NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. A-[ ] $[___________]
VITECH AMERICA
10% CONVERTIBLE DEBENTURE DUE MAY 21, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures
of Vitech America, Inc., a Florida corporation, having a principal place of
business at 0000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000 (the "Company"),
designated as its 10% Convertible Debentures, due May 21, 2001 (the
"Debentures"), in an aggregate principal amount of $10,000,000.
FOR VALUE RECEIVED, the Company promises to pay to
[_______________________], or registered assigns (the "Holder"), the principal
sum of [________________] Dollars ($___________), on or prior to May 21, 2001 or
such earlier date as the Debentures are required to be repaid as provided
hereunder (the "Maturity Date") and to pay interest to the Holder on the
principal sum at the rate of 10% per annum, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year during the term
hereof, commencing on June 30, 1999, but in no event later than the earlier to
occur of a Conversion Date (as defined in Section 4(a)(i)) for such principal
amount or the Maturity Date. Interest shall accrue daily commencing on the
Original Issue Date (as defined in Section 6) until payment in full of the
principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Interest shall be calculated on
the basis of a 360-day year and for the actual number of days elapsed. Interest
hereunder will be paid to the Person (as defined in Section 6) in whose name
this Debenture is registered on the records of the Company regarding
registration and transfers of the Debentures (the "Debenture Register"). All
overdue, accrued and unpaid interest and other amounts due hereunder shall bear
interest at the rate of 18% per annum (to accrue daily) from the date such
interest is due hereunder through and including the date of payment. The
principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address of the Holder
last appearing on the Debenture Register, except that interest due on the
principal amount (but not overdue interest) may, at the Company's option, be
paid in shares of Common Stock (as defined in Section 6) calculated based upon
the lower of (i) the Per Share Market Value (as defined in Section 6) or (ii)
the Conversion Price (as defined below) on the date such interest was due. All
amounts due
-1-
hereunder other than such interest shall be paid in cash. Notwithstanding
anything to the contrary contained herein, the Company may not issue shares of
Common Stock in payment of interest on the principal amount if: (i) the number
of shares of Common Stock at the time authorized, unissued and unreserved for
all purposes, is insufficient to pay interest hereunder in shares of Common
Stock; (ii) such shares of Common Stock are not either registered for resale
pursuant to an Underlying Securities Registration Statement (as defined in
Section 6) or freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), as determined by counsel to the Company pursuant to a written opinion
letter addressed and in form and substance acceptable to the Holder and the
transfer agent for such shares; (iii) such shares of Common Stock are not then
listed or quoted on the Nasdaq National Market ("NASDAQ") or on the New York
Stock Exchange, American Stock Exchange or the Nasdaq SmallCap Market (each, a
"Subsequent Market"); (iv) the Company has failed to timely satisfy its
conversion obligations hereunder; or (v) the issuance of such shares would
result in the recipient thereof beneficially owning more than 4.999% of the
issued and outstanding shares of Common Stock as determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Payment of
interest on the principal amount in shares of Common Stock is further subject to
the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of One Thousand Dollars ($1,000)
unless such amount represents the full principal balance of Debentures
outstanding to such Holder. No service charge will be made for such registration
of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the Company
for transfer of this Debenture, the Company and any agent of the Company may
treat the Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
-2-
(i) any default in the payment of the principal of, interest
on or liquidated damages in respect of this Debenture (free of any
claim of subordination), as and when the same shall become due and
payable (whether on the applicable quarterly interest payment date, a
Conversion Date or the Maturity Date or by acceleration or otherwise.
