As Filed with the Securities and Exchange Commission on July 30, 1999.
Registration No. 333 - 40491
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
POST EFFECTIVE AMENDMENT NO. 2
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VITECH AMERICA, INC.
(Exact name of Company as specified in its charter)
FLORIDA 65 041 9086
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8807 Northwest 23rd Street
Miami, Florida 33172
(305) 477-1161
(Name, address, including Zip Code, and
telephone number, including area code, of
registrant's principal executive offices)
<TABLE>
<CAPTION>
<S> <C>
William C. St. Laurent, President Copies to: James M. Schneider, Esq.
Vitech America, Inc. Joel D. Mayersohn, Esq.
8807 Northwest 23rd Street Atlas, Pearlman, Trop & Borkson, P.A.
Miami, Florida 33172 200 East Las Olas Blvd., Suite 1900
(305) 477-1161 Fort Lauderdale, Florida 33301
(Name, address, including Zip Code, and telephone number, Telephone: (954) 766-7858
including area code, of agent for service) Telecopier: (954) 766-7800
</TABLE>
Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement becomes effective. [ ]
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH
CLASS OF Proposed maximum Proposed maximum
SECURITIES TO BE Amount to be offering price aggregate Amount of
REGISTERED registered per unit (1) offering price (1) registration fee
- --------------------------- ------------------------- -------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value per share ------ ------ ------ ------
Common Stock, no par
value per share
reserved for issuance
upon conversion of
Convertible Notes(2) 3,990,481 $16.87 $67,327,396 $20,403
Common Stock, no par
value per share
reserved for issuance
upon exercise of
Common Stock
Warrants(3) 484,818 $16.87 $ 8,179,850 $ 2,479
TOTAL 4,475,299 -- $75,507,246 $22,882
- --------------------------- ------------------------- -------------------------- -------------------------- ----------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended
(the "Securities Act") based on the average of the high and low sale price
of the Common Stock, no par value per share (the "Common Stock") as
reported in the NASDAQ National Stock Market on November 12, 1997.
(2) To be offered and sold by the Selling Security Holders upon conversion of
$38,608,250 aggregate principal amount of 10% convertible promissory notes
(the "Convertible Notes") and certain convertible notes (the "St. Laurent
Notes") issued to Georges C. St. Laurent Jr. The initial conversion price
for the Convertible Notes is $15.00. In the event that the Company shall
decline to repay in full, following the exercise by Noteholders of certain
quick rights, the initial conversion price shall be: (i) the lesser of .85
multiplied by the 10-day weighted average sale price (the "WASP") on Nasdaq
as reported by Bloomberg, LP (or other principal exchange on which the
Company's securities are then traded) for the lowest 10-day consecutive
period during a 30 consecutive trading day period ending one trading day
prior to the conversion date or (ii) $15.00 per share. The number of shares
of Common Stock registered represents the number of shares issuable upon
conversion based upon a conversion price of $15.00 per share. The St.
Laurent Notes may not be converted unless Mr. St. Laurent gives 90 days
prior written notice to the Company. As of the date of this Prospectus, no
such notice has been given.
(3) To be offered and sold by the Selling Security Holders upon exercise of
Common Stock Warrants (the "Warrants").
Pursuant to Rule 416 under the Securities Act, there are also being
registered such additional number of shares as may be issuable as a result of
the anti-dilution provisions of the Convertible Notes.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 30, 1999
4,475,299 SHARES
VITECH AMERICA, INC.
COMMON STOCK
THIS PROSPECTUS RELATES TO THE OFFER AND SALE OF UP TO 4,475,299 SHARES
OF OUR COMMON STOCK, NO PAR VALUE, BY CERTAIN SELLING SECURITY HOLDERS. OF THE
4,475,299 SHARES OF COMMON STOCK OFFERED HEREBY, (I) UP TO 2,573,917 SHARES ARE
ISSUABLE UPON CONVERSION OF $38,608,250 AGGREGATE PRINCIPAL AMOUNT OF 10%
CONVERTIBLE PROMISSORY NOTES, HELD BY SELLING SECURITY HOLDERS; (II) 1,416,564
SHARES ISSUED UPON CONVERSION OF A CONVERTIBLE NOTE HELD BY A SELLING SECURITY
HOLDER ISSUED IN OCTOBER 1997, AND JUNE AND AUGUST 1997; (III) 220,000 SHARES
ISSUABLE UPON EXERCISE OF THE REPRESENTATIVES WARRANTS ISSUED IN OUR INITIAL
PUBLIC OFFERING EXERCISABLE AT $12.73 PER SHARE; (IV) UP TO 241,392 SHARES
ISSUABLE UPON EXERCISE OF COMMON STOCK PURCHASE WARRANTS EXERCISABLE AT $15.00
PER SHARE ISSUED IN CONNECTION WITH AN OCTOBER 1997 FINANCING TRANSACTION HELD
BY THE SELLING SECURITY HOLDERS AND (V) 23,426 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS ISSUED IN A PRIVATE PLACEMENT BY US IN AUGUST 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------------
THE DATE OF THIS PROSPECTUS IS _____________, 1998
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The selling security holders have advised us that they propose to sell
the shares, from time to time, publicly or through broker-dealers as agents for
others, or in private sales. See "Selling Security Holders" and "Plan of
Distribution." We will not receive any proceeds from the sale of our common
stock for the account of the selling security holders except upon exercise of
warrants. We have informed the selling security holders that the
anti-manipulative rules under the Exchange Act of 1934, Rule 10b-6 under
Regulation M may apply to their sales in the market and has furnished the
selling security holders with a copy of these rules. We have also informed the
selling security holders of the need for delivery of copies of this prospectus
in connection with any sale of securities registered hereunder.
We will pay all offering expenses of this offering including the SEC
registration fee, legal fees and expenses, blue sky fees, accounting fees and
expenses, printing expenses and miscellaneous expenses estimated to be $35,000,
but will not pay discounts or commissions incurred by the selling security
solders in connection with the sale of these shares.
TABLE OF CONTENTS
PAGE
WHERE YOU CAN FIND MORE INFORMATION....................................... 2
RISK FACTORS............................................................... 4
BUSINESS ................................................................. 14
SELLING SECURITY HOLDERS.................................................. 14
PLAN OF DISTRIBUTION...................................................... 19
DESCRIPTION OF SECURITIES................................................. 20
LEGAL MATTERS............................................................. 21
EXPERTS ................................................................. 21
INDEMNIFICATION........................................................... 21
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on public reference rooms. Our SEC
filings are also available to the public from the SEC's website at
"http://www.sec.gov." The SEC also allows us to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and the
information that we file later with the SEC will automatically update and
supersede this information. We will incorporate by reference the documents
listed below and any future filings we make we will make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
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You may request a copy of these filings, at no cost by writing or
telephoning our chief financial officer at the following address: Vitech
America, Inc., 8807 Northwest 23rd Street, Miami, Florida 33172 (305-477-1161).
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS PROSPECTUS UNDER "RISK FACTORS", IN ADDITION TO CERTAIN
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS OR IN OUR FILINGS UNDER THE
SECURITIES EXCHANGE ACT OF 1934, (THE "EXCHANGE ACT"), ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD- LOOKING STATEMENTS ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL FUTURE
RESULTS OR TRENDS TO DIFFER MATERIALLY FROM FUTURE RESULTS OR TRENDS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH
RISKS, UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED IN THIS PROSPECTUS UNDER
"RISK FACTORS" AND PROSPECTIVE INVESTORS ARE URGED TO CAREFULLY CONSIDER SUCH
FACTORS. UPDATED INFORMATION WILL BE PERIODICALLY PROVIDED BY US AS REQUIRED BY
THE SECURITIES ACT AND THE EXCHANGE ACT. WE, HOWEVER, UNDERTAKE NO OBLIGATION TO
PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO SUCH FORWARD- LOOKING
STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
This prospectus is part of a Registration Statement we filed with the
SEC. You should rely only on the information and representations provided in
this prospectus. We have authorized no one to provide you with different
information. We are not making offers for the securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
3
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS IN
EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
FACTORS RELATING TO US
WE MAY NOT BE ABLE TO SUSTAIN OUR CURRENT GROWTH
Although we experienced a loss in sales for the quarter ended March 31,
1999, since inception we have experienced substantial growth through both
internal operations and acquisitions. Consolidated net sales and consolidated
net income increased to $195 million and $17.9 million, respectively, for the
year ended December 31, 1998, from $117.5 million and $12.8 million,
respectively, for the year ended December 31, 1997. Consolidated net sales and
consolidated net income increased to $117.5 million and $12.8 million,
respectively, for the year ended December 31, 1997, from $73.3 million and $8.2
million, respectively, for the year ended December 31, 1996. For the year ended
December 31, 1995, consolidated net sales and consolidated net income increased
to $48.5 million and $6.9 million, respectively, from $17.5 million and $0.15
million, respectively, for the year ended December 31, 1994. There can be no
assurance that such growth will continue, and if such growth continues, that our
infrastructure will be sufficient to support such a larger enterprise.
WE DEPEND UPON KEY PERSONNEL FOR OUR OPERATIONS
Our ability to attract and retain highly skilled personnel is critical
to our operations. To date, we have been able to attract and retain the
personnel necessary for our operations. Because of our expansion plans, there
can be no assurance that we will be able to do so in the future. If we are
unable to attract and retain skilled personnel our business and expansion plans
could be materially adversely affected. We are dependent upon the efforts and
abilities of Georges C. St. Laurent III, the Chairman of the Board and Chief
Executive Officer, and William C. St. Laurent, the President and Chief Operating
Officer. Each of these individuals is a substantial shareholder of the Company.
The loss or unavailability of the services of either of these individuals for
any significant period of time could have a material adverse effect on our
business prospects. We are the sole beneficiary of key-person life insurance in
the amount of $2 million on the life of each of Messrs. St. Laurent. There can
be no assurance that such insurance will continue to be available on reasonable
terms, or at all.
FLUCTUATION IN OUR OPERATING RESULTS MAY AFFECT OUR STOCK PRICE
Our operating results have been subject to seasonality and to
significant quarterly and annual fluctuations. Our quarterly net sales and
operating results may vary significantly as a result of, among other things:
o historical seasonal purchasing patterns and the general
economic climate in Brazil;
o the volume and timing of orders received during a quarter;
o variations in sales mix;
o delays in production schedules;
o new product developments or introductions;
46
4
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o availability of components;
o changes in product mix and pricing;
o product reviews and other media coverage.
Our sales plan provides for approximately forty percent (40%) of our sales to be
made to federal, state, and municipal government customers. Such sales at times
may involve large contracts that can be a significant part of our sales. Our
sales to the consumer and small business markets fluctuate seasonally and are
dependent in part on the spending patterns of our customers, which in turn are
subject to prevailing economic conditions. Historically, our sales have
increased in the third and fourth quarters due, in part, to holiday spending.
Accordingly, our historical financial performance is not necessarily a
meaningful indicator of future results and, in general, management expects that
our financial results may vary materially from period to period.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL CAPITAL ON ACCEPTABLE TERMS
We may need to seek additional funding through public or private
financing and may elect to obtain capital in anticipation of such needs.
Adequate funds for growth through internal expansion and through acquisitions
may not be available when needed or may not be available on terms favorable to
us. If additional funds are raised by issuing equity securities or related
instruments with conversion or warrant features, dilution to existing
shareholders may result. If funding is insufficient, we may be required to
delay, reduce the scope of or eliminate some or all of our expansion programs.
In addition, we have in the past sought funding through third parties related to
our management and there can be no assurance that these sources can be relied
upon in the future. More recently, we have entered into a receivables financing
facility with Technology Acceptance Corp. ("TAC"), an independently owned
special purpose corporation, pursuant to which TAC issues and sells senior notes
to investors collateralized by certain receivables of the Company. We are
required to repurchase these receivables under certain circumstances, including
their non-payment.
Additionally, at the end of July and September 1999 we have
approximately $10 million and $11 million, respectively, in debt maturing. We
believe that the projected cash flows from continuing operations and existing
and contemplated sources of credit will be sufficient to satisfy our capital
requirements. Such belief is based on certain assumptions, and there can be no
assurance that such assumptions are correct. Accordingly, there can be no
assurance that such resources will be sufficient to satisfy our capital
requirements or expansion plans. There can be no assurance that such
contemplated sources will be available at the time they are needed or that the
receivables financing facility with TAC will be available to us for financing
accounts receivable at favorable terms.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN OUR INDUSTRY
The manufacturing and sale of computer equipment and related products
is highly competitive and requires substantial capital. We compete with, and
will compete with, numerous international, national, and regional companies,
many of which have significantly larger operations and greater financial,
marketing, human, and other resources than us, which may give such competitors
competitive advantages. Competitors in the computer hardware market include
internationally recognized companies such as IBM, Acer, Dell, Hewlett Packard
and Compaq. Additionally, we compete in the systems integration market with
internationally recognized systems integrators such as IBM, EDS and Unisys.
Competition is based on price, product quality, customer support and the ability
to deliver products in a timely fashion. No assurance can be given that we will
successfully compete in any market in which we conduct or may conduct
operations.
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In addition, we compete with other small manufacturers of computer
equipment sold on the "gray market" in Brazil. Such manufacturers are able to
sell products at prices that are often significantly lower than those offered by
us and other legitimate manufacturers. Gray market manufacturers are able to
offer lower prices because of the avoidance of import duties and other taxes,
and the avoidance of necessary software licensing fees. There can be no
assurance that gray market activity will not continue to flourish, putting
downward pressures on our profit margins as result of low pricing strategies.
WE DEPEND ON CREDIT SALES AND THERE ARE RISKS TO CUSTOMER LENDING
Credit sales are an important component of our results of operations.
In 1998, approximately ninety percent (90%) of our net sales revenue was
accounted for by sales on credit (with terms from 1 to 24 months). Our results
of operations could be materially and adversely affected if demand for customer
credit falls, or if Brazilian Government policies curtail our ability to extend
credit or to fund our extensions of credit. In addition, our customer credit
activities expose it to significant risks. At March 31, 1999, our outstanding
exposure to customer credit risk was approximately $83.3 million, including the
balance of accounts receivable sold to TAC. While an allowance for doubtful
accounts (including those sold to TAC) is made monthly based on management's
reviews of prior period losses and anticipated losses, there can be no assurance
that such allowances would be sufficient to cover actual losses.
WE DEPEND ON OUR SUPPLIERS FOR QUALITY COMPONENTS FOR OUR MANUFACTURING PROCESS
Our manufacturing process requires a high volume of quality components
that are procured from third party suppliers. Reliance on suppliers, as well as
industry supply conditions, generally involves several risks, including:
o the possibility of defective parts (which can adversely
affect the reliability and reputation of our products);
o a shortage of components and reduced control over delivery
schedules (which can adversely affect our manufacturing
efficiencies);
o increases in component costs (which can adversely affect
our profitability).
We have several single-sourced supplier relationships, either because
alternative sources are not available or the relationship is advantageous due to
performance, quality, support, delivery, capacity or price considerations. If
these sources are unable to provide timely and reliable supply, we could
experience manufacturing delays or inefficiencies, adversely affecting our
results of operations. During the year ended December 31, 1998, we had one
supplier which accounted for more than ten percent (10%) of purchases.
Substantially all of our inventory has, and will be, purchased from
manufacturers and distributors with whom we have entered into non-exclusive
agreements, which are typically cancellable upon 30 days written notice. There
can be no assurance that such agreements will not be canceled. The loss of, or
significant disruptions in relationships with, suppliers could have a material
adverse effect on our business since there can be no assurance that we will be
able to replace lost suppliers on a timely basis.
WE DEPEND ON OUR TAX-EXEMPT STATUS IN BRAZIL
The government of the State of Bahia, Brazil has issued a decree that
exempts companies such as our subsidiary, Bahiatech - Bahia Tecnologia, Ltda.,
from the payment of state import duties, state sales tax, and state services
tax. Bahiatech has received an exemption from such taxes through and including
the year 2003.
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Additionally, Bahiatech is exempted from the payment of Brazilian federal income
tax through and including the year 2004, provided that we meet certain budgeted
production goals. We are not exempted from the payment of a federal social
contribution tax of approximately eight percent (8%) of pre-tax income. The
normal rate of federal taxation on a non-exempt basis is thirty-three percent
(33%). If we are unable to extend such tax-exempt status, our after-tax earnings
as a percentage of net sales would decline by the amount of the tax benefit,
which may be substantial.
In December of 1997, as a result of our plan to consolidate the
manufacturing operations of Microtec Sistemas Industria e Comercio S.A. by
relocating it to the State of Bahia, Microtec applied with the State of Bahia
and the federal government of Brazil for the same tax incentives that have been
granted to Bahiatech. Microtec has been granted the state tax incentives from
the state of Bahia and will enjoy such state tax holiday through 2005. Should
Microtec be granted the federal incentive, it would enjoy the federal income tax
holiday through 2007. While we believe that Microtec will be granted this
federal incentive, there is no assurance that Microtec's eligibility will be
approved.
OUR PRODUCTS ARE CHARACTERIZED BY CONTINUOUS AND RAPID TECHNOLOGICAL ADVANCES
AND EVOLVING INDUSTRY STANDARDS
Compatibility with industry standards in areas such as operating
systems and communications protocols is material to our marketing strategy and
product development efforts. In order to remain competitive, we must respond
effectively to technological changes by continuing to enhance and improve our
existing products to incorporate emerging or evolving standards, and by
successfully developing and introducing new products that meet customer
requirements. There can be no assurance that we will successfully develop,
market, or support such products or that we will respond effectively to
technological changes or new product announcements or introductions by others.
If we do not enhance and improve our products, our sales and financial results
could be materially adversely affected. In addition, there can be no assurance
that, as a result of technological changes, all or a portion of our inventory
would not be rendered obsolete.
OUR TRANSACTIONS WITH RELATED PARTIES CREATES CONFLICTS OF INTEREST
We have, since 1995, received loans and sold securities and certain of
our accounts receivable to Georges C. St. Laurent Jr. ("GSL Jr."), the father of
Georges C. St. Laurent III, our Chairman of the Board and Chief Executive
Officer, and William C. St. Laurent, our President and Chief Operating Officer.
We believe that the terms of these transactions were no less favorable to us
than what could have been obtained from unaffiliated third parties. To the
extent that we enter into transactions with affiliated persons and entities in
the future, we will do so only on terms no less favorable to us than those
available from unaffiliated third parties.
OUR ASSETS ARE LOCATED OUTSIDE THE U.S. AND ENFORCEABILITY OF CIVIL LIABILITIES
AGAINST FOREIGN PERSONS IS DIFFICULT
While we are a U.S. corporation with executive offices in Florida, our
principal operations are conducted by our Brazilian subsidiaries. A substantial
portion of our assets will be held or used outside the U.S. (in Brazil).
Consequently, enforcement by investors of civil liabilities under the Federal
securities laws may be adversely affected by the fact that, while we are located
in the U.S., our principal subsidiaries and operations are located in Brazil.
