the Outstanding Stated Amounts of all
Eligible Receivables that become Defaulted Receivables during such month by (b)
the sum of the Outstanding Stated Amounts of all Eligible Receivables that
matured during the second immediately preceding month (the term Loss, used as
defined herein, is not meant to refer to any actual loss).
"Monthly Records" means all records and data maintained by the
Principal Servicer with respect to the Designated Receivables, including the
following with respect to each Designated Receivable: the account number;
Eligible Obligor name; Eligible Obligor address; Eligible Obligor home phone
number; Eligible Obligor business phone number; original Outstanding Stated
Amount; current Outstanding Stated Amount; current remaining term; origination
date; first payment date; next payment due date; date of most recent payment;
days currently delinquent; past due late charges, if any.
"n", in calculating the Net Present Value of any Receivable, means the
number of days remaining until the maturity of such Receivable, divided by 30.
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"Net Present Value" means the sum of a fraction, the numerator of which
is one less the Average Dilution Rate multiplied by the sum of the Outstanding
Stated Amounts of the Designated Receivables in respect of which such
calculation is being made and the denominator of which is the Average Yield
divided by 12 plus one multiplied by the Average Monthly Foreign Exchange Rate
Variation plus one to the power of the number of months remaining until the
maturity of such Receivables being the result of such division multiplied by one
less the Average Loss.
[ OUTSTANDING (1 - AVG ) ]
NET PRESENT =[ STATED AMOUNT(x) ( DILUTION RATE) ] x (1 - AVG LOSS)
VALUE [ ---------------------------------------------]
[ (1+ AVG YIELD) x (1+ AVG MONTHLY) ]n ]
[ --------- (FOREIGN EXCHANGE VARIATION)]
[ 12 ]
"New York Business Day" means a day on which banks are not required or
authorized to close in New York, New York.
"Note Payment Amount" means in respect of any Payment Date for any
Series of Senior Notes, the sum of (a) the Principal Payment Amount in respect
of the outstanding principal amount of such Series of Senior Notes on such
Payment Date and (b) the Principal Payment Amount of principal scheduled to be
paid on such Series of Senior Notes on such Payment Date.
"Obligor" means the Person or Persons who are obligated to make
payments under any Sale Agreement.
"Offering Circular" means the Issuer's offering circular, dated April
16, 1998.
"Officer's Certificate" shall mean a certificate signed by a
Responsible Officer.
"Offshore Register" has the meaning specified in Section 3.3(a) of the
Indenture.
"Offshore Registrar" has the meaning specified in Section 6.16 of the
Indenture.
"Opinion of Counsel" means an opinion of counsel who is acceptable to
the Trustee. The counsel may be counsel to the Repurchase Guarantor, the Issuer,
TTSA, the Trustee, the Brazilian Collateral Agent or the Noteholders.
"Other Costs" has the meaning specified in Section 15.4(c) of the
Indenture.
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"Outstanding" means, with respect to any Series of Senior Notes, all
Senior Notes issued and outstanding, excluding (a) those canceled, purchased or
otherwise acquired by the Issuer, the Repurchase Guarantor or the Trustee, or
any of the Affiliates of any of them, and (b) Senior Notes in lieu of which
others have been delivered pursuant to the Indenture.
"Outstanding Stated Amount" means, with respect to any Eligible
Receivable, as of any date, the total outstanding amount payable, in Reais, in
respect of such Eligible Receivable.
"Overcollateral Amount" means, on any date, an amount equal to (a) the
sum of (i) the Net Present Value of the Designated Receivables Pool, (ii) the
Aggregate Account Balance and (iii) the current value of all Eligible
Investments minus (b) the sum of the aggregate unpaid principal amount of all
Senior Notes Outstanding. For purposes of calculation of the Overcollateral
Amount, any amounts included in clause (a) of the preceding sentence that are
determined in Reais shall be converted into U.S. Dollars using the Reference
Rate.
"Overcollateral Obligation" means the obligation of the Issuer to
maintain, at all times, an Overcollateral Ratio at least equal to the Minimum
Overcollateral Ratio pursuant to Section 2.5 of the Master Sales and Servicing
Agreement.