Notwithstanding anything to the contrary, no Event of Default shall
exist upon the occurrence of a default in payment of interest on this
Debenture that the Company cures within five (5) days following receipt
of written notice of such default;
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, the Purchase Agreement or the Registration
Rights Agreement, and such failure or breach shall not have been
remedied within 10 days after the date on which notice of such failure
or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence,
or there shall be commenced against the Company or any such subsidiary
a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period
of 60 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or the Company or any
subsidiary thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or any
subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall state that it is unable to pay its
debts generally as they become due; or the Company or any subsidiary
thereof shall call a meeting of its creditors with a view to arranging
a composition or adjustment of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or any
corporate or other action is taken by the Company or any subsidiary
thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default, after the lapse of any
applicable grace period, in any of its obligations under any mortgage,
credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount
exceeding five hundred thousand dollars ($500,000), whether such
indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
-3-
(v) the Common Stock shall fail to be listed for trading on
the NASDAQ or on a Subsequent Market or the Common Stock shall be
suspended from trading on the NASDAQ or on a Subsequent Market, in
either case, for more than three (3) days (which need not be
consecutive days);
(vi) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission
(the "Commission") on or prior to the 180th day after the Original
Issue Date;
(vii) an Event (as hereinafter defined) shall not have been
cured to the reasonable satisfaction of the Holder prior to the
expiration of thirty (30) days from the Event Date (as hereinafter
defined) relating thereto (other than an Event resulting from a failure
of an Underlying Securities Registration Statement to be declared
effective by the Commission on or prior to the Effective Date (as
defined in the Registration Rights Agreement);
(viii) the Company shall fail for any reason to deliver
certificates to a Holder prior to the twelfth (12th) day after the
Conversion Date pursuant to Section 4(b) or the Company shall provide
notice to the Holder, including by way of public announcement, at any
time, of its intention not to comply with requests for conversions of
any Debentures in accordance with the terms hereof; or
(ix) the Company shall fail for any reason to deliver the
payment in cash pursuant to a Buy-In (as defined below) within ten (10)
days after notice is deemed delivered hereunder.
(b) If during the time that any portion of this Debenture remains
outstanding, any Event of Default occurs and is continuing, then the Holders of
a majority in interest of the outstanding principal amount of Debentures may, by
notice to the Company declare the full principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the date
of acceleration, due and payable in cash. The aggregate amount payable upon an
Event of Default shall be equal to the sum of (i) the Mandatory Prepayment
Amount (as defined below) plus (ii) the product of (A) the number of Underlying
Shares issued in respect of conversions hereunder or as payment of interest
hereunder, in either case, within thirty (30) days of the date of a declaration
of an Event of Default and then held by the Holder and (B) the Per Share Market
Value on the date prepayment is due or the date the full prepayment price is
paid, whichever is greater. Interest shall accrue on the prepayment amount
hereunder from the seventh day after such amount is due (being the date of an
Event of Default) through the date of payment in full thereof at the rate of 18%
per annum. All Debentures and Underlying Shares for which the full repayment
price hereunder shall have been paid in accordance herewith shall be promptly
surrendered to or as directed by the Company. The Holder need not provide and
the Company hereby waives any presentment, demand, protest or other notice of
any kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Xxxxxx at any time prior to payment
-4-
hereunder. No such rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) This Debenture shall be convertible into shares of
Common Stock (subject to the limitations set forth in Section 4(a)(ii) hereof)
at the option of the Holder, in whole or in part at any time and from time to
time following the Original Issue Date. The number of shares of Common Stock
issuable upon a conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be converted, plus all accrued
but unpaid interest thereon (to the extent that the Company has elected and is
permitted to pay interest in shares of Common Stock), by the Conversion Price,
each as subject to adjustment as provided hereunder. The Holder shall effect
conversions by surrendering the Debentures (or such portions thereof) to be
converted, together with the form of conversion notice attached hereto as
Exhibit A (a "Conversion Notice") to the Company. Each Conversion Notice shall
specify the principal amount of Debentures to be converted and the date on which
such conversion is to be effected, which date may not be prior to the date such
Conversion Notice is deemed to have been delivered hereunder (a "Conversion
Date"). If no Conversion Date is specified in a Conversion Notice, the
Conversion Date shall be the date that such Conversion Notice is deemed
delivered hereunder. If the Holder is converting less than all of the principal
amount represented by the Debenture(s) tendered by the Holder with the
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to such Holder (in the manner and within
the time set forth in Section 4(b)) a new Debenture for such principal amount as
has not been converted.
(ii) Certain Conversion Restrictions.
