<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(A)
(Amendment No. ________)*
VITECH AMERICA, INC.
(Name of Issuer)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
928489103
(CUSIP Number)
WILLIAM M. ELLIOTT, ESQ.
GATEWAY COMPANIES, INC.
4545 TOWNE CENTRE COURT
SAN DIEGO, CA 92121
(858)799-3401
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 16, 1999
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check
the following box. [_]
Note: Schedules filed in paper format shall include a signed original and
----
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
_____________
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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CUSIP NO. 928489103 13D PAGE _____ OF ______ PAGES
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<TABLE>
<S> <C> <C>
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
GATEWAY COMPANIES, INC.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS* WC, OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR
2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
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</TABLE>
<TABLE>
<S> <C> <C>
NUMBER OF 7 SOLE VOTING POWER 3,351,351
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING
PERSON WITH
8 SHARED VOTING POWER -0-
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9 SOLE DISPOSITIVE POWER 3,351,351
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10 SHARED DISPOSITIVE POWER -0-
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</TABLE>
<TABLE>
<S> <C>
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,351,351
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_]
- ----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.6%
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14 TYPE OF REPORTING PERSON* CO
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</TABLE>
* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2
<PAGE>
Item 1. Security and Issuer.
This statement relates to the Common Stock, no par value (the "Common Stock"),
of Vitech America, Inc., a Florida corporation (the "Issuer"). Gateway
Companies, Inc., a Delaware corporation ("Gateway"), has acquired 538,284 shares
of Common Stock and has acquired certain other securities which are convertible
into Common Stock within 60 days of the date of this Schedule 13D. The
principal executive offices of the Issuer are located at 8807 Northwest 23rd
Street, Miami, Florida 33172.
Item 2. Identity and Background.
This statement is being filed by Gateway, which is a corporation organized under
the laws of the State of Delaware. Its principal business and executive office
is located at 4545 Towne Centre Court, San Diego, California 92121. Information
in this schedule is also being disclosed by (i) the directors and executive
officers of Gateway, (ii) Gateway, Inc., a Delaware corporation and 100% parent
of Gateway ("Gateway, Inc."), and (iii) the directors and executive officers of
Gateway, Inc., all of whom are set forth on Appendix A attached hereto and
incorporated herein by reference. Gateway, Inc's principal business and
executive office is located at 4545 Towne Centre Court, San Diego, California
92121.
Gateway is a leading direct marketer of personal computers and related products
and services. Gateway develops, manufactures, markets and supports a broad line
of desktop and portable PCs, digital media (convergence) PCs, servers,
workstations and PC-related products used by individuals, families, businesses,
government agencies and educational institutions.
None of Gateway nor any other person disclosed in response to this Item 2 has
during the last five years been (i) convicted in a criminal proceeding, or (ii)
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to judgment,
decree and final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
On September 16, 1999, pursuant to a Convertible Loan Agreement (the "Loan
Agreement"), Gateway loaned $31 million to the Issuer and received a 10%
Convertible Promissory Note evidencing such loan (the "Promissory Note"). Each
$11.02 outstanding under the Promissory Note is convertible into one share of
the Issuer's Common Stock (subject to adjustment upon the occurrence of certain
events). The source of the funds loaned by Gateway under the Loan Agreement was
Gateway's working capital.
Under the Loan Agreement, the Issuer also issued 538,284 shares of Common Stock
to Gateway as consideration for Gateway's granting of rights to the Issuer to
enter into certain territorial arrangements with Gateway (the "Territorial
Rights Arrangement").
Gateway did not acquire any of the Common Stock or fund the loan evidenced by
the Promissory Note with borrowed funds.
The foregoing descriptions of the Loan Agreement and the Promissory Note are
each qualified in their entirety by the text of such agreements which are
attached hereto as Exhibits 1 and 2, respectively, and which are incorporated
herein by this reference.
Item 4. Purpose of Transaction.
Gateway acquired the Common Stock, the Promissory Note and, if converted, the
Common Stock issuable upon conversion of the Promissory Note as an investment.
The persons other than Gateway described in Item 2 do not own any shares of the
Issuer.
3
<PAGE>
In addition, Gateway was granted an option (the "Gateway Option"), exercisable
prior to September 16, 2001, to (1) extend an additional $40 million convertible
loan to the Issuer on the same terms and conditions as the Promissory Note, with
a conversion price equal to the lower of (x) $11.02 per share or (y) a 20%
premium over the then-market value of the Issuer's Common Stock as reported on
the Nasdaq Stock Market determined by taking the arithmetic average of the
closing price of the Issuer's Common Stock for a period of twenty trading days
preceding the date on which Gateway gives notice of its intent to exercise this
option and/or (2) subject to compliance with applicable law, enter into a merger
agreement whereby the Issuer's shareholders shall have the option to exchange
each of their shares of the Issuer's Common Stock for (x) $14.00 per share in
cash or (y) one share of a new callable putable common stock (the "New Stock").
The New Stock shall have a call provision whereby Gateway will have the right to
call 100% (and not less than 100%) of the New Stock, including all vested
options, which it does not already own, at a price which shall be determined by
the Issuer's performance. The New Stock shall also have a put provision whereby
the New Stock holders will have the right to put to Gateway 100% (and not less
than 100%) of their New Stock, including all vested dilutive options and
warrants, at a price which shall be determined by the Issuer's performance. The
Gateway Option would allow Gateway to acquire all or an additional portion of
the Issuer's Common Stock and the New Stock. Gateway has no current plans to
exercise the Gateway Option.
Except as set forth in this Item 4, none of Gateway nor any other person
disclosed in response to Item 2 has any current plans or proposals which relate
to or would result in any of the events described in clauses (a) through (j) of
the instructions to Item 4 of Schedule 13D. Gateway expects to evaluate on an
ongoing basis the Issuer's financial condition, business operations and
prospects, the market price of the Issuer's Common Stock, conditions in the
securities markets generally, general economic and industry conditions and other
factors. Accordingly, Gateway reserves the right to change its plans and
intentions at any time, as it deems appropriate. In particular, Gateway may,
subject to applicable securities laws, at any time and from time to time acquire
additional shares of the Issuer's Common Stock or securities convertible or
exchangeable for the Issuer's Common Stock in public or private transactions;
dispose of shares of the Issuer's Common Stock or other securities convertible
or exchangeable for the Issuer's Common Stock in public or private transactions;
and/or enter into privately negotiated derivative transactions with one or more
parties to hedge the market risk of some or all of its positions in the Issuer's
Common Stock or such other securities. Any such transactions may be effected at
any time and from time to time.
The foregoing description of the Loan Agreement is qualified in its entirety by
the text of the Loan Agreement which is attached hereto as Exhibit 1 and is
incorporated herein by this reference.
Item 5. Interest in Securities of the Issuer.
On September 16, 1999, Gateway and the Issuer entered into the Loan Agreement,
whereby Gateway loaned the Issuer $31 million principal amount evidenced by the
Promissory Note and the Issuer issued a total of 538,284 shares of Common Stock
in consideration of the granting by Gateway of rights to enter into the
Territorial Rights Arrangement. Each $11.02 outstanding under the Promissory
Note is convertible into one share of the Issuer's Common Stock (subject to
adjustment upon the occurrence of certain events). Due to such convertibility
of the Promissory Note, Gateway may be deemed to presently be the beneficial
owner of shares of the Common Stock pursuant to Exchange Act Rule 13d-
4
<PAGE>
3(d)(1)(i)(B). Gateway's beneficial ownership of the Common Stock represents
approximately 18.6% of the Issuer's outstanding Common Stock (including the
Common Stock deemed to be beneficially held by Gateway) based upon the
outstanding shares of Common Stock set forth in the Issuer's prospectus filed
with the Securities and Exchange Commission on September 1, 1999. Other than
Gateway, Inc. through its ownership of Gateway, no other person disclosed in
response to Item 2 beneficially owns any shares of the Issuer's Common Stock.
Gateway has sole voting power and sole dispositive power of the Common Stock
that it holds, and, upon conversion of the Promissory Note, will have sole
voting and dispositive power of the Common Stock it holds as a result of such
conversion. In the last sixty days, none of Gateway nor any other person
disclosed in response to Item 2 has been a party to any transaction in the
Common Stock or the Promissory Note other than by the Loan Agreement. Gateway
knows of no other person that has the right to receive or the power to direct
the receipt of the dividends from, or the proceeds from the sale of, the Common
Stock or the Promissory Note.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Under the Loan Agreement, Gateway received the Gateway Option and a right of
first refusal with respect to future issuances of securities by the Issuer. The
Issuer also gave Gateway certain demand and piggy-back registration rights with
respect to the Common Stock issued to Gateway under the Loan Agreement and the
Common Stock issuable to Gateway upon conversion of the Promissory Note.
William St. Laurent, the Issuer's President and Chief Operating Officer, and
Georges St. Laurent III, the Issuer's Chairman and Chief Executive Officer,
jointly and severally, have executed a Guaranty with Gateway pursuant to which
they personally guaranteed $11 million of the outstanding amount under the
Promissory Note. Pursuant to a Pledge Agreement with Gateway, William St.
Laurent pledged 500,000 shares of his Common Stock as collateral for repayment
of the Promissory Note and Georges St. Laurent III pledged 400,000 shares of his
Common Stock as collateral for repayment of the Promissory Note. William and
Georges St. Laurent also executed Voting Agreements with Gateway under which
they agreed to vote their shares of Common Stock in favor of any future
shareholder proposals supporting the transactions contemplated by the Loan
Agreement and against certain extraordinary transactions or changes to the
Issuer. They also agreed to transfer their shares of Common Stock only in
limited circumstances, and granted Gateway a right of first refusal with respect
to any such proposed transfers. In accordance with the Voting Agreements,
William and Georges St. Laurent executed and delivered irrevocable proxies in
favor of Gateway with respect to the matters covered in the Voting Agreements.
Except as disclosed in this Item 6, none of Gateway nor any other person
disclosed in response to Item 2 is a party to any contract, arrangements,
understandings or relationships with respect to any securities of the Issuer,
including but not limited to the transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option agreements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
The foregoing descriptions of the Loan Agreement, Voting Agreements, Guaranty
and Pledge Agreement are each qualified in their entirety by the text of such
agreements which are attached hereto as Exhibits 1, 3, 4 and 5, respectively,
and which are incorporated herein by this reference.
Item 7. Material to Be Filed as Exhibits.
The information set forth in the Exhibit Index is incorporated herein by
reference.
5
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: September 27, 1999 GATEWAY COMPANIES, INC.
By: /s/ John J. Todd
----------------
John J. Todd
Senior Vice President and
Chief Financial Officer
6
<PAGE>
Exhibit Index
1. Convertible Loan Agreement between Vitech America, Inc. and Gateway
Companies, Inc. dated September 19, 1999.
2. Convertible Promissory Note issued by Vitech America, Inc. in favor of
Gateway Companies, Inc. dated September 16, 1999.
3. Form of Voting Agreement executed by Gateway Companies, Inc. with William
St. Laurent and Georges St. Laurent III dated September 16, 1999.
4. Guaranty executed by and among Gateway Companies, Inc., William St. Laurent
and Georges St. Laurent III dated September 16, 1999.
5. Pledge Agreement executed by and among Gateway Companies, Inc., William St.
Laurent and Georges St. Laurent III dated September 16, 1999.
7
<PAGE>
SCHEDULE 13D
VITECH AMERICA, INC.,
Issuer
APPENDIX A
<TABLE>
<CAPTION>
GATEWAY GATEWAY
NAME GATEWAY, GATEWAY, COMPANIES, COMPANIES,
Citizenship(1) PRESENT PRINCIPAL INC. INC. INC. INC.
Address(2) OCCUPATION Exec. Officer Director Exec. Officer Director
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Theodore W. Waitt Chairman and X X
Chief Executive Officer
Jeffrey Weitzen President and X X X X
Chief Operating Officer
David J. Robino Executive Vice President, X X
Chief Administrative Officer
Van M. Andrews Senior Vice President, X
Gateway Business
Anil Arora Senior Vice President, X
Gateway.net
Peter B. Ashkin Senior Vice President, X
Products
R. Todd Bradley Senior Vice President, X
Gateway Consumer
Joseph J. Burke Senior Vice President, X
Global Business Development
William M. Elliott Senior Vice President, X X X
General Counsel and Secretary
Michael D. Hammond Senior Vice President, X
Manufacturing
Frank Smilovic Senior Vice President, X
Regional Managing Director -
Asia-Pacific
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
John J. Todd Senior Vice President and X X X
Chief Financial Officer
George H. Krauss Director X
(attorney with law firm of
Kutak Rock)
Richard D. Snyder Director X
(President - Avalon
Investments, Inc.)
Douglas L. Lacey Director X
(Partner in accounting firm
of Nichols, Rise & Company,
L.L.P.)
Charles G. Carey Director X
(Chairman of the Board and
Chief Executive Officer of
Fox Television Division of
Fox Inc. and Co-Chief
Operating Officer of News
Corporation)
James F. McCann Director X
(President of 1-800-FLOWERS)
</TABLE>
(1) All are United States citizens.
(2) All addresses are 4545 Towne Centre Court, San Diego, CA 92101
<PAGE>
EXHIBIT 1
__________________________________________________________________
VITECH AMERICA, INC.
_____________________
CONVERTIBLE LOAN AGREEMENT
_____________________
Dated as of September 16, 1999
with
GATEWAY COMPANIES, INC.
__________________________________________________________________
<PAGE>
CONVERTIBLE LOAN AGREEMENT
This CONVERTIBLE LOAN AGREEMENT (this "Agreement") is dated as of September
16, 1999 between VITECH AMERICA, INC., a Florida corporation (the "Borrower"),
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and GATEWAY COMPANIES, INC. (the "Lender").
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Recitals
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WHEREAS, the Borrower desires to borrow a total principal amount of $31,000,000
from the Lender to be used for the purposes set forth herein, and the Lender is
prepared to lend such amount upon the terms and conditions hereof;
NOW, THEREFORE, for the consideration described above and for other good and
valuable consideration, the parties hereto agree as follows:
Section 1. Definitions.
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"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq.
--------------- ------
"Borrower Shareholders' Meeting" shall have the meaning set forth in
------------------------------
Section 9.03 hereof.
"Business Day" shall mean any day on which commercial banks are not
------------
authorized or required to close in the State of Florida.
"Closing Date" shall mean the date of this Agreement.
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"Common Stock" shall mean shares of the Borrower's Common Stock, no par
------------
value.
"Default" shall mean any Event of Default or any event or condition
-------
specified in Section 8 hereof, which with the giving of notice or lapse of time
or both would constitute an Event of Default.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
"Form S-3" means such form under the Securities Act as in effect on the
--------
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Borrower
with the SEC.
"Guarantors" shall mean William C. St. Laurent and Georges C. St. Laurent,
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III.
"Guaranty" shall mean a guaranty executed by the Guarantors, on a joint and
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several basis, in substantially the form of Exhibit E hereto.
1
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"Holder" means any person owning of record Registrable Securities that have
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not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 9.02(h) hereof.
"Initial Promissory Note" shall mean the Promissory Note issued by the
-----------------------
Borrower to the Lender dated April 2, 1999 as extended on July 1, 1999 with an
aggregate principal amount of $11,000,000.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, and the
filing of or agreement to give any financing statement or other similar form of
public notice under the laws of any jurisdiction).
"Loan" shall mean the loan made to the Borrower by the Lender pursuant to
----
Section 2 hereof.
"Loan Documents" shall mean, as in effect at any time, this Agreement, the
--------------
Guaranty and the Note.
"Material Adverse Effect" shall have the meaning set forth in Section 4.01
-----------------------
hereof.
"Maturity Date" shall mean the date that is eighteen months from the
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Closing Date or, if such date shall not be a Business Day, the Maturity Date
shall be the next Business Day after such date.
"Note" shall mean the promissory note provided for in Section 2 hereof and
----
in substantially the form of Exhibit A hereto, and any note or notes issued in
exchange or substitution therefor.
"Pledge Agreement" shall mean the Pledge Agreement, dated as of the Closing
----------------
Date, from the Guarantors in favor of the Lender in substantially the form
attached hereto as Exhibit F.
"Post-Default Rate" shall mean, in respect of any principal of or interest
-----------------
on the Loan or any other amount payable by the Borrower under this Agreement or
the Note that is not paid when due (whether at stated maturity, by acceleration
or otherwise), a rate per annum during the period from and including the due
date to but excluding the date such amount is paid in full, equal to eighteen
percent (18%).
"Register," "registered," and "registration" refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Borrower issued or
----------------------
issuable upon conversion of the Note; (b) Common Stock of the Borrower issued
pursuant hereto for the Territorial Rights Arrangement, and (c) any Common Stock
of the Borrower issued as (or issuable upon the conversion or exercise of any
warrant, right or other security
2
<PAGE>
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 under the Securities Act or sold in a private transaction
in which the transferor's rights under Section 9.02 of this Agreement are not
assigned.
"Registrable Securities then outstanding" shall be the number of shares
---------------------------------------
determined by calculating the total number of shares of the Borrower's Common
Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the Borrower in
---------------------
complying with Sections 9.02(a), (b) and (c) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Borrower, reasonable fees and disbursements of
a single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Borrower which shall
be paid in any event by the Borrower).
"Selling Expenses" shall mean all underwriting discounts and selling
----------------
commissions applicable to the sale.
"SEC" shall mean the United States Securities and Exchange Commission.
---
"Securities" shall mean the Note and the shares of Common Stock issuable
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upon conversion of the Note.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Territorial Rights Arrangement" shall have the meaning set forth in
------------------------------
Section 2.07 herein.
Section 2. The Loan.
--------
2.01 Loan. On the terms and conditions hereof, the Lender hereby
----
agrees to make the Loan in the principal amount of $31,000,000, in the form of a
single $31,000,000 advance made on the Closing Date . The $31 million advance of
the Loan shall be reduced pursuant to Section 7.04 in an amount equal to the
Borrower's principal and accrued interest under the Initial Promissory Note and
the amount of currently due trade payables from the Borrower to the Lender.
2.02 Note. The Loan shall be evidenced by a promissory note of the
----
Borrower in the form of Exhibit A hereto, dated the Closing Date, payable to
the order of the Lender in the principal amount set forth thereon and otherwise
duly completed.
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2.03 Interest. The Borrower hereby promises to pay to the Lender
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interest on the unpaid principal amount of each Note, on a quarterly basis on
the 25th day of each quarter, from and including the Closing Date to but
excluding the Maturity Date, at a rate per annum equal to ten percent (10.0%).
2.04 Principal. The Borrower hereby promises to pay the entire
---------
principal amount of the Loan on the Maturity Date (unless the Lender elects to
convert any or all of the principal amount of the Loan to Common Stock on or
prior to the Maturity Date pursuant to the terms of the Note).
2.05 Conversion to Common Stock. The Loan shall be convertible at
--------------------------
the Lender's option into shares of the Borrower's Common Stock at any time as
set forth in the Note; provided, however, that until such time as the Borrower's
shareholders approve the issuance of the Excess Shares (as defined below) at a
Borrower Shareholders' Meeting (in accordance with Section 9.03 hereof), the
Borrower shall not be obligated to issue upon conversion of the Note and for the
Territorial Rights Arrangement, in the aggregate, more than that number of
shares of Common Stock equal to 19.99% of the number of shares of Common Stock
of the Borrower outstanding on the date of issuance of the Note (such amount to
be proportionately and equitably adjusted from time to time in the event of
stock splits, stock dividends, combinations, reverse stock splits,
reclassifications, capital reorganization and similar events relating to the
Common Stock) (the "Maximum Share Amount") if the issuance of shares of Common
--------------------
Stock in excess of the Maximum Share Amount (such number of excess shares
referred to in the aggregate as the "Excess Shares") would constitute a breach
-------------
or violation of the Borrower's obligations under the rules or regulations of the
Nasdaq National Market or any other principal securities exchange or market upon
which the Common Stock is or becomes traded.
2.06 Prepayments. The Borrower may prepay all or any part of the
-----------
principal amount of the Note before maturity with 30 days prior written notice
to the Lender. The notice shall represent a bona-fide prepayment commitment
under the Note, with the prepayment amount set forth therein deemed due and
payable by the Borrower on the prepayment date set forth in the notice. At any
time during the 30-day notice period, the Lender may elect to convert the
portion of the principal amount of the Loan intended to be prepaid as described
in the notice.