"Overcollateral Ratio" means, on any day, the percentage determined by
dividing (a) the sum of (i) the Aggregate Account Balance,(ii) the Net Present
Value of the Designated Receivables Pool, and (iii) the current value of
Eligible Investments, by (b) the sum of the unpaid principal amount of each
Series of Senior Notes Outstanding. For purposes of calculation of the
Overcollateral Ratio, any amounts included in clause (a) of the preceding
sentence that are determined in Reais shall be converted into U.S. Dollars using
the Reference Rate.
"Paying Agent" means the London Issuing and Paying Agent or any other
paying agent appointed pursuant to Section 6.15 of the Indenture.
"Payment Date" means any Interest Payment Date or Maturity Date.
"Payment Obligation" means all principal, interest and Additional
Amounts required to be paid by the Issuer pursuant to the terms of the Indenture
and the Senior Notes.
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"Permanent Regulation S Global Note" has the meaning specified in
Section 3.2(a) of the Indenture.
"Person" means any individual, company, corporation, firm, partnership,
trust, joint venture, association, organization, state or agency of a state or
other entity, whether or not having a separate legal personality.
"Principal Payment Amount" means, as specified in the relevant Series
Supplement, the principal amount of any Series of Senior Notes, in each case
payable on the Maturity Date thereof.
"Principal Servicer" means Bahia Tecnologia Ltda., or any successor
Principal Servicer appointed pursuant to Section 6.3 of the Master Sales and
Servicing Agreement.
"Principal Servicer Fee" has the meaning set forth in Section 3.4 of
the Master Sales and Servicing Agreement.
"Principal Servicer Monthly Certificate" has the meaning set forth in
Section 3.5 of the Master Sales and Servicing Agreement.
"Principal Servicer Report Date" has the meaning specified in Section
3.5 of the Master Sales and Servicing Agreement.
"Principal Servicer Termination Event" means an event described in
Section 6.1 of the Master Sales and Servicing Agreement.
"Process Agent" has the meaning set forth in Section 7.3 of the Master
Sales and Servicing Agreement and in Section 15.11(b) of the Indenture.
"Program Amount" is U.S.$150,000,000.
"Reais," "Real," or "R$" means the legal currency of Brazil.
"Receivable" means the right to receive payments under, and the right
to enforcement of, any Sale Agreement.
"Receivable File" means the documents, electronic entries, instruments
and writings pertaining to a particular Designated Receivable.
"Receivables Purchase Price" means the Net Present Value of any
Receivables purchased by TTSA and the Issuer minus the Principal Servicer Fee
pursuant to Article II of the Master Sales and Servicing Agreement.
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"Record Date" has the meaning specified in Section 3.3(e) of the
Indenture.
"Reference Rate" means the rate of exchange announced by the Central
Bank of Brazil on the PCOT 390 screen at 5:00 p.m. (Sao Paulo time) on the
Brazilian Business Day preceding the date of determination.
"Regulation S" has the meaning specified in Section 3.2(a)
of the Indenture.
"Regulation S Global Note" means each Temporary Regulation S Global
Note, and each Permanent Regulation S Global Note to be issued in registered
form and sold in transactions outside the United States in reliance on
Regulation S.
"Regulation S Notes" means each Temporary Regulation S Global Note,
each Permanent Regulation S Global Note and each Definitive Regulation S Note.
"Repurchase Guarantor" means Vitech America, Inc., a corporation
organized under the laws of Florida.
"Repurchase Obligation" shall have the meaning set forth in Section
2.3(b) of the Master Sales and Servicing Agreement.
"Repurchase Price" means, in respect of any Affected Receivable
required to be repurchased by the Seller pursuant to Section 2.3(b) of the
Master Sales and Servicing Agreement, the Net Present Value thereof on the date
such Affected Receivable was initially sold to the Issuer multiplied by one plus
the Average Monthly Foreign Exchange Variation applied in the calculation of the
original Receivables Purchase Price multiplied by one plus the Average Yield
applied in the calculation of the original Receivables Purchase Price divided by
12, both to the power of the number of days elapsed between the date of the
initial sale and the date of the repurchase divided by 30.