(A) (1) The Holder may not convert Debentures or
receive shares of Common Stock as payment of interest hereunder to the extent
such conversion or receipt of such interest would result in the Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 4.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon
conversion of, and payment of interest on, the Debentures held by the Holder
after application of this Section. The Holder shall have the sole authority and
obligation to determine whether the restriction contained in this Section
applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which Debentures are
convertible shall be in the sole discretion of the Holder. The provisions of
this Section may be waived by a Holder (but only as to itself and not to any
other Holder) upon not less than 75 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
(2) The Holder may not convert Debentures or
receive shares of Common Stock as payment of interest hereunder to the extent
such conversion or receipt of such interest would result in the Holder
beneficially owning (as determined in accordance with Section
-5-
13(d) of the Exchange Act and the rules thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of interest on, the Debentures held by the
Holder after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in this
Section applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which Debentures are
convertible shall be in the sole discretion of the Holder. The provisions of
this Section may be waived by a Holder (but only as to itself and not to any
other Holder) upon not less than 75 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
(B) Notwithstanding anything to the contrary set
forth herein, the Company shall not be obligated to issue in excess of 2,927,130
shares of Common Stock upon conversion of Debentures and payment of interest
hereunder, which number of shares shall be subject to adjustment pursuant to
Sections 4(c)(ii), (iii), and (v) (such number of shares, the "Issuable
Maximum"). The Issuable Maximum equals 19.99% of the number of shares of Common
Stock outstanding immediately prior to the Closing. Shares of Common Stock
issued in respect of liquidated damages hereunder shall not count towards the
2,927,130 share limit set forth in this paragraph and shall be paid in cash as
provided herein unless otherwise agreed to by the Holders. If on any Conversion
Date (A) the Conversion Price then in effect is such that the aggregate number
of shares of Common Stock that would then be issuable upon conversion in full of
all then outstanding Debentures and as payment of interest thereon in shares of
Common Stock, together with any shares of Common Stock previously issued upon
conversion of Debentures and as payment of interest thereon, would equal or
exceed the Issuable Maximum, and (B) the Company shall not have previously
obtained the vote of shareholders (the "Shareholder Approval"), if any, as may
be required by the applicable rules and regulations of NASDAQ or other exchange
or market on which the Common Stock is then listed or quoted for trading to
approve the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof, then the Company shall issue to the Holder so
requesting a conversion a number of shares of Common Stock equal to its pro-rata
share of the Issuable Maximum (determined by reference to the aggregate
principal amount of Debentures issued to all Holders on the Original Issue Date)
and, with respect to the remainder of the aggregate principal amount of
Debentures then held by such Holder for which a conversion in accordance with
the Conversion Price would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum (the "Excess Value"), the Company shall have the
option to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 75th day after such request, or (2)(i) issue and deliver to such Holder
a number of shares of Common Stock as equals (x) the Excess Value, plus accrued
interest on all Debentures being converted, divided by (y) the closing sales
price of the Common Stock as reported by the NASDAQ on the Original Issue Date,
and (ii) cash in an amount equal to the product of (x) the Per Share Market
Value on the Conversion Date and (y) the number of shares of Common Stock in
excess of such Holder's pro rata portion of the Issuable Maximum that would have
otherwise been issuable to the Holder in respect of such conversion but for the
provisions of this Section (such amount of cash being hereinafter referred to as
the "Discount Equivalent"), or (3) pay cash to the converting Holder in an
amount equal to the Mandatory Prepayment Amount (as
-6-
defined in Section 6) for the Excess Value. If the Company fails to pay the
Discount Equivalent or the Mandatory Redemption Amount, as the case may be, in
full pursuant to this Section within ten (10) days after the date payable, the
Company will pay interest thereon at a rate of 18% per annum to the converting
Holder, accruing daily from the Conversion Date until such amount, plus all such
interest thereon, is paid in full. If the Company fails to obtain the
Shareholder Approval by the 75th day, then the Holders shall have the right to
require the Company to perform under, at the sole option of such Holder, clause
(2) or (3) of this Section 4(a)(iii)(B). The Company and the Holders understand
and agree that shares of Common Stock issued to and then held by the Holders as
a result or conversion of Debentures and as payment of interest thereon shall
not be entitled to cast votes on any resolution to obtain Shareholder Approval
pursuant hereto.