Although our executive officers and directors are residents of the U.S.,
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except for Messrs. Touma Makdassi Elias and William R. Blackhurst, who are
residents of Brazil, all or a substantial portion of our assets are located
outside the U.S.
REPATRIATION OF EXCESS RETAINED EARNINGS THROUGH THE FLOATING RATE MARKET IS
VOLATILE
For the foreseeable future, Bahiatech does not intend to distribute any
excess retained earnings to Vitech, but intends to reinvest such earnings, if
any, in the development and expansion of its business. Up to now, substantially
all of our retained earnings on a consolidated basis have been attributable to
Bahiatech. Bahiatech is exempted from the payment of Brazilian federal income
tax through and including the year 2004, provided that Bahiatech meets certain
budgeted production goals. Tax exemption benefits cannot be distributed as
dividends to the parent company in U.S. Dollars and are segregated for capital
reserves and offsetting accumulated losses in accordance with Brazilian law. For
the years ended December 31, 1998, 1997 and 1996 the tax exemption benefits
amounted to approximately $5,600,000 ($0.42 per share), $3,000,000 ($0.25 per
share) and $2,200,000 ($0.22 per share), respectively.
In the future, should Bahiatech wish to remit retained earnings in
excess of the tax exemption benefits in U.S. Dollars, it may do so only in Reais
convertible into U.S. Dollars in the floating rate exchange market. There are
two legal foreign exchange markets in Brazil: the Commercial Market and the
Floating Market. The "Commercial Market Rate" is the commercial selling rate for
Brazilian currency into U.S. Dollars, as reported by the Central Bank. The
"Floating Market Rate" generally applies to transactions to which the Commercial
Market Rate does not apply. Prior to the implementation of the Real Plan, the
Commercial Market Rate and the Floating Market Rate differed significantly at
times. Since the introduction of the Real, the two rates have not differed
significantly. However, there can be no assurance that there will not be
significant differences between the two rates in the future. Both the Commercial
Market Rate and the Floating Market Rate are reported by the Central Bank on a
daily basis.
In order for a company to remit retained earnings abroad in U.S.
dollars at the Commercial Market Rate, Brazilian law first requires the
registration of the foreign capital upon which those retained earnings were
made. Bahiatech has not made such registration and therefore is only able to
remit excess retained earnings at the Floating Market Rate. We use the
Commercial Market Rate for the translation of Bahiatech's results into U.S.
Dollars. In the event that Bahiatech remits excess retained earnings at the
Floating Market Rate, there can be no assurance that such remittance will not
vary from our reported results because of the differences between the Commercial
Market Rate and the Floating Market Rate. Although Microtec does not currently
intend to distribute any retained earnings to Vitech, it is currently eligible
to remit retained earnings in U.S. Dollars at the Commercial Market Rate.
THE EXERCISE OF OPTIONS AND WARRANTS WILL HAVE DILUTIVE EFFECT
We have issued and outstanding, options and warrants to purchase an
aggregate of 5,430,214 shares of common stock at exercise prices between $8.18
and $22.73 per share, including 4,635,827 options issued to directors,
consultants, and employees. The existence of such options and warrants may
adversely affect the terms under which we could obtain additional equity
capital. The exercise of these options and warrants may cause significant
dilution and materially and adversely affect the market price of the common
stock.
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SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, we have 14,635,655 shares of common
stock outstanding, and 5,566,578 shares of common stock issuable upon the
exercise of options and warrants. Of such shares outstanding or issuable,
13,199,880 are not registered and are held by our "affiliates" within the
meaning of the Securities Act and are subject to the resale limitations of Rule
144 promulgated under the Securities Act (the "Restricted Shares"). We issued
the Restricted Shares in private transactions in reliance upon one or more
exemptions contained in the Securities Act. The Restricted Shares are or will be
deemed to be "restricted securities" within the meaning of Rule 144 promulgated
under the Securities Act and may be publicly sold if registered under the Act or
held by the holder thereof for a prescribed amount of time, if the other
conditions of Rule 144 are satisfied. As of the date of this prospectus,
8,457,757 of the Restricted Shares, will have either been held for more than one
year and are eligible for public sale in accordance with the requirements of
Rule 144, or are eligible for resale pursuant to currently effective
registration statements. In addition to the Restricted Shares, we have 1,832,689
shares of common stock that may be issued pursuant to the conversion of certain
convertible notes. Such shares upon conversion will be eligible for resale
pursuant to a resale registration statement on file with the SEC.
WE ARE CONTROLLED BY PRINCIPAL SHAREHOLDERS
Our principal shareholders (Georges C. St. Laurent III and William C.
St. Laurent) together beneficially own approximately fifty eight percent (58%)
of the outstanding shares of common stock. Accordingly, the principal
shareholders are able to elect our entire Board of Directors and control the
outcome of all matters submitted to a vote of the shareholders of the Company.
See "Description of Securities".
WE ARE SUBJECT TO BURDENSOME GOVERNMENT REGULATION
The manufacture of computer equipment and related products is subject
to various forms of government regulation in the United States and Brazil
including, but not limited to, the following:
o technology transfer and licensing regulations;
o tariff regulations;
o regulations governing currency conversion and transfers of
profits between jurisdictions;
o labor regulations.
We do not believe that such regulations adversely affect us or our business
presently; however, there can be no assurance that such regulations will not
materially adversely affect us in the future. In addition, the government of
Brazil has exercised, and continues to exercise, substantial influence over many
aspects of the private sector in Brazil.
WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN ACQUISITION
OF VITECH AMERICA AT A PREMIUM PRICE
The Board of Directors is authorized to issue shares of preferred stock
and to determine the dividend, liquidation, conversion, redemption, and other
rights, preferences, and limitations of such shares without any further vote or
action of the shareholders. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights
9
<PAGE>
which could adversely affect the voting power or other rights of the holders of
the common stock. In the event of issuance, the preferred stock could be used as
a method of discouraging and delaying or preventing a change in control of the
Company. We have no present intention to issue any shares of its preferred
stock, although there can be no assurance that we will not do so in the future.
See "Description of Securities Preferred Stock".
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE
The market for securities of technology companies and companies that
participate in emerging markets historically has been more volatile than the
market for stocks in general. The price of the common stock may be subject to
wide fluctuations in response to the following:
o quarter-to-quarter variations in operating results;
o announcement of acquisitions, vendor additions or
cancellations;
o creation or elimination of banking or other funding
opportunities;
o favorable or unfavorable coverage of the Company or its
officers by the press;
o the availability of new products, technology, or services.
In addition, the stock market has from time to time experienced extreme price
and volume fluctuations that have particularly affected the market price for
many technology and emerging market companies, both related and unrelated to the
operating results of such companies. These market fluctuations and other factors
may affect the market for the common stock.
WE HAVE ONLY ONE MANUFACTURING FACILITY
We operate one manufacturing facility in Brazil, in Ilheus, Bahia. In
the event such facility were to experience substantial damage or disruption of
its operations for any reason, we may be required to suspend manufacturing
operations or transfer manufacturing operations to an independent facility for
an indefinite period of time. While we maintain insurance covering various
contingencies, any such suspension or disruption of our manufacturing operations
could have a material adverse effect on us and our results of operations.
YEAR 2000 COMPLIANCE
Many existing computer systems and applications, and other control
devices, use only two digits to identify a year in the date code field, and were
not designed to account for the upcoming change in the century. As a result,
such systems and applications could fail or create erroneous results unless
corrected so that they can process data related to the year 2000. We rely on our
systems, applications and devices in operating and monitoring all major aspects
of its business, including financial systems (such as general ledger, accounts
payable and accounts receivable modules), inventory and receivables systems,
customer services, infrastructure, embedded computer chips, networks and
telecommunications equipment and end products. We also rely, directly and
indirectly, on systems of external business enterprises such as distributors,
suppliers, creditors, financial organizations, and governmental entities, for
accurate exchange of data. Although we are in contact with our suppliers to
assess their compliance, there can be no assurance that there will not be a
material adverse effect on us if third parties do not convert their systems in a
timely manner and in a way that is compatible with our systems, as we could be
affected through disruptions in the operation of the enterprises with which we
interact. Based on the information currently available, we believe
10
<PAGE>
that the costs associated with the year 2000 issue, and the consequences of
incomplete or untimely resolution of the year 2000 issue, will not have a
material adverse effect on our business, financial condition and results of
operations in any given year; however, there can be no assurance that year 2000
issues will not have a material adverse effect on our business, financial
condition or results of operations.
FACTORS RELATING TO BRAZIL
WE ARE SUBJECT TO POLITICAL AND ECONOMIC CONDITIONS
The Brazilian economy has been characterized by frequent and
occasionally drastic intervention by the Brazilian government. The Brazilian
government has often changed monetary, credit, tariff and other policies to
influence the course of Brazil's economy. The Brazilian government's actions to
control inflation and effect other policies have often involved wage and price
controls as well as other measures, such as freezing bank accounts, imposing
capital controls and limiting imports into Brazil. Changes in policy involving
tariffs, exchange controls, and other matters could have a material adverse
effect on the Company, as could inflation, devaluation, social instability and
other political, economic or diplomatic developments, and the Brazilian
government's response to such developments.
The Brazilian political environment has been marked by high levels of
uncertainty since the country returned to civilian rule in 1985 after 20 years
of military government. The death of a President-elect in 1985 and the
resignation of another President in 1992 during his impeachment trial, as well
as frequent turnovers at and immediately below the cabinet level, particularly
in the economic area, historically have contributed to the absence of a coherent
and sustained policy to confront Brazil's economic problems.
Mr. Fernando Henrique Cardoso, the Finance Minister at the time of the
implementation of Brazil's latest economic stabilization plan, was elected
President in October 1994. The Real Plan, which has significantly reduced
inflation since the introduction of the Real in July 1994, has been continued by
the Cardoso government. See "Brazil has historically experienced high rates of
inflation" below. President Cardoso has continued to support free market and
privatization measures of recent years, and his government has taken steps in
this regard, such as proposing measures for the liberalization of the state
petroleum and telecommunications monopolies and the privatization of a number of
state-owned enterprises. Although these liberalization measures have enjoyed
broad political and public support, some important political factions remain
opposed to significant elements of the reform program. In addition, President
Cardoso was elected as the leader of a coalition of political parties and
governs Brazil by coalition government. As a result, President Cardoso's
leadership of Brazil is likely to be subject to more compromises and
accommodations than if his party alone had received support from the majority of
voters. Furthermore, the Brazilian government's desire to control inflation and
to reduce budget deficits may cause it to take actions that will slow or halt
Brazilian economic growth.
BRAZIL HAS HISTORICALLY EXPERIENCED EXTREMELY HIGH RATES OF INFLATION
Inflation itself, as well as certain governmental measures to combat
inflation, have in the past had significant negative effects on the Brazilian
economy. Inflation, actions taken to combat inflation and public speculation
about possible future actions have also contributed significantly to economic
uncertainty in Brazil and to heightened volatility in the Brazilian securities
markets. Beginning in December 1993, the Brazilian government introduced the
Real Plan, an economic stabilization plan designed to reduce inflation by
reducing certain public expenditures, collecting liabilities owed to the
Brazilian government, increasing tax revenues,
11
<PAGE>
continuing the privatization program and introducing a new currency. On July 1,
1994, as part of the Real Plan, the Brazilian government introduced the Real.
Since the introduction of the Real, Brazil's inflation rate has been
substantially lower than in previous periods. Inflation, as measured by the
IGP-DI, was approximately 2,708%, 910%, 15.7%, 9.3%, 7.5% and 1.7% in 1993,
1994, 1995, 1996, 1997 and 1998, respectively. There can be no assurance,
however, that the recent lower level of inflation will continue or that future
Brazilian governmental actions (including actions to adjust the value of the
Brazilian currency such as the devaluation of the Real in January 1999) will not
trigger an increase in inflation or that any such increase will not have a
material adverse effect on the Company.
WE ARE SUBJECT TO EXCHANGE RATE FLUCTUATIONS
The relationship of Brazil's currency to the value of the U.S. Dollar,
and the rates of devaluation of Brazil's currency relative to the prevailing
rates of inflation have affected, and may affect, the Company's financial
condition and results of operations. Principally all of the Company's sales are
denominated in the Real, while the Company's operating results are recorded in
U.S. Dollars. Any significant devaluation of the Real relative to the U.S.
Dollar could have a material adverse effect on the Company's operating results.
Although the Company had used Real futures and options contracts during 1996, in
an effort to hedge against currency risks, its highest coverage at any one time
had only met 20% of its exposure, consisting of accounts receivable denominated
in Reais, net of accounts payable and other current liabilities denominated in
Reais. Currently, the Company is not engaged in any hedging activities. Currency
transaction losses for the years ended December 31, 1998 and 1997 were
$1,603,670 and $2,665,224, respectively, and were associated with
dollar-denominated monetary assets and liabilities held by the Company's
Brazilian subsidiaries. For the quarter ended March 31, 1999 we experienced a
currency translation loss of $16,656,880 due to the devaluation of the Real
against the U.S. dollar which occurred in January 1999.
In the event of a significant devaluation of the Brazilian currency in
relation to the U.S. Dollar or other currencies, our ability to meet our foreign
currency denominated obligations could be adversely and materially affected.
Increases in the rate of inflation in Brazil subsequent to such a devaluation of
the Brazilian currency could adversely affect our business, results of
operations and financial condition. Although the exchange rate between the Real
and the U.S. dollar had been relatively stable from mid-July 1994 through late
1998, the spread of the Asian and Russian economic difficulties to South America
culminated in the devaluation of the Real in mid-January 1999. By the end of
January 1999, the real dropped against the dollar by approximately 45% compared
to the end of December 1998. Although some recent economic measures have been
taken by the Brazilian Federal Government in an effort to stabilize the Real,
the potential for future devaluation or volatility continues to persist.
OUR EXCHANGE CONTROLS AND RESTRICTIONS
Brazilian law provides that, whenever there is a serious imbalance in
Brazil's balance of payments or serious reasons to foresee such imbalance, the
Brazilian government may impose restrictions on the remittance to foreign
investors of the proceeds of their investments in Brazil, as it did for
approximately six months in 1989 and early 1990, and on the conversion of
Brazilian currency into foreign currencies. No assurance can be given that the
international transfer of REAIS or the Floating Market will remain legally or
commercially available to Brazilian residents. There can be no assurance that
the Brazilian government will not in the future impose more restrictive foreign
exchange regulations that would have the effect of preventing or restricting our
access to foreign currency that it may require to meet its foreign currency
obligations under foreign currency denominated liabilities.
12
<PAGE>
BRAZIL'S ECONOMIC ENVIRONMENT IS SUBJECT TO CHANGE
Despite the success to date of the Real Plan in reducing inflation in
Brazil, the fiscal adjustment program necessary to reduce government
expenditures is not complete after the fifth year of the Real Plan. There can be
no assurance that the Real Plan will be more successful than previous economic
programs in reducing inflation over the long term, especially in light of (i)
the Brazilian congress' delay in the Real Plan and in the reform of the social
security system, and (ii) the negative effects of the Asian, Russian and Latin
American crises on Brazil, which has caused a flight of foreign investment, the
devaluation of the Real and new inflationary pressures on the Brazilian economy.
Accordingly, periods of substantial inflation may once again have significant
adverse effects on the Brazilian economy, on the value of the Real and on the
Company's financial condition, results of operations and future prospects.
13
<PAGE>
BUSINESS
Vitech America, Inc. and subsidiaries are engaged in the manufacture
and direct marketing of PCs and related products, business systems integration
products and turn-key business solutions, as well as the financing of the
purchase thereof, in the Federal Republic of Brazil. Our principal operations
are conducted in Brazil by our Brazilian subsidiaries. The parent company,
Vitech America, Inc., is based in Miami, Florida and sources components in the
United States and throughout the world and engages in the distribution of those
components to its subsidiaries' manufacturing operations in Brazil.
Substantially all of our revenues have been recognized in Brazil by our
subsidiaries. Our products, which include desktop PCs, notebooks, workstations,
network servers, peripherals, software, business systems integration products
and turn-key business solutions, are marketed under brand names owned or
licensed by us directly to end-users through a variety of channels in the
Brazilian marketplace. In addition, we maintain an engineering support service
dedicated to assisting customers in effecting networking and systems integration
solutions, and to providing technical support to the end-users of our products.
SELLING SECURITY HOLDERS
SECURITIES PURCHASE AGREEMENT AND SUBSCRIPTION AGREEMENT
On October 10, 1997, the Company issued $20 million aggregate principal
amount of 10% Convertible Promissory Notes. The Notes are initially convertible
at a conversion price of $15.00 (the "Initial Conversion Price"), subject to
stock splits, stock dividends, rights offering by the Company and certain
combinations, capitalizations, reclassifications, extraordinary distributions
and other similar events. In the event that the Company shall decline to repay
in full, following the exercise by the Noteholders of the first or second put
right (as defined below), the Initial Conversion Price shall be (i) the lesser
of .85 multiplied by the 10-day weighted average sale price (the "WASP") as
reported on Nasdaq as reported by Bloomberg, L.P. (or other principal exchange
on which the Company's securities are traded) for the lowest 10-day consecutive
period during the 30 consecutive trading day period ending one trading day prior
to the conversion date and (ii) $15.00 per share.
Beginning October 10, 1998 and continuing for a period of 30 days
thereafter, each Noteholder shall have the right ("First Put Right") to request
the Company to repurchase all, but not less than all the outstanding Notes held
by such Holder at a price equal to 110% of the principal amount thereof plus
accrued and unpaid interest thereon. Commencing 180 days after the First Put
Date and continuing for a period of 30 days thereafter, each Noteholder shall
have a second right (the "Second Put Right") to request the Company to
repurchase all, but not less than all the outstanding Notes at a price equal to
115% of the principal amount thereof plus accrued and unpaid interest. The
purchase price for any Put Right shall be paid in four equal monthly
installments on the last business day of each month commencing on the first full
month following the Put Notice with respect to the First or Second Put Right,
with interest on each installment at the rate of 10% per annum. The Company
shall have the right at any time from time to time commencing on October 10,
1998 to purchase from any holder of the Notes, the Notes at a call price of 112%
of the principal amount, plus accrued and unpaid interest thereon provided that
such Call Price shall be increased by 1% per month.
The Company is obligated under the terms of the Agreements to prepare
and file a Registration Statement providing for the resale of the shares of
Common Stock issuable upon conversion of the Convertible Notes within 20 days of
November 4, 1997 and to use its best efforts to have such Registration
14
<PAGE>
Statement declare effective on or before January 15, 1998. In the event that
such Registration Statement is not declared effective by such date, the Company
shall pay to each Noteholder monthly, the greater of (x), the pro rata portion
of the amount equal to 1.5% of the aggregate outstanding principal amount of the
Convertible Notes held by such holder, which monthly amount will be increased to
2% in the event that such Registration Statement is not declared effective by
February 15, 1998 or (y), $2,500 for each day the Registration Statement is not
declared effective by January 15, 1998.