2.07 Territorial Rights Arrangement. The Lender will grant the
------------------------------
Borrower the right (the "Territorial Rights Arrangement"), exerciseable at the
------------------------------
Borrower's election within 180 days following the Closing Date (the "Election
--------
Period"), to acquire certain territorial rights in Brazil from the Lender. At
- ------
the Closing, the Borrower shall pay the Lender an application fee of 538,284
shares of the Borrower's Common Stock in exchange for the providing by the
Lender of the Borrower's right to enter into the Territorial Rights Arrangement.
Upon the Borrower's election to enter into the Territorial Rights Arrangement,
the Borrower and the Lender will negotiate in good faith to enter into
agreements on substantially the terms set forth on the term sheet attached
hereto as Exhibit G (with other typical and customary provisions for agreements
of this type),
4
<PAGE>
which agreements would also include a covenant by the Lender that the Borrower
will be the Lender's exclusive reseller of the Lender's products in Brazil for a
defined time period, subject to pre-existing arrangements between the Lender and
any third-parties that may exist at such time. During the Election Period, the
Lender agrees not to undertake a similar territorial rights arrangement in
Brazil with any party other than the Borrower and the Borrower's affiliates.
2.08. Hart-Scott-Rodino Filing. Promptly upon request by the
------------------------
Lender, necessary filings, and thereafter make any other required submissions,
with respect to this Agreement, the Note and the Additional Transactions
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder; provided, however, that
neither the Borrower, the Lender nor any of their respective subsidiaries or
affiliates shall be under any obligation to make proposals, take any actions,
execute or carry out agreements or submit to orders providing for the sale or
other disposition or holding separate (through the establishment of a trust or
otherwise) of any material (in nature or amount) assets or categories of
material (in nature or amount) assets of the Borrower, the Lender, or any of
their respective subsidiaries or the holding separate of the shares of the
Borrower's or the Lender's Common Stock or imposing or seeking to impose any
material limitation on the ability of the Borrower, the Lender or any of their
respective subsidiaries or affiliates to conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of the shares of
the Borrower's or the Lender's Common Stock. The parties hereto shall cooperate
with each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling party and its advisors
prior to filing and, if requested, by accepting all reasonable additions,
deletions or changes suggested in connection therewith, and by furnishing all
information required for any application or other filing to be made pursuant to
any applicable governmental or regulatory law, rule or regulation.
5
<PAGE>
Section 3. Payments; Computations; Etc.
---------------------------
3.01 Payments. All payments of principal, interest and other
--------
amounts to be made by the Borrower under this Agreement or the Note shall be
made, in immediately available funds, to the Lender no later than 1:00 p.m. New
York time on the date on which such payment shall become due (each such payment
made after such time on such due date to be deemed to have been made on the next
succeeding Business Day). If a Default has occurred and is continuing, the
Lender may apply any such payment to interest and principal, and then fees and
expenses. If the due date of any payment under this Agreement or the Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day and interest shall be payable for any
principal so extended for the period of such extension. Any amount of principal
not paid when due hereunder shall accrue interest at the Post-Default Rate.
3.02 Computations. Interest shall be computed on the basis of the
------------
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable, relative to a year of 365 or 366
days, as the case may be.
Section 4. Representations and Warranties of the Borrower. Except as set forth
----------------------------------------------
on the Borrower Disclosure Schedule attached hereto as Exhibit B, (the "Borrower
--------
Disclosure Schedule"), the Borrower represents and warrants to the Lender, as of
- -------------------
the Closing Date and at any time reaffirmed pursuant to the terms hereof, that:
4.01 Organization, Good Standing and Qualification. The Borrower
---------------------------------------------
and each of its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of their respective states of incorporation.
The Borrower has all requisite corporate power and authority to own and operate
its properties and assets, to execute and deliver each of the Loan Documents, to
issue the Note and the shares of Common Stock issuable upon conversion of the
Note and to carry out the provisions of each of the Loan Documents and to carry
on its business as presently conducted and as presently proposed to be
conducted. Each of the Borrower's subsidiaries has all requisite corporate power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted and as presently proposed to be conducted. The
Borrower and each of its subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so could not have, individually or in the aggregate, a
material adverse effect on the business, properties, assets, condition
(financial or otherwise), or operations of the Borrower (a "Material Adverse
----------------
Effect").
- ------
4.02 Subsidiaries. The Borrower Disclosure Schedule contains a list
------------
of each other corporation, limited partnership or similar entity in which the
Borrower owns equity securities of any kind, with a brief description of the
nature of each such equity
6
<PAGE>
interest. The Borrower is not a participant in any joint venture, partnership or
similar arrangement.
4.03 Capitalization; Voting Rights. The authorized capital stock of
-----------------------------
the Borrower consists of 30,000,000 shares of Common Stock, 14,657,655 shares of
which are issued and outstanding, and 3,000,000 shares of Preferred Stock, no
par value, none of which are issued and outstanding. All issued and outstanding
shares of the Borrower's Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable. The rights, preferences, privileges
and restrictions of the Borrower's Common Stock are as stated in the Borrower's
articles of incorporation. The shares of Borrower's Common Stock issuable upon
conversion of the Note have been duly and validly reserved for issuance. Other
than as set forth on the Borrower Disclosure Schedule or in the SEC Documents,
there are no outstanding securities, options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Borrower of any of its securities or which are convertible
into or exercisable for securities of the Borrower. When issued in compliance
with the provisions of this Agreement and the Note, the shares of Borrower's
Common Stock issuable upon conversion of the Note will be duly authorized,
validly issued, fully paid and nonassessable, and will be free of any
restrictions, limits, claims, Liens or other encumbrances (except those imposed
in the ordinary course by applicable securities laws). Except as set forth on
the Borrower Disclosure Schedule or in the SEC Documents, no stock plan, stock
purchase, stock option or other agreement or understanding between the Borrower
and any holder of any equity securities or rights to purchase equity securities
provides for acceleration or other changes in the vesting provisions or other
terms of such agreement or understanding as the result of any merger,
consolidated sale of stock or assets, change in control or other similar
transaction by the Borrower.
4.04 Authorization; Binding Obligations. All actions on the part of
----------------------------------
the Borrower, its officers, directors and shareholders necessary for the
authorization, execution and delivery of each of the Loan Documents, the
performance of all obligations of the Borrower hereunder and thereunder at the
Closing and after the Closing and the authorization, sale, issuance and delivery
of the shares of Common Stock issuable upon conversion of the Note has been
taken or will be taken prior to the Closing, except for the approval of the
Borrower's shareholders with respect to the Excess Shares and the Additional
Transactions which will take place at the Borrower Shareholders Meeting. Each of
the Loan Documents, when executed and delivered, will be valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and (b) general principles of equity that
restrict the availability of equitable remedies. The issuance of the Note and
the subsequent conversion of the Note into shares of Borrower's Common Stock are
not and will not be subject to any preemptive or similar rights or rights of
first refusal that have not been properly waived or complied with.
7
<PAGE>
4.05 Financial Condition. The balance sheets and financial
-------------------
statements of the Borrower as at December 31, 1998 and as at June 30, 1999 (the
"Statement Date") heretofore furnished to the Lender or made available to the
--------------
Lender (collectively, the "Financial Statements") are complete and correct in
--------------------
all material respects and fairly present the financial condition of the Borrower
at such date. Since the dates of said balance sheet and financial statements,
there has been no material adverse change in the financial condition of the
Borrower or in the operations, or the business taken as a whole, of the Borrower
from that set forth therein, except disclosed on the Borrower Disclosure
Schedule.
4.06 Liabilities. The Borrower has no material liabilities and, to
-----------
the best of its knowledge, knows of no material contingent liabilities not
disclosed in the Financial Statements, except current liabilities incurred in
the ordinary course of business subsequent to the Statement Date which have not
been, either in any individual case or in the aggregate, materially adverse.
4.07 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby or
disclosed in the SEC Documents or in the Borrower Disclosure Schedule, and
agreements between the Borrower and its employees with respect to the sale of
the Borrower's Common Stock, there are no agreements, understandings or proposed
transactions between the Borrower and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no written, and to the best of the Borrower's
knowledge no other, agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Borrower is a
party or to its knowledge by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to, the Borrower in excess of $100,000
(other than obligations of, or payments to, the Borrower arising from agreements
entered into in the ordinary course of business), or (ii) the license or
transfer of any patent, copyright, trade secret or other proprietary right to or
from the Borrower (other than licenses arising from the purchase of "off the
shelf" or other standard products), or (iii) provisions restricting or affecting
the development, manufacture or distribution of the Borrower's products or
services, or (iv) indemnification by the Borrower with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase or sale agreements entered into in the ordinary course of business).
(c) Except as disclosed in the SEC Documents, the Borrower has
not (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or any other liabilities (other than with
respect to dividend obligations, distributions, indebtedness and other
obligations as disclosed in the Financial Statements) individually in excess of
$500,000 or, in the case of indebtedness and/or liabilities individually less
than $500,000, in excess of $250,000 in the aggregate, (iii) made any
8
<PAGE>
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Borrower has reason to believe are affiliated therewith) shall
be aggregated for the purpose of meeting the individual minimum dollar amounts
of such subsections.
(e) All material debt instruments, joint venture and corporate
partnering agreements and all other material agreements of the Borrower are set
forth in the Borrower Disclosure Schedule or the SEC Documents. The Borrower is
in compliance with all of the agreements listed in the Borrower Disclosure
Schedule, in all material respects.
4.08 Obligations to Related Parties. Except as set forth in the SEC
------------------------------
Documents, there are no obligations of the Borrower to officers, directors,
shareholders, or employees of the Borrower other than (a) for payment of salary
for services rendered, (b) reimbursement for reasonable expenses incurred on
behalf of the Borrower, (c) for other reasonable and customary employee benefits
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Borrower), and (d) reasonable and
customary directors fees. Except as may be disclosed in the Financial
Statements, the Borrower is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
4.09 Changes. Since the Statement Date, there has not been to the
-------
Borrower's knowledge:
(a) Any change in the assets, liabilities, financial condition or
operations of the Borrower from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a Material
Adverse Effect;
(b) Any resignation or termination of any key officers of the
Borrower; and the Borrower, to the best of its knowledge after due inquiry, does
not know of the impending resignation or termination of employment of any such
officer;
(c) Any material change in the contingent obligations of the
Borrower by way of guaranty, endorsement, indemnity or warranty;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
financial condition of the Borrower;
9
<PAGE>
(e) Any waiver by the Borrower of a valuable right or of a material
debt owed to it;
(f) Any direct or indirect loans made by the Borrower to any
shareholder, employee, officer or director of the Borrower;
(g) Any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other distribution
of the assets of the Borrower;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or guaranteed
by the Borrower, except those for immaterial amounts and for liabilities
incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Borrower is a
party or by which it is bound which has resulted in a Material Adverse Effect;
or
(m) Any other event or condition of any character that, either
individually or cumulatively, has resulted in a Material Adverse Effect.
4.10 Title to Properties and Assets; Liens, Etc. The Borrower has good
------------------------------------------
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
Liens, other than (a) those resulting from taxes which have not yet become due
and payable, and (b) minor Liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
use thereof or the operations of the Borrower. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Borrower are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used, normal wear and tear
excepted. The Borrower is in compliance with all material terms of each
material lease to which it is a party or is otherwise bound.
4.11 Patents and Trademarks. To the best of its knowledge, the Borrower
----------------------
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now conducted and
as presently proposed to be conducted, without any known infringement of the
rights of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing,
10
<PAGE>
nor is the Borrower bound by or a party to any options, licenses or agreements
of any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
The Borrower has not received any written, or to the best of its knowledge
other, communications alleging that the Borrower has violated or, by conducting
its business as presently proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. To the best of its knowledge,
the Borrower is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Borrower or
that would materially conflict with the Borrower's business as presently
proposed to be conducted. Neither the execution nor delivery of any of the Loan
Documents, nor the carrying on of the Borrower's business by the employees of
the Borrower, nor the conduct of the Borrower's business as presently proposed,
will, to the Borrower's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Borrower
does not believe that it is necessary to utilize any inventions, trade secrets
or proprietary information of any of its employees made prior to their
employment by the Borrower, except for inventions, trade secrets or proprietary
information that have been assigned to the Borrower.
4.12 Compliance with Other Instruments. The Borrower is not in
---------------------------------
violation or default of any term of its articles of incorporation or bylaws, and
the Borrower is not in violation or default of any term or provision of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
party or by which it is bound or its assets or properties are subject, or of any
judgment, decree, order, writ or any statute, rule, regulation, order or
restriction applicable to the Borrower or either of the Guarantors or its assets
or properties which could have a Material Adverse Effect. The execution,
delivery, and performance of and compliance with each of the Loan Documents, and
the issuance and delivery of the Note pursuant hereto and of the shares of the
Borrower's Common Stock issuable upon conversion of the Note, will not, with or
without the passage of time or giving of notice or both, result in any such
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any Lien upon any of the properties or
assets of the Borrower or either of the Guarantors or the suspension,
revocation, impairment, forfeiture or non-renewal of any material permit,
license, right, authorization or approval applicable to the Borrower, its
business or operations or any of its assets or properties.
4.13 Litigation. Except as disclosed in the SEC Documents, there is no
----------
action, suit, proceeding or investigation pending or, to the Borrower's or
either Guarantor's knowledge, threatened against the Borrower or either
Guarantor that questions the validity of any of the Loan Documents or the right
of the Borrower or either Guarantor to enter into any of such agreements, or to
consummate the transactions
11
<PAGE>
contemplated hereby or thereby, or which could have a Material Adverse Effect or
cause any change in the capitalization or equity ownership of the Borrower. The
foregoing includes, without limitation, actions pending or threatened involving
the prior employment of any of the Borrower's employees, their use in connection
with the Borrower's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. Neither the Borrower nor either Guarantor is a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
4.14 Tax Returns and Payments. The Borrower has timely filed all tax
-----------------------
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Borrower's knowledge all other taxes due and payable by the Borrower on or
before the Closing have been paid or will be paid prior to the time they become
delinquent. The Borrower has no knowledge of any liability of any tax to be
imposed upon its properties or assets as of the date of this Agreement that is
not adequately provided for.
4.15 Employees. The Borrower has no collective bargaining agreements
---------
with any of its employees. There is no labor union organizing activity pending
or, to the Borrower's knowledge, threatened with respect to the Borrower. No
employee has any agreement or contract, written or verbal, regarding his
employment other than as disclosed in the SEC Documents. To the Borrower's
knowledge, no employee of the Borrower, nor any consultant with whom the
Borrower has contracted, is in material violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Borrower because of the nature of the business to be conducted by the Borrower;
and to the Borrower's knowledge the continued employment by the Borrower of its
present employees, and the performance of the Borrower's contracts with its
independent contractors, will not result in any such violation. The Borrower
has not received any notice alleging that any such violation has occurred. The
Borrower is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Borrower, nor does the
Borrower have a present intention to terminate the employment of any officer,
key employee or group of key employees. The Borrower does not maintain any
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, other than as set forth on the Borrower Disclosure Schedule or in the SEC
Documents.
4.16 Registration Rights. Except set forth on the Borrower Disclosure
-------------------
Schedule, the Borrower is presently not under any obligation, and has not
granted any rights, to register any of the Borrower's presently outstanding
securities or any of its securities that may hereafter be issued.
4.17 Compliance with Laws; Permits. To the best of its knowledge, the
-----------------------------
Borrower is not in violation of any applicable statute, rule, regulation, order
or restriction
12
<PAGE>
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its assets or
properties which violation could have a Material Adverse Effect. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of each of the Loan Documents and the
issuance of the Note or the shares of Common Stock issuable upon conversion of
the Note, except such as has been duly and validly obtained or filed (and which
are listed on the Borrower Disclosure Schedule), or with respect to any filings
that must be made after the Closing, as will be filed in a timely manner. The
Borrower has all franchises, permits, licenses, rights and any similar authority
and approvals necessary for the conduct of its business as now being conducted
and as proposed to be conducted by it, the lack of which could have a Material
Adverse Effect.
4.18 Environmental and Safety Laws. To its knowledge, the Borrower is
-----------------------------
not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, the violation of which could have
a Material Adverse Effect, and to its knowledge, no material expenditures are or
will be required in order to comply with any such existing statute, law or
regulation.
4.19 SEC Reports and Filings. The Borrower has delivered to the Lender
-----------------------
(or made available to the Lender through publicly available sources) a complete
and accurate copy of each Annual Report on Form 10-K, Quarterly Report on Form
10-Q, Form 8-K, definitive proxy statement, registration statement and annual
report filed by the Borrower with the SEC on or after January 1, 1998
(collectively, the "SEC Documents"), and all amendments and supplements to each
of the foregoing. The SEC Documents, including the financial statements
contained therein, (i) complied with the requirements of the Securities Act or
the Exchange Act, as the case may be, at and as of the times they were filed
(or, if amended, supplemented or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) in all material respects and
(ii) did not at and as of the time they were filed (or, if amended, supplemented
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Borrower has made all filings with the SEC since January 1,
1998 required under the Securities Act, the Exchange Act and all regulations
promulgated thereunder.
4.20 Full Disclosure. Each of the Loan Documents, the Exhibits hereto
---------------
and thereto (including the Borrower Disclosure Schedule), and all other
documents delivered by the Borrower to the Lender or the Lender's attorneys or
agents in connection herewith or therewith or with the transactions contemplated
hereby or thereby, do not contain any untrue statement of a material fact nor
omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
13
<PAGE>
Section 5. Representations and Warranties of the Lender. The Lender represents
--------------------------------------------
and warrants to the Borrower, as of the Closing Date and at any time reaffirmed
pursuant to the terms hereof, that:
5.01 Organization, Good Standing and Corporate Power. The Lender is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. The Borrower has all requisite corporate power and
authority to execute and deliver this Agreement, to own and hold the Note and
the shares of Common Stock issuable upon conversion of the Note and to carry out
the provisions of this Agreement and the Note.
5.02 Investment Representations. The Lender understands that the
--------------------------
Securities have not been registered under the Securities Act. The Lender also
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
the Lender's representations contained in this Agreement. The Lender hereby
represents and warrants as follows:
(a) The Lender Bears Economic Risk. The Lender has substantial
------------------------------
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Borrower so that it is capable of
evaluating the merits and risks of its investment in the Borrower and has the
capacity to protect its own interests. The Lender must bear the economic risk of
this investment indefinitely unless the Securities are registered pursuant to
the Securities Act, or an exemption from registration is available. The Lender
understands that, unless the Securities are registered under the Securities Act,
there is no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may not allow
the Lender to transfer all or any portion of the Securities under the
circumstances, in the amounts or at the times the Lender might propose.
(b) Acquisition for Own Account. The Lender is acquiring the
---------------------------
Securities for the Lender's own account for investment only, and not with a view
towards their distribution within the meaning of the Securities Act.
(c) Accredited Investor. The Lender represents that it is an
-------------------
accredited investor within the meaning of Regulation D under the Securities Act.
Section 6. Conditions Precedent.
--------------------
6.01 Conditions to the Loan. The obligation of the Lender to make the
----------------------
Loan hereunder is subject to the receipt by the Lender of the following
documents on the Closing Date, each of which shall be satisfactory in form and
substance to the Lender:
(a) The Note, duly completed and executed.
(b) The Guaranty, duly completed and executed.
14
<PAGE>
(a) The Pledge Agreement, duly completed and executed.
(b) A stock certificate, duly completed and executed, representing
the shares of Common Stock issued to the Borrower in exchange for the granting
of the Territorial Rights Arrangement.
(c) An opinion addressed to the Lender, from legal counsel to the
Borrower reasonably acceptable to the Lender, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit C.
(d) An opinion addressed to the Lender, from legal counsel to the
Guarantors reasonably acceptable to the Lender, dated as of the Closing Date, in
a form acceptable to the Lender.
(e) Certified copies of the articles of incorporation and bylaws of
the Borrower.
(f) A Certificate of Good Standing of the Borrower certified by the
appropriate governmental officer.
(g) The Shareholder Voting Agreements and Irrevocable Proxies
described in Sections 9.03 and 9.04 of this Agreement, in the form attached
hereto as Exhibit D.
(h) Evidence that the agent referred to in Section 11(b) of the
Guaranty has been duly appointed and holds such appointment without reservation
until six months after the Maturity Date.
(i) Evidence that the agent referred to in Section 22(b) of the
Pledge Agreement has been duly appointed and holds such appointment without
reservation until six months after the Maturity Date.
(j) Such other documents or information as the Lender reasonably may
request.