(b) (i) Not later than three Trading Days after the Conversion
Date, the Company will deliver or cause to be delivered to the Holder (i) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement and as required by law) representing the number of shares of
the Common Stock being acquired upon the conversion of Debentures (subject to
the limitations set forth in Section 4(a)(ii) hereof), (ii) Debentures in a
principal amount equal to the principal amount of Debentures not converted;
(iii) a bank check or wire transfer in the amount of all accrued and unpaid
interest (if the Company has elected to pay accrued interest in cash), together
with all other amounts then due and payable in accordance with the terms hereof,
in respect of Debentures tendered for conversion, and (iv) if the Company has
elected and is permitted hereunder to pay accrued interest in shares of the
Common Stock, certificates, which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement and as required by law), representing such number of shares
of the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion Date; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of the Common Stock
issuable upon conversion of the principal amount of Debentures until Debentures
are delivered for conversion to the Company or the Holder notifies the Company
that such Debenture has been mutilated, lost, stolen or destroyed and complies
with Section 9 hereof. If in the case of any Conversion Notice such certificate
or certificates, including for purposes hereof, any shares of the Common Stock
to be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, are not delivered to or as directed by the Holder by the third (3rd)
Trading Day after a Conversion Date, the Holder shall be entitled by written
notice to the Company at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion in which event the
Company shall immediately return the Debentures tendered for conversion. If the
Company fails to deliver to the Holder such certificate or certificates pursuant
to this Section, including for purposes hereof, any shares of the Common Stock
to be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the third (3rd) Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $2,500 for each day thereafter until the Company delivers such
certificates (such amount shall be also be due for each Trading Day after the
date that the Holder may rescind such conversion until such date as the Holder
shall have received the return of the principal amount of Debentures relating to
such rescission). Nothing herein shall limit a Xxxxxx's right to pursue actual
damages or declare an Event of Default
-7-
pursuant to Section 3 herein for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law. Further, if the Company shall not have
delivered any cash due in respect of conversions of Debentures or as payment of
interest thereon by the fifth (5th) Trading Day after the Conversion Date, the
Holder may, by notice to the Company, require the Company to issue shares of
Common Stock pursuant to Section 4(c), except that for such purpose the
Conversion Price applicable thereto shall be the lesser of the Conversion Price
on the Conversion Date and the Conversion Price on the date of such Holder
demand. Any such shares will be subject to the provision of this Section.
(ii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(b)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
interest hereunder, prior to the fifth (5th) Trading Day after the Conversion
Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder
was entitled to receive upon such conversion (a "Buy-In"), then the Company
shall (A) pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (i) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) either return the aggregate principal amount
of Debentures for which such conversion was not honored or deliver to such
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its conversion and deliver obligations under
Section 4(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of $10,000 aggregate principal amount of Debentures, the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In and evidence of the Holder's purchase as described above. Notwithstanding
anything contained herein to the contrary, if a Holder requires the Company to
make payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such payment, the
Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(i) in respect of the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion Price") in
effect on any Conversion Date shall be $11.00 per share (the "Initial Conversion
Price"); PROVIDED THAT, if the Company shall have declined to repay in full this
Debenture following the exercise by the Holder of the Put Right at the Put Price
(as each such term is defined in Section 5 herein), the
-8-
Conversion Price shall be the LESSER OF (i) 0.85 multiplied by the average of
the lowest ten (10) VWACS during the thirty (30) consecutive Trading Days
immediately preceding such Conversion Date, and (ii) the Initial Conversion
Price (subject, in each case, to equitable adjustments set forth herein).
If: (a) an Underlying Securities Registration
Statement is not filed on or prior to the Filing Date (as defined in the
Registration Rights Agreement) (if the Company files such Underlying Securities
Registration Statement without affording the Holder the opportunity to review
and comment on the same as required by Section 3(a) of the Registration Rights
Agreement, the Company shall not be deemed to have satisfied this clause (a)),
or (b) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of
1934, as amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed," or not
subject to further review, or (c) the Underlying Securities Registration
Statement is not declared effective by the Commission on or prior to the
Effectiveness Date (as defined in the Registration Rights Agreement), or (d)
except as set forth in the Registration Rights Agreement, such Underlying
Securities Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities (as defined in the Registration Rights Agreement) at any time prior
to the expiration of the "Effectiveness Period" (as defined in the Registration
Rights Agreement), without being succeeded within fifteen (15) days by an
amendment to such Underlying Securities Registration Statement or a subsequent
Underlying Securities Registration Statement filed with and declared effective
by the Commission, or (e) trading in the Common Stock shall be suspended from
the NASDAQ or a Subsequent Market for more than three (3) Business Days (which
need not be consecutive days), (f) the conversion rights of the Holders are
suspended for any reason, subject to the exceptions set forth herein or in the
Registration Rights Agreement or (g) an amendment to the Underlying Securities
Registration Statement is not filed by the Company with the Commission within
fifteen (15) days of the Commission's notifying the Company that such amendment
is required in order for the Underlying Securities Registration Statement to be
declared effective (any such failure or breach being referred to as an "Event,"
and for purposes of clauses (a), (c), (f) the date on which such Event occurs,
or for purposes of clause (b) the date on which such five (5) day period is
exceeded, or for purposes of clauses (d) and (g) the date which such 15
day-period is exceeded, or for purposes of clause (e) the date on which such
three (3) Business Day-period is exceeded, being referred to as "Event Date"),
then the Company shall pay to the Holder [2.0%] of the aggregate principal
amount of Debentures then held by such Holder, in cash, as liquidated damages
and not as a penalty, on the first day of each monthly anniversary of the Event
Date, until such time as the applicable Event is cured. The provisions of this
Section are not exclusive and shall in no way limit the Company's obligations
under the Registration Rights Agreement.