"Required Repurchase Date" has the meaning set forth in Section 2.3(b)
of the Master Sales and Servicing Agreement.
"Responsible Officer" means, with respect to any Person other than the
Trustee, the Brazilian Collateral Agent, the Seller or the Repurchase Guarantor,
a duly elected or appointed, authorized, and acting officer, agent or
representative of such Person. "Responsible Officer" when used with respect to
the Trustee or the Brazilian Collateral Agent means any officer thereof,
including without limitation any vice president, assistant vice president,
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assistant treasurer, assistant secretary or other officer or employee of the
Trustee or Brazilian Collateral Agent responsible for the administration of the
Indenture. "Responsible Officer" when used with respect to the Seller or the
Repurchase Guarantor means, unless the context otherwise requires, the
president, chief executive officer, chief financial officer, vice president,
principal accounting officer or treasurer of the Repurchase Guarantor or other
executive officer of the Repurchase Guarantor who in the normal performance of
his or her operational duties would have knowledge of the subject matter
relating to any certificate, report or notice to be delivered or given under any
Transaction Documents.
"Restricted Period" means, in respect of any Series of Senior Notes,
the period between (i) the date specified in the relevant Series Supplement as
the beginning of such period and (ii)the Maturity Date of such Series of Senior
Notes.
"Rule 144A" has the meaning specified in Section 3.2(b) of the
Indenture.
"Rule 144A Notes" has the meaning specified in Section 3.2(b) of the
Indenture.
"Sale Agreement" means any agreement for the purchase and sale of any
Products between the Seller, or any Seller Affiliate, and any Obligor.
"Securities Act" has the meaning specified in Section 3.2(a)
of the Indenture.
"Seller" has the meaning set forth in the Preamble to the Master Sales
and Servicing Agreement.
"Seller Assignment of Credit Rights" means the Seller Assignment of
Credit Rights, executed by the Seller and TTSA under the laws of Brazil,
substantially in the form of Exhibit B to the Master Sales and Servicing
Agreement, pursuant to which the Seller sells to TTSA the rights to receive
payments under certain identified Designated Receivables.
"Senior Note" means any Note authenticated and delivered under the
Indenture, and includes any Temporary Regulation S Global Note, any Permanent
Regulation S Global Note, any Definitive Regulation S Note and any Rule 144A
Note.
"Series" means any separate series of Senior Notes issued under the
Indenture.
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"Series Collateral" has the meaning specified in Section 2.1(b) of the
Indenture.
"Series Supplement" means, with respect to each Series of Senior Notes,
a Series Supplement, in the form of Schedule 1 to the Indenture, to be delivered
to the Trustee and to the Brazilian Collateral Agent at least three Business
Days prior to each proposed Issue Date of any Series of Senior Notes.
"Series Termination Date" means the date on which all amounts payable
with respect to a Series of Senior Notes have been finally and indefeasibly paid
in full in cash and none of the Issuer, the Repurchase Guarantor or the Trustee
has any remaining obligations under any of the Transaction Documents with
respect to such Series of Senior Notes.
"Series Weighted Yield" means, in respect of any Series, the product of
(a) the Interest Rate for such Series and (b) the percentage determined by
dividing (i) the principal amount Outstanding of such Series by (ii) the
aggregate principal amount of all Series of Senior Notes Outstanding.
"Servicer" means the Principal Servicer and any Subservicer.
"Sinking Fund Account" means any U.S. Sinking Fund Account or Brazilian
Sinking Fund Account.
"Sinking Fund Account Achievement Date" means, during any period that a
Restricted Period is in effect in respect of any Series of Senior Notes
Outstanding, the date on which the Sinking Fund Account Balance of each relevant
Brazilian Sinking Fund Account is at least equal to the Sinking Fund Required
Balance that must be on deposit in each such Brazilian Sinking Fund Account by
the next related Sinking Fund Account Required Balance Date.