In no event shall the Company issue more than 19.9% of its issued and
outstanding shares of Common Stock in connection with each separate issuance of
Convertible Notes ,unless the Company shall obtain stockholder approval or
waiver of such requirement by the Nasdaq Stock Market. Unless the Company shall
obtain stockholder approval or waiver of such requirement by the Nasdaq Stock
Market within the time period set forth within the Securities Purchase
Agreement, the principal amount of the Convertible Notes, which may not be
converted because of such limitation, will be payable at a formula price which
shall be the amount equal to the greater of (i) the aggregate principal amount
of the Convertible Notes then outstanding, together with all accrued and unpaid
interest thereon, in the sum of (a) the products of (x) the number of shares of
Common Stock which the Convertible Notes being redeemed are then convertible at
the current conversion price and (y) the WASP on the date the Convertible Notes
are redeemed, plus (c) accrued and unpaid interest on the Convertible Notes the
date of repayment.
On April 30, May 31, June 30 and July 13, 1999, Infinity Investors
Limited, IEO Holdings Limited, Summit Capital Limited and Glacier Capital
Limited assigned to Brazil Partners Limited an aggregate of $1,745,915.12,
$1,745,915.12, $872,957.57 and $872,957.57 respectively, of principal amount of
the Convertible Notes. Subsequently, the Company amended and restated the
Convertible Notes and entered into Put and Call Agreements on the Convertible
Notes. The Convertible Notes are convertible at $11.00, however in the event the
Company does not repay in full the Convertible Notes upon exercise by Brazil
Partners Limited of their put rights, the conversion price shall be the lesser
of (i) 0.85 multiplied by the market price of the common stock, as defined in
the Convertible Notes, and (ii) $11.00 per share.
^ The Company also issued on October 10, 1997, additional $18,608,250 aggregate
principal amount 10% Convertible Notes. The Convertible Notes were issued in a
Private Placement and under the terms and conditions of a Subscription
Agreement. The Subscription Agreement and the terms contained therein were
substantially similar to the terms in the Securities Purchase Agreement
described above, provided, however, that the Company will not incur any
penalties in the event that the shares underlying the Convertible Notes were not
registered in ninety (90) days as of November 1, 1997. In connection with both
of the above financings, the Company issued 241,392 common stock purchase
warrants.
On April 19, 1999, the Company amended the Convertible Notes dated
October 10, 1997 in the aggregate principal amount of $3,621,875 to adjust the
Initial Conversion Price down to $10.00 and provide for a third and fourth put
right.
In connection with the initial public offering in November 1996, the
Company issued 220,000 warrants to purchase Common Stock to representatives of
the underwriters. In August 1996 the Company issued 23,426 common stock purchase
warrants in a private placement. The Company also issued in June, August and
October 1997, the St. Laurent Notes in the principal amount of $20,000,000
convertible into 1,416,564 shares of Common Stock.
15
<PAGE>
STOCK OWNERSHIP
The following table sets forth the name of the Selling Security Holder,
the amount of shares of Stock held directly or indirectly underlying the
Convertible Notes and Warrants owned by the Selling Security Holder at the date
thereof. The amount of shares of Common Stock being offered by the Selling
Security Holder and the amount to be owned by the Selling Security Holder
following the sale of such shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES TO SHARES TO BE OWNED
NAME OF SELLING SECURITY HOLDER SHARES OWNED(1) BE OFFERED AFTER OFFERING
<S> <C> <C> <C>
North Hampton Holding
Corporation III(2) 110,000 110,000 0
Robert J. Setteducati(2) 27,500 27,500 0
Michael A. Bresner(2) 20,900 20,900 0
James C. Witze(2) 2,200 2,200 0
William Masucc(2) 11,000 11,000 0
Michael S. Smith(2) 3,300 3,300 0
Thomas S. Parigian(2) 11,000 11,000 0
Joseph Galligan(2) 3,300 3,300 0
Michael Vanechanos(2) 1,100 1,100 0
Glenn Busch(2) 2,200 2,200 0
Michael Bergin(2) 2,200 2,200 0
Jack Bruscianelli(2) 1,650 1,650 0
Gary Stewart(2) 1,650 1,650 0
Jerome Feldman(2) 22,000 22,000 0
Tresley, David and Cindy(2) 8,800 8,800 0
Swedbank (Luxembourg) S.A.(2) 5,500 5,500 0
Dennis and B. Elaine Brubaker(2) 2,200 2,200 0
Curry Family Trust(2) 2,200 2,200 0
Robert P. Bain(2) 2,200 2,200 0
Geoffroy del Marmol(2) 1,426 1,426 0
Daniel Phelan(2) 1,100 1,100 0
Joseph K. Meyer(2) 73,297(5) 51,297 22,000(5)
Parker Quillen(2) 50,092 50,092 0
Infinity Investors Limited(2) 113,332 113,332 0
IEO Holdings Limited(2)(7) 6,668 6,668 0
Summit Capital Limited(2) 6,668 6,668 0
Glacier Capital Limited(2) 6,668 6,668 0
Little Wing LP(2) 4,667 4,667 0
Tradewinds Fund Ltd.(2) 1,000 1,000 0
Contrary Fund Ltd.(2) 1,000 1,000 0
Infinity Investors Limited(3)(6) 230,505 230,505 0
IEO Holdings Limited(3)(6)(7) 13,559 13,559 0
Summit Capital Limited(3)(6) 13,559 13,559 0
Glacier Capital Limited(3)(6) 13,559 13,559 0
Georges C. St. Laurent Jr.(3) 1,185,355(4) 1,416,564 1,185,355
16
<PAGE>
Eugenie & Joseph Jones
Family Foundation(3) 26,667 26,667 0
Susan Jones Gundlach(3) 13,334 13,334 0
Whitcust & Co.(3) 246,668 246,668 0
Institute of Mental Hygiene(3) 13,334 13,334 0
Burgeois Bennett Thokey & Hickey
401(k) Profit Sharing Plan & Trust(3) 13,334 13,334 0
The Toler Foundation(3) 20,001 20,001 0
Enbecee Company(3) 133,334 133,334 0
Reliable Credit Profit Sharing Trust(3) 25,000 25,000 0
David E. Palmisano(3) 5,000 5,000 0
David E. & Becky Palmisano
JT TEN(3) 20,000 20,000 0
Richard F. Deich(3) 10,000 10,000 0
Earle C. May(3) 10,000 10,000 0
Earl E. Schatz(3) 20,000 20,000 0
Gerald T. Lisac IRA Rollover(3) 30,000 30,000 0
Gerald T. Lisac & Maryann
Lisac JT TEN(3) 4,000 4,000 0
J.R. Mann(3) 10,000 10,000 0
Paul R. Farago Trust(3) 40,000 40,000 0
Joe L. Mangan(3) 30,000 30,000 0
Peter R. Evans(3) 5,000 5,000 0
David C. Mann(3) 42,500 42,500 0
Smooch Reynolds(3) 3,333 3,333 0
Jack Reynolds(3) 10,001 10,001 0
Emerging Markets Debt I, LP(3)(8) 5,000 5,000 0
Alexandra Rome Revocable Trust(3) 20,001 20,001 0
Alexandra Rome Mudd & Alexandra
Rome JT TEN(3) 6,668 6,668 0
Alyssa Rome Mudd & Alexandra
Rome JT TEN(3) 6,668 6,668 0
Alexandra Rome Cust for Emily
Rome Mudd UCAUTMA(3) 5,000 5,000 0
Emerging Markets Debt I, LP(3)(9) 25,000 25,000 0
Reliable Credit Association, Inc.
Pension Plan(3) 25,000 25,000 0
K & C Family Trust(3) 5,000 5,000 0
The Cuttyhunk Fund Limited(3) 26,667 26,667 0
Little Wing LP(3) 46,667 46,667 0
Tradewinds Fund Ltd.(3) 10,001 10,001 0
Contrary Fund Ltd.(3) 10,001 10,001 0
Crane Mills, Inc.(3) 25,000 25,000 0
David Sloop(3) 10,001 10,001 0
Drucilla Sloop(3) 1,000 1,000 0
John C. Swatman(3) 3,333 3,333 0
Jill B. Meyer(3) 634 634 0
17
<PAGE>
Compass Advisors, Inc.(3) 1,667 1,667 0
David & Drucilla Sloop(3) 2,000 2,000 0
Quimby Welding Supplies(3) 6,668 6,668 0
Wayne M. Quimby(3) 2,667 2,667 0
Elaine N. Quimby(3) 2,334 2,334 0
Emerging Markets Debt I, LP(3) 333,333 333,333 0
Charles D. & Trina T. Denson(3) 6,668 6,668 0
Kensington Partners LP I(3) 33,334 33,334 0
Kensington Partners LP II(3) 917 917 0
Brazil Partners Limited(3)(10) 950,000 950,000 0
(1) Represents shares of Common Stock issuable upon conversion of the
Convertible Notes, the St. Laurent Notes and upon the exercise of
Common Stock Warrants.
(2) Represent the shares of Common Stock issuable upon conversion of
Warrants.
(3) Represents shares of Common Stock issuable upon conversion of
Convertible Notes based upon the number of shares required to be
registered for resale pursuant to the Subscription Agreement and
Securities Purchase Agreement relating thereto. The initial number of
shares issuable at the conversion of the Convertible Notes will depend
upon the timing of the conversion.
(4) Does not include 1,416,564 shares of Common Stock issuable upon
conversion of the St. Laurent Notes. The St. Laurent Notes may not be
converted unless Mr. St. Laurent gives 90 days prior written notice. As
of the date of this Prospectus, no such notice has been given. Includes
stock options to purchase 76,828 shares of Common Stock.
(5) Includes stock options to purchase 22,000 shares of Common Stock.
(6) Notwithstanding the foregoing, each of these Selling Security Holders
has agreed to limit the number of shares acquired such that the number
of such shares beneficially held will be such number representing less
than five percent (5%) of the total outstanding number of shares.
(7) Transferred from Infinity Emerging Opportunities Limited.
(8) Transferred from Jerry E. Nye, M.D. P.C. Pension & Profit Sharing Trust
(SNWSC & Co.).
(9) Transferred from Marc Iseri M.D. P.C. Pension Plan (SNWSC & Co.)
(10) Transferred (i) 807,500 shares from Infinity Investors Limited, (ii)
47,500 from IEO Holdings Limited, (iii) 47,500 from Summit Capital
Limited and (iv) 47,500 from Glacier Capital Limited.
</TABLE>
The Company has agreed to pay full costs and expenses, incentives to
the issuance, offer, sale and delivery of the Shares, including but not limited
to, all fees and expenses in preparing, filing and printing the Registration
Statement and Prospectus and related exhibits, amendments and supplements
thereto and mailing of such items. The Company will not pay selling commissions
and expenses associated with any sale by the Selling Security Holders.
18
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Security Holders may be sold
from time to time by the Selling Security Holders, or by pledgees, donees,
transferees or other successors in interest. Such sales may be made on one or
more exchanges or in the over-the-counter market (including the Nasdaq National
Market of The Nasdaq Stock Market), or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The Shares may be sold by one or more of the following
methods, including, without limitation: (a) a block trade in which the
broker-dealer so engaged will attempt to sell the Shares as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) face-to-face or other direct transactions between the Selling Security
Holders and purchasers without a broker-dealer or other intermediary and (e)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Security Holders may arrange for other brokers or dealers to participate in the
resales. Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Security Holders in amounts
to be negotiated in connection with the sale. Such broker-dealers and agents and
any other participating broker-dealers, or agents may be deemed to be
"underwriters" within the meaning of the Act, in connection with such sales. In
addition, any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 might be sold under Rule 144 rather than pursuant to this
Prospectus.
In connection with distributions of the Shares or otherwise, the
Selling Security Holders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers may engage
in short sales of the Shares registered hereunder in the course of hedging the
positions they assume with Selling Security Holders. The Selling Security
Holders may also sell shares short and deliver the Shares to close out such
short positions. The Selling Security Holders may also enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the Shares registered hereunder, which the broker-dealer may
resell pursuant to this Prospectus. The Selling Security Holders may also pledge
the Shares registered hereunder to a broker or dealer and upon a default, the
broker or dealer may effect sales of the pledged Shares pursuant to this
Prospectus.
Information as to whether an underwriter(s) who may be selected by the
Selling Security Holders, or any other broker-dealer, is acting as principal or
agent for the Selling Security Holders, the compensation to be received by
underwriters who may be selected by the Selling Security Holders, or any
broker-dealer, acting as principal or agent for the Selling Security Holders and
the compensation to be received by other broker-dealers, in the event the
compensation of such other broker-dealers is in excess of usual and customary
commissions, will, to the extent required, be set forth in a supplement to this
Prospectus (the "Prospectus Supplement"). Any dealer or broker participating in
any distribution of the Shares may be required to deliver a copy of this
Prospectus, including the Prospectus Supplement, if any, to any person who
purchases any of the Shares from or through such dealer or broker.
The Company has advised the Selling Security Holders that during such
time as they may be engaged in a distribution of the Shares included herein they
are required to comply with Regulation M promulgated under the Exchange Act.
With certain exceptions, Regulation M precludes any Selling Security Holders,
any affiliated purchasers and any broker-dealer or other person who participates
in such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchase
19
<PAGE>
made in order to stabilize the price of a security in connection with the
distribution of that security. All of the foregoing may affect the marketability
of the Common Stock.
It is anticipated that the Selling Security Holders will offer all of
the Shares for sale. Further, because it is possible that a significant number
of Shares could be sold at the same time hereunder, such sales, or the
possibility thereof, may have a depressive effect on the market price of the
Company's Common Stock.
Except as specifically set forth herein, none of the Selling Security
Holders has, or within the past three years has had, any position, office or
other material relationship with the Company or any of its predecessors or
affiliates.
DESCRIPTION OF SECURITIES
GENERAL
As of the date of this prospectus, our articles of incorporation
authorize us to issue 30,000,000 shares of common stock, no par value, and
3,000,000 shares of preferred stock, no par value (the "Preferred Stock"). As of
June 10, 1999, there were outstanding 14,635,655 shares of common stock and no
shares of Preferred Stock.
COMMON STOCK
Each shareholder has the right to one vote per share on all matters
which require their vote. Holders of common stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. In the event of a liquidation, dissolution, or
winding up of Vitech, holders of common stock are entitled to share ratably all
assets remaining after payment of liabilities. Holders of common stock have no
preemptive rights and have no rights to convert their common stock into any
other securities.
PREFERRED STOCK
Our preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by shareholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion rights, redemption rights, and sinking
fund provisions. The issuance of any such preferred stock could adversely affect
the rights of the holders of common stock and, therefore, reduce the value of
the common stock. The ability of the Board of Directors to issue preferred stock
could discourage, delay, or prevent a takeover of Vitech. See "Risk Factors - We
have implemented anti-takeover provisions that could prevent an acquisition of
Vitech America at a premium price."
NASDAQ NATIONAL MARKET
Our common stock is traded on the Nasdaq National Market under the
symbol "VTCH".
TRANSFER AND WARRANT AGENT AND REGISTRAR
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<PAGE>
Our transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for the Company by Atlas, Pearlman, Trop & Borkson P.A., Fort
Lauderdale, Florida. Atlas, Pearlman, Trop & Borkson own shares of common stock.
EXPERTS
The audited Consolidated Financial Statements of Vitech America, Inc.,
as of December 31, 1998 and 1997, and for each of the three fiscal years in the
period ended December 31, 1998, incorporated by reference into this prospectus,
have been audited by Pannell Kerr Forster PC, independent certified public
accountants, as indicated in their report with respect thereto, and incorporated
by reference herein in reliance upon the authority of said firm as experts in
giving said reports.
INDEMNIFICATION
The Articles of Incorporation of the Company provide that every
director and every officer of the corporation, every former director and former
officer of the corporation, and every person who may have served at the request
of the corporation as a director or officer of another corporation in which the
corporation owns shares of capital stock or of which it is a creditor, and the
heirs, executors, administrators, and assignors of all of the above persons
shall be indemnified by the corporation for expenses actually and necessarily
incurred by him in connection with the defense of any action, suit, or
proceeding to which he may be a party by reason of his being or having been a
director or officer of the corporation or of such other corporation regardless
of whether or not he continues to be a director or officer at the time of
incurring such expenses, except with respect to matters as to which he shall be
finally adjudged in such action, suit, or proceeding to be liable for negligence
or misconduct in the performance of his duty. The rights of indemnification set
forth in the Articles of Incorporation shall not be exclusive of any other
rights to which such person may be entitled by law or otherwise.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of the director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for: (a) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for, or
assenting to, an unlawful distribution; and (d) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by, or in the
right of, the Company to procure a judgment in its favor or in a proceeding by,
or in the right of, a shareholder. The statute does not effect the director's
responsibilities under any other law.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
21
<PAGE>
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Registration Fees - Securities and
Exchange Commission $ 22,871
Cost of Printing 1,000*
Legal Fees and Expenses 5,000*
Accounting Fees and Expenses 5,000*
Blue Sky Fees and Expenses 500*
Miscellaneous 629*
---------
Total $ 35,000*
*Estimated
Item 15. Indemnification of Directors and Officers.
The Articles of Incorporation of the Company provide that every
director and every officer of the corporation, every former director and former
officer of the corporation, and every person who may have served at the request
of the corporation as a director or officer of another corporation in which the
corporation owns shares of capital stock or of which it is a creditor, and the
heirs, executors, administrators, and assignors of all of the above persons
shall be indemnified by the corporation for expenses actually and necessarily
incurred by him in connection with the defense of any action, suit, or
proceeding to which he may be a party by reason of his being or having been a
director or officer of the corporation or of such other corporation regardless
of whether or not he continues to be a director or officer at the time of
incurring such expenses, except with respect to matters as to which he shall be
finally adjudged in such action, suit, or proceeding to be liable for negligence
or misconduct in the performance of his duty. The rights of indemnification set
forth in the Articles of Incorporation shall not be exclusive of any other
rights to which such person may be entitled by law or otherwise.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of the director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for: (a) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for, or
assenting to, an unlawful distribution; and (d) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by, or in the
right of, the Company to procure a judgment in its favor or in a proceeding by,
or in the right of, a shareholder. The statute does not effect the director's
responsibilities under any other law.
23
<PAGE>
Item 16. Exhibits and Consolidated Financial Statement Schedules.
a. The exhibits constituting part of the Registration Statement
are as follows:
(1.1) Form of Underwriting Agreement.(1)
(1.2) Form of Representative's Warrant Agreement.(1)
(2.1) Contract for Discontinuation of Company Participations and other
Agreements between Vitech America, Inc., Microtec Holding USA, Inc. and
Microhold Partipacoes e Empreendimentos S/C Ltda. dated July 10, 1997.