(iii) If the Company, at any time while any
Debentures are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of the Common Stock, (b)
subdivide outstanding shares of the Common Stock into a larger number of shares,
(c) combine
-9-
outstanding shares of the Common Stock into a smaller number of shares, or (d)
issue by reclassification of shares of the Common Stock any shares of capital
stock of the Company, the Initial Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of the Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iv) If the Company, at any time while any Debentures
are outstanding, shall issue rights or warrants to all holders of the Common
Stock (and not to Holders of Debentures) entitling them to subscribe for or
purchase shares of the Common Stock at a price per share less than the Per Share
Market Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of the
Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase shares of the Common Stock the issuance of which resulted in an
adjustment in the Initial Conversion Price pursuant to this Section, if any such
right or warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial Conversion
Price made pursuant to the provisions of this Section 4 after the issuance of
such rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(v) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while Debentures are outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that is convertible into
or exchangeable for shares of Common Stock, other than stock options to
employees, directors or officers of the Company and outstanding convertible
debentures issued on October 10, 1997 in the aggregate principal amount of
$11,080,535 ("Common Stock Equivalents") entitling any Person to acquire shares
of Common Stock at a price per share less than the Conversion Price then in
effect, then the Conversion Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of shares of Common Stock or such Common Stock
Equivalents plus the number of shares of
-10-
Common Stock which the offering price for such shares of Common Stock or Common
Stock Equivalents would purchase at the Conversion Price, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock so
issued or issuable, provided, that for purposes hereof, all shares of Common
Stock that are issuable upon exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares of Common Stock
or Common Stock Equivalents are issued.
(vi) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case the
Initial Conversion Price at which Debentures shall thereafter be convertible
shall be determined by multiplying the Initial Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value of the Common Stock determined as of the
record date mentioned above, and of which the numerator shall be such Per Share
Market Value of the Common Stock on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith; provided, however,
that in the event of a distribution exceeding ten percent (10%) of the net
assets of the Company, such fair market value shall be determined by a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") selected in good faith by the holders of a majority in interest of
Debentures then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the holders
of Debentures of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of the Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(vii) In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holder of this Debenture
shall have the right thereafter to, at its option, (A) convert the then
outstanding principal amount, together with all accrued but unpaid interest and
any other amounts then owing hereunder in respect of this Debenture only into
the shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of the Common Stock following such reclassification
or share exchange, and the Holders of the Debentures shall be entitled upon such
event to receive such amount of securities, cash or property as the shares of
the Common Stock of the Company into which the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture
-11-
could have been converted immediately prior to such reclassification or share
exchange would have been entitled or (B) require the Company to prepay the
aggregate of its outstanding principal amount of Debentures, plus all interest
and other amounts due and payable thereon, at the then effective Put Price
adjusted to reflect at least a 16% annualized return. The entire prepayment
price shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(viii) All calculations under this Section 4 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
(ix) Whenever the Conversion Price is adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder of Debentures a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(x) If (A) the Company shall declare a dividend (or
any other distribution) on its Common Stock; (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of its Common Stock; (C)
the Company shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, and in each case, the Company shall cause to be filed at
each office or agency maintained for the purpose of conversion of the
Debentures, and shall cause to be mailed to the Holders of Debentures at their
last addresses as they shall appear upon the stock books of the Company, at
least 15 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. Holders are entitled
to convert Debentures during the 15-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(xi) In case of any (1) merger or consolidation of
the Company with or into another Person that would constitute a Change of
Control Transaction, or (2) sale, directly or indirectly, by the Company of more