6.02 General Conditions. The obligation of the Lender to make the
------------------
Loan is further subject to all of the following additional conditions precedent:
(a) No Event of Default shall have occurred and be continuing either
immediately prior to the making of the Loan or immediately after the making of
the Loan.
(b) The representations and warranties made by the Borrower in
Section 4 hereof shall be true and correct in all material respects as of the
Closing Date (without regard to any materiality qualifiers contained in the
representations and warranties themselves) with the same force and effect as if
they had been made pursuant to this Agreement as of the Closing Date (except for
those representations and warranties
15
<PAGE>
which refer to dates other than the Closing Date, which representations and
warranties relate only to the referred dates).
(c) On the Closing Date, the issuance of the Note and the proposed
issuance of the Common Stock upon conversion of the Note shall be legally
permitted by all laws and regulations to which the Borrower and the Lender are
subject (subject to shareholder approval for the Excess Shares).
(d) The Borrower shall have obtained any and all consents, permits
and waivers necessary or appropriate for consummation of the transactions
contemplated by each of the Loan Documents (except for such as may be properly
obtained subsequent to the Closing).
(e) The shares of Borrower's Common Stock issuable upon conversion of
the Note shall have been duly authorized and reserved for issuance upon such
conversion (subject to shareholder approval for the Excess Shares).
(f) The Borrower shall have delivered to the Lender a compliance
certificate, executed by the President of the Borrower, dated the Closing Date,
to the effect that the conditions specified in subsections (a), (b), (d) and (e)
in this Section 6.02 have been satisfied.
(g) The Lender shall have received a certificate dated the Closing
Date and executed by the Guarantors, to the effect that the representations and
warranties made by the Guarantors in the Guaranty and the Pledge Agreement shall
be true and correct on the Closing Date.
(h) All corporate and other proceedings in connection with the
transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Lender, and the Lender shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
Section 7. Covenants of the Borrower. The Borrower agrees that from the date
-------------------------
hereof, until payment in full of the Loan, all interest thereon and all other
amounts payable by the Borrower under the Loan Documents:
7.01 Information. The Borrower shall deliver to the Lender:
-----------
(a) Promptly after the Borrower knows that any Event of Default has
occurred, a notice of such Event of Default, describing the same in detail;
(b) Promptly after the Borrower knows that a material adverse change
in the financial condition of the Borrower or either Guarantor has occurred, a
notice of such material adverse change, describing the same in detail; and
16
<PAGE>
(c) From time to time such other information regarding the business,
affairs or financial condition of the Borrower and/or the Guarantors as the
Lender may reasonably request.
7.02 Basic Financial Information and Reporting.
-----------------------------------------
(a) The Borrower will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Borrower, and in any event within ninety (90) days thereafter, the Borrower will
furnish the Lender with a consolidated balance sheet of the Borrower, as at the
end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Borrower, for such year, all
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Borrower's Board of
Directors.
(c) The Borrower will furnish the Lender, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Borrower as of the end of each
such quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows of the Borrower for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and normal year-end audit adjustments may not have been made.
(d) The Borrower will furnish the Lender (i) at least thirty (30)
days prior to the beginning of each fiscal year an annual budget and operating
plans for such fiscal year, prepared on a monthly basis, including balance
sheets, a statement of cash flows for such months, and, as soon as available,
any subsequent revisions thereto; and (ii) as soon as practicable after the end
of each month, and in any event within twenty (20) days thereafter, a
consolidated balance sheet of the Borrower as of the end of each such month, and
a consolidated statement of income and a consolidated statement of cash flows of
the Borrower for such month and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles consistently applied,
with the exception that no notes need be attached to such statements.
7.03 SEC Filings. The Borrower shall deliver to the Lender (or make
-----------
available to the Lender through publicly available sources) a complete and
accurate copy of each report, schedule, registration statement and definitive
proxy statement filed by the
17
<PAGE>
Borrower with the SEC on or after the Closing Date and all amendments and
supplements to each of the foregoing (collectively, the "Borrower SEC Reports").
--------------------
The Borrower SEC Reports (i) will constitute all the forms, reports and
documents required to be filed by the Borrower with the SEC under the Securities
Act and the Exchange Act, as applicable, and the rules and regulations
promulgated thereunder from and after the Closing Date, (ii) will comply with
the requirements of the Securities Act the Exchange Act, as the case may be, at
and as of the times they are filed, and (iii) will not at and as of the time
they are filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
7.04 Use of the Loan. The Borrower shall use the proceeds of the Loan
---------------
for the purpose of fully retiring all of the Borrower's outstanding debt to
Lender under the Initial Promissory Note (including accrued interest) and to
fully retire the Borrower's currently owing trade account balance to the Lender
of $475,270. All amounts owed by the Borrower to the Lender described in the
preceding sentence will be netted from the amount of the $31,000,000 advance
under the Loan. The balance of the proceeds of the Loan shall be used by the
Borrower for working capital purposes and for expansion projects. Any use of
proceeds for expansion projects shall require mutual written approval of the
Borrower and the Lender.
7.05 Visitation Rights to Board of Directors. The Borrower shall allow
---------------------------------------
one representative designated by the Lender to attend all meetings of the
Borrower's board of directors in a nonvoting capacity, and in connection
therewith, the Borrower shall give such representative copies of all notices,
minutes, consents and other materials, financial or otherwise, which the
Borrower provides to its board of directors.
7.06 No Solicitation. Neither the Borrower nor any of its subsidiaries
---------------
shall, directly or indirectly, through any directors, officers, employees,
agents, affiliates, representatives or otherwise, solicit or initiate any
inquiries or the submission of any proposal or offer from any person with
respect to any tender offer, merger, consolidation, liquidation,
recapitalization, business combination, sale of significant assets, sales of
significant shares of capital stock (other than financing transactions in the
ordinary course of the Borrower's business) or similar transactions involving
the Borrower or any of its subsidiaries or any division of the Borrower or any
of its subsidiaries (an "Acquisition Transaction") or participate in any
-----------------------
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in
or facilitate, any effort or attempt by any other person with respect to any
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate any of
the transactions contemplated by this Agreement or any of the agreements
contemplated in exhibits attached to this Agreement; provided that the Borrower
may, in response to an unsolicited proposal with respect to an Acquisition
Transaction (an "Alternative Proposal") from a third party, furnish information
--------------------
to, and negotiate, explore or otherwise engage in substantive discussions with
such third party, in each case only if the Borrower's Board
18
<PAGE>
of Directors, in good faith, determines that such proposal is one superior to
the transactions contemplated by this Agreement or in any exhibits to this
Agreement and the Board of Directors deems it necessary to do so in the exercise
of its fiduciary obligations after consultation with outside counsel and an
independent nationally recognized investment banking firm. The Borrower
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. The Borrower shall notify the Lender promptly (but in
any event within 3 days) in writing if any such proposal or offer, or any
inquiry or contact with any person with respect thereto, is made or if any party
makes any Alternative Proposal and shall, in any such written notice to the
Lender, indicate in reasonable detail the identity of the person making such
proposal, offer, inquiry, contact or Alternative Proposal and the terms and
conditions of such proposal, offer, inquiry, contact or Alternative Proposal and
any subsequent developments with respect thereto. The Borrower also agrees to
afford the Lender an opportunity to revise its own proposal within ten days
after the Lender's receipt from the Borrower of the final terms of the
Alternative Proposal made by a party prior to any determination by the Borrower
to approve any Alternative Proposal.
7.07 Reservation of Common Stock. The Borrower will at all times
---------------------------
reserve and keep available, solely for issuance and delivery upon the conversion
of the Note, all Common Stock (or other securities into which the Note is then
convertible) issuable from time to time upon such conversion.
7.08 Compliance with Laws. The Borrower shall preserve and maintain its
---------------------
existence and all of its material rights and privileges; comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental or regulatory authorities if failure to comply with such
requirements could result in a Material Adverse Effect; and pay and discharge
all taxes, assessments and governmental charges or levies imposed on it or on
its income or profits or on any of its property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by proper proceedings.
7.09 Inspection. The Borrower shall permit any authorized
----------
representative designated by the Lender upon reasonable notice to visit and
inspect any properties of the Borrower or either Guarantor, and to examine its
or their books and records (and to make extracts and copies therefrom) and to
discuss the Borrower's affairs, finances and accounts with its officers and its
independent auditors (and the Borrower hereby authorizes such auditors to
release any information about it to the Lender and undertakes to cause the
Guarantors to authorize their respective auditors to release any information
about them to the Lender), all at such times and as often as may be requested.
7.10 Pledged Shares. On the Closing Date, the Borrower shall deliver to
--------------
the Lender certificates evidencing all of the Pledged Shares (as defined in the
Pledge Agreement), together with undated stock transfer powers endorsed in
blank.
19
<PAGE>
7.11 Other Documents. The Borrower shall furnish to the Lender such
---------------
other documents relating to the Borrower as the Lender shall reasonably request.
7.12 Negative Covenants. The Borrower shall not, and shall not permit
------------------
any of its subsidiaries to, directly or indirectly:
(a) Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist any Indebtedness, except:
(i) Indebtedness of the Borrower under this Agreement and the
Note;
(ii) Indebtedness to finance the acquisition of fixed or
capital assets (whether pursuant to a loan, a financing lease or otherwise) in
an aggregate principal amount not exceeding $500,000;
(iii) Indebtedness of the Borrower outstanding on the Closing
Date; and
(iv) Indebtedness outstanding pursuant to a commercial working
capital credit facility not to exceed $5,000,000.
(b) Limitation on Liens. Create, incur, assume or suffer to exist any
-------------------
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(i) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower in conformity with
GAAP;
(ii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings, and contractual and statutory
landlords' Liens;
(iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or self-
insurance arrangements;
(iv) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(v) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
20
<PAGE>
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary course of business of the Borrower;
(vi) Liens securing Indebtedness of the Borrower permitted by
Section 7.12(a)(ii) incurred to finance the acquisition of fixed or capital
assets, provided that (A) such Liens shall be created simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at any time
encumber any property other than the property financed by such Indebtedness, (C)
the amount of Indebtedness secured thereby is not increased and (D) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed 100% of the original purchase price of such property at the time it was
acquired; and
(vii) Liens securing Indebtedness of the Borrower permitted by
Section 7.12(a)(i), (iii) or (iv)).
(c) Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting business
or enter into any transaction or series of transactions in which in excess of
fifty percent (50%) of the Borrower's voting power is transferred.
(d) Limitation on Sale of Assets. Convey, sell, lease, assign,
----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, except:
(i) the sale or other disposition of obsolete or worn out
property in the ordinary course of business;
(ii) the sale of inventory in the ordinary course of business;
and
(iii) the sale or discount with or without recourse of accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof.
(e) Limitation on Dividends. Declare or pay any dividend (other than
-----------------------
dividends solely payable in Common Stock of the Borrower) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of capital stock of the Borrower or any warrants or
options to purchase any such stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower.
(f) Limitation on Capital Expenditures. Make or commit to make (by
----------------------------------
way of the acquisition of securities or otherwise), without unanimous approval
of the
21
<PAGE>
Board of Directors of the Borrower, any expenditure in respect of the purchase
or other acquisition of fixed or capital assets (excluding any such asset
acquired in connection with normal replacement and maintenance programs properly
charged to current operations) except for expenditures in the ordinary course of
business not exceeding in the aggregate during each period of six months during
the term of this Agreement the sum of $5,000,000, or $1,000,000 on any one
expenditure.
(g) Limitations on Investments, Loans and Advances. Make any advance,
----------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any person or entity, except
extensions of trade credit in the ordinary course of business and investments in
cash equivalents.
(h) Limitation on Optional Payments and Modifications of Debt
---------------------------------------------------------
Instruments. Make any optional payment or prepayment on or redemption or
- -----------
purchase of any Indebtedness or amend, modify or change, or consent or agree to
any amendment, modification or change to any of the terms of any Indebtedness.
Notwithstanding the foregoing, however, the Borrower may make payments or
otherwise perform pursuant to the terms of agreements in effect as of the date
of this Agreement.
(i) Limitation on Transactions With Affiliates. Enter into any
------------------------------------------
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any affiliate of the
Borrower unless such transaction is (i) otherwise permitted under this
Agreement, (ii) in the ordinary course of Borrower's business, and (iii) upon
fair and reasonable terms no less favorable to the Borrower than it would obtain
in a comparable arm's length transaction with a party which is not an affiliate
of the Borrower.
(j) Limitation on Sales and Leasebacks. Enter into any arrangement
----------------------------------
with any party providing for the leasing by the Borrower of real or personal
property which has been or is to be sold or transferred by the Borrower to such
party or to any other party to whom funds have been or are to be advance by such
party on the security of such property or rental obligations of the Borrower.
(k) Limitation on Negative Pledge Clauses. Enter into any agreement,
-------------------------------------
other than (i) this Agreement, (ii) any industrial revenue bonds, purchase money
mortgages, financing leases and operating leases permitted by this Agreement (in
which cases, any prohibition or limitation shall only be effective against the
assets financed thereby), and (iii) customary restrictions contained in asset
sale agreements for asset dispositions permitted under this Agreement and
relating only to the assets subject to such disposition, which prohibits or
limits the ability of the Borrower to create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired.
(l) Limitation on Lines of Business. Enter into any type of business,
-------------------------------
either directly or indirectly through any subsidiary, except for those
businesses which the Borrower is engaged on the date of this Agreement.
22
<PAGE>
(m) Governing Documents. Without the prior written consent of
-------------------
the Lender, amend the Borrower's articles of incorporation or other governing or
charter documents in a manner that would materially and adversely affect the
Lender's rights pursuant to any of the Loan Documents.
Section 8. Events of Default. If one or more of the following events or
-----------------
conditions (an "Event of Default") shall occur and be continuing:
----------------
(a) The Borrower or either Guarantor shall default for more
than five (5) days in the payment when due of any principal of or interest on
the Loan, any other amount payable by it hereunder or under the Note, or any
amount of securities and/or cash payable upon conversion of the Note;
(b) The Borrower or either Guarantor shall default in the
payment of any debt or other obligation in excess of $500,000 when due and
payable pursuant to any other agreement;
(c) Any representation, warranty or certification made in
any of the Loan Documents or in any document furnished in connection herewith or
therewith by the Borrower or either Guarantor shall prove to have been false or
misleading as of the time made or furnished in any material respect (without
regard to any materiality provisions contained in the representations,
warranties or certifications themselves);
(d) The Borrower shall default in the performance of any of
its obligations under Section 7 hereof;
(e) Either Pledgor (as defined in the Pledge Agreement)
shall default in the performance of any of its respective obligations under the
Pledge Agreement;
(f) The Borrower shall default in the performance of any of
its material obligations (other than those described or covered by another
clause of this Section 8) and such default (if remediable) shall continue
unremedied for a period of 30 days;
(g) The Lender shall determine that a material adverse
change has occurred in the financial condition of the Borrower from the
conditions set forth in its June 30, 1999 financial statements;
(h) The Borrower or either Guarantor shall (i) apply for or
consent to the appointment of, or the taking of a position by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property; (ii) make a general assignment for the benefit of its creditors;
(iii) commence a voluntary case under the Bankruptcy Code (as now or hereafter
in effect); (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-
23
<PAGE>
up, or composition or readjustment of debts; (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed against
it in any involuntary case under the Bankruptcy Code; or (vi) take any action
for the purpose of effecting any of the foregoing;
(i) A proceeding or case shall be commenced, without the
application or consent of the Borrower or either Guarantor in any court of
competent jurisdiction, seeking (i) liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of debts of the Borrower or
either Guarantor; (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Borrower or either Guarantor or of all or any
substantial part of any of the Borrower's or either Guarantor's assets; or (iii)
similar relief in respect of the Borrower or either Guarantor under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgment or decree approving or ordering any of the foregoing shall
be entered or an order for relief against the Borrower or either Guarantor shall
be entered in an involuntary case under the Bankruptcy Code;
(j) The Guaranty shall be revoked, cancelled or terminated;
(k) A final judgment or judgments for the payment of money shall
be rendered against the Borrower or either Guarantor in excess of $1,000,000;
THEREUPON (i) in the case of an Event of Default, other than one referred to in
clause (h) or (i) of this Section 8, the Lender may, by notice to the Borrower,
declare the principal amount then outstanding of, and the accrued interest on
all amounts payable by the Borrower under, this Agreement and the Note and all
other amounts payable by the Borrower hereunder and thereunder to be forthwith
due and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby waived by the Borrower, and (ii) in the case of the occurrence
of an Event of Default referred to in clause (h) or (i) of this Section 8, the
principal amount then outstanding of, and the accrued interest on all amounts
payable by the Borrower under, this Agreement and the Note and all other amounts
payable by the Borrower hereunder and thereunder shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby waived by the Borrower.
Section 9. Additional Rights of Lender.
---------------------------
9.01 Right of Lender to Purchase Additional Securities. The Borrower
-------------------------------------------------
hereby grants to the Lender the following rights with respect to any and all
proposed issuances of Additional Securities (as defined below) by the Borrower:
24
<PAGE>
(a) The Borrower shall give the Lender written notice of the
Borrower's intention to issue Additional Securities (the "Issuance Notice")
---------------
describing the type of Additional Securities, the price at which the Additional
Securities will be issued and the general terms upon which the Borrower proposes
to issue the Additional Securities, including the anticipated date of such
issuance.
(b) The Lender shall have fifteen business days from the date it
receives the Issuance Notice to agree to purchase all or any portion of such
Additional Securities as is equal to the Lender's Proportionate Amount (as
defined below) by giving written notice to the Borrower of its desire to
purchase Additional Securities (the "Response Notice") and stating therein the
---------------
quantity of Additional Securities to be purchased. Such Response Notice shall
constitute the irrevocable agreement of the Lender to purchase the quantity of
Additional Securities indicated in the Response Notice at the price and upon the
terms stated in the Issuance Notice; provided, however, that if the Borrower is
proposing to issue Additional Securities for consideration other than all cash,
the Borrower shall accept from the Lender either non-cash consideration which is
reasonably comparable to the non-cash consideration proposed by the Borrower or
the cash value of such non-cash consideration. Any purchase by the Lender of
Additional Securities shall be consummated on or prior to the later of the date
on which all other Additional Securities described in the applicable Issuance
Notice are issued or the twentieth business day following delivery of the
Response Notice by the Lender.
(c) The Borrower shall have 90 days from the date of the Issuance
Notice to consummate the proposed issuance of the Additional Securities which
the Lender has not elected to purchase pursuant to subsection (b). In the event
the Borrower proposes to issue Additional Securities after such 90-day period or
Additional Securities in addition to those specified in the Issuance Notice, it
must again comply with the procedures set forth in this Section 9.01.
(d) For the purposes of this Section 9.01, the following terms
shall have the following respective meanings:
"Additional Securities" shall mean all capital stock of the Borrower
---------------------
and any other securities of any type whatsoever (collectively,
"Interests") which are issued by the Borrower after the Closing Date
---------
other than (i) any Interests issued or issuable to any employees,
officers, directors or consultants of the Borrower pursuant to any
benefit or incentive compensation plan approved by the Borrower's
Board of Directors as being reasonable and appropriate as to the level
granted and at a price that is not less than the fair market value of
the Interest on the date of grant; and (ii) any Interests reissued by
the Borrower to employees, officers, directors and consultants
following the repurchase, redemption or other acquisition of such
Interests by the Borrower from any employee, officer, director or
consultant; (iii) Common Stock issued as a stock dividend to holders
of Common Stock or upon any subdivision or combination of
25
<PAGE>
shares of Common Stock; and (iv) the issuance of any shares of Common
Stock upon conversion of the Note or upon the exercise or conversion
of any other convertible securities outstanding on the date of this
Agreement.
"Proportionate Amount" shall mean (i) prior to the expiration or
--------------------
termination of the Lender Option Period (as defined in Section 9.04
below), all of the Additional Securities, and (ii) from and after the
expiration or termination of the Lender Option Period, the Lender's
pro rata portion of the Additional Securities determined by dividing
the aggregate number of shares of Common Stock issued or issuable to
the Lender upon conversion of the Note and for the granting of the
Territorial Rights Arrangement (after giving effect to stock splits,
stock dividends, recapitalizations and the like) by the total number
of shares of Common Stock outstanding (including shares of Common
Stock then issuable upon conversion of the Note) as of the date of the
Issuance Notice.
9.02 Registration Rights.
-------------------
(a) Demand Registration.