(2)
(2.2) Purchase agreement between Vitech America, Inc. and Microtec Holdings
USA, Inc. dated July 10, 1997.(2)
(2.3) Buy-Sell Contract between Vitech America, Inc. and Tech Shop Holdings
USA, Inc. dated November 17, 1997.(4)
(2.4) Buy-Sell Contract between Vitech America, Inc. and Recife Holdings USA,
Inc. dated November 18, 1997. (4)
(3.1) Articles of Incorporation dated June 24, 1993.(1)
(3.2) Amendments to the Company's Articles of Incorporation dated
November 13, 1995 and July 26, 1996.(1)
(3.3) By-Laws of the Company.(1)
(4.1) Form of Common Stock Certificate.(1)
(5.1) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning legality of
shares being registered pursuant to the Registration Statement.(8)
(10.1) Stock Option Plan.(1)
(10.5) Option Agreements for William C. St. Laurent and Georges St. Laurent,
III.(1)
(10.13) Senior convertible note payable to Georges St. Laurent Jr. dated
June 26, 1997.(2)
(10.15) Senior Convertible Note dated August 19, 1997 to Georges C. St. Laurent
Jr.(5)
(10.16) Senior Convertible Note dated October 10, 1997 to Georges C. St.
Laurent Jr.(5)
(10.17) Securities Purchase Agreement dated October 10, 1997, by and between
the Company, H.W. Partners, L.P., as Purchaser's Representative and
Investor.(3)
(10.18) Form of Convertible Promissory Note dated October 10, 1997 for the
Investors.(3)
(10.19) Put and Call Agreement dated October 10, 1997 between the
Company and the Investors.(3)
(10.20) Registration Rights Agreement dated October 10, 1997 between the
Company and the Investors.(3)
(10.21) Form of Convertible Promissory Note dated October 10, 1997.(3)
(10.22) Master Sales and Servicing Agreement among Technology Acceptance Corp.,
Technology Trust S.A., Bahiatech-Bahia Tecnologia Ltda., Banco
Credibanco, S.A. and Vitech America, Inc. dated April 16, 1998.(7)
(10.23) Form of Convertible Promissory Note dated September 30, 1998 for Little
Wing LP.(9)
(10.24) Convertible Debenture Purchase Agreement dated May 21, 1999, by and
between the Company and Advantage
Fund II Ltd. and Koch Investment Group Ltd., as Investors.(9)
(10.25) Form of Convertible Debenture dated May 21, 1999.(9)
(10.26) Registration Rights Agreement dated May 21, 1999 between the Company,
Advantage Fund II Ltd. and Koch Investment Group Ltd.(9)
(10.27) Form of Warrant dated May 21, 1999.(9)
(10.28) Form of Convertible Promissory Note dated April 30, 1999.*
(10.29) Put and Call Agreement dated April 30, 1999 between the Company and
Brazil Partners Limited.*
(10.30) Form of Convertible Promissory Note dated May 31, 1999.*
(10.31) Put and Call Agreement dated May 31, 1999 between the Company and
Brazil Partners Limited.*
(10.32) Form of Convertible Promissory Note dated June 30, 1999.*
(10.33) Put and Call Agreement dated June 30, 1999 between the Company and
Brazil Partners Limited.*
(10.34) Form of Convertible Promissory Note dated July 13, 1999.*
(10.35) Put and Call Agreement dated July 13, 1999 between the Company and
Brazil Partners Limited.*
(10.36) Form of Amended Convertible Promissory Note dated April 19, 1999.*
(21) Subsidiaries of the Company. (6)
(23.1) Consent of Pannell Kerr Forster PC. *
24
<PAGE>
(23.2) Consent of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the
Company, is included in an opinion filed in Exhibit 5.1.(8)
- --------------------
* Filed herewith.
(1) Incorporated by reference to exhibit filed with the Company's
Registration Statement on Form S-1, file #333-11505.
(2) Incorporated by reference to exhibit filed with the Company's Form 8-K
dated July 10, 1997 as amended.
(3) Incorporated by reference to exhibit filed with the Company's Form 8-K
dated October 10, 1997.
(4) Incorporated by reference to exhibit filed with the Company's Form 8-K
dated November 17, 1997.
(5) Incorporated by reference to exhibit filed with the Company's Form 10-Q
for the quarterly period ended September 30, 1997. (6) Incorporated by
reference to exhibit filed with the Company's Form 10-K for the year
ended December 31, 1998.
(7) Incorporated by reference to exhibit filed with the Company's Form 10-Q
for the quarterly period ended March 31, 1998.
(8) Incorporated by referenced to exhibits filed with the Company's
Registration Statement on Form S-3, File No. 333-40491.
(9) Incorporated by referenced to exhibits filed with the Company's
Registration Statement on Form S-3, File No. 333-80711.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement which includes any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officer, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Post
Effective Amendment to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Miami and the State
of Florida, on the 30th day of July, 1999.
VITECH AMERICA, INC.
By: /S/ WILLIAM C. ST. LAURENT
WILLIAM C. ST. LAURENT, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ GEORGES C. ST. LAURENT, III Chairman of the Board of Directors July 30, 1999
- ---------------------------------------
Georges C. St. Laurent, III and Chief Executive Officer
(Principal Executive Officer)
/S/ WILLIAM C. ST. LAURENT President, Chief Operating Officer July 30, 1999
- ---------------------------------------
William C. St. Laurent and Director
/S/ EDWARD A. KELLY Chief Financial Officer July 30, 1999
- ---------------------------------------
Edward A. Kelly (Principal Accounting Officer)
/S/ TOUMA MAKDASSI ELIAS Director July 30, 1999
- ---------------------------------------
Touma Makdassi Elias
Joseph K. Meyer Director July 30, 1999
- ---------------------------------------
Joseph K. Meyer
/S/ H. R. SHEPHERD Director July 30, 1999
- ---------------------------------------
H.R. Shepherd
/S/ WILLIAM ROBIN BLACKHURST Director July 30, 1999
- ---------------------------------------
William Robin Blackhurst
</TABLE>
26
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF REGISTERED UNDER THE
1933 ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES
PURCHASE AGREEMENT AND PUT AND CALL AGREEMENT, EACH DATED AS OF THE DATE HEREOF,
COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICE, CONTAIN CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING,
WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE
HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION
RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE
REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED.
No. BP1 $1,745,915.12
VITECH AMERICA, INC.
10% Convertible Note due October 10, 2000
VITECH AMERICA, INC., a Florida corporation (together with its
successors, the "Company"), for value received hereby promises to pay to:
BRAZIL PARTNERS LIMITED
(the "Holder") and registered assigns, the principal sum of One Million Seven
Hundred Forty Five Thousand Nine Hundred Fifteen & 12/100 Dollars
($1,745,915.12) or, if less, the principal amount of this Note then outstanding,
on the Maturity Date by wire transfer of immediately available funds to the
Holder in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay interest, monthly in arrears, on (i) the last day of each month until
the Maturity Date, commencing May 31, 1999 (unless such day is not a Business
Day, in which event on the next succeeding Business Day) (each an "Interest
Payment Date"), (ii) the Maturity Date, (iii) each Conversion Date, as hereafter
defined, and (iv) the date the principal amount of the Convertible Notes shall
be declared to be or shall automatically become due and payable, on the
principal sum hereof outstanding in like coin or currency, at the rates per
annum set forth below, from the most recent Interest Payment Date to which
interest has been paid on this Convertible Note, or if no interest has been paid
on this Convertible Note, from the date of this Convertible Note until payment
in full of the principal sum hereof has been made.
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 1 84661.5
(Vitech America, Inc.)
<PAGE>
The interest rate shall be ten percent (10%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus five percent (5%) per annum or, if less, the
maximum rate permitted by applicable law, and will be payable on demand
("Default Interest"). Interest on this Convertible Note will be calculated on
the basis of a 360-day year of twelve 30-day months. All payments of principal
and interest hereunder shall be made for the benefit of the Holder at the
Holder's account at Charles Schwab & Co.
This Convertible Note is transferable and assignable to one or more
purchasers (in minimum denominations of $100,000 or larger multiples of $1,000).
The Company shall keep a register (the "Register") in which shall be entered the
names and addresses of the registered holder of this Convertible Note and
particulars of this Convertible Note held by such holder and of all transfers of
this Convertible Note. References to the Holder or "Holders" shall mean the
Person listed in the Register as the registered holder of such Convertible
Notes. The ownership of this Convertible Note shall be proven by the Register.
1. Payment of Principal. The Company shall repay the remaining unpaid
balance on this Convertible Note on the Maturity Date. The Company may, and
shall be obligated to, prepay all or a portion of this Convertible Note on the
terms specified in the Agreements.
2.1 Conversion of Convertible Note. (a) The Holder shall have the
right, at its option, at any time and from time to time, after the date hereof
to convert the principal amount of this Convertible Note, or any portion of such
principal amount in the minimum amount of $1,000 or any integral multiple
thereof, into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) determined pursuant to this Section
2.1. The number of shares of Common Stock to be issued upon each conversion of
this Convertible Note shall be determined by dividing the Conversion Amount (as
defined below) by the Conversion Price in effect on the date (the "Conversion
Date") a Notice of Conversion is delivered to the Company by the Holder by
facsimile or other reasonable means of communication dispatched prior to 11:00
p.m., New York City Time. The term "Conversion Amount" means, with respect to
any conversion of this Convertible Note, the sum of (i) the principal amount of
this Convertible Note to be converted in such conversion plus (ii) accrued and
unpaid interest, if any, on such principal amount at the interest rates provided
in this Convertible Note to the Conversion Date plus (iii) Default Interest, if
any, on the interest referred to in the immediately preceding clause (ii) plus
(iv) at the Holder's option, any amounts owed to the Holder pursuant to Section
2.2 hereof.
4.2 Conversion Price. The Conversion Price of this Convertible Note
(the "Conversion Price") shall be $11.00 per share (the "Initial Conversion
Price"); provided that, if the Company shall have declined to repay in full this
Convertible Note following the exercise by the Holder of either the First Put
Right or Second Put Right at the Put Price or Second Put Price, as applicable
(as each such term is defined in the Put and Call Agreement), the Conversion
Price shall be the lesser of (i) 0.85 multiplied by the Market Price, where the
Market Price means the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 2 84661.5
(Vitech America, Inc.)
<PAGE>
10-Day VWASP (as defined below) of the Common Stock on the Nasdaq Stock Market's
National Market ("Nasdaq"), or on the principal securities exchange or other
securities market on which the Common Stock is then being traded during the
thirty (30) consecutive Trading Day period ending one Trading Day prior to the
Conversion Date, and (ii) the Initial Conversion Price (subject, in each case,
to equitable adjustments for stock splits, stock dividends or rights offerings
by the Company relating to the Company's securities or the securities of any
Subsidiary of the Company, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The term "10-Day VWASP" means,
for any security as of any date, the volume-weighted average sales price on
Nasdaq as reported by Bloomberg, L.P. ("Bloomberg") or, if Nasdaq is not the
principal trading market for such security, the volume-weighted average sales
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the volume-weighted average sales price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no volume-weighted average sales price
is reported for such security by Bloomberg, then the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc., in each case for the lowest ten (10)
consecutive day period during such 30-day period. If the 10-Day VWASP cannot be
calculated for such security on such date on any of the foregoing basis, the
10-Day VWASP of such security on such date shall be the fair market value as
mutually determined by the Company and the Holders of a majority in interest of
Convertible Notes being converted for which the calculation of the closing bid
price is required in order to determine the Conversion Price of such Convertible
Notes.
2.3 Authorized Shares.
(a) The Company (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Convertible Note and (ii) agrees
that its issuance of this Convertible Note shall constitute full
authority to its officers and agents who are charged with the duty of
executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms
and conditions of this Convertible Note.
(b) If at any time a Holder of this Convertible Note submits a
Notice of Conversion, (i) the Company does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in full in accordance with the provisions of this Article 2
or (ii) the Company is prohibited by the applicable rules of Nasdaq to
effect such conversion in full in accordance with the provisions of
this Article 2 without stockholder approval (each, a "Conversion
Default"), the Company shall issue to the Holder all of the shares of
Common Stock which are then available to effect such conversion. The
portion of this Convertible Note which the Holder included in its
Conversion Notice and which exceeds the amount which is then
convertible into available shares
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 3 84661.5
(Vitech America, Inc.)
<PAGE>
of Common Stock (the "Excess Amount") shall, notwithstanding anything
to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the Holder's option
at any time after) the date additional shares of Common Stock are
authorized by the Company, or its stockholders, as applicable, at which
time the Conversion Price in respect thereof shall be the lower of (i)
the Conversion Price on the Conversion Default Date (as defined below)
and (ii) the Conversion Price on the Conversion Date thereafter elected
by the Holder in respect thereof. The Company shall pay to the Holder
payments ("Conversion Default Payments") for a Conversion Default in
the amount of (N/365) x .24 x the Excess Amount on the Conversion Date
in respect of the Conversion Default (the "Conversion Default Date"),
where N = the number of days from the Conversion Default Date to the
date (the "Authorization Date") that the Company, or its stockholders,
as applicable, authorizes a sufficient number of shares of Common Stock
to effect conversion of the full outstanding principal balance of this
Convertible Note. The Company shall use its best efforts to authorize,
or cause its stockholders to authorize, as applicable, a sufficient
number of shares of Common Stock as soon as practicable following the
earlier of (i) such time that the Holder notifies the Company or that
the Company otherwise becomes aware that there are or likely will be
insufficient shares of Common Stock to allow full conversion thereof
and (ii) a Conversion Default. The Company shall send notice to the
Holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder's accrued Conversion
Default Payments. The accrued Conversion Default Payments for each
calendar month shall be paid in cash or shall be convertible into
Common Stock (at such time as there are sufficient authorized shares of
Common Stock) at the Market Price, at the Holder's option, as follows:
(i) In the event the Holder elects to take such
payment in cash, cash payment shall be made to Holder by the
fifth day of the month following the month in which it has
accrued; and
(ii) In the event the Holder elects to take such
payment in Common Stock, the Holder may convert such payment
amount into Common Stock at the Conversion Price (as in effect
at the time of conversion) at any time after the fifth day of
the month following the month in which it has accrued (at such
time as there are sufficient authorized shares of Common
Stock) in accordance with the terms of this Article 2.
(c) The Holder's election pursuant to this Section 2.3 shall
be made in writing to the Borrower at any time prior to 9:00 p.m., New
York City Time, on the third day of the month following the month in
which Conversion Default payments have accrued. If no election is made,
the Holder shall be deemed to have elected to receive cash. Nothing
herein shall limit the Holders right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) due to the
Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(d) In no event shall the Company issue more than the Maximum
Number of Shares upon conversion of this Convertible Note, unless the
Company shall have obtained Stockholder Approval (as defined below) or
a waiver of such requirement by the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 4 84661.5
(Vitech America, Inc.)
<PAGE>
Nasdaq Market. As used herein, Stockholder Approval means approval by
the stockholders of the Company in accordance with Rule 4460(i) of the
rules of the Nasdaq Market. Once the Maximum Number of Shares has been
issued (the date of which is hereinafter referred to as the "Maximum
Conversion Date"). Unless the Company shall have obtained Stockholder
Approval or a waiver of such requirement by the Nasdaq Market within 90
days of the Maximum Conversion Date, the Company shall pay to the
Holder within 10 Business Days of the Maximum Conversion Date (or, if
the Company is, in good faith, using its best efforts to obtain
Stockholder Approval, then the earlier of (x) 90 days following the
Maximum Conversion Date, and (y) such date that it becomes reasonably
apparent that Stockholder Approval will not be obtained within such 90
day period), this Convertible Note in full at the Formula Price. The
Maximum Number of Shares shall be subject to adjustment from time to
time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock
occurring after the date hereof. With respect to each Holder of this
Convertible Note, the Maximum Number of Shares shall refer to such
Holder's pro rata share thereof based upon the aggregate principal
balance of the convertible Note then outstanding. In the event that the
Company obtains Stockholder Approval, the approval of the Nasdaq Market
or otherwise is able to increase the number of shares to be issued
above the Maximum Number of Shares (such increased number being the
"New Maximum Number of Shares"), the references to Maximum Number of
Shares above shall be deemed to be, instead, references to the New
Maximum Number of Shares.
2.4 Method of Conversion
(a) Notwithstanding anything to the contrary set
forth herein, upon conversion of this Convertible Note in
accordance with the terms hereof, the Company shall not be
required to physically surrender this Convertible Note to the
Holder unless the entire unpaid principal amount of this
Convertible Note is so converted. The Company and the Holder
shall maintain records showing the principal amount so
converted and the date of such conversions or shall use such
other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this
Convertible Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall
be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of
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CONVERTIBLE NOTE No. 1- Page 5 84661.5
(Vitech America, Inc.)
<PAGE>
this Convertible Note is converted as aforesaid, the Company
may not transfer this Convertible Note unless the Holder first
physically surrenders this Convertible Note to the Company,
whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes), may request, representing in the aggregate
the remaining unpaid principal amount of this Convertible
Note. The Holder and any assignee, by acceptance of this
Convertible Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a
portion of this Convertible Note, the unpaid and unconverted
principal amount of this Convertible Note represented by this
Convertible Note may be less than the amount stated on the
face hereof.
(b) The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock or other
securities or property on conversion of this Convertible Note
in a name other than that of the Holder (or in street name),
and the Company shall not be required to issue or deliver any
such shares or other securities or property unless and until
the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have
paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax
has been paid.
(c) Upon receipt by the Company of a Notice of
Conversion, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and
unpaid interest on this Convertible Note shall be reduced to
reflect such conversion, and, unless the Company defaults on
its obligations under this Article 2, all rights with respect
to the portion of this Convertible Note being so converted
shall forthwith terminate except the right to receive the
Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the
same, any waiver or consent with respect to any provision
thereof, the recovery of any judgment against any person or
any action by the Holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of
any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other
obligation of the Company to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any
obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with such conversion.
The date of receipt of such Notice of Conversion shall be the
Conversion Date so long as it is received before 11:00 p.m.,
New York City Time, on such date.
(d) Notwithstanding the foregoing, if a Holder has
not received certificates for all shares of Common Stock prior
to the second (2nd) business day after the expiration of the
Deadline with respect to a conversion of any portion of this
Convertible Note following delivery of a properly completed
Notice of Conversion for any reason, then (unless the Holder
otherwise elects to retain its
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 6 84661.5
(Vitech America, Inc.)
<PAGE>
status as a holder of Common Stock by so notifying the
Company), the Holder shall regain the rights of a Holder of
this Convertible Note with respect to such unconverted
portions of this Convertible Note and the Company shall, as
soon as practicable, return such unconverted Convertible Note
to the holder or, if the Convertible Note has not been
surrendered, adjust its records to reflect that such portion
of this Convertible Note has not been converted. In all cases,
the Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for
such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with
Section 2.3) for the Company's failure to convert this
Convertible Note.
(e) In lieu of delivering physical certificates
representing the shares of Common Stock assessable upon
conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the
Holder and its compliance with the provisions contained in
Section 2.1 and in this Section 2.4, the Company shall use its
best efforts to cause its transfer agent to electronically
transmit the shares of Common Stock assessable upon conversion
to the Holder by crediting the account of Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent
Commission system.