than 40% of the assets of the Company (on an as valued basis)
-12-
in one or a series of related transactions, or (3) tender or other offer or
exchange (whether by the Company or another Person) pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, stock, cash or property of the Company or another Person; then, if a
Holder has not exercised its Put Right or rights of redemption, if any, such
Holder shall have the right thereafter to convert its Debentures into shares of
Common Stock at any time prior to the effective day of such transaction and
thereafter to (A) require the Company to prepay the aggregate of its outstanding
principal amount of Debentures, plus all interest and other amounts due and
payable thereon at the then effective Put Price adjusted to reflect at least a
16% annualized return, or (B) convert its Debentures into the shares of stock
and other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale, and such
Holder shall be entitled upon such event or series of related events to receive
such amount of securities, cash and property as the shares of Common Stock into
which such Debentures could have been converted immediately prior to such
merger, consolidation or sales would have been entitled
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and payment
of interest on the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(c)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of the Common Stock that shall
be so issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Underlying Securities Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Securities Registration
Statement.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
-13-
(g) Any and all notices or other communications or deliveries
to be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
0000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000, facsimile number (305)
477-1379, attention CFO, with a copy to Atlas, Xxxxxxxx, Trop & Borkson, New
River Center, Suite 1900, 000 Xxxx Xxx Xxxx Xxxxxxxxx, Xx. Lauderdale, Florida
33301, facsimile number (000) 000-0000, attention Xxxx X. Xxxxxxxxx, or such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder of the Debentures at
the facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears, at
the principal place of business of the holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United States mail, (iv) the Business Day
following the date of mailing, if send by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
Section 5. Put Option.
(a) Commencing on the nine (9) month anniversary of the
Original Issue Date and on each three (3) month anniversary of such nine (9)
month anniversary of the Original Issue Date, if the Holder has not yet
exercised such Put Right (as defined below) (the "Put Date"), and continuing for
a period of ten (10) days thereafter, the Holder shall have the right (the "Put
Right") to request that the Company repurchase all, but not less than all, of
the outstanding principal balance of such Holder's Debentures (the "Put Option")
at a price equal to the Put Price (as defined below), by delivering to the
Company a written notice specifying (i) the aggregate principal amount of
Debentures subject to the Put Option which shall be all such Debentures of the
Holder, (ii) the aggregate Put Price, and (iii) the date, not earlier than
twenty (20) days and not later than thirty (30) days after the Put Date, on
which the Put Option may be exercised (the "Put Exercise Date"). The Put Price
is payable in four (4) equal monthly installments commencing on Put Exercise
Date. "Put Price" means (i) one hundred and twelve percent (112%) of the
principal amount of the Debentures to be repaid, plus all accrued and unpaid
interest thereon if the Put Date occurs on or prior to the 360th day after the
Original Issue Date, (ii) one hundred and sixteen percent (116%) of the
principal amount of the Debentures to be repaid, plus all accrued and unpaid
interest thereon if the Put Date occurs on or after the 361st day after the
Original Issue Date and prior to the 450th day after the Original Issue Date,
(iii) one hundred and twenty percent (120%) of the principal amount of the
-14-
Debentures to be repaid, plus all accrued and unpaid interest thereon if the Put
Date occurs on or after the 451st day after the Original Issue Date and prior to
the 540th day after the Original Issue Date, (iv) one hundred and twenty-four
percent (124%) of the principal amount of the Debentures to be repaid, plus all
accrued and unpaid interest thereon if the Put Date occurs on or after the 541st
day after the Original Issue Date and prior to the 630th day after the Original
Issue Date, and (v) one hundred and twenty-eight percent (128%) of the principal
amount of the Debentures to be repaid, plus all accrued and unpaid interest
thereon if the Put Date occurs on or after the 631st day after the Original
Issue Date.
(b) Upon receipt by the Company of a notice exercising the Put
Right, the Company shall, within the time periods required in Sections 5(a),
deliver to the Holder exercising the Put Right a notice stating whether the
Company agrees to repurchase all, but not less than all, of the outstanding
principal amount of the Debentures subject to the Put Right. In the event the
Company delivers notice of its agreement to effect such repurchase (a "Company
Acceptance Notice"), the provisions in subsection (c) below shall apply. In the
event the Company declines to repurchase the outstanding Debentures subject to
the Put Right, the Debentures shall remain convertible pursuant to Section 4(c)
at the option of the Holder hereof.