-------------------
(i) On and after the date that is six months after the
Closing Date, the Holders of at least 50% of the Registrable Securities (the
"Initiating Holders") may request in a written notice that the Borrower file a
------------------
registration statement under the Securities Act (or a similar document pursuant
to any other statute then in effect corresponding to the Securities Act)
covering the registration of any or all Registrable Securities held by such
Initiating Holders in the manner specified in the notice; provided, however,
that there must be included in such registration at least 50% of the Registrable
Securities. Following receipt of any notice under this Section 9.02(a), the
Borrower shall (X) within 20 days notify all other Holders of such request in
writing and (Y) use its best efforts to cause to be registered under the
Securities Act all Registrable Securities that the Initiating Holders and such
other Holders have, within ten (10) days after the Borrower has given such
notice, requested be registered in accordance with the manner of disposition
specified in such notice by the Initiating Holders
(ii) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting, the
Borrower shall include such information in the written notice referred to in
clause (X) of Section 9.02(a)(i) above. In such event, the right of any Holder
to include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or
26
<PAGE>
underwriters shall be reasonably acceptable to the Borrower), provided that (X)
all of the representations and warranties by, and the other agreements on the
part of, the Borrower to and for the benefit of such underwriters shall also be
made to and for the benefit of such Holders of Registrable Securities, (Y) any
or all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement shall be conditions precedent to the obligations of
such Holders of Registrable Securities, and (iii) no Holder shall be required to
make any representations or warranties to or agreements with the Borrower or the
underwriters other than representations, warranties or agreements regarding such
holder, the Registrable Securities of such Holder and such holder's intended
method of distribution and any other representations required by law or
reasonably required by the underwriter or the SEC in order to have such
registration statement declared effective. If any holder of Registrable
Securities disapproves of the terms of the underwriting, such holder may elect
to withdraw all its Registrable Securities by written notice to the Borrower,
the managing underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration.
(iii) The Borrower shall not be required to effect a
registration pursuant to this Section 9.02(a) if the Borrower shall furnish to
such Holders a certificate signed by the Chairman of the Board stating that in
the good faith judgment of the Board of Directors of the Borrower, it would be
seriously detrimental to the Borrower and its shareholders for such registration
statement to be effected at such time, in which event the Borrower shall have
the right to defer such filing for a period of not more than ninety (90) days
after receipt of the request of the Initiating Holders; provided that such right
to delay a request shall be exercised by the Borrower not more than once in any
twelve (12) month period.
(b) Incidental Registration.
-----------------------
(i) The Borrower shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to the filing of any
registration statement under the Securities Act for purposes of a public
offering of securities of the Borrower (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Borrower, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within twenty (20) days after the above-described notice from the
Borrower, so notify the Borrower in writing, and the Borrower shall use its best
efforts to cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has so requested to be Registered.
Such notice shall state the intended method of disposition of the Registrable
Securities by such Holder. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Borrower, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
27
<PAGE>
registration statement or registration statements as may be filed by the
Borrower with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(ii) If the registration statement under which the Borrower
gives notice under this Section 9.02(b) is for an underwritten offering, the
Borrower shall so advise the Holders of Registrable Securities and shall use its
best efforts to cause the managing underwriters to include such Registrable
Securities requested by the Holders in such offering on the same terms and
conditions as any similar securities of the Borrower included therein.
Notwithstanding any other provision of the Agreement, if (in the written opinion
of the underwriter) the total amount of such securities to be so registered,
including such Registrable Securities, will exceed the maximum amount of the
Borrower's securities which can be marketed (X) at a price reasonably related to
the then current market value of the securities, or (Y) without otherwise
materially and adversely affecting the entire offering, then the Borrower shall
be entitled to reduce pro rata with respect to each holder the number of shares
of Registrable Securities to not less than one-third of the total number of
shares in such offering. Such reduction shall be allocated among all such
Holders in proportion (as nearly as practicable) to the amount of Registrable
Securities owned by each holder at the time of filing of the registration
statement. If securities are being offered for the account of other
securityholders of the Borrower, then with respect to the Registrable Securities
intended to be offered by the Holders, the proportion by which the amount of
such class of Registrable Securities intended to be offered by such Holders is
reduced shall not exceed the proportion by which the amount of such class of
securities intended to be offered by such other securityholders is reduced.
There shall be no limitation on the number of registrations on Form S-3 which
may be requested and obtained under this section 9.02(b).
(c) Registration on Form S-3. In case the Borrower shall receive
------------------------
from any Holder or Holders of Registrable Securities a written request or
requests that the Borrower effect a registration on Form S-3 (or any successor
to Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Borrower will promptly give
written notice of the proposed registration, and any related qualification or
compliance, to all other Holders of Registrable Securities. The Borrower will
use its best efforts to expeditiously effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within ten
(10) days after receipt of such written notice from the Borrower; provided,
however, that the Borrower shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 9.02(c):
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
28
<PAGE>
(ii) if the Holders, together with the holders of any other
securities of the Borrower entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000, or
(iii) if the Borrower shall furnish to such Holders a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board of Directors of the Borrower, it would be seriously detrimental to the
Borrower and its shareholders for such registration statement to be effected at
such time, in which event the Borrower shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders; provided that such right to delay a request shall be
exercised by the Borrower not more than once in any twelve (12) month period, or
(iv) if the Borrower has already effected four (4) registrations
on Form S-3 for the Holders pursuant to this Section 9.02(c).
(d) Registration Expenses. Except as specifically provided herein,
---------------------
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 9.02(a), (b) or (c) herein shall
be borne by the Borrower. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Borrower shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 9.02(a) or (c), the request of which has
been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal
is based upon material adverse information concerning the Borrower of which the
Initiating Holders were not aware at the time of such request or (b) the Holders
of a majority of Registrable Securities agree to forfeit their right to one
requested registration pursuant to Section 9.02(a) or (c), as applicable, in
which event such right shall be forfeited by all Holders. If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Borrower is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 9.02(a) or (c) to a demand
registration.
(e) Obligations of the Borrower. Whenever required to effect the
---------------------------
registration of any Registrable Securities, the Borrower shall, as expeditiously
as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration
29
<PAGE>
statement effective until the Holder or Holders have completed the distribution
related thereto.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph (i) above.
(iii) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(iv) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Borrower shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions, and
to list and to allow the trading of such securities on the principal national
securities exchange or market upon which the Common Stock is then listed or
traded.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(vi) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and use its best efforts to prepare a supplement or amendment to the
registration statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Holder as such
Holder may reasonably request.
(vii) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Borrower for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
30
<PAGE>
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Borrower, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
(viii) Use its reasonable best efforts to prevent the issuance of
stop orders or any other suspensions in trading of the Borrower's Common Stock
by the SEC or any applicable exchange or market, and use its best efforts to
have removed or reversed any such stop order or suspension in trading that
occurs.
(f) Furnishing Information. It shall be a condition precedent to the
----------------------
obligations of the Borrower to take any action pursuant to Section 9.02(a), (b)
or (c) that the selling Holders shall furnish to the Borrower such information
regarding themselves, the Registrable Securities held by them and the intended
method of disposition of the Registrable Securities held by them as shall be
reasonably required to effect the registration of their Registrable Securities.
(g) Indemnification In the event any Registrable Securities are
---------------
included in a registration statement under this Section 9.02:
(i) To the extent permitted by law, the Borrower will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Borrower: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Borrower of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Borrower will pay as incurred to each such Holder, partner, officer, director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or
31
<PAGE>
action; provided however, that the indemnity agreement contained in this Section
9.02(g) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Borrower, which consent shall not be unreasonably withheld or delayed,
nor shall the Borrower be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(ii) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualifications or compliance is being effected,
indemnify and hold harmless the Borrower, each of its directors and its officers
and each person, if any, who controls the Borrower within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Borrower or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Borrower or any such
director, officer, controlling person, underwriter or other Holder, or partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 9.02(g) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided further, that in no event
shall any indemnity under this Section 9.02(g) exceed the net proceeds from the
offering received by such Holder.
(iii) Promptly after receipt by an indemnified party under this
Section 9.02(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9.02(g), deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties after the receipt by the indemnified party or
parties of written notice of such assumption; provided, however, that
32
<PAGE>
an indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party may be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
9.02(g) (but only to the extent of such material prejudice), but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 9.02(g).
(iv) If the indemnification provided for in this Section 9.02(g)
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall except to the extent prohibited by applicable law contribute
to the amount paid or payable by such indemnified party as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event shall any contribution by
a Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(v) The obligations of the Borrower and Holders under this
Section 9.02(g) shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(h) Assignment of Registration Rights. The rights to cause the
---------------------------------
Borrower to register Registrable Securities pursuant to this Section 9.02 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(a) is a subsidiary, parent, general partner, limited partner, retired partner,
member or retired member of a Holder, (b) is a Holder's family member or trust
for the benefit of an individual Holder, or (c) acquires at least twenty-five
thousand (25,000) shares of Registrable Securities (as adjusted for stock splits
and combinations); provided, however, (i) the transferor shall,
33
<PAGE>
within twenty (20) days after such transfer, furnish to the Borrower written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned and (ii) such
transferee shall agree to be subject to all restrictions set forth in this
Section 9.02.
(i) Amendment of Registration Rights. Any provision of this
--------------------------------
Section 9.02 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Borrower and the Holders of
at least two-thirds of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 9.02 shall be
binding upon each Holder and the Borrower. By acceptance of any benefits under
this Section 9, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
(j) Limitation on Subsequent Registration Rights. After the
--------------------------------------------
Closing Date, the Borrower shall not, without the prior written consent of the
Holders of at least a two-thirds of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Borrower that would grant such holder registration rights senior to those
granted to the Holders hereunder.
(k) Rule 144 Reporting. With a view to making available to the
------------------
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Borrower agrees to use its best efforts to:
(i) Make and keep public information available, as
those terms are understood and defined in SEC Rule 144 or any similar or
analogous rule promulgated under the Securities Act, at all times after the
effective date of the first registration filed by the Borrower for an offering
of its securities to the general public;
(ii) File with the SEC, in a timely manner, all
reports and other documents required of the Borrower under the Exchange Act;
(iii) So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request: a written statement
by the Borrower as to its compliance with the reporting requirements of said
Rule 144 of the Securities Act, and of the Exchange Act (at any time after it
has become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Borrower; and such other reports and documents
as a Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing it to sell any such securities without registration.
9.03 Borrower Shareholders Matters.
-----------------------------
(a) Borrower Shareholders' Meeting. Within one year
------------------------------
following the Closing Date (or earlier as requested in writing by the Lender),
the Borrower shall, in
34
<PAGE>
accordance with its articles of incorporation and bylaws and the applicable
requirements of the Florida Business Corporation Act, the rules of the NASDAQ
Stock Market (including, but not limited to, Rule 4460(i)(1) of the National
Association of Securities Dealers, Inc.), and the SEC, call and hold an annual
or special meeting of its shareholders for the purpose of permitting them to
consider and to vote upon and approve the Loan, this Agreement, the Note and the
terms of conversion of the Note into Common Stock of the Borrower (the "Borrower
--------
Shareholders' Meeting"). At a Borrower Shareholders' Meeting, the
- ---------------------
Lender agrees not to vote any of its shares of Common Stock issued upon
conversion of the Note and issued for the Territorial Rights Arrangement if such
matter presented at the meeting relates to the rules and regulations imposed by
the NASDAQ Stock Market. The directors of the Borrower shall, subject to their
fiduciary duties, recommend approval by the Borrower's shareholders of the Loan,
this Agreement, the Note and the terms of conversion of the Note into Common
Stock of the Borrower. In connection with such meeting, the Borrower (i) will
promptly prepare and file with the SEC, will use all reasonable efforts to have
cleared by the SEC and will thereafter mail to its shareholders as promptly as
practicable a proxy statement and all other proxy materials for such meeting,
(ii) will, subject to the fiduciary duties of its Board of Directors, use all
reasonable efforts to obtain the necessary approvals by its shareholders of the
Loan, this Agreement, the Note and the terms of conversion of the Note into
Common Stock of the Borrower, and (iii) will otherwise comply with all legal
requirements applicable to such meeting.
(b) Proxies. Concurrently with the execution and delivery of this
-------
Agreement and as a condition and inducement to the Lender's willingness to enter
into this Agreement, the Guarantors are each executing a voting agreement and
granting to the Lender an irrevocable proxy in the form attached hereto as
Exhibit D ("Company Stock Proxy") to vote their respective shares of the
Borrower's stock in favor of the matters set forth in Section 9.03(a) above.
9.04 Lender's Right to Engage In Additional Transactions.
---------------------------------------------------
(a) Additional Transaction Option. The Borrower agrees that the
-----------------------------
Lender has the option (the "Additional Transaction Option"), exerciseable at the
-----------------------------
Lender's election within two years following the Closing Date (the "Lender
------
Option Period"), to engage in the following transactions with the Borrower (the
- -------------
"Additional Transactions"): (i) extend an additional $40 million convertible
-----------------------
loan to the Borrower on the same terms and conditions as the Loan, with a
conversion price equal to the lower of (X) $11.02 per share or (Y) a 20% premium
over the then-market value of the Borrower's Common Stock as reported on the
NASDAQ stock market (or the principal market or exchange on which the Borrower's
Common Stock is then traded) determined by taking the arithmetic average of the
closing price of the Borrower's Common Stock for a period of twenty (20) trading
days preceding the date on which the Lender gives notice of its intent to
exercise the Additional Transaction Option and/or (ii) enter into agreements
with the Borrower on the terms set forth on the term sheet attached hereto as
Exhibit H (with other typical and customary provisions for agreements of this
type). The Lender may elect to engage in either, both or none of the additional
transactions pursuant to the Additional Transaction
35
<PAGE>
Option, and the Lender's election as to each additional transaction may be made
at different times within the Lender Option Period.
(b) Borrower Shareholders' Meeting. To the extent that the Lender
------------------------------
exercises the Additional Transaction Option and the consummation or performance
of the Additional Transaction requires approval of the Borrower's shareholders,
the Borrower shall, in accordance with its articles of incorporation and bylaws
and the applicable requirements of the Florida Business Corporation Act, the
rules of the NASDAQ Stock Market (including, but not limited to, Rule 4460(i)(1)
of the National Association of Securities Dealers, Inc.), and the SEC, call and
hold an annual or special meeting of its shareholders for the purpose of
permitting them to consider and to vote upon and approve the Additional
Transaction (the "Additional Transaction Shareholders' Meeting").
--------------------------------------------
Notwithstanding the preceding sentence, without the Lender's prior written
consent not to be unreasonably withheld, the Borrower shall not call an
Additional Transaction Shareholders Meeting or otherwise hold a meeting of its
shareholders or solicit the written consent of its shareholders for the purpose
of permitting them to consider and to vote upon and approve the Additional
Transaction. The directors of the Borrower shall, subject to their fiduciary
duties, recommend approval by the Borrower's shareholders of the Additional
Transaction. In connection with such meeting, the Borrower (i) will promptly
prepare and file with the SEC, will use all reasonable efforts to have cleared
by the SEC and will thereafter mail to its shareholders as promptly as
practicable a proxy statement and all other proxy materials for such meeting,
(ii) will, subject to the fiduciary duties of its Board of Directors, use all
reasonable efforts to obtain the necessary approvals by its shareholders of the
Additional Transaction, and (iii) will otherwise comply with all legal
requirements applicable to such meeting.
(c) Proxies. Concurrently with the execution and delivery of this
-------
Agreement and as a condition and inducement to the Lender's willingness to enter
into this Agreement, the Guarantors are each executing a voting agreement and
granting to the Lender an irrevocable proxy in the form attached hereto as
Exhibit D to vote their respective shares of the Borrower's stock in favor of
the Additional Transaction.
Section 10. Miscellaneous.
-------------
10.01 Waiver. No failure on the part of the Lender to exercise
------
and no delay in exercising, and no course of dealing with respect to any right,
power or privilege under any of the Loan Documents shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any of the Loan Documents preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
10.02 Notices. All notices and other communications provided
-------
for herein shall be in writing and shall be delivered to the intended recipient
at the "Address for Notices" specified below or at such other address as shall
be designated by a party in a notice to each other party. All notices and other
communications hereunder shall be
36
<PAGE>
deemed to have been duly given, in the case of hand delivery, when received, or
in the case of mail, three Business Days after the date deposited in the mail,
addressed as aforesaid.
Addresses for Notices:
If to the Borrower:
Vitech America, Inc.
8807 Northwest 23/rd/ Street
Miami, FL 33172
Attn: Edward Kelly
Fax: (305) 477-1379
Phone: (305) 477-1161
with a copy to:
Atlas Pearlman Trop & Borkson, P.A.'
200 E. Las Olas Blvd.
Suite 1900
Ft. Lauderdale, FL 33301
Attn: Joel D. Mayersohn
Fax: (954) 766-7816
Tele: (954) 766-7800
If to the Lender:
Gateway Companies, Inc.
4545 Towne Centre Court
San Diego, CA 92121
Attn: General Counsel
Fax: (858) 799-3413
Tele: (858) 799-3419
10.03 Expenses, Etc. Except as set forth in this Section 10.03, all
-------------
costs and expenses incurred in connection with the Loan Documents shall be paid
by the party incurring such costs and expenses. The Borrower agrees to promptly
pay on demand (a) all costs and expenses of the Lender, including counsels'
fees, in connection with the enforcement of the Loan Documents; (b) all expenses
of the Lender, including counsels' fees, in connection with any actual or
proposed waiver or amendment requested by the Borrower to any of the foregoing,
whether or not such waiver or amendment shall become effective; and (c) all
transfer, stamp, documentary or other similar taxes,
37
<PAGE>
assessments or charges levied by any governmental or revenue authority in
respect of any of the foregoing or any other document referred to herein.
10.04. Amendments, Etc. Any provision of this Agreement may be modified
---------------
or waived by an instrument or instruments in writing signed by the Borrower and
the Lender.
10.05. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns except that the Borrower may not assign its rights or delegate its
obligations hereunder or under the Note without the prior written consent of
Lender.
10.06. Survival of Representations and Warranties. The representations,
------------------------------------------
warranties, covenants and agreements made herein shall survive any investigation
made by the Lender and the closing of the transactions contemplated hereby.
10.07. Confidentiality. Other than as required by law (and then, only
----------------
upon advance notice with a reasonably opportunity for the other party to
comment), without the prior written consent of the other party, no party to this
Agreement shall make, or cause to be made, any press release or public
announcement in respect of this Agreement, the transactions contemplated hereby
or any other discussions or negotiations between the parties, or otherwise
communicate with any news media regarding this Agreement or the transactions
contemplated hereby or any other discussions or negotiations between the
parties. The parties shall cooperate as to the timing and contents of any such
press release, public announcement or other communication. Other than as
required by law (and then, only upon advance notice with a reasonably
opportunity for the Lender to comment), without the prior written consent of the
Lender, the Borrower agrees not to use the name "Gateway" in any press release,
public announcement or other public document, or to make any other disclosure of
the name "Gateway" to any third party, in relation to this transaction or any
other discussions or negotiations between the parties hereto.
10.08. Counterparts. This Agreement may be executed in counterparts.
------------
10.09. GOVERNING LAW; WAIVER OF JURY TRIAL.
-----------------------------------
(a) THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) THE PARTIES EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE ARISING OUT OF, OR IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP BETWEEN THEM ESTABLISHED BY THIS AGREEMENT, THE NOTE AND ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT
38
<PAGE>
ENTERED INTO IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
10.10 Jurisdiction and Consent to Suit. Any proceeding to enforce any
--------------------------------
of the Loan Documents may be brought in any state or federal court of competent
jurisdiction in the State of New York. The Borrower hereby irrevocably waives
any present and future objection to any such venue, and irrevocably consents and
submits unconditionally to the non-exclusive jurisdiction for itself and in
respect of any of its property in such court. The Borrower further agrees that
final judgment against it in any such action or proceeding arising out of or
relating to any of the Loan Documents shall be conclusive and may be enforced in
any other jurisdiction within or outside the United States of America by suit on
the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of the obligation.
10.11 Severability. If any terms or provisions of this Agreement or
------------
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10.12 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Convertible Loan
Agreement to be duly executed as of the day and year first above written.
VITECH AMERICA, INC.
By: __________________________
Name:
Title:
GATEWAY COMPANIES, INC.
By: __________________________
Name:
Title:
40
<PAGE>
Exhibit G
Summary of Terms
Territorial Rights Arrangement
Brand License and Related Charger will grant Carnival a license to brand
Arrangements: specifically identified products manufactured by
Carnival in Brazil with Charger trademarks and
trade names. The license will establish specific
quality controls, component requirements, branding
rules, manufacturing standards, and engineering
standards.