3. Modification of Convertible Note. This Convertible Note may be
modified without prior notice to any Holder but with the written consent of the
Majority Holders and the Company. However, without the consent of each Holder
affected, an amendment, supplement or waiver may not (i) reduce the principal
amount of Convertible Note whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate or extend the time for payment of
interest on any Convertible Note, (iii) reduce the principal amount of or extend
the fixed maturity of any Convertible Note or alter the redemption or conversion
provisions with respect thereto or (iv) make any Convertible Note payable in
money or property other than as stated in the Convertible Note.
4. Miscellaneous. This Convertible Note shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of said State.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Company hereby submits to the exclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Convertible Note. The Company irrevocably
waives, to the fullest extent
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 7 84661.5
(Vitech America, Inc.)
<PAGE>
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
The Holder of this Convertible Note by acceptance of this Convertible
Note agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
[Signature Page Follows]
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 8 84661.5
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: April 30, 1999.
VITECH AMERICA, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 9 84661.5
(Vitech America, Inc.)
PUT AND CALL AGREEMENT
This PUT AND CALL AGREEMENT (this "Agreement") dated as of April 30,
1999, is entered into by and among VITECH AMERICA, INC. (the "Company"), a
Florida corporation, and BRAZIL PARTNERS LIMITED, a Grand Cayman, British West
Indies corporation, ( the "Purchaser").
WITNESSETH
WHEREAS, the Purchaser has agreed to purchase $1,745,915.12 aggregate
principal amount of the Company's 10% Convertible Note due October 10, 2000 (the
"Note");
WHEREAS, the Note is convertible into common stock of the Company (the
"Common Stock") at the conversion price defined in the Note (such Common Stock,
when issued upon conversion of the Note, being referred to herein as "Conversion
Shares"); and
WHEREAS, the Company has agreed to grant the Purchaser certain rights
with respect to the Note and Conversion Shares as an inducement to, and a
condition of, the Purchasers' purchase of the Note.
NOW THEREFORE, the parties hereto agree as follows:
1. Put Option.
(a) Commencing July 1, 1999 (the "First Put Date"), and continuing for
a period of forty-five (45) days thereafter, each holder of the Note shall have
the right (the "First Put Right") to request that the Company repurchase all,
but not less than all, of the Note outstanding (the "Put Option") at a price
equal to one hundred and sixteen & 6/10 percent (116.6%) of the principal amount
thereof, plus accrued and unpaid interest thereon (the "Put Price"), by
delivering to the Company a written notice specifying (i) the number of
Conversion Shares that are subject to the Put Option which shall be the entire
amount of the Note of the Noteholder, (ii) the aggregate Put Price, and (iii)
the date, not earlier than twenty (20) Trading Days and not later than
forty-five (45) days after the First Put Date, on which the Put Option shall be
exercised (the "First Put Exercise Date").
(b) Commencing October 1, 1999 and continuing for a period of thirty
(30) days thereafter, each holder of the Note shall have a second right (the
"Second Put Right") to request that the Company repurchase all, but not less
than all, of the Note outstanding at a price equal to one hundred and nineteen &
6/10 percent (119.6%) of the principal amount thereof plus accrued and unpaid
interest thereon (the "Second Put Price" and together with the First Put Right
sometimes referred to collectively as the "Put Rights"), by delivering to the
Company a written notice specifying (i) the number of Conversion Shares that are
subject to the Put Option, (ii) the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 1 84734.3
(Vitech America, Inc.)
<PAGE>
Second Put Price, and (iii) the date, not earlier than twenty (20) days and not
later than thirty (30) days on which the Put Option shall be exercised (the
"Second Put Exercise Date").
(c) Upon receipt by the Company of a notice exercising the First Put
Right and/or Second Put Right, the Company shall, within two (2) days of
receipt of such notice, deliver to each holder of the Note exercising the First
Put Right or Second Put Right, as applicable, a notice stating whether the
Company agrees to repurchase all, but not less than all, of the outstanding Note
subject to the First Put Right or Second Put Right, as applicable. In the event
the Company delivers notice of its agreement to effect such repurchase (a
"Company Acceptance Notice"), the provisions in subsection (d) below shall
apply. In the event the Company declines to repurchase the outstanding Note
subject to the First Put Right and/or Second Put Right, as applicable, the Note
shall remain convertible pursuant to their terms at the option of the holders
thereof.
(d) Assuming the Company has delivered a Company Acceptance Notice, on
the First Put Exercise Date or the Second Put Exercise Date, as applicable, (i)
the Purchaser shall deliver to the Company the Note, properly endorsed,
representing the Note subject to the Put Option, and (ii) the Company shall
deliver to the Purchasers, in immediately available funds, the applicable Put
Price. The purchase price for any Put Right shall be paid in four (4) equal
monthly installments on the last Business Day of each month commencing on the
first full month following the First Put Exercise Date or the Second Put
Exercise Date, as the case may be, with interest on each installment at the rate
of ten percent (10%) per annum.
2. Call Option.
(a) The Company shall have the right, at any time and from time to time
commencing on July 1, 1999 to purchase from any holder of the Note (the "Call
Option") the Note at a call price of one hundred and sixteent & 6/10 percent
(116.6%) of the principal amount, plus accrued and unpaid interest thereon (the
"Call Price") by delivering to the Purchasers a written notice specifying (i)
the number of Conversion Shares that are subject to the Call Option, (ii) the
Call Price, and (iii) the date, not earlier than twenty (20) Trading Days and
not later than thirty (30) days, on which the Call Option shall be exercised
(the "Call Exercise Date"). Commencing on the first day of the month from August
1, 1999 and on each month thereafter until the Maturity Date, the Call Price
shall be increased by one percent (1%) per month.
(b) On the Call Exercise Date (i) the Purchasers shall deliver to the
Company the Note, properly endorsed, representing the Note subject to the Call
Option and (ii) the Company shall deliver to the Purchasers, in immediately
available funds, the applicable Call Price.
(c) The Call Option provisions described in this Section 2 shall at all
times be subject to (i) the prior Conversion Rights of the Purchasers and (ii)
the shares of Common Stock underlying the Notes must be covered by an effective
resale registration statement pursuant to the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 2 84734.3
(Vitech America, Inc.)
<PAGE>
terms of the Securities Purchase Agreement at the time of the Call Notice and on
the Call Exercise Date.
3. Miscellaneous.
(a) Payment Method. The payment of the Put Price or the Call Price, as
the case may be, shall be made by wire transfer or bank draft in immediately
available funds to each applicable Purchaser.
(b) No Assignment or Transfer. Neither this Agreement, nor the Put
Option or the Call Option granted hereby, nor any other rights under this
Agreement, shall be assignable or transferable, directly or indirectly.
(c) Notices. All notices, requests and demands to or upon the parties
hereto shall be in writing and shall be delivered by any method that shall
provide a written acknowledgment of receipt at the addresses shown below.
If to Vitech America, Inc. Vitech America, Inc.,
8807 Northwest 23rd Street
Miami, Florida 33172-2419
Attn: Mr. William St. Laurent
Telefax:
With a copy to: Atlas, Perlman, Trop & Borkson
New River Center, Ste. 1900
200 East Las Olas Blvd.
Fort Lauderdale, Florida 33301
Attn: Joel Mayersohn, Esq.
Telefax: (954) 766-7800
If to any Purchaser Bazil Partners Limited
Picadilly Centre
Suite 10688 - SMB
Grand Cayman, BWI
Attn: Guilherme Tebecherani
For purposes of this Agreement, a "Notice Date" shall be the date which
is two (2) business days after the date on which any notice hereunder is sent by
telecopy (provided, however, that it is telephonically or electronically
confirmed).
(f) Further Assurances. The parties agree to do all things and to
deliver all instruments and documents necessary to accomplish the purposes of
this Agreement, and to
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 3 84734.3
(Vitech America, Inc.)
<PAGE>
provide to one another such information and assistance necessary to enable one
another to do the same.
(g) Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
[Signature Page Follows]
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 4 84734.3
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement this 30th
day of April, 1999.
BRAZIL PARTNERS LIMITED
By:
--------------------------------
Title:
-----------------------------
ACCEPTED AND ACKNOWLEDGED:
VITECH AMERICA, INC.
By:
--------------------------
Title:
-----------------------
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 5 84734.3
(Vitech America, Inc.)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF REGISTERED UNDER THE
1933 ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES
PURCHASE AGREEMENT AND PUT AND CALL AGREEMENT, EACH DATED AS OF THE DATE HEREOF,
COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICE, CONTAIN CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING,
WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE
HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION
RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE
REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED.
No. BP2 $1,745,915.12
VITECH AMERICA, INC.
10% Convertible Note due October 10, 2000
VITECH AMERICA, INC., a Florida corporation (together with its
successors, the "Company"), for value received hereby promises to pay to:
BRAZIL PARTNERS LIMITED
(the "Holder") and registered assigns, the principal sum of One Million Seven
Hundred Forty Five Thousand Nine Hundred Fifteen & 12/100 Dollars
($1,745,915.12) or, if less, the principal amount of this Note then outstanding,
on the Maturity Date by wire transfer of immediately available funds to the
Holder in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay interest, monthly in arrears, on (i) the last day of each month until
the Maturity Date, commencing June 30, 1999 (unless such day is not a Business
Day, in which event on the next succeeding Business Day) (each an "Interest
Payment Date"), (ii) the Maturity Date, (iii) each Conversion Date, as hereafter
defined, and (iv) the date the principal amount of the Convertible Notes shall
be declared to be or shall automatically become due and payable, on the
principal sum hereof outstanding in like coin or currency, at the rates per
annum set forth below, from the most recent Interest Payment Date to which
interest has been paid on this Convertible Note, or if no interest has been paid
on this Convertible Note, from the date of this Convertible Note until payment
in full of the principal sum hereof has been made.
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 1 84661.5
(Vitech America, Inc.)
<PAGE>
The interest rate shall be ten percent (10%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus five percent (5%) per annum or, if less, the
maximum rate permitted by applicable law, and will be payable on demand
("Default Interest"). Interest on this Convertible Note will be calculated on
the basis of a 360-day year of twelve 30-day months. All payments of principal
and interest hereunder shall be made for the benefit of the Holder at the
Holder's account at Charles Schwab & Co.
This Convertible Note is transferable and assignable to one or more
purchasers (in minimum denominations of $100,000 or larger multiples of $1,000).
The Company shall keep a register (the "Register") in which shall be entered the
names and addresses of the registered holder of this Convertible Note and
particulars of this Convertible Note held by such holder and of all transfers of
this Convertible Note. References to the Holder or "Holders" shall mean the
Person listed in the Register as the registered holder of such Convertible
Notes. The ownership of this Convertible Note shall be proven by the Register.
1. Payment of Principal. The Company shall repay the remaining unpaid
balance on this Convertible Note on the Maturity Date. The Company may, and
shall be obligated to, prepay all or a portion of this Convertible Note on the
terms specified in the Agreements.
2.1 Conversion of Convertible Note. (a) The Holder shall have the
right, at its option, at any time and from time to time, after the date hereof
to convert the principal amount of this Convertible Note, or any portion of such
principal amount in the minimum amount of $1,000 or any integral multiple
thereof, into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) determined pursuant to this Section
2.1. The number of shares of Common Stock to be issued upon each conversion of
this Convertible Note shall be determined by dividing the Conversion Amount (as
defined below) by the Conversion Price in effect on the date (the "Conversion
Date") a Notice of Conversion is delivered to the Company by the Holder by
facsimile or other reasonable means of communication dispatched prior to 11:00
p.m., New York City Time. The term "Conversion Amount" means, with respect to
any conversion of this Convertible Note, the sum of (i) the principal amount of
this Convertible Note to be converted in such conversion plus (ii) accrued and
unpaid interest, if any, on such principal amount at the interest rates provided
in this Convertible Note to the Conversion Date plus (iii) Default Interest, if
any, on the interest referred to in the immediately preceding clause (ii) plus
(iv) at the Holder's option, any amounts owed to the Holder pursuant to Section
2.2 hereof.
4.2 Conversion Price. The Conversion Price of this Convertible Note
(the "Conversion Price") shall be $11.00 per share (the "Initial Conversion
Price"); provided that, if the Company shall have declined to repay in full this
Convertible Note following the exercise by the Holder of either the First Put
Right or Second Put Right at the Put Price or Second Put Price, as applicable
(as each such term is defined in the Put and Call Agreement), the Conversion
Price shall be the lesser of (i) 0.85 multiplied by the Market Price, where the
Market Price means the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 2 84661.5
(Vitech America, Inc.)
<PAGE>
10-Day VWASP (as defined below) of the Common Stock on the Nasdaq Stock Market's
National Market ("Nasdaq"), or on the principal securities exchange or other
securities market on which the Common Stock is then being traded during the
thirty (30) consecutive Trading Day period ending one Trading Day prior to the
Conversion Date, and (ii) the Initial Conversion Price (subject, in each case,
to equitable adjustments for stock splits, stock dividends or rights offerings
by the Company relating to the Company's securities or the securities of any
Subsidiary of the Company, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The term "10-Day VWASP" means,
for any security as of any date, the volume-weighted average sales price on
Nasdaq as reported by Bloomberg, L.P. ("Bloomberg") or, if Nasdaq is not the
principal trading market for such security, the volume-weighted average sales
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the volume-weighted average sales price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no volume-weighted average sales price
is reported for such security by Bloomberg, then the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc., in each case for the lowest ten (10)
consecutive day period during such 30-day period. If the 10-Day VWASP cannot be
calculated for such security on such date on any of the foregoing basis, the
10-Day VWASP of such security on such date shall be the fair market value as
mutually determined by the Company and the Holders of a majority in interest of
Convertible Notes being converted for which the calculation of the closing bid
price is required in order to determine the Conversion Price of such Convertible
Notes.
2.3 Authorized Shares.
(a) The Company (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Convertible Note and (ii) agrees
that its issuance of this Convertible Note shall constitute full
authority to its officers and agents who are charged with the duty of
executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms
and conditions of this Convertible Note.
(b) If at any time a Holder of this Convertible Note submits a
Notice of Conversion, (i) the Company does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in full in accordance with the provisions of this Article 2
or (ii) the Company is prohibited by the applicable rules of Nasdaq to
effect such conversion in full in accordance with the provisions of
this Article 2 without stockholder approval (each, a "Conversion
Default"), the Company shall issue to the Holder all of the shares of
Common Stock which are then available to effect such conversion. The
portion of this Convertible Note which the Holder included in its
Conversion Notice and which exceeds the amount which is then
convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date
additional shares
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 3 84661.5
(Vitech America, Inc.)
<PAGE>
of Common Stock are authorized by the Company, or its stockholders, as
applicable, at which time the Conversion Price in respect thereof shall
be the lower of (i) the Conversion Price on the Conversion Default Date
(as defined below) and (ii) the Conversion Price on the Conversion Date
thereafter elected by the Holder in respect thereof. The Company shall
pay to the Holder payments ("Conversion Default Payments") for a
Conversion Default in the amount of (N/365) x .24 x the Excess Amount
on the Conversion Date in respect of the Conversion Default (the
"Conversion Default Date"), where N = the number of days from the
Conversion Default Date to the date (the "Authorization Date") that the
Company, or its stockholders, as applicable, authorizes a sufficient
number of shares of Common Stock to effect conversion of the full
outstanding principal balance of this Convertible Note. The Company
shall use its best efforts to authorize, or cause its stockholders to
authorize, as applicable, a sufficient number of shares of Common Stock
as soon as practicable following the earlier of (i) such time that the
Holder notifies the Company or that the Company otherwise becomes aware
that there are or likely will be insufficient shares of Common Stock to
allow full conversion thereof and (ii) a Conversion Default. The
Company shall send notice to the Holder of the authorization of
additional shares of Common Stock, the Authorization Date and the
amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in
cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the Market Price,
at the Holder's option, as follows:
(i) In the event the Holder elects to take such
payment in cash, cash payment shall be made to Holder by the
fifth day of the month following the month in which it has
accrued; and
(ii) In the event the Holder elects to take such
payment in Common Stock, the Holder may convert such payment
amount into Common Stock at the Conversion Price (as in effect
at the time of conversion) at any time after the fifth day of
the month following the month in which it has accrued (at such
time as there are sufficient authorized shares of Common
Stock) in accordance with the terms of this Article 2.
(c) The Holder's election pursuant to this Section 2.3 shall
be made in writing to the Borrower at any time prior to 9:00 p.m., New
York City Time, on the third day of the month following the month in
which Conversion Default payments have accrued. If no election is made,
the Holder shall be deemed to have elected to receive cash. Nothing
herein shall limit the Holders right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) due to the
Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(d) In no event shall the Company issue more than the Maximum
Number of Shares upon conversion of this Convertible Note, unless the
Company shall have obtained Stockholder Approval (as defined below) or
a waiver of such requirement by the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 4 84661.5
(Vitech America, Inc.)
<PAGE>
Nasdaq Market. As used herein, Stockholder Approval means approval by
the stockholders of the Company in accordance with Rule 4460(i) of the
rules of the Nasdaq Market. Once the Maximum Number of Shares has been
issued (the date of which is hereinafter referred to as the "Maximum
Conversion Date"). Unless the Company shall have obtained Stockholder
Approval or a waiver of such requirement by the Nasdaq Market within 90
days of the Maximum Conversion Date, the Company shall pay to the
Holder within 10 Business Days of the Maximum Conversion Date (or, if
the Company is, in good faith, using its best efforts to obtain
Stockholder Approval, then the earlier of (x) 90 days following the
Maximum Conversion Date, and (y) such date that it becomes reasonably
apparent that Stockholder Approval will not be obtained within such 90
day period), this Convertible Note in full at the Formula Price. The
Maximum Number of Shares shall be subject to adjustment from time to
time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock
occurring after the date hereof. With respect to each Holder of this
Convertible Note, the Maximum Number of Shares shall refer to such
Holder's pro rata share thereof based upon the aggregate principal
balance of the convertible Note then outstanding. In the event that the
Company obtains Stockholder Approval, the approval of the Nasdaq Market
or otherwise is able to increase the number of shares to be issued
above the Maximum Number of Shares (such increased number being the
"New Maximum Number of Shares"), the references to Maximum Number of
Shares above shall be deemed to be, instead, references to the New
Maximum Number of Shares.
2.4 Method of Conversion
(a) Notwithstanding anything to the contrary set
forth herein, upon conversion of this Convertible Note in
accordance with the terms hereof, the Company shall not be
required to physically surrender this Convertible Note to the
Holder unless the entire unpaid principal amount of this
Convertible Note is so converted. The Company and the Holder
shall maintain records showing the principal amount so
converted and the date of such conversions or shall use such
other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this
Convertible Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall
be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of this
Convertible Note is converted as aforesaid, the Company may
not transfer this Convertible Note unless the Holder first
physically surrenders this Convertible Note to the Company,
whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes), may request, representing in the aggregate
the remaining unpaid principal amount of this Convertible
Note. The Holder and any assignee, by acceptance of this
Convertible Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a
portion of
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CONVERTIBLE NOTE No. 1- Page 5 84661.5
(Vitech America, Inc.)