"Sinking Fund Account Balance" means, on any day and with respect to
any Sinking Fund Account, the amount of cash on deposit in such Sinking Fund
Account.
"Sinking Fund Required Balance" means, in respect of the Brazilian
Sinking Fund Account established in respect of any Series of Senior Notes, the
required balance (stated in U.S. Dollars) for such Brazilian Sinking Fund
Account as of the related Sinking Fund Required Balance Date, as specified in
the relevant Series Supplement. For purposes of calculating the Sinking Fund
Required Balance, the amount on deposit in Reais in
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the relevant Brazilian Sinking Fund Account shall be converted into U.S. Dollars
using the Reference Rate.
"Sinking Fund Required Balance Date" has the meaning set forth in the
relevant Series Supplement.
"Sinking Fund Schedule" means, with respect to any Sinking Fund
Account, the schedule of Sinking Fund Required Balances set forth in the related
Series Supplement.
"Subsequent Purchase Date" means each date on which Additional
Designated Receivables are sold, assigned and transferred by the Seller to TTSA
and by TTSA to the Issuer.
"Subservicer" means any entity appointed as subservicer pursuant to
Section 5.4 of the Master Sales and Servicing Agreement and any successor
thereto.
"Substitution" has the meaning specified in Section 2.3(b) of the
Master Sales and Servicing Agreement.
"Tax" or "Taxes" has the meaning specified in Section 4.5(a) of the
Indenture.
"Temporary Regulation S Global Note" has the meaning specified in
Section 3.2(a) of the Indenture.
"Transaction Documents" means the Indenture, the Senior Notes, the
Master Sales and Servicing Agreement, each Assignment of Credit Rights and each
Series Supplement and any exhibits, annexes and appendices to such documents.
"Trigger Event" has the meaning specified in Section 5.1 (a) of the
Indenture.
"Trustee" means The Bank of New York, in its capacity as trustee under
the Indenture and any successor in such capacity.
"TTSA" means Technology Trust S.A., a corporation organized under the
laws of Brazil.
"TTSA Assignment of Credit Rights" means the TTSA Assignment of Credit
Rights, executed by TTSA and the Issuer under the laws of Brazil, substantially
in the form of Exhibit B of the Master Sales and Servicing Agreement, pursuant
to which TTSA sells to the Issuer the rights to receive payments under
identified Designated Receivables.
"Unibanco" means Unibanco - Uniao de Bancos Brasileiros S.A., Grand
Cayman Branch.
A-17
<PAGE>
"U.S. Dollars", "Dollars" or "U.S.$" means the legal currency of the
United States of America.
"U.S. Register" has the meaning specified in Section 3.3(b) of the
Indenture.
"U.S. Registrar" has the meaning specified in Section 6.16 of the
Indenture.
"U.S. Sinking Fund Account" has the meaning specified in Section 4.1(c)
of the Indenture.
"Yield to Maturity" means, in respect to any Series of Non Interest
Bearing Notes, the rate specified in the relevant Series Supplement.
A-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VITECH
AMERICA, INC.'S CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 26,666,953
<SECURITIES> 0
<RECEIVABLES> 60,129,181
<ALLOWANCES> 1,600,266
<INVENTORY> 35,254,746
<CURRENT-ASSETS> 128,078,048
<PP&E> 16,125,922
<DEPRECIATION> 410,905
<TOTAL-ASSETS> 165,300,354
<CURRENT-LIABILITIES> 45,480,620
<BONDS> 61,224,354
0
0
<COMMON> 25,486,848
<OTHER-SE> 31,228,041
<TOTAL-LIABILITY-AND-EQUITY> 165,300,354
<SALES> 33,774,644
<TOTAL-REVENUES> 33,774,644
<CGS> 20,707,324
<TOTAL-COSTS> 27,844,684
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,412,179
<INCOME-PRETAX> 3,392,108
<INCOME-TAX> 258,560
<INCOME-CONTINUING> 3,106,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,106,500
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