Carnival and Charger will coordinate their sales
and marketing efforts to use Carnival's
distribution channels in Brazil to sell Charger-
branded products not competitive with Carnival.
The parties will investigate co-branding of
products and/or the phasing in of Charger-branded
products, consistent with market conditions. The
territory of the trademark license shall be Brazil
initially and thereafter extend to other parts of
South America, as may be mutually agreed by the
parties.
Charger will also grant Carnival a technology and
know-how license to use the state-of-the-art
manufacturing and assembly techniques used by
Charger in its own manufacturing operations.
Charger will provide expert technical assistance,
in the form of experienced manufacturing and
quality control personnel, who will advise and
assist Carnival. All Carnival employees and agents
exposed to any of Charger's confidential
information, materials or data or any of Charger's
proprietary interests or rights shall be required
to execute confidentiality agreements with terms
that are consistent with the confidentiality
agreements executed by Charger's own employees.
Charger will provide Carnival design and
engineering blueprints and technical assistance to
permit Carnival to manufacture computer products
equivalent or identical to Charger designs.
Charger will undertake to provide procurement
assistance to Carnival in connection with the
purchase of product parts and components, so as to
permit Carnival to benefit from the favorable
pricing, quality and other terms and conditions
that Charger can obtain from suppliers and
vendors.
In consideration for the above agreements (which
shall be embodied in multiple agreements that may,
but will not necessarily, include a territorial
rights agreement, a trademark/brand license
agreement, a technology and manufacturing license
agreement, a component purchase or supply
agreement, a marketing assistance agreement and/or
a transportation/logistics agreement, etc.),
Carnival will pay to Charger, subject to the
limitations set forth below, aggregate fees on
total revenue as follows:
Months 1 -12 3.5%
Months 13-24 5.0%
Thereafter 6.5%
The first $200 million of annual fees generated by
Carnival in Brazil will be excluded from this fee
structure. Fees on revenues generated in other
countries will begin the scale again and not be
subject to a revenue threshold.
Charger will have the right to terminate the
foregoing licenses / arrangements under certain
circumstances common in such arrangements (e.g.
change of control, breach in quality standards,
etc.).
<PAGE>
Exhibit H
Summary of Terms
Structure: A convertible note will be issued by Carnival in
exchange for the agreed upon investment amount. This
note will be in a principal amount of $70 million
(which includes amounts already outstanding to Charger
of $31 million pursuant to the Convertible Loan
Agreement) and be convertible into shares of
Carnival's common stock at $13.00 per share. The
proceeds will be used to first fully retire Carnival's
outstanding financial debt and the balance will be
used for working capital purposes and expansion
projects to be agreed upon between Charger and
Carnival. Accordingly, Carnival's current indebtedness
to Charger will be netted from the above amount.
To the extent that the shares of common stock issued
upon conversion would result in the Company issuing
more than 20% of its outstanding common stock,
approval of the Company's shareholders and a proxy
statement would be required by virtue of the Nasdaq
NMS Rules. Accordingly, immediately following the
investment Carnival would prepare a proxy and file the
same with the SEC. The proxy would include the terms
of the investment and the conversion features.
Conversion up to the 20% limitation would be permitted
pending shareholder approval.
The proxy would also contain the description of the
Merger for Newco and request, if required, shareholder
approval for such transaction. Since the principals of
Carnival control a majority of Carnival's common
stock, such transaction would not be subject to the
risk of approval. The principal shareholders of
Carnival would agree to grant irrevocable proxies to
vote for such transactions and enter a form of voting
agreement for the matters which are the subject of the
proxy.
Non-Affiliate Carnival shareholders shall have the
option to exchange their Carnival common shares for
$14.00 per share in cash or one share of a new
callable putable common stock ("New Stock"). [New
Stock will be registered with the SEC and publicly
listed.] Charger will fund the 'Cash Option' election
and receive one share of New Stock for each Carnival
share tendered. Carnival's founders and executive
management (specifically George St. Laurent and
William St. Laurent) will elect to receive New Stock
("Affiliate Shares").
Call Provision Upon the third anniversary date of closing and through
the fourth anniversary of the closing, Charger will
have the right to call 100% (and not less than 100%)
of the New Stock, including all vested options and
warrants, which it does not already own.
<PAGE>
Summary of Terms
Call Option Strike Price: The Call Option that Charger has on New Stock will
have a variable Strike Price which will be determined
subsequent to the third anniversary of Closing, i.e.
when the Call Option first becomes exercisable. The
Strike Price of the Call Option shall be a per share,
US dollar amount calculated as follows:
1) Calculate the compound annual growth rate
("CAGR") of the trailing twelve calendar quarters
ending Q4 2001 of Carnival's tax-effected EBIT
("Adjusted EBIT") (see definition below) over the
Adjusted EBIT of calendar year 1998 ("Base
Year"). Round to the nearest whole percent.
2) Determine the corresponding Adjusted EBIT
Multiple from Annex A.
3) Multiply the Adjusted EBIT Multiple derived in
Step 2 times the prior trailing twelve months'
Adjusted EBIT to determine Carnival's Firm Value,
then subtract Net Debt on Carnival's balance
sheet and the Liability Adjustment to determine
the fully-diluted Equity Value. Net Debt is
defined as debt (other than the $70 million
convertible debt from Charger) less cash on the
balance sheet.
4) Calculate the Per Share Strike Price as
Carnival's fully diluted Equity Value divided by
all outstanding shares including all vested,
dilutive options and warrants, taking into
consideration the proceeds from such options and
warrants (based on the treasury method of
accounting).
5) The Call Option shall be exercisable for 100%
(and not less than 100%) of the New Stock,
including all vested dilutive options and
warrants, which Charger does not already own.
** If the Adjusted EBIT CAGR calculated at the third
anniversary of the Closing is less than 13%, then the
Call Option will terminate and become void.
Liability Adjustment: The Liability Adjustment shall be defined as the
cumulative dollar amount of all claims or liabilities
paid or owed by Carnival attributable to activities
and operations prior to Closing against which Carnival
is not currently adequately reserved. The Liability
Adjustment shall include all such amounts paid or
deemed payable through the exercise of the Put or Call
Option.
Page 2
<PAGE>
Summary of Terms
Put Provision: Between the third and fourth anniversary after the
date of Closing, New Stock holders will have the right
to put annually to Charger 100% (and not less than
100%) of their New Stock, including all vested
dilutive options and warrants. The put provisions may
be restructured in a manner not materially adverse to
Carnival shareholders to facilitate compliance with
the Williams Act and Regulation M.
Put Option Strike Price: The Put Option that New Stock owners have will have a
variable Strike Price which will be determined
pursuant to the same methodology as the Call Option
Strike Price, except that the Strike Price of the Put
Option shall be a per share, US dollar amount
calculated as 60% of the Call Option Strike Price as
determined above. In the event that Carnival is
successfully able to renew its existing package of
state-level tax incentives to Charger's satisfaction
for additional periods of at least three years, then
Carnival shall receive a premium on the Put Option
Strike Price to make it equivalent to 100% of the
applicable Call Option Strike Price.
** If the Call Option is void per the above
calculation, the Put Option will also terminate and
become void.
Adjusted EBIT: Adjusted EBIT shall be defined as the after-tax income
from operations of Carnival adjusted to remove the
incremental or decremental effects of changes in the
relative value of the Brazilian Real and the US
dollar. Fees due to Charger from Carnival for the
respective period in excess of component cost savings
will be added back to the above income figure to
determine Adjusted EBIT.
Consideration: Cash offer of $14.00 per share of Carnival Common
Stock or exchange of Carnival common stock for New
Stock.
Accounting Treatment: Purchase accounting.
Treatment of Options All options and warrants for capital stock of Carnival
and Warrants: not exercised into Carnival Common Stock will be
converted into new options or warrants for New Stock
consistent with their original vesting period and
strike prices.
Representations & Consistent with those for similar transactions.
Warranties:
Page 3
<PAGE>
Summary of Terms
Conduct of Business: Prior to closing, Carnival shall conduct its business
only in the normal and ordinary course and shall use
its best efforts to preserve its business intact, to
retain the services of its present employees, to
preserve the goodwill of its customers and suppliers.
Carnival shall adhere to covenants consistent with
those for similar transactions, including restrictions
on (i) changes to capital structure, (ii) accounting
policies, (iii) changes in benefit plans and executive
compensation, etc.
As long as non-Charger stockholders are in managerial
positions, the business shall be conducted in an
ordinary manner consistent with the long-term
development of the business and past practice. No
trade loading will occur.
The Put and Call provisions described above shall
terminate and become void, at Charger's election, in
the event that the following catastrophic events
occur: (a) the authorities close down the business of
Carnival; (b) the authorities seize all or
substantially all of the assets of Carnival preventing
the conduct of business; (c) the authorities claim
taxes or other similar levies that are in a cumulative
amount of $30 million or more, and are claimed for
periods prior to the closing; and (d) other
catastrophic events that render Carnival unable to
carry on its business.
Page 4
<PAGE>
Summary of Terms
Merger Agreement: The Merger will be subject to, among other things,
approval of the Boards of Directors of Charger and
Carnival, Charger's satisfactory completion of due
diligence, appropriate execution of management
employment agreements, and absence of material adverse
change and other customary conditions. The Convertible
Note agreement will be attached to the definitive
Merger Agreement. Both of the above referenced
agreements shall be drafted by Charger's counsel, and
shall contain customary representations and warranties
by each Charger and Carnival and other terms,
provisions and conditions customary in similar
transactions.
Convertible Note: Purchase price of Convertible Note will be $70 million
(which includes amounts already outstanding to Charger
of $31 million pursuant to the Convertible Loan
Agreement) with a coupon of 10.0% and a three-year
maturity. Charger will net its current term loan and a
1% origination fee from the proceeds. Interest on the
Note will be payable on a quarterly basis. The
Convertible Note will be convertible any time during
its term at Charger's discretion for a price of $13.00
per share, except that prior to the third anniversary
of the Closing, Charger shall not convert the note,
partially or fully, if such conversion would result in
Charger holding an equity position in Carnival greater
than 50%. In the event the merger is not consummated
by the four month anniversary of the issuance of the
Convertible Note, the Convertible Note will become
immediately due and payable in an amount equal to the
principal plus the accrued amount of unpaid interest.
In the event that Charger does not exercise the full
conversion of this note into stock within the 3 year
term, the note will become subordinated debt with an
additional two year term carrying an appropriate
market rate of interest.
Right of First Refusal: In the future, should Carnival desire to raise
capital, either debt or equity, it will provide a
Capital Proposal to Charger. Charger will have fifteen
business days to accept or waive its rights to supply
such capital. Immaterial commercial financing
arrangements will be excluded from such obligation on
the part of Carnival. Charger will have a similar
right with regards to any third party offer to acquire
Carnival.
Page 5
<PAGE>
Summary of Terms
Corporate Governance: Charger will be entitled to name two members to the
Board of Directors, but in no case, a greater number
than in proportion to its implied ownership from the
Merger and the Convertible Note. Certain major
decisions affecting Carnival shall require the
unanimous approval of the Board of Directors,
including the following: (i) capital expenditures or
borrowings in excess of $500,000, (ii) material
changes in Carnival's business plans, (iii) hiring or
termination of senior management, (iv) mergers and
acquisitions, joint ventures, or other material
transactions, (v) advances to third parties in excess
of $500,000; (vi) issuance of equity securities of
Carnival; (vii) the sale, lease, exchange or transfer
of material assets of Carnival; (viii) the repurchase
or redemption of the equity securities of Carnival;
(ix) amendment of the Articles of Incorporation or
Bylaws of Carnival; (x) dissolution of Carnival; and
(xi) establishment of any material changes in the
stock-based compensation programs of Carnival.
No-Shop Provision: Carnival will not solicit, encourage or facilitate
inquiries or the making of a proposal or offer
relating to a business combination or similar
transaction. If, and only if, fiduciary duties require
and Carnival determines that an unsolicited proposal
or offer from a third party is a "Superior Proposal",
Carnival can (i) provide information to such third
party (provided the third party has entered into an
equivalent confidentiality agreement), (ii) engage in
negotiations with respect to such proposal or offer
and (iii) recommend such proposal or offer. Carnival
must cease any current discussions with respect to
acquisition proposals and notify Charger of receipt of
any acquisition proposal and give Charger an
opportunity to revise its offer within 10 days of such
notice to Charger before accepting a Superior
Proposal.
Recommendations: Carnival Board must submit the Merger Agreement to all
Carnival stockholders and recommend stockholder
approval unless otherwise required by directors'
fiduciary duties.
Page 6
<PAGE>
Summary of Terms
Brand License and Charger will grant Carnival a license to brand
Related specifically identified products manufactured by
Arrangements: Carnival in Brazil with Charger trademarks and trade
names. The license will establish specific quality
controls, component requirements, branding rules,
manufacturing standards, and engineering standards.
Carnival and Charger will coordinate their sales and
marketing efforts to use Carnival's distribution
channels in Brazil to sell Charger-branded products
not competitive with Carnival. The parties will
investigate co-branding of products and/or the phasing
in of Charger-branded products, consistent with market
conditions. The territory of the trademark license
shall be Brazil initially and thereafter extend to
other parts of South America, as may be mutually
agreed by the parties.
Charger will also grant Carnival a technology and
know-how license to use the state-of-the-art
manufacturing and assembly techniques used by Charger
in its own manufacturing operations. Charger will
provide expert technical assistance, in the form of
experienced manufacturing and quality control
personnel, who will advise and assist Carnival. All
Carnival employees and agents exposed to any of
Charger's confidential information, materials or data
or any of Charger's proprietary interests or rights
shall be required to execute confidentiality
agreements with terms that are consistent with the
confidentiality agreements executed by Charger's own
employees.
Charger will provide Carnival design and engineering
blueprints and technical assistance to permit Carnival
to manufacture computer products equivalent or
identical to Charger designs.
Charger will undertake to provide procurement
assistance to Carnival in connection with the purchase
of product parts and components, so as to permit
Carnival to benefit from the favorable pricing,
quality and other terms and conditions that Charger
can obtain from suppliers and vendors.
In consideration for the above agreements (which shall
be embodied in multiple agreements that may, but will
not necessarily, include a territorial rights
agreement, a trademark/brand license agreement, a
technology and manufacturing license agreement, a
component purchase or supply agreement, a marketing
assistance agreement and/or a transportation/logistics
agreement), Carnival will pay to Charger, subject to
the limitations set forth below, aggregate fees on
total revenue as follows:
Months 1-12 3.5%
Months 13-24 5.0%
Thereafter 6.5%
The first $200 million of annual fees generated by
Carnival in Brazil will be excluded from this fee
structure. Fees on revenues generated in other
countries will begin the scale again and not be
subject to a revenue threshold.
Charger will have the right to terminate the foregoing
licenses / arrangements under certain circumstances
common in such arrangements (e.g. change of control,
breach in quality standards, etc.).
Page 7
<PAGE>
Summary of Terms
Expenses; Break-Up Fees: Each party shall bear its own expenses in connection
with the preparation for and consummation of the
transactions contemplated by this term sheet. Carnival
will pay Charger a break-up fee of $6 million in the
event that Charger or Carnival terminates the Merger
Agreement under the following circumstances i) any
other entity or group becomes the beneficial owner of
20% or more of the outstanding shares of capital stock
of Carnival, ii) the board of directors of Carnival
withdraws or modifies its approval or recommendation
of the Merger agreement, iii) the board of directors
of Carnival solicits approves or recommends a
competing transaction or iv) the stockholders of
Carnival fail to vote in favor of the merger or v)
Carnival breaches the no-shop provision.
Employment Matters: (a) At Closing, certain key employees of Carnival
(approximately 10 people) to be identified by Charger
will enter into noncompetition agreements in a form
reasonably acceptable to Charger agreeing not to
compete with Charger or its subsidiaries with respect
to the business of Carnival for a period of three
years after the merger
(b) After execution of the Merger Agreement but prior
to consummation of the merger, approximately 10 key
employees of Carnival to be identified by Charger will
enter into confidentiality and non-competition
agreements similar to those described in (a) above;
and
(c) When appropriate, Charger will take steps
necessary to make available to those employees of
Carnival who will become employees of Charger all
employee benefits then offered to Charger employees of
like position and responsibilities.
(d) Certain key employees of Carnival will be granted
additional options which will total in aggregate up to
6 - 8% of New Stock based upon meeting or exceeding
specific performance objectives to include but not
limited to (i) the expansion of business and
operations into certain specified countries, and (ii)
development of a suitable executive management
succession plan and identification/training of key
executive successors.
Confidentiality/ This Summary of Terms will not be made public by
Exclusivity: either party and the information contained herein is
solely for review by the Carnival Board, senior
management team and advisors. In the event that the
existence or terms of this document become known
publicly or by any other party interested in
consummating a transaction with Carnival, these
discussions will be immediately terminated.
Termination: The transaction may be terminated by the mutual
agreement of Carnival and Charger.
Page 8
<PAGE>
Summary of Terms
Page 9
<PAGE>
Summary of Terms
Annex A
<TABLE>
<CAPTION>
--------------- ----------------------
Adjusted EBIT Call Option
CAGR Adjusted EBIT Multiple
--------------- ----------------------
<S> <C>
*13% Call & Put are void
--------------- ----------------------
13% 6.6
--------------- ----------------------
14% 6.8
--------------- ----------------------
15% 7.0
--------------- ----------------------
16% 7.2
--------------- ----------------------
17% 7.4
--------------- ----------------------
18% 7.6
--------------- ----------------------
19% 7.8
--------------- ----------------------
20% 8.0
--------------- ----------------------
21% 8.2
--------------- ----------------------
22% 8.4
--------------- ----------------------
23% 8.6
--------------- ----------------------
24% 8.8
--------------- ----------------------
25% 9.0
--------------- ----------------------
26% 9.2
--------------- ----------------------
27% 9.4
--------------- ----------------------
28% 9.6
--------------- ----------------------
29% 9.8
--------------- ----------------------
30% 10.0
--------------- ----------------------
31% 10.2
--------------- ----------------------
32% 10.4
--------------- ----------------------
33% 10.6
--------------- ----------------------
34% 10.8
--------------- ----------------------
35% 11.0
--------------- ----------------------
36% 11.2
--------------- ----------------------
37% 11.4
--------------- ----------------------
38% 11.6
--------------- ----------------------
39% 11.8
--------------- ----------------------
40+% 12.0
--------------- ----------------------
</TABLE>
* Less than sign
Page 10
<PAGE>
EXHIBIT 2
CONVERTIBLE PROMISSORY NOTE
$31,000,000.00 September 16, 1999
FOR VALUE RECEIVED, VITECH AMERICA, INC. a Florida corporation (the
"Borrower"), hereby unconditionally promises to pay to the order of GATEWAY
- ---------
COMPANIES, INC. (the "Lender"), at its head office at 4545 Towne Centre Court,
------
San Diego, CA 92121, the principal sum of THIRTY ONE MILLION DOLLARS
($31,000,000), or so much thereof as shall be outstanding, in lawful money of
the United States of America and in immediately available funds, on or before
March 16, 2001 (the "Maturity Date") in one lump-sum payment of $31,000,000 and
-------------
as provided in the Convertible Loan Agreement (defined below), and to pay
interest on the unpaid principal amount hereof, in like money and funds at such
office, at the rate per annum of ten percent (10%), on a quarterly basis on the
25th day of each quarter (each October 11, January 10, April 10, and July11),
and as provided in the Convertible Loan Agreement.
This Convertible Promissory Note is the Note referred to in the Convertible
Loan Agreement (as in effect from time to time, the "Convertible Loan
----------------
Agreement") dated as of the date hereof between the Borrower and the Lender, and
evidences the Loan made thereunder. Capitalized terms used in this Convertible
Promissory Note have the respective meanings assigned to them in the Convertible
Loan Agreement.
Unless all or part of the principal amount of this Convertible Promissory
Note is converted to the Borrower's Common Stock by the Lender on or before the
Maturity Date as provided for herein, all outstanding principal and accrued
interest hereunder shall be due and payable on the Maturity Date.
Conversion: The aggregate amount of outstanding principal of this
----------
Convertible Promissory Note plus all interest accrued thereon is convertible, in
whole or in part, at the option of the Lender at any time prior to and including
the Maturity Date into Common Stock of the Borrower, as follows:
1. Mechanics of Conversion. The Lender shall notify the Borrower in
-----------------------
writing (the "Conversion Notice"), in the manner prescribed in Section 10 of the
-----------------
Convertible Loan Agreement, of its desire to convert all or part of the
aggregate amount of principal of this Convertible Promissory Note plus interest
accrued thereon. The Conversion Notice shall specify (i) the aggregate amount
of principal of this Convertible Promissory Note plus interest accrued thereon
to be converted (the "Conversion Amount"), and (ii) the name(s) which should
-----------------
appear on the stock certificate(s) to be issued by the Borrower which represent
the Common Stock acquired by the Lender upon conversion.