<PAGE>
this Convertible Note, the unpaid and unconverted principal
amount of this Convertible Note represented by this
Convertible Note may be less than the amount stated on the
face hereof.
(b) The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock or other
securities or property on conversion of this Convertible Note
in a name other than that of the Holder (or in street name),
and the Company shall not be required to issue or deliver any
such shares or other securities or property unless and until
the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have
paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax
has been paid.
(c) Upon receipt by the Company of a Notice of
Conversion, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and
unpaid interest on this Convertible Note shall be reduced to
reflect such conversion, and, unless the Company defaults on
its obligations under this Article 2, all rights with respect
to the portion of this Convertible Note being so converted
shall forthwith terminate except the right to receive the
Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the
same, any waiver or consent with respect to any provision
thereof, the recovery of any judgment against any person or
any action by the Holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of
any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other
obligation of the Company to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any
obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with such conversion.
The date of receipt of such Notice of Conversion shall be the
Conversion Date so long as it is received before 11:00 p.m.,
New York City Time, on such date.
(d) Notwithstanding the foregoing, if a Holder has
not received certificates for all shares of Common Stock prior
to the second (2nd) business day after the expiration of the
Deadline with respect to a conversion of any portion of this
Convertible Note following delivery of a properly completed
Notice of Conversion for any reason, then (unless the Holder
otherwise elects to retain its
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 6 84661.5
(Vitech America, Inc.)
<PAGE>
status as a holder of Common Stock by so notifying the
Company), the Holder shall regain the rights of a Holder of
this Convertible Note with respect to such unconverted
portions of this Convertible Note and the Company shall, as
soon as practicable, return such unconverted Convertible Note
to the holder or, if the Convertible Note has not been
surrendered, adjust its records to reflect that such portion
of this Convertible Note has not been converted. In all cases,
the Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for
such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with
Section 2.3) for the Company's failure to convert this
Convertible Note.
(e) In lieu of delivering physical certificates
representing the shares of Common Stock assessable upon
conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the
Holder and its compliance with the provisions contained in
Section 2.1 and in this Section 2.4, the Company shall use its
best efforts to cause its transfer agent to electronically
transmit the shares of Common Stock assessable upon conversion
to the Holder by crediting the account of Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent
Commission system.
3. Modification of Convertible Note. This Convertible Note may be
modified without prior notice to any Holder but with the written consent of the
Majority Holders and the Company. However, without the consent of each Holder
affected, an amendment, supplement or waiver may not (i) reduce the principal
amount of Convertible Note whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate or extend the time for payment of
interest on any Convertible Note, (iii) reduce the principal amount of or extend
the fixed maturity of any Convertible Note or alter the redemption or conversion
provisions with respect thereto or (iv) make any Convertible Note payable in
money or property other than as stated in the Convertible Note.
4. Miscellaneous. This Convertible Note shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of said State.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Company hereby submits to the exclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Convertible Note. The Company irrevocably
waives, to the fullest extent
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 7 84661.5
(Vitech America, Inc.)
<PAGE>
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
The Holder of this Convertible Note by acceptance of this Convertible
Note agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
[Signature Page Follows]
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 8 84661.5
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: May 31, 1999.
VITECH AMERICA, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 9 84661.5
(Vitech America, Inc.)
PUT AND CALL AGREEMENT
This PUT AND CALL AGREEMENT (this "Agreement") dated as of May 31,
1999, is entered into by and among VITECH AMERICA, INC. (the "Company"), a
Florida corporation, and BRAZIL PARTNERS LIMITED, a Grand Cayman, British West
Indies corporation, ( the "Purchaser").
WITNESSETH
WHEREAS, the Purchaser has agreed to purchase $1,745,915.12 aggregate
principal amount of the Company's 10% Convertible Note due October 10, 2000 (the
"Note");
WHEREAS, the Note is convertible into common stock of the Company (the
"Common Stock") at the conversion price defined in the Note (such Common Stock,
when issued upon conversion of the Note, being referred to herein as "Conversion
Shares"); and
WHEREAS, the Company has agreed to grant the Purchaser certain rights
with respect to the Note and Conversion Shares as an inducement to, and a
condition of, the Purchasers' purchase of the Note.
NOW THEREFORE, the parties hereto agree as follows:
1. Put Option.
(a) Commencing July 1, 1999 (the "First Put Date"), and continuing for
a period of forty-five (45) days thereafter, each holder of the Note shall have
the right (the "First Put Right") to request that the Company repurchase all,
but not less than all, of the Note outstanding (the "Put Option") at a price
equal to one hundred and seventeen & 7/10 percent (117.7%) of the principal
amount thereof, plus accrued and unpaid interest thereon (the "Put Price"), by
delivering to the Company a written notice specifying (i) the number of
Conversion Shares that are subject to the Put Option which shall be the entire
amount of the Note of the Noteholder, (ii) the aggregate Put Price, and (iii)
the date, not earlier than twenty (20) Trading Days and not later than
forty-five (45) days after the First Put Date, on which the Put Option shall be
exercised (the "First Put Exercise Date").
(b) Commencing October 1, 1999 and continuing for a period of thirty
(30) days thereafter, each holder of the Note shall have a second right (the
"Second Put Right") to request that the Company repurchase all, but not less
than all, of the Note outstanding at a price equal to one hundred and twenty &
7/10 percent (120.7%) of the principal amount thereof plus accrued and unpaid
interest thereon (the "Second Put Price" and together with the First Put Right
sometimes referred to collectively as the "Put Rights"), by delivering to the
Company a written notice specifying (i) the number of Conversion Shares that are
subject to the Put Option, (ii) the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 1 84734.3
(Vitech America, Inc.)
<PAGE>
Second Put Price, and (iii) the date, not earlier than twenty (20) days and not
later than thirty (30) days on which the Put Option shall be exercised (the
"Second Put Exercise Date").
(c) Upon receipt by the Company of a notice exercising the First Put
Right and/or Second Put Right, the Company shall, within two (2) days of
receipt of such notice, deliver to each holder of the Note exercising the First
Put Right or Second Put Right, as applicable, a notice stating whether the
Company agrees to repurchase all, but not less than all, of the outstanding Note
subject to the First Put Right or Second Put Right, as applicable. In the event
the Company delivers notice of its agreement to effect such repurchase (a
"Company Acceptance Notice"), the provisions in subsection (d) below shall
apply. In the event the Company declines to repurchase the outstanding Note
subject to the First Put Right and/or Second Put Right, as applicable, the Note
shall remain convertible pursuant to their terms at the option of the holders
thereof.
(d) Assuming the Company has delivered a Company Acceptance Notice, on
the First Put Exercise Date or the Second Put Exercise Date, as applicable, (i)
the Purchaser shall deliver to the Company the Note, properly endorsed,
representing the Note subject to the Put Option, and (ii) the Company shall
deliver to the Purchasers, in immediately available funds, the applicable Put
Price. The purchase price for any Put Right shall be paid in four (4) equal
monthly installments on the last Business Day of each month commencing on the
first full month following the First Put Exercise Date or the Second Put
Exercise Date, as the case may be, with interest on each installment at the rate
of ten percent (10%) per annum.
2. Call Option.
(a) The Company shall have the right, at any time and from time to time
commencing on July 1, 1999 to purchase from any holder of the Note (the "Call
Option") the Note at a call price of one hundred and sixteent & 6/10 percent
(116.6%) of the principal amount, plus accrued and unpaid interest thereon (the
"Call Price") by delivering to the Purchasers a written notice specifying (i)
the number of Conversion Shares that are subject to the Call Option, (ii) the
Call Price, and (iii) the date, not earlier than twenty (20) Trading Days and
not later than thirty (30) days, on which the Call Option shall be exercised
(the "Call Exercise Date"). Commencing on the first day of the month from August
1, 1999 and on each month thereafter until the Maturity Date, the Call Price
shall be increased by one percent (1%) per month.
(b) On the Call Exercise Date (i) the Purchasers shall deliver to the
Company the Note, properly endorsed, representing the Note subject to the Call
Option and (ii) the Company shall deliver to the Purchasers, in immediately
available funds, the applicable Call Price.
(c) The Call Option provisions described in this Section 2 shall at all
times be subject to (i) the prior Conversion Rights of the Purchasers and (ii)
the shares of Common Stock underlying the Notes must be covered by an effective
resale registration statement pursuant to the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 2 84734.3
(Vitech America, Inc.)
<PAGE>
terms of the Securities Purchase Agreement at the time of the Call Notice and on
the Call Exercise Date.
3. Miscellaneous.
(a) Payment Method. The payment of the Put Price or the Call Price, as
the case may be, shall be made by wire transfer or bank draft in immediately
available funds to each applicable Purchaser.
(b) No Assignment or Transfer. Neither this Agreement, nor the Put
Option or the Call Option granted hereby, nor any other rights under this
Agreement, shall be assignable or transferable, directly or indirectly.
(c) Notices. All notices, requests and demands to or upon the parties
hereto shall be in writing and shall be delivered by any method that shall
provide a written acknowledgment of receipt at the addresses shown below.
If to Vitech America, Inc. Vitech America, Inc.,
8807 Northwest 23rd Street
Miami, Florida 33172-2419
Attn: Mr. William St. Laurent
Telefax:
With a copy to: Atlas, Perlman, Trop & Borkson
New River Center, Ste. 1900
200 East Las Olas Blvd.
Fort Lauderdale, Florida 33301
Attn: Joel Mayersohn, Esq.
Telefax: (954) 766-7800
If to any Purchaser Bazil Partners Limited
Picadilly Centre
Suite 10688 - SMB
Grand Cayman, BWI
Attn: Guilherme Tebecherani
For purposes of this Agreement, a "Notice Date" shall be the date which
is two (2) business days after the date on which any notice hereunder is sent by
telecopy (provided, however, that it is telephonically or electronically
confirmed).
(f) Further Assurances. The parties agree to do all things and to
deliver all instruments and documents necessary to accomplish the purposes of
this Agreement, and to
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 3 84734.3
(Vitech America, Inc.)
<PAGE>
provide to one another such information and assistance necessary to enable one
another to do the same.
(g) Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
[Signature Page Follows]
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 4 84734.3
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement this 31st
day of May, 1999.
BRAZIL PARTNERS LIMITED
By:
--------------------------------
Title:
-----------------------------
ACCEPTED AND ACKNOWLEDGED:
VITECH AMERICA, INC.
By:
-----------------------------
Title:
--------------------------
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 5 84734.3
(Vitech America, Inc.)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF REGISTERED UNDER THE
1933 ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES
PURCHASE AGREEMENT AND PUT AND CALL AGREEMENT, EACH DATED AS OF THE DATE HEREOF,
COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICE, CONTAIN CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING,
WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE
HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION
RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE
REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED.
No. BP3 $872,957.57
VITECH AMERICA, INC.
10% Convertible Note due October 10, 2000
VITECH AMERICA, INC., a Florida corporation (together with its
successors, the "Company"), for value received hereby promises to pay to:
BRAZIL PARTNERS LIMITED
(the "Holder") and registered assigns, the principal sum of Eight Hundred
Seventy Two Thousand Nine Hundred Fifty Seven & 57/100 Dollars ($872,957.57) or,
if less, the principal amount of this Note then outstanding, on the Maturity
Date by wire transfer of immediately available funds to the Holder in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest,
monthly in arrears, on (i) the last day of each month until the Maturity Date,
commencing July 31, 1999 (unless such day is not a Business Day, in which event
on the next succeeding Business Day) (each an "Interest Payment Date"), (ii) the
Maturity Date, (iii) each Conversion Date, as hereafter defined, and (iv) the
date the principal amount of the Convertible Notes shall be declared to be or
shall automatically become due and payable, on the principal sum hereof
outstanding in like coin or currency, at the rates per annum set forth below,
from the most recent Interest Payment Date to which interest has been paid on
this Convertible Note, or if no interest has been paid on this Convertible Note,
from the date of this Convertible Note until payment in full of the principal
sum hereof has been made.
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 1 84661.5
(Vitech America, Inc.)
<PAGE>
The interest rate shall be ten percent (10%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus five percent (5%) per annum or, if less, the
maximum rate permitted by applicable law, and will be payable on demand
("Default Interest"). Interest on this Convertible Note will be calculated on
the basis of a 360-day year of twelve 30-day months. All payments of principal
and interest hereunder shall be made for the benefit of the Holder at the
Holder's account at Charles Schwab & Co.
This Convertible Note is transferable and assignable to one or more
purchasers (in minimum denominations of $100,000 or larger multiples of $1,000).
The Company shall keep a register (the "Register") in which shall be entered the
names and addresses of the registered holder of this Convertible Note and
particulars of this Convertible Note held by such holder and of all transfers of
this Convertible Note. References to the Holder or "Holders" shall mean the
Person listed in the Register as the registered holder of such Convertible
Notes. The ownership of this Convertible Note shall be proven by the Register.
1. Payment of Principal. The Company shall repay the remaining unpaid
balance on this Convertible Note on the Maturity Date. The Company may, and
shall be obligated to, prepay all or a portion of this Convertible Note on the
terms specified in the Agreements.
2.1 Conversion of Convertible Note. (a) The Holder shall have the
right, at its option, at any time and from time to time, after the date hereof
to convert the principal amount of this Convertible Note, or any portion of such
principal amount in the minimum amount of $1,000 or any integral multiple
thereof, into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) determined pursuant to this Section
2.1. The number of shares of Common Stock to be issued upon each conversion of
this Convertible Note shall be determined by dividing the Conversion Amount (as
defined below) by the Conversion Price in effect on the date (the "Conversion
Date") a Notice of Conversion is delivered to the Company by the Holder by
facsimile or other reasonable means of communication dispatched prior to 11:00
p.m., New York City Time. The term "Conversion Amount" means, with respect to
any conversion of this Convertible Note, the sum of (i) the principal amount of
this Convertible Note to be converted in such conversion plus (ii) accrued and
unpaid interest, if any, on such principal amount at the interest rates provided
in this Convertible Note to the Conversion Date plus (iii) Default Interest, if
any, on the interest referred to in the immediately preceding clause (ii) plus
(iv) at the Holder's option, any amounts owed to the Holder pursuant to Section
2.2 hereof.
4.2 Conversion Price. The Conversion Price of this Convertible Note
(the "Conversion Price") shall be $11.00 per share (the "Initial Conversion
Price"); provided that, if the Company shall have declined to repay in full this
Convertible Note following the exercise by the Holder of either the First Put
Right or Second Put Right at the Put Price or Second Put Price, as applicable
(as each such term is defined in the Put and Call Agreement), the Conversion
Price shall be the lesser of (i) 0.85 multiplied by the Market Price, where the
Market Price means the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 2 84661.5
(Vitech America, Inc.)
<PAGE>
10-Day VWASP (as defined below) of the Common Stock on the Nasdaq Stock Market's
National Market ("Nasdaq"), or on the principal securities exchange or other
securities market on which the Common Stock is then being traded during the
thirty (30) consecutive Trading Day period ending one Trading Day prior to the
Conversion Date, and (ii) the Initial Conversion Price (subject, in each case,
to equitable adjustments for stock splits, stock dividends or rights offerings
by the Company relating to the Company's securities or the securities of any
Subsidiary of the Company, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The term "10-Day VWASP" means,
for any security as of any date, the volume-weighted average sales price on
Nasdaq as reported by Bloomberg, L.P. ("Bloomberg") or, if Nasdaq is not the
principal trading market for such security, the volume-weighted average sales
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the volume-weighted average sales price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no volume-weighted average sales price
is reported for such security by Bloomberg, then the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc., in each case for the lowest ten (10)
consecutive day period during such 30-day period. If the 10-Day VWASP cannot be
calculated for such security on such date on any of the foregoing basis, the
10-Day VWASP of such security on such date shall be the fair market value as
mutually determined by the Company and the Holders of a majority in interest of
Convertible Notes being converted for which the calculation of the closing bid
price is required in order to determine the Conversion Price of such Convertible
Notes.
2.3 Authorized Shares.
(a) The Company (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Convertible Note and (ii) agrees
that its issuance of this Convertible Note shall constitute full
authority to its officers and agents who are charged with the duty of
executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms
and conditions of this Convertible Note.
(b) If at any time a Holder of this Convertible Note submits a
Notice of Conversion, (i) the Company does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in full in accordance with the provisions of this Article 2
or (ii) the Company is prohibited by the applicable rules of Nasdaq to
effect such conversion in full in accordance with the provisions of
this Article 2 without stockholder approval (each, a "Conversion
Default"), the Company shall issue to the Holder all of the shares of
Common Stock which are then available to effect such conversion. The
portion of this Convertible Note which the Holder included in its
Conversion Notice and which exceeds the amount which is then
convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date
additional shares
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 3 84661.5
(Vitech America, Inc.)
<PAGE>
of Common Stock are authorized by the Company, or its stockholders, as
applicable, at which time the Conversion Price in respect thereof shall
be the lower of (i) the Conversion Price on the Conversion Default Date
(as defined below) and (ii) the Conversion Price on the Conversion Date
thereafter elected by the Holder in respect thereof. The Company shall
pay to the Holder payments ("Conversion Default Payments") for a
Conversion Default in the amount of (N/365) x .24 x the Excess Amount
on the Conversion Date in respect of the Conversion Default (the
"Conversion Default Date"), where N = the number of days from the
Conversion Default Date to the date (the "Authorization Date") that the
Company, or its stockholders, as applicable, authorizes a sufficient
number of shares of Common Stock to effect conversion of the full
outstanding principal balance of this Convertible Note. The Company
shall use its best efforts to authorize, or cause its stockholders to
authorize, as applicable, a sufficient number of shares of Common Stock
as soon as practicable following the earlier of (i) such time that the
Holder notifies the Company or that the Company otherwise becomes aware
that there are or likely will be insufficient shares of Common Stock to
allow full conversion thereof and (ii) a Conversion Default. The
Company shall send notice to the Holder of the authorization of
additional shares of Common Stock, the Authorization Date and the
amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in
cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the Market Price,
at the Holder's option, as follows:
(i) In the event the Holder elects to take such
payment in cash, cash payment shall be made to Holder by the
fifth day of the month following the month in which it has
accrued; and
(ii) In the event the Holder elects to take such
payment in Common Stock, the Holder may convert such payment
amount into Common Stock at the Conversion Price (as in effect
at the time of conversion) at any time after the fifth day of
the month following the month in which it has accrued (at such
time as there are sufficient authorized shares of Common
Stock) in accordance with the terms of this Article 2.
(c) The Holder's election pursuant to this Section 2.3 shall
be made in writing to the Borrower at any time prior to 9:00 p.m., New
York City Time, on the third day of the month following the month in
which Conversion Default payments have accrued. If no election is made,
the Holder shall be deemed to have elected to receive cash. Nothing
herein shall limit the Holders right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) due to the
Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(d) In no event shall the Company issue more than the Maximum
Number of Shares upon conversion of this Convertible Note, unless the
Company shall have obtained Stockholder Approval (as defined below) or
a waiver of such requirement by the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 4 84661.5
(Vitech America, Inc.)