(c) Assuming the Company has delivered a Company Acceptance
Notice, on the Put Exercise Date and on each monthly anniversary of the Put
Exercise Date terminating on the second monthly anniversary of the Put Exercise
Date, (i) the Holder shall deliver to the Company the principal amount of
Debentures, properly endorsed, representing one-quarter of the Debentures
subject to the Put Option, and (ii) the Company shall deliver to the Purchasers,
in immediately available funds, the applicable portion of Put Price. The
purchase price for any Put Right shall be in cash and shall be free of any claim
of subordination. If any portion of the purchase price for any Put Right shall
not be paid within the time set forth in this Section 5, as an alternative to
any other rights or remedies set fort herein and not in addition to such other
rights or remedies, such purchase price shall be increased by 15% per annum (to
accrue daily) until paid (which amount shall be paid as liquidated damages and
not as a penalty) and the Holder shall have the right to convert the Debentures
subject to the Put Option pursuant to Section 4(c).
Section 6. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
in excess of 40% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof
-15-
in one or a series of related transactions, (iii) the merger of the Company with
or into another entity, the direct or indirect consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company's
securities continue to hold at least 40% of such securities following such
transaction or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"Common Stock" means the common stock, $.01 par value, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (i) the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on (x) the
date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the closing sale price per share of the Common Stock on NASDAQ or
on such Subsequent Market on which the Common Stock is listed or quoted on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the NASDAQ or on
such Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on which the Common Stock is then listed or quoted on
the date nearest preceding such date, or (b) if the Common Stock is not then
listed or quoted on the NASDAQ or on a Subsequent Market, the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the Holder,
or (d) if the Common Stock is not then publicly traded the fair market value of
a share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority interest of the principal amount of Debentures. .
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
-16-
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is
traded on the NASDAQ or on such Subsequent Market on which the Common Stock is
then listed or quoted, as the case may be, or (b) if the Common Stock is not
listed on the NASDAQ or on a Subsequent Market, a day on which the Common Stock
is traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance with the
terms hereof.
"Underlying Securities Registration Statement" means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a "selling stockholder" thereunder.
"VWACS" means the weighted daily average bid price per share
of the Common Stock on NASDAQ or any Subsequent Market as reported by Bloomberg
Informational Services, Inc. or its successor to its function of reporting
prices.
Section 7. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation of
the Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
Section 8. This Debenture shall not entitle the Holder to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other
-17-
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof. As long as there are
Debentures outstanding, the Company shall not and shall cause it subsidiaries
not to, without the consent of the Holders, (i) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of the Holders; (ii) except with respect to the redemption of the
outstanding convertible promissory notes issued by the Company on October 10,
1997 in the aggregate principal amount of $11,080,535, repay, repurchase or
offer to repay, repurchase or otherwise acquire shares of its Common Stock or
other equity securities other than as to the Underlying Shares to the extent
permitted or required under the Transaction Documents; or (iii) enter into any
agreement with respect to any of the foregoing
Section 9. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 10. Except as set forth in Schedule 2.1(p) to the
Purchase Agreement ("Permitted Liens"), no indebtedness of the Company is senior
to this Debenture in right of payment, whether with respect to interest, damages
or upon liquidation or dissolution or otherwise. The Company will not and will
not permit any of its subsidiaries to, directly or indirectly, enter into,
create, incur, assume or suffer to exist any Liens (as defined in the Purchase
Agreement) of any kind, other than Permitted Liens, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom.
Section 11. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably submit
to the non-exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
Section 12. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Debenture. The failure of the Company
-18-
or the Holder to insist upon strict adherence to any term of this Debenture on
one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Debenture. Any waiver must be in writing.
Section 13. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
Section 14. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next calendar month, the preceding Business Day in the appropriate
calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-19-
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.
VITECH AMERICA, INC.
By:________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
-20-
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-[ ] into shares of
common stock, no par value (the "Common Stock"), of Vitech America, Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
______________________________________________
Number of shares of Common Stock to be Issued
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name
______________________________________________
Address
-1-