2. Common Stock Issuable Upon Conversion. Within three (3) business days
-------------------------------------
of receipt of a Conversion Notice, the Borrower shall issue to the Lender that
number of shares of Common Stock of the Lender, no par value, determined by
dividing the Conversion Amount by
<PAGE>
$11.02 (the "Conversion Price"). The Conversion Price shall be subject to
----------------
adjustment as set forth below. Notwithstanding the foregoing, however, until and
unless the Borrower's shareholders approve the issuance of the Excess Shares (as
defined below) as may be required by and in accordance with all applicable laws,
rules and regulations, the Borrower shall not be obligated to issue upon
conversion of this Convertible Promissory Note and for the Territorial Rights
Arrangement, in the aggregate, more than that number of shares of Common Stock
equal to 19.99% of the number of shares of Common Stock of the Borrower
outstanding on the Closing Date (such amount to be proportionately and equitably
adjusted from time to time in the event of stock splits, stock dividends,
combinations, reverse stock splits, reclassifications, capital reorganization
and similar events relating to the Common Stock) (the "Maximum Share Amount") if
--------------------
the issuance of shares of Common Stock in excess of the Maximum Share Amount
(such number of excess shares referred to in the aggregate as the "Excess
------
Shares") would constitute a breach or violation of the Borrower's obligations
- ------
under the rules or regulations of the Nasdaq National Market or any other
principal securities exchange or market upon which the Common Stock is or
becomes traded.
A. Adjustment for Stock Splits and Combinations. If the
--------------------------------------------
Borrower shall at any time or from time to time after the issuance of this
Convertible Promissory Note effect a subdivision of its outstanding Common
Stock, the Conversion Price in effect immediately before that subdivision shall
be proportionately decreased. Conversely, if the Borrower shall at any time or
from time to time after the issuance of this Convertible Promissory Note combine
the outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 2(a) shall become
effective concurrent with the time the subdivision or combination becomes
effective.
B. Adjustment for Common Stock Dividends and Distributions. If
-------------------------------------------------------
the Borrower at any time or from time to time after the issuance of this
Convertible Promissory Note makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Conversion
Price that is then in effect shall be decreased as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this Section 2(b) to reflect the actual payment of such
dividend or distribution.
C. Adjustment for Other Dividends and Distributions. If the
------------------------------------------------
Borrower at any time or from time to time after the issuance of this Convertible
Promissory Note makes, or fixes a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Borrower other than shares of Common
2
<PAGE>
Stock, in each such event provision shall be made so that the holder of this
Convertible Promissory Note shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the amount of
other securities of the Borrower which they would have received had this
Convertible Promissory Note been converted into Common Stock on the date of such
event and had the holder thereafter, during the period from the date of such
event to and including the conversion date, retained such securities receivable
by it as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 2 with respect to the rights of the
holder of this Convertible Promissory Note or with respect to such other
securities by their terms.
D. Adjustment for Reclassification, Exchange and Substitution.
----------------------------------------------------------
If at any time or from time to time after the issuance of this Convertible
Promissory Note, the Common Stock issuable upon the conversion of this
Convertible Promissory Note is changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 2), in
any such event the holder of this Convertible Promissory Note shall have the
right thereafter to convert this Convertible Promissory Note into the kind and
amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Common Stock into which this Convertible Promissory Note
could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
E. Reorganizations, Mergers, Consolidations or Sales of Assets.
-----------------------------------------------------------
If at any time or from time to time after the issuance of this Convertible
Promissory Note, there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 2), as a part of
such capital reorganization, provision shall be made so that the holder of this
Convertible Promissory Note shall thereafter be entitled to receive upon
conversion of this Convertible Promissory Note the number of shares of stock or
other securities or property of the Borrower to which a holder of the number of
shares of Common Stock deliverable upon conversion would have been entitled on
such capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 2 with respect to
the rights of the holder of this Convertible Promissory Note after the capital
reorganization to the end that the provisions of this Section 2 (including
adjustment of the Conversion Price then in effect and the number of shares
issuable upon conversion of this Convertible Promissory Note) shall be
applicable after that event and be as nearly equivalent as practicable.
F. Sale of Shares Below Conversion Price.
-------------------------------------
(i) If at any time or from time to time after the
Closing Date, the Borrower issues or sells, or is deemed by the express
provisions of this subsection to have issued or sold, Additional Shares of
Common Stock (as defined in subsection f(iv) below)), other than as a dividend
or other distribution on any class of stock as provided in Sections 2(b) or 2(c)
above, and other than a subdivision or combination of shares of Common Stock as
provided in
3
<PAGE>
Section 2(a) above, for an Effective Price (as defined in subsection f(iv)
below) less than the then effective Conversion Price, then and in each such case
the then existing Conversion Price shall be reduced, as of the opening of
business on the date of such issue or sale, to a price equal to the Effective
Price for the Additional Shares of Common Stock.
(ii) For the purpose of making any adjustment required
under this Section 2(f), the consideration received by the Borrower for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Borrower after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Borrower in connection with such issue or sale but without
deduction of any expenses payable by the Borrower, (B) to the extent it consists
of property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as defined in subsection f(iii) below)
or rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Borrower for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment required under
this Section 2(f), if the Borrower issues or sells any (i) stock or other
securities convertible into Additional Shares of Common Stock (such convertible
stock or securities being herein referred to as "Convertible Securities") or
(ii) rights or options for the purchase of Additional Shares of Common Stock or
Convertible Securities, and if the Effective Price of such Additional Shares of
Common Stock is less than the Conversion Price, in each case the Borrower shall
be deemed to have issued at the time of the issuance of such rights or options
or Convertible Securities the maximum number of Additional Shares of Common
Stock issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Borrower for the issuance
of such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Borrower upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Borrower (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Borrower shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Borrower upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Borrower upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Borrower upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the
4
<PAGE>
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Conversion Price as
adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to the Conversion Price which would have been in effect had
an adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Borrower
upon such exercise, plus the consideration, if any, actually received by the
Borrower for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Borrower (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities; provided that such readjustment shall not apply to prior
conversions of the Convertible Promissory Note.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Borrower or deemed to be issued pursuant to
this Section 2(f), whether or not subsequently reacquired or retired by the
Borrower other than (A) shares of Common Stock issued upon conversion of the
Convertible Promissory Note; (B) shares of Common Stock and/or options, warrants
or other Common Stock purchase rights and the Common Stock issued pursuant to
such options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) after the Closing Date to
employees, officers or directors of, or consultants or advisors to the Borrower
or any subsidiary pursuant to stock purchase or stock option plans (such plans
being approved by at least one of the non-employee directors of the Borrower) or
other arrangements that are approved by the Board of Directors of the Borrower
(including at least one of the non-employee directors of the Borrower); and (C)
shares of Common Stock issued pursuant to the exercise of options, warrants or
convertible securities outstanding as of the Closing Date. The "Effective Price"
of Additional Shares of Common Stock shall mean the quotient determined by
dividing the total number of Additional Shares of Common Stock issued or sold,
or deemed to have been issued or sold by the Borrower under this Section 2(f),
into the aggregate consideration received, or deemed to have been received by
the Borrower for such issue under this Section 2(f), for such Additional Shares
of Common Stock.
g. Certificate of Adjustment. In each case of an adjustment or
-------------------------
readjustment of the Conversion Price for the number of shares of Common Stock or
other securities issuable upon conversion of this Convertible Promissory Note,
if this Convertible Promissory Note is then convertible pursuant to this Section
2, the Borrower, at its expense, shall compute such adjustment or readjustment
in accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate pursuant to the
notice provisions of Section 10 of the Convertible Loan Agreement. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the Conversion Price at the time in effect, and
5
<PAGE>
(ii) the type and amount, if any, of other property which at the time would be
received upon conversion of this Convertible Promissory Note.
h. Notices of Record Date. Upon (i) any taking by the Borrower
----------------------
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any consolidation or merger of the Borrower with or
into any other corporation or other entity or other capital reorganization of
the Borrower, any reclassification or recapitalization of the capital stock of
the Borrower, any merger or consolidation of the Borrower with or into any other
corporation, or any sale, lease or other disposition of all or substantially all
of the assets of the Borrower or any voluntary or involuntary dissolution,
liquidation or winding up of the Borrower, the Borrower shall deliver notice to
the holder of this Convertible Promissory Note (pursuant to the provisions of
Section 9 of the Convertible Loan Agreement) at least fifteen (15) days prior to
the record date specified therein a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, sale, lease,
dissolution, liquidation, winding up or other disposition is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, sale, lease, dissolution, liquidation, winding up or
other disposition.
i. Fractional Shares. No fractional shares of Common Stock
-----------------
shall be issued upon conversion of this Convertible Promissory Note. If, in the
aggregate, any conversion would result in the issuance of any fractional share,
the Borrower shall, in lieu of issuing the fractional share, pay cash equal to
the product of such fraction multiplied by the Common Stock's fair market value
(as determined by the closing price of the Common Stock on the principal
securities exchange or market on which it is then being listed) on the date of
conversion.
j. Reservation of Stock Issuable Upon Conversion. The Borrower
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of this Convertible Promissory Note, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding principal and accrued but unpaid interest on this Convertible
Promissory Note. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all outstanding
principal and accrued but unpaid interest on this Convertible Promissory Note,
the Borrower will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
K. No Dilution or Impairment. Without the consent of the
-------------------------
holder of this Convertible Promissory Note, the Borrower shall not amend its
articles of incorporation (except as necessary to comply with the terms of the
Convertible Loan Agreement) or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or take
any other voluntary action, for the purpose of avoiding or seeking to avoid the
observance
6
<PAGE>
or performance of any of the terms to be observed or performed hereunder by the
Borrower, but shall at all times in good faith assist in carrying out all such
action as may be reasonably necessary or appropriate in order to protect the
conversion rights of the holder of this Convertible Promissory Note against
dilution or other impairment.
Upon the occurrence of an Event of Default (as defined in the
Convertible Loan Agreement), the principal hereof and accrued interest hereon
shall become, or may be declared to be, forthwith due and payable in the manner,
upon the conditions and with the effect provided in the Convertible Loan
Agreement.
The transfer of this Convertible Promissory Note may be registered on
the books maintained for that purpose by or on behalf of the Borrower.
None of the terms or provisions of this Convertible Promissory Note
may be amended, modified or waived except by a written agreement duly executed
on behalf of the Lender and the Borrower and specifically setting forth the
provision so amended, modified or waived. No course of dealing between the
Lender and the Borrower shall operate as a waiver of any right of any holder
hereof and no delay on the part of the holder hereof in exercising any right
hereunder shall so operate.
The Borrower hereby waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Convertible Promissory Note,
and shall pay all costs of collection when incurred, including, without
limitation, reasonable attorneys' fees, costs and other expenses.
The Borrower may prepay all or any part of the principal amount of
this Convertible Promissory Note before maturity with 30 days prior written
notice to the Lender. The notice shall represent a bona-fide prepayment
commitment under this Convertible Promissory Note, with the prepayment amount
set forth therein deemed due and payable by the Borrower on the prepayment date
set forth in the notice. At any time during the 30-day notice period, the
Lender may elect to convert the portion of the principal amount of the Loan
intended to be prepaid as described in the notice.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK.
VITECH AMERICA, INC.
By________________________
Name:
Title:
7
<PAGE>
EXHIBIT 3
VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of September 16, 1999 by and
between Gateway Companies, Inc., a Delaware corporation ("Gateway"), and ______
__________________ ("Stockholder").
-----------
RECITALS
A. Gateway, and Vitech America, Inc., a Florida corporation ("Vitech"),
are entering into a Convertible Loan Agreement of even date herewith (the "Loan
----
Agreement"), which provides (subject to the conditions set forth therein) for
- ---------
the issuance by Vitech of a Convertible Promissory Note (the "Note") and affords
----
Gateway (subject to the conditions set forth therein) certain rights to require
Vitech to engage in Additional Transactions (as defined in the Loan Agreement).
-----------------------
B. As of the date hereof, Stockholder owns the number of shares of Common
Stock of Vitech, no par value ("Vitech Common Stock"), set forth below the
-------------------
Stockholder's name on the signature page hereto (all such shares, together with
any shares of Vitech Common Stock or other shares of capital stock of Vitech
that may hereafter be acquired by Stockholder or at any time become acquirable
by Stockholder, less any shares of capital stock that the Stockholder or any
stockholder executing a similar agreement to this Voting Agreement may hereafter
sell, transfer or otherwise dispose of in accordance with the terms of this
Voting Agreement or such similar voting agreement, being referred to herein as
the "Subject Shares").
--------------
C. As a condition to the willingness of Gateway and Vitech to enter into
the Loan Agreement, Gateway and Vitech have required that Stockholder agree, and
in order to induce Gateway and Vitech to enter into the Loan Agreement
Stockholder has agreed (based on the Stockholder's expectation that the value of
shares of Vitech's Common Stock will increase as a result of the Loan Agreement
and the transactions contemplated therein), to enter into this Voting Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound, agree
as follows:
SECTION 1. TRANSFER OF SUBJECT SHARES
1.1 No Disposition or Encumbrance of Subject Shares. Stockholder hereby
-----------------------------------------------
covenants and agrees that, during the period commencing on the date of this
Voting Agreement and ending on the Expiration Date (as defined below),
Stockholder will not, directly or indirectly, except pursuant to agreements
existing as of the date of this Voting Agreement, (i) offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or otherwise
dispose of or transfer (or announce any offer, sale, offer of sale, contract of
sale or grant of any option to purchase or other
<PAGE>
disposition or transfer of) any of the Subject Shares to any party other than
Gateway, (ii) create or permit to exist any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, and the
filing of or agreement to give any financing statement or other similar form of
public notice under the laws of any jurisdiction) (collectively, "Encumbrances")
------------
on any of the Subject Shares or (iii) reduce his beneficial ownership of,
interest in or risk relating to any of the Subject Shares; provided, however,
that the number of Subject Shares beneficially held by William C. St. Laurent
and Georges C. St. Laurent, III (the "Aggregate Subject Shares") can be reduced
------------------------
through the transactions described in (i), (ii) and (iii) above as long as (1)
the sum of the Aggregate Subject Shares outstandingalways exceeds 50% of the
total number of shares of capital stock of Vitech outstanding, and (2) the sum
of the Aggregate Subject Shares outstanding on a fully-diluted basis (including
the number of shares of capital stock which could be obtained through the
exercise or conversion of all rights, options and convertible securities that
are outstanding or exercisable) always exceeds 50% of the total number of shares
of capital stock of Vitech outstanding on a fully-diluted basis (including the
number of shares of capital stock which could be obtained through the exercise
or conversion of all rights, options and convertible securities issued by Vitech
that are outstanding or exercisable).
As used in this Agreement, the term "Expiration Date" shall mean the later
---------------
of (i) the date upon which the Note is converted or can be converted into Common
Stock pursuant to the terms of the Note without the issuance of any Excess
------
Shares (as defined in the Loan Agreement) in breach or violation of Vitech's
- ------
obligations under the rules or regulations of the Nasdaq National Market or any
other principal securities exchange or market upon which the Common Stock is or
becomes traded, and (ii) the date upon which all of the Additional Transactions
(to the extent that Gateway continues to have the Additional Transaction Option
-----------------------------
(as defined in the Loan Agreement)) have been consummated.
1.2 Transfer of Voting Rights. Stockholder covenants and agrees that,
-------------------------
prior to the Expiration Date, Stockholder will not deposit any of the Subject
Shares into a voting trust or grant a proxy or enter into a voting agreement or
similar agreement with respect to any of the Subject Shares.
SECTION 2. VOTING OF SUBJECT SHARES
2.1 Pre-Termination Voting Agreement. Stockholder hereby agrees that,
--------------------------------
prior to the Effective Time, at any meeting of the shareholders of Vitech,
however called, and in any written action by consent of shareholders of Vitech,
unless otherwise directed in writing by Gateway, Stockholder shall vote the
Subject Shares:
(i) in favor of the Loan Agreement, the Loan (as defined in the
----
Loan Agreement), the Note, the terms of conversion of the Note into Common
Stock, the Additional Transactions, the execution and delivery by Vitech of
any agreements necessary to implement any of the foregoing and the adoption
and approval of the terms thereof and in favor of each of the other actions
contemplated by the Loan Agreement and any action required in furtherance
hereof or thereof;
2
<PAGE>
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of Vitech in
the Loan Agreement;
(iii) against the following actions (other than transactions
contemplated by the Loan Agreement): (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving Vitech or any subsidiary of Vitech; (B) any sale, lease or
transfer of a material amount of assets of Vitech or any subsidiary of
Vitech; (C) any reorganization, recapitalization, dissolution or
liquidation of Vitech or any subsidiary of Vitech; (D) any change in a
majority of the board of directors of Vitech; (E) any amendment to the
Vitech's articles of incorporation; (F) any change in the capitalization of
Vitech or Vitech's corporate structure; or (G) any other action which is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the contemplated economic
benefits to Gateway of the Loan Agreement, the Note, the Additional
Transactions or any of the other transactions contemplated by the Loan
Agreement or this Voting Agreement; and
(iv) notwithstanding the foregoing, Stockholder shall not be
required to vote the Subject Shares in favor of any proposal submitted to
Vitech's shareholders in the event that such proposal does not materially
conform to the terms described in Section 9.04(a) of the Loan Agreement or
the terms set forth in the term sheet attached as Exhibit H to the Loan
Agreement (as applicable).
Prior to the Effective Time, Stockholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)" or "(iii)" of the preceding sentence.
2.2 Post-Termination Voting Agreement. Prior to the Expiration Date, at
---------------------------------
any meeting of the shareholders of Vitech, however called, and in any written
action by consent of shareholders of the Vitech, unless otherwise directed in
writing by Gateway, Stockholder shall vote the Subject Shares (i) against any
Alternative Proposal (as defined in the Loan Agreement) and any related
- --------------------
transaction or agreement and (ii) against any action which is intended, or could
reasonably be expected, to facilitate the consummation of any Acquisition
-----------
Transaction (as defined in the Loan Agreement). Stockholder shall not enter into
- -----------
any agreement or understanding with any party prior to the Expiration Date to
vote or give instructions in any manner inconsistent with clause "(i)" or "(ii)"
of the preceding sentence.
2.3 Proxy; Further Assurances.
-------------------------
(a) Contemporaneously with the execution of this Voting Agreement,
Stockholder shall deliver to Gateway a proxy in the form attached hereto as
Exhibit A, which shall be irrevocable to the fullest extent permitted by law,
with respect to the Subject Shares (the "Proxy").
(b) Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Gateway the power to carry out and give effect to the provisions of this Voting
Agreement.
3
<PAGE>
SECTION 3. WAIVER OF APPRAISAL RIGHTS.
Stockholder hereby waives any rights of appraisal and any dissenters'
rights that Stockholder may have in connection with any Additional Transaction.
SECTION 4. NO SOLICITATION.
Stockholder covenants and agrees that, during the period commencing on the
date of this Voting Agreement and ending on the Expiration Date, Stockholder
shall not, directly or indirectly, and shall not authorize or permit any
representative of Stockholder, directly or indirectly, to: (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Alternative Proposal or take any action that could reasonably be expected to
lead to an Alternative Proposal; (ii) engage in discussions with any party with
respect to any Alternative Proposal; (iii) approve, endorse or recommend any
Alternative Proposal; or (v) enter into any letter of intent or other similar
document or any agreement contemplating or otherwise relating to any Acquisition
Transaction. The foregoing provision shall not prevent Stockholder from acting
in accordance with Stockholder's fiduciary duties as a director of Vitech,
provided Stockholder complies with the provisions of the Loan Agreement.
Stockholder shall immediately cease any existing discussions with any party that
relate to any Acquisition Transaction.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Gateway as follows:
5.1 Due Organization, Authorization, etc. Stockholder has all requisite
-------------------------------------
power and capacity to execute and deliver this Voting Agreement and to perform
his obligations hereunder. This Voting Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
5.2 No Conflicts, Required Filings and Consents.
-------------------------------------------
(a) The execution and delivery of this Voting Agreement by Stockholder
do not, and the performance of this Voting Agreement by Stockholder will not:
(i) conflict with or violate any writ, statute, rule, regulation, order, decree,
judgment or other restriction applicable to Stockholder or by which he or any of
his properties is bound or affected; or (ii) result in any breach of or
constitute a default (with notice or lapse of time, or both) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on the Subject Shares pursuant to, any
mortgage, indenture, contract, agreement or instrument to which Stockholder is a
party or by which Stockholder or any of his properties is bound or affected.