<PAGE>
Nasdaq Market. As used herein, Stockholder Approval means approval by
the stockholders of the Company in accordance with Rule 4460(i) of the
rules of the Nasdaq Market. Once the Maximum Number of Shares has been
issued (the date of which is hereinafter referred to as the "Maximum
Conversion Date"). Unless the Company shall have obtained Stockholder
Approval or a waiver of such requirement by the Nasdaq Market within 90
days of the Maximum Conversion Date, the Company shall pay to the
Holder within 10 Business Days of the Maximum Conversion Date (or, if
the Company is, in good faith, using its best efforts to obtain
Stockholder Approval, then the earlier of (x) 90 days following the
Maximum Conversion Date, and (y) such date that it becomes reasonably
apparent that Stockholder Approval will not be obtained within such 90
day period), this Convertible Note in full at the Formula Price. The
Maximum Number of Shares shall be subject to adjustment from time to
time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock
occurring after the date hereof. With respect to each Holder of this
Convertible Note, the Maximum Number of Shares shall refer to such
Holder's pro rata share thereof based upon the aggregate principal
balance of the convertible Note then outstanding. In the event that the
Company obtains Stockholder Approval, the approval of the Nasdaq Market
or otherwise is able to increase the number of shares to be issued
above the Maximum Number of Shares (such increased number being the
"New Maximum Number of Shares"), the references to Maximum Number of
Shares above shall be deemed to be, instead, references to the New
Maximum Number of Shares.
2.4 Method of Conversion
(a) Notwithstanding anything to the contrary set
forth herein, upon conversion of this Convertible Note in
accordance with the terms hereof, the Company shall not be
required to physically surrender this Convertible Note to the
Holder unless the entire unpaid principal amount of this
Convertible Note is so converted. The Company and the Holder
shall maintain records showing the principal amount so
converted and the date of such conversions or shall use such
other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this
Convertible Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall
be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of this
Convertible Note is converted as aforesaid, the Company may
not transfer this Convertible Note unless the Holder first
physically surrenders this Convertible Note to the Company,
whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes), may request, representing in the aggregate
the remaining unpaid principal amount of this Convertible
Note. The Holder and any assignee, by acceptance of this
Convertible Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a
portion of
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 5 84661.5
(Vitech America, Inc.)
<PAGE>
this Convertible Note, the unpaid and unconverted principal
amount of this Convertible Note represented by this
Convertible Note may be less than the amount stated on the
face hereof.
(b) The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock or other
securities or property on conversion of this Convertible Note
in a name other than that of the Holder (or in street name),
and the Company shall not be required to issue or deliver any
such shares or other securities or property unless and until
the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have
paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax
has been paid.
(c) Upon receipt by the Company of a Notice of
Conversion, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and
unpaid interest on this Convertible Note shall be reduced to
reflect such conversion, and, unless the Company defaults on
its obligations under this Article 2, all rights with respect
to the portion of this Convertible Note being so converted
shall forthwith terminate except the right to receive the
Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the
same, any waiver or consent with respect to any provision
thereof, the recovery of any judgment against any person or
any action by the Holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of
any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other
obligation of the Company to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any
obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with such conversion.
The date of receipt of such Notice of Conversion shall be the
Conversion Date so long as it is received before 11:00 p.m.,
New York City Time, on such date.
(d) Notwithstanding the foregoing, if a Holder has
not received certificates for all shares of Common Stock prior
to the second (2nd) business day after the expiration of the
Deadline with respect to a conversion of any portion of this
Convertible Note following delivery of a properly completed
Notice of Conversion for any reason, then (unless the Holder
otherwise elects to retain its
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 6 84661.5
(Vitech America, Inc.)
<PAGE>
status as a holder of Common Stock by so notifying the
Company), the Holder shall regain the rights of a Holder of
this Convertible Note with respect to such unconverted
portions of this Convertible Note and the Company shall, as
soon as practicable, return such unconverted Convertible Note
to the holder or, if the Convertible Note has not been
surrendered, adjust its records to reflect that such portion
of this Convertible Note has not been converted. In all cases,
the Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for
such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with
Section 2.3) for the Company's failure to convert this
Convertible Note.
(e) In lieu of delivering physical certificates
representing the shares of Common Stock assessable upon
conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the
Holder and its compliance with the provisions contained in
Section 2.1 and in this Section 2.4, the Company shall use its
best efforts to cause its transfer agent to electronically
transmit the shares of Common Stock assessable upon conversion
to the Holder by crediting the account of Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent
Commission system.
3. Modification of Convertible Note. This Convertible Note may be
modified without prior notice to any Holder but with the written consent of the
Majority Holders and the Company. However, without the consent of each Holder
affected, an amendment, supplement or waiver may not (i) reduce the principal
amount of Convertible Note whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate or extend the time for payment of
interest on any Convertible Note, (iii) reduce the principal amount of or extend
the fixed maturity of any Convertible Note or alter the redemption or conversion
provisions with respect thereto or (iv) make any Convertible Note payable in
money or property other than as stated in the Convertible Note.
4. Miscellaneous. This Convertible Note shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of said State.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Company hereby submits to the exclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Convertible Note. The Company irrevocably
waives, to the fullest extent
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 7 84661.5
(Vitech America, Inc.)
<PAGE>
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
The Holder of this Convertible Note by acceptance of this Convertible
Note agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
[Signature Page Follows]
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 8 84661.5
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: June 30, 1999.
VITECH AMERICA, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 9 84661.5
(Vitech America, Inc.)
PUT AND CALL AGREEMENT
This PUT AND CALL AGREEMENT (this "Agreement") dated as of June 30,
1999, is entered into by and among VITECH AMERICA, INC. (the "Company"), a
Florida corporation, and BRAZIL PARTNERS LIMITED, a Grand Cayman, British West
Indies corporation, ( the "Purchaser").
WITNESSETH
WHEREAS, the Purchaser has agreed to purchase $872,957.57 aggregate
principal amount of the Company's 10% Convertible Note due October 10, 2000 (the
"Note");
WHEREAS, the Note is convertible into common stock of the Company (the
"Common Stock") at the conversion price defined in the Note (such Common Stock,
when issued upon conversion of the Note, being referred to herein as "Conversion
Shares"); and
WHEREAS, the Company has agreed to grant the Purchaser certain rights
with respect to the Note and Conversion Shares as an inducement to, and a
condition of, the Purchasers' purchase of the Note.
NOW THEREFORE, the parties hereto agree as follows:
1. Put Option.
(a) Commencing August 1, 1999 (the "First Put Date"), and continuing
for a period of thirty (30) days thereafter, each holder of the Note shall have
the right (the "First Put Right") to request that the Company repurchase all,
but not less than all, of the Note outstanding (the "Put Option") at a price
equal to one hundred and eighteen & 8/10 percent (118.8%) of the principal
amount thereof, plus accrued and unpaid interest thereon (the "Put Price"), by
delivering to the Company a written notice specifying (i) the number of
Conversion Shares that are subject to the Put Option which shall be the entire
amount of the Note of the Noteholder, (ii) the aggregate Put Price, and (iii)
the date, not earlier than twenty (20) Trading Days and not later than thirty
(30) days after the First Put Date, on which the Put Option shall be exercised
(the "First Put Exercise Date").
(b) Commencing October 1, 1999 and continuing for a period of thirty
(30) days thereafter, each holder of the Note shall have a second right (the
"Second Put Right") to request that the Company repurchase all, but not less
than all, of the Note outstanding at a price equal to one hundred and twenty &
8/10 percent (120.8%) of the principal amount thereof plus accrued and unpaid
interest thereon (the "Second Put Price" and together with the First Put Right
sometimes referred to collectively as the "Put Rights"), by delivering to the
Company a written notice specifying (i) the number of Conversion Shares that are
subject to the Put Option, (ii) the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 1 84734.3
(Vitech America, Inc.)
<PAGE>
Second Put Price, and (iii) the date, not earlier than twenty (20) days and not
later than thirty (30) days on which the Put Option shall be exercised (the
"Second Put Exercise Date").
(c) Upon receipt by the Company of a notice exercising the First Put
Right and/or Second Put Right, the Company shall, within two (2) days of
receipt of such notice, deliver to each holder of the Note exercising the First
Put Right or Second Put Right, as applicable, a notice stating whether the
Company agrees to repurchase all, but not less than all, of the outstanding Note
subject to the First Put Right or Second Put Right, as applicable. In the event
the Company delivers notice of its agreement to effect such repurchase (a
"Company Acceptance Notice"), the provisions in subsection (d) below shall
apply. In the event the Company declines to repurchase the outstanding Note
subject to the First Put Right and/or Second Put Right, as applicable, the Note
shall remain convertible pursuant to their terms at the option of the holders
thereof.
(d) Assuming the Company has delivered a Company Acceptance Notice, on
the First Put Exercise Date or the Second Put Exercise Date, as applicable, (i)
the Purchaser shall deliver to the Company the Note, properly endorsed,
representing the Note subject to the Put Option, and (ii) the Company shall
deliver to the Purchasers, in immediately available funds, the applicable Put
Price. The purchase price for any Put Right shall be paid in four (4) equal
monthly installments on the last Business Day of each month commencing on the
first full month following the First Put Exercise Date or the Second Put
Exercise Date, as the case may be, with interest on each installment at the rate
of ten percent (10%) per annum.
2. Call Option.
(a) The Company shall have the right, at any time and from time to time
commencing on August 1, 1999 to purchase from any holder of the Note (the "Call
Option") the Note at a call price of one hundred and eighteen & 8/10 percent
(118.8%) of the principal amount, plus accrued and unpaid interest thereon (the
"Call Price") by delivering to the Purchasers a written notice specifying (i)
the number of Conversion Shares that are subject to the Call Option, (ii) the
Call Price, and (iii) the date, not earlier than twenty (20) Trading Days and
not later than thirty (30) days, on which the Call Option shall be exercised
(the "Call Exercise Date"). Commencing on the first day of the month from
September 1, 1999 and on each month thereafter until the Maturity Date, the Call
Price shall be increased by one percent (1%) per month.
(b) On the Call Exercise Date (i) the Purchasers shall deliver to the
Company the Note, properly endorsed, representing the Note subject to the Call
Option and (ii) the Company shall deliver to the Purchasers, in immediately
available funds, the applicable Call Price.
(c) The Call Option provisions described in this Section 2 shall at all
times be subject to (i) the prior Conversion Rights of the Purchasers and (ii)
the shares of Common Stock underlying the Notes must be covered by an effective
resale registration statement pursuant to the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 2 84734.3
(Vitech America, Inc.)
<PAGE>
terms of the Securities Purchase Agreement at the time of the Call Notice and on
the Call Exercise Date.
3. Miscellaneous.
(a) Payment Method. The payment of the Put Price or the Call Price, as
the case may be, shall be made by wire transfer or bank draft in immediately
available funds to each applicable Purchaser.
(b) No Assignment or Transfer. Neither this Agreement, nor the Put
Option or the Call Option granted hereby, nor any other rights under this
Agreement, shall be assignable or transferable, directly or indirectly.
(c) Notices. All notices, requests and demands to or upon the parties
hereto shall be in writing and shall be delivered by any method that shall
provide a written acknowledgment of receipt at the addresses shown below.
If to Vitech America, Inc. Vitech America, Inc.,
8807 Northwest 23rd Street
Miami, Florida 33172-2419
Attn: Mr. William St. Laurent
Telefax:
With a copy to: Atlas, Perlman, Trop & Borkson
New River Center, Ste. 1900
200 East Las Olas Blvd.
Fort Lauderdale, Florida 33301
Attn: Joel Mayersohn, Esq.
Telefax: (954) 766-7800
If to any Purchaser Bazil Partners Limited
Picadilly Centre
Suite 10688 - SMB
Grand Cayman, BWI
Attn: Guilherme Tebecherani
For purposes of this Agreement, a "Notice Date" shall be the date which
is two (2) business days after the date on which any notice hereunder is sent by
telecopy (provided, however, that it is telephonically or electronically
confirmed).
(f) Further Assurances. The parties agree to do all things and to
deliver all instruments and documents necessary to accomplish the purposes of
this Agreement, and to
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 3 84734.3
(Vitech America, Inc.)
<PAGE>
provide to one another such information and assistance necessary to enable one
another to do the same.
(g) Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
[Signature Page Follows]
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 4 84734.3
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement this 30th
day of June, 1999.
BRAZIL PARTNERS LIMITED
By:
-----------------------------------
Title:
--------------------------------
ACCEPTED AND ACKNOWLEDGED:
VITECH AMERICA, INC.
By:
-----------------------------
Title:
--------------------------
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 5 84734.3
(Vitech America, Inc.)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF REGISTERED UNDER THE
1933 ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES
PURCHASE AGREEMENT AND PUT AND CALL AGREEMENT, EACH DATED AS OF THE DATE HEREOF,
COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICE, CONTAIN CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING,
WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE
HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION
RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE
REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED.
No. BP4 $872,957.57
VITECH AMERICA, INC.
10% Convertible Note due October 10, 2000
VITECH AMERICA, INC., a Florida corporation (together with its
successors, the "Company"), for value received hereby promises to pay to:
BRAZIL PARTNERS LIMITED
(the "Holder") and registered assigns, the principal sum of Eight Hundred
Seventy Two Thousand Nine Hundred Fifty Seven & 57/100 Dollars ($872,957.57) or,
if less, the principal amount of this Note then outstanding, on the Maturity
Date by wire transfer of immediately available funds to the Holder in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest,
monthly in arrears, on (i) the last day of each month until the Maturity Date,
commencing July 31, 1999 (unless such day is not a Business Day, in which event
on the next succeeding Business Day) (each an "Interest Payment Date"), (ii) the
Maturity Date, (iii) each Conversion Date, as hereafter defined, and (iv) the
date the principal amount of the Convertible Notes shall be declared to be or
shall automatically become due and payable, on the principal sum hereof
outstanding in like coin or currency, at the rates per annum set forth below,
from the most recent Interest Payment Date to which interest has been paid on
this Convertible Note, or if no interest has been paid on this Convertible Note,
from the date of this Convertible Note until payment in full of the principal
sum hereof has been made.
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 1 84661.5
(Vitech America, Inc.)
<PAGE>
The interest rate shall be ten percent (10%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus five percent (5%) per annum or, if less, the
maximum rate permitted by applicable law, and will be payable on demand
("Default Interest"). Interest on this Convertible Note will be calculated on
the basis of a 360-day year of twelve 30-day months. All payments of principal
and interest hereunder shall be made for the benefit of the Holder at the
Holder's account at Charles Schwab & Co.
This Convertible Note is transferable and assignable to one or more
purchasers (in minimum denominations of $100,000 or larger multiples of $1,000).
The Company shall keep a register (the "Register") in which shall be entered the
names and addresses of the registered holder of this Convertible Note and
particulars of this Convertible Note held by such holder and of all transfers of
this Convertible Note. References to the Holder or "Holders" shall mean the
Person listed in the Register as the registered holder of such Convertible
Notes. The ownership of this Convertible Note shall be proven by the Register.
1. Payment of Principal. The Company shall repay the remaining unpaid
balance on this Convertible Note on the Maturity Date. The Company may, and
shall be obligated to, prepay all or a portion of this Convertible Note on the
terms specified in the Agreements.
2.1 Conversion of Convertible Note. (a) The Holder shall have the
right, at its option, at any time and from time to time, after the date hereof
to convert the principal amount of this Convertible Note, or any portion of such
principal amount in the minimum amount of $1,000 or any integral multiple
thereof, into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) determined pursuant to this Section
2.1. The number of shares of Common Stock to be issued upon each conversion of
this Convertible Note shall be determined by dividing the Conversion Amount (as
defined below) by the Conversion Price in effect on the date (the "Conversion
Date") a Notice of Conversion is delivered to the Company by the Holder by
facsimile or other reasonable means of communication dispatched prior to 11:00
p.m., New York City Time. The term "Conversion Amount" means, with respect to
any conversion of this Convertible Note, the sum of (i) the principal amount of
this Convertible Note to be converted in such conversion plus (ii) accrued and
unpaid interest, if any, on such principal amount at the interest rates provided
in this Convertible Note to the Conversion Date plus (iii) Default Interest, if
any, on the interest referred to in the immediately preceding clause (ii) plus
(iv) at the Holder's option, any amounts owed to the Holder pursuant to Section
2.2 hereof.
4.2 Conversion Price. The Conversion Price of this Convertible Note
(the "Conversion Price") shall be $11.00 per share (the "Initial Conversion
Price"); provided that, if the Company shall have declined to repay in full this
Convertible Note following the exercise by the Holder of either the First Put
Right or Second Put Right at the Put Price or Second Put Price, as applicable
(as each such term is defined in the Put and Call Agreement), the Conversion
Price shall be the lesser of (i) 0.85 multiplied by the Market Price, where the
Market Price means the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 2 84661.5
(Vitech America, Inc.)
<PAGE>
10-Day VWASP (as defined below) of the Common Stock on the Nasdaq Stock Market's
National Market ("Nasdaq"), or on the principal securities exchange or other
securities market on which the Common Stock is then being traded during the
thirty (30) consecutive Trading Day period ending one Trading Day prior to the
Conversion Date, and (ii) the Initial Conversion Price (subject, in each case,
to equitable adjustments for stock splits, stock dividends or rights offerings
by the Company relating to the Company's securities or the securities of any
Subsidiary of the Company, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The term "10-Day VWASP" means,
for any security as of any date, the volume-weighted average sales price on
Nasdaq as reported by Bloomberg, L.P. ("Bloomberg") or, if Nasdaq is not the
principal trading market for such security, the volume-weighted average sales
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the volume-weighted average sales price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no volume-weighted average sales price
is reported for such security by Bloomberg, then the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc., in each case for the lowest ten (10)
consecutive day period during such 30-day period. If the 10-Day VWASP cannot be
calculated for such security on such date on any of the foregoing basis, the
10-Day VWASP of such security on such date shall be the fair market value as
mutually determined by the Company and the Holders of a majority in interest of
Convertible Notes being converted for which the calculation of the closing bid
price is required in order to determine the Conversion Price of such Convertible
Notes.
2.3 Authorized Shares.
(a) The Company (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Convertible Note and (ii) agrees
that its issuance of this Convertible Note shall constitute full
authority to its officers and agents who are charged with the duty of
executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms
and conditions of this Convertible Note.
(b) If at any time a Holder of this Convertible Note submits a
Notice of Conversion, (i) the Company does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in full in accordance with the provisions of this Article 2
or (ii) the Company is prohibited by the applicable rules of Nasdaq to
effect such conversion in full in accordance with the provisions of
this Article 2 without stockholder approval (each, a "Conversion
Default"), the Company shall issue to the Holder all of the shares of
Common Stock which are then available to effect such conversion. The
portion of this Convertible Note which the Holder included in its
Conversion Notice and which exceeds the amount which is then
convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date
additional shares
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 3 84661.5
(Vitech America, Inc.)
<PAGE>
of Common Stock are authorized by the Company, or its stockholders, as
applicable, at which time the Conversion Price in respect thereof shall
be the lower of (i) the Conversion Price on the Conversion Default Date
(as defined below) and (ii) the Conversion Price on the Conversion Date
thereafter elected by the Holder in respect thereof. The Company shall
pay to the Holder payments ("Conversion Default Payments") for a
Conversion Default in the amount of (N/365) x .24 x the Excess Amount
on the Conversion Date in respect of the Conversion Default (the
"Conversion Default Date"), where N = the number of days from the
Conversion Default Date to the date (the "Authorization Date") that the
Company, or its stockholders, as applicable, authorizes a sufficient
number of shares of Common Stock to effect conversion of the full
outstanding principal balance of this Convertible Note. The Company
shall use its best efforts to authorize, or cause its stockholders to
authorize, as applicable, a sufficient number of shares of Common Stock
as soon as practicable following the earlier of (i) such time that the
Holder notifies the Company or that the Company otherwise becomes aware
that there are or likely will be insufficient shares of Common Stock to
allow full conversion thereof and (ii) a Conversion Default. The
Company shall send notice to the Holder of the authorization of
additional shares of Common Stock, the Authorization Date and the
amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in
cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the Market Price,
at the Holder's option, as follows:
(i) In the event the Holder elects to take such
payment in cash, cash payment shall be made to Holder by the
fifth day of the month following the month in which it has
accrued; and
(ii) In the event the Holder elects to take such
payment in Common Stock, the Holder may convert such payment
amount into Common Stock at the Conversion Price (as in effect
at the time of conversion) at any time after the fifth day of
the month following the month in which it has accrued (at such
time as there are sufficient authorized shares of Common
Stock) in accordance with the terms of this Article 2.
(c) The Holder's election pursuant to this Section 2.3 shall
be made in writing to the Borrower at any time prior to 9:00 p.m., New
York City Time, on the third day of the month following the month in
which Conversion Default payments have accrued. If no election is made,
the Holder shall be deemed to have elected to receive cash. Nothing
herein shall limit the Holders right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) due to the
Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
(d) In no event shall the Company issue more than the Maximum
Number of Shares upon conversion of this Convertible Note, unless the
Company shall have obtained Stockholder Approval (as defined below) or
a waiver of such requirement by the
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 4 84661.5
(Vitech America, Inc.)
<PAGE>
Nasdaq Market. As used herein, Stockholder Approval means approval by
the stockholders of the Company in accordance with Rule 4460(i) of the
rules of the Nasdaq Market. Once the Maximum Number of Shares has been
issued (the date of which is hereinafter referred to as the "Maximum
Conversion Date"). Unless the Company shall have obtained Stockholder
Approval or a waiver of such requirement by the Nasdaq Market within 90
days of the Maximum Conversion Date, the Company shall pay to the
Holder within 10 Business Days of the Maximum Conversion Date (or, if
the Company is, in good faith, using its best efforts to obtain
Stockholder Approval, then the earlier of (x) 90 days following the
Maximum Conversion Date, and (y) such date that it becomes reasonably
apparent that Stockholder Approval will not be obtained within such 90
day period), this Convertible Note in full at the Formula Price. The
Maximum Number of Shares shall be subject to adjustment from time to
time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock
occurring after the date hereof. With respect to each Holder of this
Convertible Note, the Maximum Number of Shares shall refer to such
Holder's pro rata share thereof based upon the aggregate principal
balance of the convertible Note then outstanding. In the event that the
Company obtains Stockholder Approval, the approval of the Nasdaq Market
or otherwise is able to increase the number of shares to be issued
above the Maximum Number of Shares (such increased number being the
"New Maximum Number of Shares"), the references to Maximum Number of
Shares above shall be deemed to be, instead, references to the New
Maximum Number of Shares.
2.4 Method of Conversion
(a) Notwithstanding anything to the contrary set
forth herein, upon conversion of this Convertible Note in
accordance with the terms hereof, the Company shall not be
required to physically surrender this Convertible Note to the
Holder unless the entire unpaid principal amount of this
Convertible Note is so converted. The Company and the Holder
shall maintain records showing the principal amount so
converted and the date of such conversions or shall use such
other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this
Convertible Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall
be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of this
Convertible Note is converted as aforesaid, the Company may
not transfer this Convertible Note unless the Holder first
physically surrenders this Convertible Note to the Company,
whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes), may request, representing in the aggregate
the remaining unpaid principal amount of this Convertible
Note. The Holder and any assignee, by acceptance of this
Convertible Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a
portion of
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 5 84661.5
(Vitech America, Inc.)
<PAGE>
this Convertible Note, the unpaid and unconverted principal
amount of this Convertible Note represented by this
Convertible Note may be less than the amount stated on the
face hereof.
(b) The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock or other
securities or property on conversion of this Convertible Note
in a name other than that of the Holder (or in street name),
and the Company shall not be required to issue or deliver any
such shares or other securities or property unless and until
the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have
paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax
has been paid.
(c) Upon receipt by the Company of a Notice of
Conversion, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and
unpaid interest on this Convertible Note shall be reduced to
reflect such conversion, and, unless the Company defaults on
its obligations under this Article 2, all rights with respect
to the portion of this Convertible Note being so converted
shall forthwith terminate except the right to receive the
Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the
same, any waiver or consent with respect to any provision
thereof, the recovery of any judgment against any person or
any action by the Holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of
any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other
obligation of the Company to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any
obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with such conversion.
The date of receipt of such Notice of Conversion shall be the
Conversion Date so long as it is received before 11:00 p.m.,
New York City Time, on such date.
(d) Notwithstanding the foregoing, if a Holder has
not received certificates for all shares of Common Stock prior
to the second (2nd) business day after the expiration of the
Deadline with respect to a conversion of any portion of this
Convertible Note following delivery of a properly completed
Notice of Conversion for any reason, then (unless the Holder
otherwise elects to retain its
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 6 84661.5
(Vitech America, Inc.)
<PAGE>
status as a holder of Common Stock by so notifying the
Company), the Holder shall regain the rights of a Holder of
this Convertible Note with respect to such unconverted
portions of this Convertible Note and the Company shall, as
soon as practicable, return such unconverted Convertible Note
to the holder or, if the Convertible Note has not been
surrendered, adjust its records to reflect that such portion
of this Convertible Note has not been converted. In all cases,
the Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for
such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with
Section 2.3) for the Company's failure to convert this
Convertible Note.
(e) In lieu of delivering physical certificates
representing the shares of Common Stock assessable upon
conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the
Holder and its compliance with the provisions contained in
Section 2.1 and in this Section 2.4, the Company shall use its
best efforts to cause its transfer agent to electronically
transmit the shares of Common Stock assessable upon conversion
to the Holder by crediting the account of Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent
Commission system.
3. Modification of Convertible Note. This Convertible Note may be
modified without prior notice to any Holder but with the written consent of the
Majority Holders and the Company. However, without the consent of each Holder
affected, an amendment, supplement or waiver may not (i) reduce the principal
amount of Convertible Note whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate or extend the time for payment of
interest on any Convertible Note, (iii) reduce the principal amount of or extend
the fixed maturity of any Convertible Note or alter the redemption or conversion
provisions with respect thereto or (iv) make any Convertible Note payable in
money or property other than as stated in the Convertible Note.
4. Miscellaneous. This Convertible Note shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be governed by and construed in accordance with the laws of said State.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Company hereby submits to the exclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Convertible Note. The Company irrevocably
waives, to the fullest extent
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 7 84661.5
(Vitech America, Inc.)
<PAGE>
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
The Holder of this Convertible Note by acceptance of this Convertible
Note agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
[Signature Page Follows]
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 8 84661.5
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: July 13, 1999.
VITECH AMERICA, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE No. 1- Page 9 84661.5
(Vitech America, Inc.)
PUT AND CALL AGREEMENT
This PUT AND CALL AGREEMENT (this "Agreement") dated as of July 13,
1999, is entered into by and among VITECH AMERICA, INC. (the "Company"), a
Florida corporation, and BRAZIL PARTNERS LIMITED, a Grand Cayman, British West
Indies corporation, ( the "Purchaser").
WITNESSETH
WHEREAS, the Purchaser has agreed to purchase $872,957.57 aggregate
principal amount of the Company's 10% Convertible Note due October 10, 2000 (the
"Note");
WHEREAS, the Note is convertible into common stock of the Company (the
"Common Stock") at the conversion price defined in the Note (such Common Stock,
when issued upon conversion of the Note, being referred to herein as "Conversion
Shares"); and
WHEREAS, the Company has agreed to grant the Purchaser certain rights
with respect to the Note and Conversion Shares as an inducement to, and a
condition of, the Purchasers' purchase of the Note.
NOW THEREFORE, the parties hereto agree as follows:
1. Put Option.
(a) Commencing August 1, 1999 (the "First Put Date"), and continuing
for a period of thirty (30) days thereafter, each holder of the Note shall have
the right (the "First Put Right") to request that the Company repurchase all,
but not less than all, of the Note outstanding (the "Put Option") at a price
equal to one hundred and nineteen & 3/10 percent (119.3%) of the principal
amount thereof, plus accrued and unpaid interest thereon (the "Put Price"), by
delivering to the Company a written notice specifying (i) the number of
Conversion Shares that are subject to the Put Option which shall be the entire
amount of the Note of the Noteholder, (ii) the aggregate Put Price, and (iii)
the date, not earlier than twenty (20) Trading Days and not later than thirty
(30) days after the First Put Date, on which the Put Option shall be exercised
(the "First Put Exercise Date").
(b) Commencing October 1, 1999 and continuing for a period of thirty
(30) days thereafter, each holder of the Note shall have a second right (the
"Second Put Right") to request that the Company repurchase all, but not less
than all, of the Note outstanding at a price equal to one hundred and twenty one
& 3/10 percent (121.3%) of the principal amount thereof plus accrued and unpaid
interest thereon (the "Second Put Price" and together with the First Put Right
sometimes referred to collectively as the "Put Rights"), by delivering to the
Company a written notice specifying (i) the number of Conversion Shares that are
subject to the Put Option, (ii) the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 1 84734.3
(Vitech America, Inc.)
<PAGE>
Second Put Price, and (iii) the date, not earlier than twenty (20) days and not
later than thirty (30) days on which the Put Option shall be exercised (the
"Second Put Exercise Date").
(c) Upon receipt by the Company of a notice exercising the First Put
Right and/or Second Put Right, the Company shall, within two (2) days of
receipt of such notice, deliver to each holder of the Note exercising the First
Put Right or Second Put Right, as applicable, a notice stating whether the
Company agrees to repurchase all, but not less than all, of the outstanding Note
subject to the First Put Right or Second Put Right, as applicable. In the event
the Company delivers notice of its agreement to effect such repurchase (a
"Company Acceptance Notice"), the provisions in subsection (d) below shall
apply. In the event the Company declines to repurchase the outstanding Note
subject to the First Put Right and/or Second Put Right, as applicable, the Note
shall remain convertible pursuant to their terms at the option of the holders
thereof.
(d) Assuming the Company has delivered a Company Acceptance Notice, on
the First Put Exercise Date or the Second Put Exercise Date, as applicable, (i)
the Purchaser shall deliver to the Company the Note, properly endorsed,
representing the Note subject to the Put Option, and (ii) the Company shall
deliver to the Purchasers, in immediately available funds, the applicable Put
Price. The purchase price for any Put Right shall be paid in four (4) equal
monthly installments on the last Business Day of each month commencing on the
first full month following the First Put Exercise Date or the Second Put
Exercise Date, as the case may be, with interest on each installment at the rate
of ten percent (10%) per annum.
2. Call Option.
(a) The Company shall have the right, at any time and from time to time
commencing on August 1, 1999 to purchase from any holder of the Note (the "Call
Option") the Note at a call price of one hundred and nineteen & 3/10 percent
(119.3%) of the principal amount, plus accrued and unpaid interest thereon (the
"Call Price") by delivering to the Purchasers a written notice specifying (i)
the number of Conversion Shares that are subject to the Call Option, (ii) the
Call Price, and (iii) the date, not earlier than twenty (20) Trading Days and
not later than thirty (30) days, on which the Call Option shall be exercised
(the "Call Exercise Date"). Commencing on the first day of the month from
September 1, 1999 and on each month thereafter until the Maturity Date, the Call
Price shall be increased by one percent (1%) per month.
(b) On the Call Exercise Date (i) the Purchasers shall deliver to the
Company the Note, properly endorsed, representing the Note subject to the Call
Option and (ii) the Company shall deliver to the Purchasers, in immediately
available funds, the applicable Call Price.
(c) The Call Option provisions described in this Section 2 shall at all
times be subject to (i) the prior Conversion Rights of the Purchasers and (ii)
the shares of Common Stock underlying the Notes must be covered by an effective
resale registration statement pursuant to the
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 2 84734.3
(Vitech America, Inc.)
<PAGE>
terms of the Securities Purchase Agreement at the time of the Call Notice and on
the Call Exercise Date.
3. Miscellaneous.
(a) Payment Method. The payment of the Put Price or the Call Price, as
the case may be, shall be made by wire transfer or bank draft in immediately
available funds to each applicable Purchaser.
(b) No Assignment or Transfer. Neither this Agreement, nor the Put
Option or the Call Option granted hereby, nor any other rights under this
Agreement, shall be assignable or transferable, directly or indirectly.
(c) Notices. All notices, requests and demands to or upon the parties
hereto shall be in writing and shall be delivered by any method that shall
provide a written acknowledgment of receipt at the addresses shown below.
If to Vitech America, Inc. Vitech America, Inc.,
8807 Northwest 23rd Street
Miami, Florida 33172-2419
Attn: Mr. William St. Laurent
Telefax:
With a copy to: Atlas, Perlman, Trop & Borkson
New River Center, Ste. 1900
200 East Las Olas Blvd.
Fort Lauderdale, Florida 33301
Attn: Joel Mayersohn, Esq.
Telefax: (954) 766-7800
If to any Purchaser Bazil Partners Limited
Picadilly Centre
Suite 10688 - SMB
Grand Cayman, BWI
Attn: Guilherme Tebecherani
For purposes of this Agreement, a "Notice Date" shall be the date which
is two (2) business days after the date on which any notice hereunder is sent by
telecopy (provided, however, that it is telephonically or electronically
confirmed).
(f) Further Assurances. The parties agree to do all things and to
deliver all instruments and documents necessary to accomplish the purposes of
this Agreement, and to
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 3 84734.3
(Vitech America, Inc.)
<PAGE>
provide to one another such information and assistance necessary to enable one
another to do the same.
(g) Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
[Signature Page Follows]
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 4 84734.3
(Vitech America, Inc.)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement this 13th
day of July, 1999.
BRAZIL PARTNERS LIMITED
By:
------------------------------------
Title:
---------------------------------
ACCEPTED AND ACKNOWLEDGED:
VITECH AMERICA, INC.
By:
-----------------------------
Title:
--------------------------
- --------------------------------------------------------------------------------
PUT AND CALL AGREEMENT - Page 5 84734.3
(Vitech America, Inc.)
VITECH AMERICA, INC.
(Incorporated Under the Laws of the State of Florida)
8807 Northwest 23 Street
Miami, Florida 33172
Amendment Dated April 19, 1999 to the Vitech America, Inc.
10% Convertible Promissory Note Dated October 10, 1997
Reference is hereby made to the Vitech America, Inc. 10% Convertible
Promissory Note No. ___ issued on October 10, 1997 (the "Note") in the principal
amount of ___________Dollars ($______) due and payable to _____________ (the
"Holder") on October 1, 2000. This document represents an amendment to the terms
of the Note, but not as a replacement of the Note.
In order to induce the Holder of the Note to not exercise its Second
Put Right, Vitech America, Inc. (the "Company") has offered and the Holder has
agreed to amend the terms of the Note as follows:
1. The Conversion Price is to be adjusted to equal Ten and 00/100 Dollars
($10.00) per share, subject to adjustment in certain event.
2. Beginning October 1, 1999 (the "Third Put Date"), for a period of thirty
(30) days, the Holder of a Note shall have the right (the "Third Put
Right") to cause the Company to repurchase all, but not less than all, of
the outstanding principal amount of the Note then outstanding at a price
equal to one hundred twenty percent (120%) of the principal amount thereof
plus accrued and unpaid interest. In the event the Third Put Right is
exercised by the Holder and the Company does not pay the redemption price
(or any installment thereof), then the Conversion Price shall be adjusted,
with respect to any unconverted or unredeemed principal amount of the Note,
to the lesser of (i) the Conversion Price or (ii) eighty percent (80%) of
the average of the volume weighted average closing sales price for the
Company's Common Stock as reported on the Nasdaq National Stock Market, if
traded thereon, or if not traded thereon, the average of the volume
weighted average closing sales price if listed on a national securities
exchange (or other reporting system that provides the last sales price) for
the ten (10) lowest consecutive trading days during the thirty (30) trading
day period prior to delivery of the notice of conversion by the Holder to
the Company.
3. Beginning April 1, 2000 (the "Fourth Put Date"), for a period of thirty
(30) days, the Holder of a Note shall have the right (the "Fourth Put
Right") to cause the Company to repurchase all, but not less than all, of
the outstanding principal amount of the Note then outstanding at a price
equal to one hundred twenty-five percent (125%) of the principal amount
thereof plus accrued and unpaid interest. In the event the Fourth Put Right
is exercised by the Holder and the Company does not pay the redemption
price (or any installment thereof), then the Conversion Price shall be
adjusted, with respect to any unconverted or unredeemed principal amount of
the Note, to the lesser of (i) the Conversion Price or (ii) seventy-five
percent
<PAGE>
(75%) of the average of the volume weighted average closing sales price for
the Company's Common Stock as reported on the Nasdaq National Stock Market,
if traded thereon, or if not traded thereon, the average of the volume
weighted average closing sales price if listed on a national securities
exchange (or other reporting system that provides the last sales price) for
the ten (10) lowest consecutive trading days during the thirty (30) trading
day period prior to delivery of the notice of conversion by the Holder to
the Company.
Upon delivery of a notice of exercise of a Holder Put Right, the
Company may pay the repurchase price for any Holder Put Right in four (4) equal
monthly installments beginning twenty (20) trading days after delivery of the
notice of Holder Put Right by the holder. Such repurchase price shall include
interest at a rate of ten percent (10%) per annum.
From and after the date hereof all references to the Note shall be
deemed to be references to the Note as amended hereby.
Date: April 19, 1999
VITECH AMERICA, INC.
By:
---------------------------------
(Corporate Seal) Name: Edward A. Kelly
Its: Chief Financial Officer
2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated April 12, 1999, on our audit of the consolidated
financial statements of Vitech America, Inc. and Subsidiaries as of December 31,
1998 and 1997 and for each of the three years ended December 31, 1998 in the
Post Effective Amendment No. 2 to form S-3 Registration Statement of Vitech
America, Inc. and subsidiaries (File No. 333-40491).
/s/ Pannel Kerr Forster PC
- -----------------------------
Pannel Kerr Forster PC
New York, New York
July 29, 1999