(b) The execution and delivery of this Voting Agreement by Stockholder
do
4
<PAGE>
not, and the performance of this Voting Agreement by Stockholder will not,
require any order, permission, consent, approval or authorization of any party.
5.3 Title to Subject Shares. Stockholder owns of record and beneficially
-----------------------
the Subject Shares set forth under Stockholder's name on the signature page
hereof and does not directly or indirectly own, either beneficially or of
record, any shares of capital stock of Vitech, or rights to acquire any shares
of capital stock of Vitech, other than the Subject Shares set forth below
Stockholder's name on the signature page hereof.
5.4 Accuracy of Representations. The representations and warranties
---------------------------
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of any Additional Transactions as if made on that date.
SECTION 6. COVENANTS OF STOCKHOLDER
6.1 Further Assurances. From time to time and without additional
------------------
consideration, Stockholder will execute and deliver, or cause to be executed and
delivered, such additional or further transfers, assignments, endorsements,
proxies, consents and other instruments as Gateway may reasonably request for
the purpose of effectively carrying out and furthering the intent of this Voting
Agreement.
6.2 Legend. Stockholder shall instruct Vitech to cause each certificate of
------
Stockholder evidencing the Subject Shares (except for Subject Shares that are
pledged or otherwise encumbered as of the date of this Agreement) to bear a
legend (the "Legend") in the following form:
------
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE VOTING AGREEMENT
DATED AS OF SEPTEMBER 16, 1999, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
With respect to Subject Shares that are pledged or otherwise encumbered as of
the date of this Agreement, Stockholder shall instruct Vitech to cause each
certificate of Stockholder evidencing such Subject Shares to bear the Legend
when, if ever, such pledge or other encumbrance on any such Subject Shares
lapses, terminates or otherwise is cancelled.
6.3 Right of First Refusal. Stockholder hereby grants to Gateway the
----------------------
following rights with respect to any and all proposed sales or transfers of
Subject Shares ("Transfers") by Stockholder prior to the Expiration Date:
---------
5
<PAGE>
(a) Stockholder shall give Gateway written notice of Stockholder's
bona fide intention to Transfer Subject Shares (the "Transfer Notice")
---------------
describing the type of Subject Shares, the price at which the Subject Shares
will be Transferred and the general terms upon which Stockholder proposes to
Transfer the Subject Shares, including the anticipated date of such Transfer.
(b) Gateway shall have two Business Days from the date it receives
the Transfer Notice to agree to purchase such Subject Shares by giving written
notice to Stockholder of its desire to purchase such Subject Shares (the
"Response Notice"). Such Response Notice shall constitute the irrevocable
- ----------------
agreement of Gateway to purchase the Subject Shares at the price and upon the
terms stated in the Transfer Notice. Any purchase by Gateway of Subject Shares
shall be consummated on or prior to the tenth Business Day following delivery of
the Response Notice by Gateway.
(c) Stockholder shall have 20 Business Days from the date of the
Transfer Notice to consummate the proposed Transfer of the Subject Shares which
Gateway has not elected to purchase pursuant to subsection (b). In the event
Stockholder proposes to issue Subject Shares after such 20 Business Day period
or Subject Shares in addition to those specified in the Transfer Notice, it must
again comply with the procedures set forth in this Section 6.3.
SECTION 7. MISCELLANEOUS
7.1 Termination of Representations, Warranties and Agreements. All
---------------------------------------------------------
representations, warranties and agreements made by Stockholder in this Voting
Agreement shall terminate upon the Expiration Date.
7.2 Indemnification. Without in any way limiting any of the rights or
---------------
remedies otherwise available to Gateway, Stockholder shall hold harmless and
indemnify Gateway from and against, and shall compensate and reimburse Gateway
for, any losses, claims, damages or liabilities (regardless of whether or not
such losses, claims, damages or liabilities relate to a third-party claim) which
are directly or indirectly suffered or incurred at any time by Gateway, or to
which Gateway otherwise becomes subject, and that arise from or are directly or
indirectly connected with any breach of any representation, warranty, covenant
or obligation of Stockholder contained herein.
7.3 Expenses. All costs and expenses incurred in connection with the
--------
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
7.4 Notices. Any notice or other communication required or permitted to be
-------
delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other party hereto):
6
<PAGE>
if to Stockholder:
at the address set forth below Stockholder's signature on the
signature page hereto;
7
<PAGE>
if to Gateway:
Gateway Companies, Inc.
4545 Towne Centre Court
San Diego, CA 92121
Attn: General Counsel
Fax: (858) 799-3413
Tele: (858) 799-3419
7.5 Severability. Any term or provision of this Voting Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting Agreement in any other jurisdiction. If any
provision of this Voting Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
7.6 Entire Agreement. This Voting Agreement and any documents delivered by
----------------
the parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings between the parties with respect thereto. No
addition to or modification of any provision of this Voting Agreement shall be
binding upon either party hereto unless made in writing and signed by all
parties hereto. The parties hereto waive trial by jury in any action at law or
suit in equity based upon, or arising out of, this Voting Agreement or the
subject matter hereof.
7.7 Assignment; Binding Effect. Except as provided herein, neither this
--------------------------
Voting Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that
Gateway may assign all or any of its rights hereunder to any affiliate of
Gateway. Subject to the preceding sentence, this Voting Agreement shall be
binding upon and shall inure to the benefit of (i) Stockholder and his heirs,
successors and assigns and (ii) Gateway and its successors and assigns.
Notwithstanding anything contained in this Voting Agreement to the contrary,
nothing in this Voting Agreement, expressed or implied, is intended to confer on
any Person other than the parties hereto or their respective heirs, successors
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Voting Agreement.
7.8 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Voting
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that Gateway shall be entitled to
an injunction or injunctions to prevent breaches of this Voting Agreement and to
enforce specifically the terms and provisions hereof in any New York court or
other court of proper jurisdiction, this being in addition to any other remedy
to which Gateway is entitled at law or in equity.
7.9 Other Agreements. Nothing in this Voting Agreement shall limit any of
----------------
the rights
8
<PAGE>
or remedies of Gateway or any of the obligations of Stockholder under any other
agreement.
7.10 Governing Law. This Voting Agreement shall be governed in all respects
-------------
by the laws of the State of New York as applied to contracts entered into and to
be performed entirely within the State of New York.
7.11 Jurisdiction and Consent to Suit. Any proceeding to enforce this
--------------------------------
Voting Agreement may be brought in any state or federal court of competent
jurisdiction in the State of New York. Stockholder hereby irrevocably waives
any present and future objection to any such venue, and irrevocably consents and
submits unconditionally to the non-exclusive jurisdiction for itself and in
respect of any of its property in such court. Stockholder further agrees that
final judgment against it in any such action or proceeding arising out of or
relating to this Voting Agreement shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States of America by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the fact and of the amount of the obligation.
7.12 Counterparts. This Voting Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original; but all such counterparts shall together constitute one
and the same instrument.
7.13 Construction.
------------
(a) Headings of the Sections of this Voting Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Voting Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(c) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Voting Agreement.
(d) As used in this Voting Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(e) Except as otherwise indicated, all references in this Voting
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Voting Agreement and Exhibits to this Voting Agreement.
9
<PAGE>
IN WITNESS WHEREOF, Gateway and Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
GATEWAY COMPANIES, INC.
By: ___________________________
Name: _________________________
Title: ________________________
STOCKHOLDER
_______________________________
Name: _________________________
Address: _______________________
________________________________
Facsimile: _____________________
Number of Shares of Vitech Common Stock
owned of record as of the date of this
Voting Agreement:
10
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of Vitech America, Inc., a Florida corporation
("Vitech"), hereby irrevocably (to the fullest extent permitted by law) appoints
------
and constitutes Joseph J. Burke, John J. Todd and William M. Elliott, and each
of them, the attorneys and proxies of the undersigned with full power of
substitution and resubstitution, to the full extent of the undersigned's rights
with respect to (i) the shares of capital stock of Vitech owned by the
undersigned as of the date of this proxy, which shares are specified on the
final page of this proxy and (ii) any and all other shares of capital stock of
Vitech which the undersigned may acquire after the date hereof. (The shares of
the capital stock of Vitech referred to in clauses (i) and (ii) of the
immediately preceding sentence are collectively referred to as the "Shares.")
------
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and no subsequent proxies will
be given with respect to any of the Shares.
This proxy is irrevocable and is coupled with an interest. This proxy is
granted in connection with the Voting Agreement of even date herewith between
Gateway Companies, Inc., a Delaware corporation ("Gateway"), and the undersigned
-------
(the "Voting Agreement") and in consideration of Gateway entering into the Loan
Agreement of even date herewith between Gateway and Vitech (the "Loan
----
Agreement"). Capitalized terms used but not otherwise defined in this proxy have
- ---------
the meanings assigned to such terms in the Loan Agreement.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares at any time until the Effective Time (as defined
in the Voting Agreement) at any meeting of the shareholders of Vitech, however
called, or in any written action by consent of shareholders of Vitech:
(i) in favor of the Loan Agreement, the Loan, the Note, the
terms of conversion of the Note into Common Stock, the Additional
Transactions, the execution and delivery by Vitech of any agreements
necessary to implement any of the foregoing and the adoption and approval
of the terms thereof and in favor of each of the other actions contemplated
by the Loan Agreement and any action required in furtherance hereof or
thereof;
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of Vitech in
the Loan Agreement; and
(iii) in their discretion, against the following actions (other
than transactions contemplated by the Loan Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving Vitech or any subsidiary of Vitech;
(B) any sale, lease or transfer of a material amount of assets of Vitech or
any subsidiary of Vitech; (C) any reorganization, recapitalization,
dissolution or liquidation of Vitech or any subsidiary of Vitech; (D) any
change in a
11
<PAGE>
majority of the board of directors of Vitech; (E) any amendment to the
Vitech's articles of incorporation; (F) any change in the capitalization of
Vitech or Vitech's corporate structure; or (G) any other action which is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the contemplated economic
benefits to Gateway of the Loan Agreement, the Note, the Additional
Transactions or any of the other transactions contemplated by the Loan
Agreement or the Voting Agreement.
(iv) notwithstanding the foregoing, the attorneys and proxies
named above shall not vote the Shares in favor of any proposal submitted to
Vitech's shareholders in the event that such proposal does not materially
conform to the terms described in Section 9.04(a) of the Loan Agreement or
the terms set forth in the term sheet attached as Exhibit H to the Loan
Agreement (as applicable).
Prior to the Expiration Date, at any meeting of the shareholders of Vitech,
however called, and in any written action by consent of shareholders of the
Vitech, unless otherwise directed in writing by Gateway, Stockholder shall vote
the Subject Shares (i) against any Alternative Proposal and any related
transaction or agreement and (ii) against any action which is intended, or could
reasonably be expected, to facilitate the consummation of any Acquisition
Transaction.
This proxy shall be binding upon the heirs, successors and assigns of the
undersigned (including any transferee of any of the Shares).
Dated: September 16, 1999
__________________________________
Name:_____________________________
Number of Shares of Vitech Common
Stock:
__________________________________
12
<PAGE>
EXHIBIT 4
GUARANTY
September 16, 1999
Gateway Companies, Inc.
4545 Towne Centre Court
San Diego, CA 92121
Ladies and Gentlemen:
We refer to that Convertible Loan Agreement (the "Loan Agreement"), dated
--------------
as of September 16, 1999, between Gateway Companies, Inc. ("Gateway") and Vitech
-------
America, Inc., ("Vitech"), pursuant to which Gateway agreed to lend to Vitech
------
the principal amount of $31,000,000.00 for use in the repayment of certain of
Vitech's debts and accounts payable. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Loan Agreement. Each of
William C. St. Laurent and Georges C. St. Laurent, III (individually, a
"Guarantor" and, collectively, the "Guarantors") are shareholders in Vitech and
--------- ----------
will benefit from the making of the Loan. Accordingly, in order to induce
Gateway to enter into the Loan Agreement and make the Loan thereunder, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and Gateway agree as follows:
1. Guarantee of Performance and Payment. The Guarantors, jointly and
------------------------------------
severally as primary obligors and not as sureties only, hereby unconditionally
and irrevocably guarantee to Gateway, in an amount not to exceed $11,000,000,
the performance by Vitech of its obligations to Gateway arising out of or in
connection with the Loan Documents, including without limitation, the due and
punctual payment of an aggregate of $11,000,000 of any and all sums owed by
Vitech under the Loan Documents (collectively, the "Guaranteed Obligations").
----------------------
This guaranty shall remain in effect so long as Vitech has any obligations under
the Loan Documents. The Guarantors' liabilities and obligations hereunder shall
not exceed the lesser of (i) $11,000,000 or (ii) the liabilities and obligations
of Vitech to Gateway arising out of or in connection with the Loan Documents,
except that the Guarantors shall also be liable for the costs and expenses set
forth in Section 7 hereof.
2. Guaranty Unconditional and Absolute. The obligations of the Guarantors
-----------------------------------
hereunder shall be joint, several, unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of Vitech or any other guarantor of any of
the Guaranteed Obligations;
-1-
<PAGE>
(ii) any modification or amendment of or supplement to the Loan Agreement
or the Note;
(iii) any change in the corporate existence (including its constitution,
laws, rules, regulations or powers), structure or ownership of Vitech
or the Guarantors, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting Vitech or its assets, the
Guarantors or any other guarantor of any of the Guaranteed
Obligations;
(iv) the existence of any claim, set-off or other rights which the
Guarantors may have at any time against Vitech or any other
corporation or person, whether in connection herewith or in
connection with any unrelated transaction;
(v) any invalidity or unenforceability relating to or against Vitech or
any other guarantor for any reason of the Loan Agreement or any other
guaranty agreement, or any provision of applicable law or regulation
purporting to prohibit payment by Vitech of amounts to be paid by it
under the Loan Agreement or any of the Guaranteed Obligations or
under any such guaranty agreement; or
(vi) any other act or omission to act or delay of any kind by Vitech, any
other guarantor or any other corporation or person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the
Guarantors' obligations hereunder.
3. Waiver by the Guarantors. The Guarantors irrevocably waive
------------------------
acceptance hereof, diligence, presentment, demand, protest, notice of dishonor
and any notice not provided for herein, any requirement that at any time any
person exhaust any right or take any action against Vitech or its assets or any
other guarantor or person, and any other defense that may be available to a
surety and guarantor.
4. Subrogation. Upon making any payment hereunder, the Guarantors shall
-----------
be subrogated to the rights of Gateway against Vitech with respect to such
payment; provided that the Guarantors shall not enforce any right or receive any
payment by way of subrogation until all of the Guaranteed Obligations shall have
been discharged or paid in full.
5. Stay of Acceleration Ineffective with respect to Guarantors. In the
-----------------------------------------------------------
event that acceleration of the time for payment of any amount payable by Vitech
under the Loan Agreement is stayed upon the insolvency, bankruptcy, or
reorganization of Vitech, all such amounts otherwise subject to acceleration or
required to be paid upon any early termination pursuant to the terms of the Loan
Agreement shall nonetheless be payable by the Guarantors hereunder forthwith on
demand by Gateway.
6. Amendments and Waivers. No provision of this guaranty may be
----------------------
amended, supplemented or modified, nor any of the terms and conditions hereof or
thereof waived, except by a written instrument executed by the Guarantors and
Gateway.
-2-
<PAGE>
7. Expenses and Taxes. Without limiting the generality of the
------------------
Guarantors' obligations hereunder, the Guarantors agree to pay to Gateway upon
its request all reasonable costs and expenses, including fees and disbursements
of counsel and taxes, incurred by Gateway in connection with any enforcement,
collection or other proceedings against any person or assets arising out of or
related to the Loan Documents, all of which shall be "Guaranteed Obligations"
the performance and payment of which is guaranteed hereunder. The Guarantors
agree that all amounts payable under this guaranty shall be paid without set-off
or counterclaim and free and clear of, and without deduction or withholding for
or on account of any present or future taxes, levies, imports, duties, fees,
assessments or other charges of whatever nature, now or hereafter imposed by any
governmental or taxing authority to which the Guarantors are subject.
8. Enforcement. Notwithstanding anything to the contrary in the Loan
-----------
Agreement, Guarantors and Vitech agree that any decision by Gateway to enforce
the terms hereof shall be in the sole discretion of Gateway, and Guarantors and
Vitech hereby waive any rights they may have to object to any such decision made
by Gateway.
9. Termination and Release. This guaranty shall be terminated and the
-----------------------
Guarantors shall be released from their obligations hereunder upon the earlier
of:
(i) the payment and performance in full by Vitech of each of the
Guaranteed Obligations in accordance with the terms of the Loan
Agreement and each other agreement, document, instrument or other
understanding pursuant to which such Guaranteed Obligations arose, and
the subsequent expiry of all applicable bankruptcy preference periods,
and
(ii) the execution and delivery of an instrument in writing from Gateway
terminating this guaranty and releasing Guarantors.
10. GOVERNING LAW; WAIVER OF JURY TRIAL. (a) THIS GUARANTY SHALL BE
-----------------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CONFLICT OF LAWS.
(b) THE GUARANTORS EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP BETWEEN THEM ESTABLISHED BY THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT AND ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT ENTERED INTO IN
CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11. Jurisdiction and Consent to Suit. (a) Any proceeding to enforce this
--------------------------------
guaranty may be brought in any state or federal court of competent jurisdiction
in the State of New
-3-
<PAGE>
York. Each Guarantor hereby irrevocably waives any present or future objection
to any such venue, and irrevocably consents and submits unconditionally to the
non-exclusive jurisdiction for itself and in respect of any of its property of
any such court. Each Guarantor further agrees that final judgment against it in
any such action or proceeding arising out of or relating to this guaranty shall
be conclusive and may be enforced in any other jurisdiction within or outside
the United States of America by suit on the judgment, a certified or exemplified
copy of which shall be conclusive evidence of the fact and of the amount of its
obligation.
(b) Prior to the Closing Date, each Guarantor shall irrevocably
designate and appoint an agent satisfactory to Gateway for service of process in
The City of New York, New York as its authorized agent to receive, accept, and
forward on its behalf service of process in any such proceeding, and shall
provide Gateway with evidence of the prepayment in full of the fees of such
agent. Each Guarantor agrees that service of process, writ, judgment, or other
notice of legal process upon said agent shall be deemed and held in every
respect to be effective personal service upon it. Each Guarantor shall maintain
such appointment (or that of a successor satisfactory to Gateway) continuously
in effect at all times
[remainder of this page intentionally left blank]
-4-
<PAGE>
while the Guarantor is obligated under this guaranty. Nothing herein shall
affect Gateway's right to serve process in any other manner permitted by
applicable law.
Very truly yours,
_____________________________
William C. St. Laurent
_____________________________
Georges C. St. Laurent, III
AGREED AND ACCEPTED:
GATEWAY COMPANIES, INC.
By:__________________________
Name:
Title:
AGREED AND ACCEPTED AS TO SECTION 8:
VITECH AMERICA, INC.
By:__________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT 5
PLEDGE AGREEMENT
----------------
This PLEDGE AGREEMENT (this "Agreement") is dated as of September 16, 1999
---------
from each of William C. St. Laurent and Georges C. St. Laurent, III
(individually, a "Pledgor" and, collectively, the "Pledgors"), in favor of
------- --------
GATEWAY COMPANIES, INC. (the "Lender").
------
RECITALS
--------
WHEREAS, Vitech America, Inc. (the "Company") and the Lender have,
-------
contemporaneously herewith, entered into that certain Convertible Loan Agreement
dated as of the date hereof (as in effect from time to time, the "Loan
----
Agreement"), and the Company has issued the promissory note referred to therein;
- ---------
WHEREAS, each of the Pledgors holds a direct legal and beneficial ownership
interest in the capital stock of the Company and will benefit from the making of
the Loan (as defined in the Loan Agreement;
WHEREAS, it is a condition precedent to the extension of credit under the
Loan Documents that each Pledgor enter into this Agreement and grant to the
Lender the security interests hereinafter provided to secure the Obligations.
AGREEMENT
---------
In consideration of the promises contained herein, and in order to induce
the Lender to enter into the Loan Documents and to make the Loan pursuant to the
terms thereof, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each Pledgor hereby agrees with the
Lender as follows:
SECTION 1. Definitions.
-----------
The following term shall have the following meaning:
"Obligations" means any and all obligations (now existing or hereafter
-----------
arising) of the Company under the Loan Agreement, the Note or any other Loan
Document.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Loan Agreement.
SECTION 2. Pledge.
------
(a) In order to secure the prompt payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations,
each Pledgor hereby irrevocably and unconditionally assigns, pledges, transfers,
hypothecates, mortgages, charges
<PAGE>
and sets over to the Lender, and grants to the Lender a continuing security
interest in all of such Pledgor's right, title and interest, in, to, and under
all shares of the Company described in Exhibit A now owned by such Pledgor (the
---------
"Pledged Shares") or otherwise distributable in respect of, in exchange for, or
--------------
in substitution of, any and all such Pledged Shares, together with all of the
proceeds of any thereof (the "Pledged Collateral").
------------------
(b) Delivery. The certificates evidencing the Pledged Shares pledged
--------
hereunder shall be delivered to the Lender, duly endorsed in blank or with
undated stock powers executed in blank annexed to each certificate. If
certificates evidencing any Pledged Shares required to be pledged hereunder are
hereafter received by either Pledgor, such Pledgor agrees forthwith to transfer
and deliver to the Lender such certificates so received (with appropriate
endorsements, if any, and together with undated stock powers executed in blank),
all of which thereafter shall be held by the Lender pursuant to the terms of
this Agreement, as part of the Pledged Collateral.
(c) Registration in Lender's Name, Etc. The Lender shall have the right
----------------------------------
(in its sole discretion): (i) to hold any certificates representing the Pledged
Collateral in its own name, or in the name of the relevant Pledgor endorsed or
assigned in blank or in favor of the Lender, or (ii) to have the Pledged
Collateral or any part thereof registered in the name of the Lender or in the
names of the Lender's nominees.
SECTION 3. Representations and Warranties; Certain Undertakings. Each Pledgor
----------------------------------------------------
hereby represents and warrants to the Lender and agrees as follows:
(a) The Pledgor is the legal and equitable owner of the Pledged Shares
pledged by it hereunder and will not make any assignment, pledge, mortgage,
hypothecation of transfer of any thereof or of any part thereof, except the
pledge provided for herein.
(b) All of the Pledged Shares are and will at all times be duly authorized,
validly issued, fully paid and nonassessable.
(c) The Pledgor owns the Pledged Shares pledged by it hereunder free and
clear of all liens except the pledge provided for herein.
(d) The execution, delivery and performance by the Pledgor of this
Agreement does not and will not (i) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Pledgor, (ii) result in a breach
of or constitute a default under any indenture or loan or credit agreement or
other material agreement, lease or instrument to which the Pledgor is a party or
by which he or his properties may be bound or affected, or (iii) result in, or
require, the creation or imposition of any lien (other than the pledge provided
for herein), upon or with respect to any of the property now owned or hereafter
acquired by the Pledgor. This Agreement is the legal, valid and binding
obligations of the Pledgor, enforceable in accordance with its terms.
SECTION 4. Further Assurances.
------------------
2
<PAGE>
(a) Each Pledgor agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that the Lender may reasonably request,
in order to perfect and protect the assignment, pledge and security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce the rights and remedies provided hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, each
Pledgor shall: (i) if any Pledged Collateral shall be evidenced by a promissory
note or other instrument, deliver and pledge to the Lender hereunder such note
or instrument duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Lender;
(ii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, endorsements or notices, as may be
necessary, or as the Lender may reasonably request, in order to perfect and
preserve the assignment, pledge and security interest granted or purported to be
granted hereby by such Pledgor; (iii) defend the Pledged Collateral against any
and all liens howsoever arising (other than the pledge provided for herein),
prior to or equal to the security interest created hereby; (iv) upon an Event of
Default (after lapse of any applicable grace or cure period contained in the
Loan Agreement), if deemed necessary by the Lender to effect a sale of all or
any portion of the Pledged Shares, register, at the expense of such Pledgor,
such Pledged Shares under the Securities Act of 1933 and/or the applicable Blue
Sky laws of any state or other jurisdiction as may be requested by the Lender;
and (v) if deemed necessary by the Lender to effect a sale of all or any portion
of the Pledged Shares, execute and file with the Federal Reserve Board, the
Florida Comptroller or any other governmental authority any application, notice
or other document as the Lender may reasonably request.
(b) Each Pledgor hereby authorizes the Lender to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Pledged Collateral without the signature of such Pledgor where permitted
by law. Copies of any such statement or amendments thereto shall promptly be
delivered to the relevant Pledgor.
SECTION 5. Voting Rights; Dividends; Etc.
-----------------------------
(a) So long as no Event of Default shall have occurred and be continuing
(after lapse of any applicable grace or cure period contained in the Loan
Agreement):
(i) Each Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Loan Agreement.
(ii) The Lender shall execute and deliver (or cause to be executed and
delivered) to each Pledgor all such proxies and other instruments as such
Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise voting and other rights which it is entitled to exercise pursuant
to this Section 5(a).
(b) As a supplement to the rights under other provisions of this Agreement,
if any Event of Default shall have occurred (after lapse of any applicable grace
or cure period contained in the Loan Agreement), then, so long as the same shall
continue, and whether or not the Lender
3
<PAGE>
exercises any right, or seeks or pursues any other relief or remedy available to
it under applicable laws, the Loan Agreement or any Loan Document:
(i) The Lender, or its nominee or nominees, shall forthwith, without
further act by any party, have the sole and exclusive right to exercise all
voting, consensual and other powers of ownership pertaining to the Pledged
Shares pledged hereunder and shall exercise such powers in such manner as the
Lender, in its sole discretion, shall determine to be necessary, appropriate or
advisable, and if the Lender shall so request, each Pledgor agrees to execute
and deliver to the Lender such other and additional powers, authorizations,
proxies and other orders, and such other documents, as the Lender may request to
secure to the Lender the rights, powers and authorities intended to be conferred
upon the Lender by this Section 5(b); and
(ii) All dividends and other distributions on, or accrued interest on,
or constituting any of the Pledged Collateral shall be paid directly to the
Lender and retained by it as part of the Pledged Collateral, subject to the
terms of this Agreement, and, if the Lender shall so request, each Pledgor
agrees to execute and deliver to the Lender appropriate additional dividend,
distribution and other orders and documents to that end.
SECTION 6. Lender Appointed Attorney-in-Fact.
---------------------------------
Each Pledgor hereby irrevocably appoints the Lender as such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor, the Lender or otherwise, from time to time to take
any action and to execute any instrument necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, to ask, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in connection with the Pledged
Collateral, to receive, endorse, and collect any drafts of other instruments,
documents and chattel paper in connection therewith, and to file any claims or
take any action or institute any proceedings that the Lender may deem necessary
or desirable for the collection thereof or to enforce compliance with the terms
and conditions thereof.
SECTION 7. Lender May Perform.
------------------
If either Pledgor fails to perform any agreement contained herein, the
Lender itself may perform or pay any obligation which such Pledgor has agreed to
perform or pay under or in connection with this Agreement and the reasonable
expenses of the Lender (including the reasonable fees and expenses of its agents
and counsel) incurred in connection therewith shall be payable by the relevant
Pledgor and become part of the Obligations.
SECTION 8. Rights and Remedies.
-------------------
(a) If an Event of Default shall have occurred and be continuing, all
payments received by either Pledgor under or in connection with the Pledged
Collateral (including, without limitation, any dividends) shall be received in
trust for the benefit of the Lender, shall be segregated from other funds of
such Pledgor and shall be forthwith paid over to the Lender in the same form as
so received (with any necessary endorsement or instrument of transfer);
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(b) If any Event of Default shall have occurred and be continuing and the
principal amount of the Loan and the Note or other Obligations shall have been
declared to be, or shall have become, due and payable under the Loan Agreement,
then, in addition to any other rights and remedies provided for herein or that
may otherwise be available, the Lender may without any further demand,
advertisement or notice (except as expressly provided for below in this
subsection (b)), exercise all the rights and remedies of a secured party under
the New York, Florida and/or California Uniform Commercial Code (whether or not
said Code applies to the affected Pledged Collateral), and in addition: (i) may
apply the moneys, if any, then held by it as part of the Pledged Collateral, for
the purposes and in the order provided in Section 10 herein and (ii) if there
shall be no such moneys or the moneys so applied shall be insufficient to
satisfy in full all Obligations, may sell the Pledged Collateral, or any part
thereof, as hereinafter provided. The Pledged Collateral my be sold in one or
more sales, at public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Lender, at the Lender's place of business or
elsewhere, for cash, upon credit or for other property, for immediate or future
delivery, and at such price or prices and on such terms as the Lender shall, in
its sole and absolute discretion, deem appropriate. The Lender may be the
purchaser of any or all of the Pledged Collateral so sold at a public sale and
thereafter hold the same, absolutely free from any right or claim of whatsoever
kind and the obligations of each Pledgor to the Lender shall be applied as a
credit against the purchase price. The Lender may, in its sole discretion, at
any such sale restrict the prospective bidders or purchasers as to their number,
nature of business and investment intention, including a requirement that the
prospective bidders or purchasers represent and agree, to the satisfaction of
the Lender, that they are purchasing the Pledged Collateral for their own
account, for investment, and not with a view to the distribution or resale of
any thereof. Upon any such sale the Lender shall have the right to deliver,
assign and transfer to the purchaser thereof the Pledged Collateral so sold.
Each purchaser (including the Lender) at any such sale shall hold the Pledged
Collateral so sold, absolutely free from any claim or right of whatsoever kind,
including any equity or right of redemption, of either Pledgor, and each Pledgor
hereby specifically waives, to the full extent it may lawfully do so, all rights
of redemption, stay or appraisal that it has or may have under any rule of law
or statute now existing or hereafter adopted. The Lender shall give each
Pledgor at least ten (10) days notice (which each Pledgor agrees is reasonable
notification within the meaning of the Uniform Commercial Code) of any such
public or private sale. Such notice, in case of public sale, shall state the
time and place fixed for such sale. Any such public sale shall be held at such
time or times within ordinary business hours as the Lender shall fix in the
notice of such sale. At any such sale the Pledged Collateral may be sold in one
lot as an entirety or in separate parcels. The Lender shall not be obligated to
make any sale pursuant to any such notice. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for such
sale, and any such sale may be made any time or place to which the same may be
so adjourned without further notice or publication. In case of any sale of all
or any part of the Pledged Collateral on credit or for future delivery, the
Pledged Collateral so sold may be retained by the Lender until the full selling
price is paid by the purchaser thereof, but the Lender shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Pledged Collateral so sold, and, in case of any such failure, such Pledged
Collateral may again be sold pursuant to the provisions herein;
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(c) Instead of exercising the power of sale provided in Section 8(b)
herein, the Lender may proceed by a suit or suits at law or in equity to
foreclose the assignment, pledge and security interest under this Agreement and
sell the Pledged Collateral or any portion thereof under a judgment or decree of
a court or courts of competent jurisdiction;
(d) The Lender as attorney-in-fact pursuant to Section 6 herein may, in the
name and stead of the Pledgors, make and execute all conveyances, assignments
and transfers of the Pledged Collateral sold pursuant to Section 8(b) or Section
8(c) herein, and each Pledgor hereby ratifies and confirms all that the Lender,
as said attorney-in-fact, shall do by virtue hereof in compliance with this
Agreement. Nevertheless, each Pledgor shall, if so requested by the Lender,
ratify and confirm any sale or sales by executing and delivering to the Lender,
or to such purchaser or purchasers, all such instruments as may, in the judgment
of the Lender, be advisable for the purpose;
(e) The receipt of the Lender for the purchase money paid at any such sale
made by it shall be a sufficient discharge therefor to any purchaser of the
Pledged Collateral, or any portion thereof, sold as aforesaid; and no such
purchaser (or the representatives or assigns of such purchaser), after paying
such purchase money and receiving such receipt, shall be bound to see to the
application of such purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication or nonapplication of any
such purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale; and
(f) The Lender shall incur no liability as a result of the manner of sale
of the Pledged Collateral, or any part thereof, at any private sale conducted in
a commercially reasonable manner and in accordance with this Agreement. Each
Pledgor hereby waives, to the full extent permitted by applicable law, any
claims against the Lender arising by reason of the fact that the price at which
the Pledged Collateral, or any part thereof, may have been sold at a private
sale was less than the price that might have been obtained at a public sale or
was less than the aggregate amount of the Obligations, even if the Lender
accepts the first offer received that the Lender in good faith deems to be
commercially reasonable under the circumstances and does not offer the Pledged
Collateral to more than one offeree. To the extent permitted by law, each
Pledgor shall have the burden of proving that any such sale of the Pledged
Collateral was conducted in a commercially unreasonable manner.
SECTION 9. Limitation on Duty of Lender with Respect to the Pledged Collateral.
-------------------------------------------------------------------
The powers conferred on the Lender hereunder are solely to protect its
interest in the Pledged Collateral and nothing herein shall be construed as
imposing on the Lender any duty to exercise any such powers. Except for the
safe custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Lender shall have no duty with
respect to any Pledged Collateral.
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SECTION 10. Application of Proceeds.
-----------------------
If an Event of Default shall have occurred and be continuing, all proceeds
of any sale or enforcement of the lender's rights in respect of the Pledged
Collateral, and all monies then held by the Lender as Pledged Collateral, shall
be applied as follows:
(a) first to the payment of all costs and expenses of such sale or
enforcement (including reasonable fees, costs and expenses of the Lender and its
agents and counsel);
(b) then to the payment in full of all accrued and unpaid interest on the
Obligations;
(c) then to the payment in full of the principal of the Obligations;
(d) then to the payment of any other Obligations; and
(e) any surplus remaining shall be paid to the Pledgors or to whosoever may
be lawfully entitled to receive the same.
SECTION 11. Termination of Security Interests; Release of Pledged Collateral.
----------------------------------------------------------------
Upon indefeasible payment, performance and discharge in full of all
Obligations, the security interests shall terminate and all rights to the
Pledged Collateral shall revert to the Pledgors. Upon such termination of the
security interests or release of any Pledged Collateral, the Lender will, at the
Pledgors' written request and cost and expense, execute and deliver to the
Pledgors such documents as the Pledgors shall reasonably request to evidence the
termination of the security interests or this Agreement or the release of such
Pledged Collateral which has not yet theretofore been sold or otherwise applied
or released and will duly reassign, transfer and deliver to the Pledgors free
from any interest of the Lender such of the Pledged Collateral as may be in the
possession of the Lender and which has not theretofore been sold or released
pursuant to this Agreement. Such release shall be without recourse or warranty
to the Lender or any other person.
SECTION 12. Amendments; Waivers; Consents.
-----------------------------
No amendment, modification, termination or waiver of any provision of this
Agreement, or consent to any departure by either Pledgor therefrom, shall in any
event be effective without the written concurrence of the Lender and each
Pledgor, and then such waiver or consent shall be effective only in the specific
instance for the specified purpose for which given.
SECTION 13. Notices.
-------
Any notice, approval, request, demand, consent or other communication
hereunder shall be in writing and shall be given in accordance with the
provisions of the Loan Agreement. Notices to each Pledgor shall be sent to such
Pledgor at the address set forth below or to such other address as such Pledgor
shall have previously designated by written notice to the serving party:
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William C. St. Laurent
c/o Vitech America, Inc.
8807 NW 23rd Street
Miami, FL 33172
Georges C. St. Laurent, III
c/o Vitech America, Inc.
8807 NW 23rd Street
Miami, FL 33172
SECTION 14. Continuing Security Interest; Successors and Assigns.
----------------------------------------------------
This Agreement shall create a continuing assignment, pledge and security
interest in the Pledged Collateral and shall (i) remain in full force and effect
for the benefit of the Lender until payment in full of the Obligations, (ii) be
jointly and severally binding upon each Pledgor, its successors and assigns and
(iii) inure, together with the rights and remedies of the Lender hereunder, to
the benefit of the Lender and its successors, transferees and assigns.
SECTION 15. GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES OF AMERICA.
SECTION 16. Severability.
------------
In case any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and the parties hereto shall enter into good faith
negotiations to replace the invalid, illegal or unenforceable provision.
SECTION 17. Indemnity.
---------
(a) Each Pledgor agrees to indemnify the Lender from and against any and
all claims, losses and liabilities growing out of or resulting from (i) the
Lender's exercise of any of its rights or powers under this Agreement (including
enforcement of this Agreement) or (ii) any refund or adjustment of any amount
paid or payable to the Lender under or in respect of any of the Pledged
Collateral, or any interest thereon, that may be ordered or otherwise required
by any person.
(b) Each Pledgor shall promptly upon demand pay to the Lender the amount of
any and all expenses, including the fees and expenses of counsel and of any
experts and agents that the Lender may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
collection from or other realization upon, any of the Pledged Collateral, (iii)
the exercise or enforcement of any of the rights of the Lender hereunder or (iv)
the failure by such Pledgor to perform or observe any of the provisions hereof.
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SECTION 18. Headings Descriptive.
--------------------
Paragraph headings have been inserted in this Agreement as a matter of
convenience for reference only and it is agreed that such paragraph headings are
not a part of this Agreement and shall not be used in the interpretation of any
provision of this Agreement.
SECTION 19. Counterparts.
------------
This Agreement may be executed in one or more duplicate counterparts and
when signed by all of the parties listed below shall constitute a single binding
agreement.
SECTION 20. CERTAIN WAIVERS.
---------------
EACH PLEDGOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE OF RIGHTS BY THE LENDER FROM AND AFTER AN EVENT OF DEFAULT AND
PURSUANT TO THE TERMS HEREOF TO REPOSSESS WITH JUDICIAL PROCESS OR TO REPLEVY,
ATTACH OR LEVY UPON THE PLEDGED COLLATERAL. EACH PLEDGOR WAIVES THE POSTING OF
ANY BOND OTHERWISE REQUIRED OF THE LENDER IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH, OR LEVY UPON THE
PLEDGED COLLATERAL, TO ENFORCE ANY JUDGMENT OR OTHER SECURITY FOR THE
OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE LENDER OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER AGREEMENT OR
DOCUMENT BETWEEN ANY PLEDGOR AND THE LENDER.
SECTION 21. WAIVER OF JURY TRIAL.
--------------------
EACH PLEDGOR HEREBY IRREVOCABLY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF SUCH PLEDGOR. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE LENDER TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR OTHER
MODIFICATIONS OF THIS AGREEMENT.
SECTION 22. Consent to Jurisdiction.
-----------------------
(a) Any legal action or proceeding by or against either Pledgor or with
respect to or arising out of this Agreement may be brought in or removed to the
courts of the State of New York, in and for the County of New York, or of the
United States of America for the Southern District of New York. By execution
and delivery of this Agreement, each Pledgor accepts, for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
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aforesaid courts for legal proceedings arising out of or in connection with this
Agreement. The Pledgor hereby waives any right to stay or dismiss any action or
proceeding under or in connection with this Agreement or any other Loan Document
brought before the foregoing courts on the basis of forum non-conveniens.
(b) Prior to the Closing Date, each Pledgor shall irrevocably designate and
appoint an agent satisfactory to the Lender for service of process in The City
of New York, New York as its authorized agent to receive, accept, and forward on
its behalf service of process in any such proceeding, and shall provide the
Lender with evidence of the prepayment in full of the fees of such agent. Each
Pledgor agrees that service of process, writ, judgment, or other notice of legal
process upon said agent shall be deemed and held in every respect to be
effective personal service upon it. Each Pledgor shall maintain such
appointment (or that of a successor satisfactory to the Lender) continuously in
effect at all times while the Pledgor is obligated under this Agreement.
Nothing herein shall affect the Lender's right to serve process in any other
manner permitted by applicable law.
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IN WITNESS WHEREOF, each of the undersigned has caused this Pledge
Agreement to be duly executed and delivered as of the date first above written.
_____________________________
William C. St. Laurent
_____________________________
Georges C. St. Laurent, III
AGREED AND ACCEPTED:
GATEWAY COMPANIES, INC.
By:__________________________
Name:
Title:
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Exhibit A
to Pledge Agreement
Pledged Shares
For Georges C. St. Laurent:
Four hundred thousand (400,000) shares of the common stock of Vitech
America, Inc.
Certificate Numbers:
For William C. St. Laurent:
Five hundred thousand (500,000) shares of the common stock of Vitech
America, Inc.
Certificate Numbers:
