SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
March 10, 1998
- --------------------------------------------------------------------------------
(Date of earliest event reported)
R&G Financial Corporation
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(Exact name of registrant as specified in its charter)
Puerto Rico 0-21137 66-0532217
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
280 Jesus T. Pinero Avenue, Hato Rey, San Juan, Puerto Rico 00918
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(Address of principal executive offices) (Zip Code)
(787) 758-2424
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Exhibit Index appears on page 4.
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Item 5. Other Events
On March 10, 1998, R&G Financial Corporation ("RGFC"), a Puerto Rico
corporation, R&G Premier Bank of Puerto Rico ("Premier"), a Puerto
Rico-chartered commercial bank and wholly-owned subsidiary of RGFC, and Fajardo
Federal Savings Bank ("Fajardo"), a federally-chartered savings bank
headquartered in Fajardo, Puerto Rico, entered into an Agreement of Merger (the
"Agreement") (including a Plan of Merger) which sets forth the terms and
conditions under which Fajardo will merge with and into Premier (the "Merger").
Premier shall be the surviving corporation of the Merger, and shall continue to
operate as a wholly-owned subsidiary of RGFC under the name "R&G Premier Bank of
Puerto Rico." Upon consummation of the Merger, the separate corporate existence
of Fajardo shall terminate.
The Agreement provides that upon consummation of the Merger, and
subject to certain further terms, conditions, adjustments, limitations and
procedures set forth in the Agreement, each share of common stock of Fajardo,
par value $1.00 per share ("Fajardo Common Stock"), issued and outstanding at
the Effective Time (as defined in the Agreement) (other than (i) shares owned by
Fajardo (including treasury shares) or RGFC which shares will be cancelled and
retired and (ii) shares the holder of which pursuant to any applicable law
providing for dissenters' or appraisal rights is entitled to receive payment in
accordance with the provisions of any such law, as to which shares such holder
shall have only the rights provided in any such law) will be converted into the
right to receive, at the election of the holder thereof (i) $37.80 in cash (the
"Cash Consideration") or (ii) the number of shares of Class B Common Stock, par
value $.01 per share, of RGFC ("RGFC Class B Shares") which is equal to (A) if
the average of the mean between the closing high bid and low asked prices of a
share of RGFC Class B Shares, as reported on the Nasdaq Stock Market, for the 10
consecutive trading days ending five days immediately preceding the Closing (as
defined in the Agreement)(the "RGFC Average Market Value") is equal to or less
than $30.50 but equal to or greater than $24.00, 1.40 shares (B) if the RGFC
Average Market Value is greater than $30.50, the quotient determined by dividing
(x) $42.70 by (y) such RGFC Average Market Value or (C) if the RGFC Average
Market Value is less than $24.00, the quotient determined by dividing (x) $32.91
by (y) such RGFC Average Market Value, subject to an overall requirement that
the aggregate Cash Consideration to be paid in the Merger shall not exceed
$1,182,633.
Consummation of the Merger is subject to the approval of the Fajardo
shareholders and the receipt of all required regulatory approvals, as well as
other customary conditions.
In connection with the Agreement, RGFC and Fajardo entered into an
Option Agreement, dated March 10, 1998 (the "Option Agreement"), pursuant to
which Fajardo granted to RGFC an option to purchase, under certain limited
circumstances, up to 52,116 shares of Fajardo Common Stock (representing 24.9%
of the outstanding shares of Fajardo Common Stock on a pro forma basis) at a
price of $16.54 per share. The Option
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Agreement was entered into by Fajardo as a condition to RGFC's willingness to
enter into the Agreement.
Also in connection with the Agreement, the directors of Fajardo entered
into a Stockholder Agreement with RGFC, dated March 10, 1998 (the "Stockholder
Agreement"), pursuant to which each such person agreed in his personal capacity
to vote shares of Fajardo Common Stock beneficially owned by him ("Stockholders'
Shares") in favor of the Agreement at the meeting of Fajardo shareholders called
for the purpose of considering the Agreement. Such persons have also agreed not
to sell, pledge, transfer or otherwise dispose of the Stockholders' Shares, and
certain other conditions.
The Agreement (including the Plan of Merger, Option Agreement and
Stockholder Agreement, each of which is attached to the Agreement as an Exhibit
thereto) is attached as an exhibit to this report and is incorporated herein by
reference. The foregoing summary of the Agreement does not purport to be
complete and is qualified in its entirety by reference to such Agreement.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following exhibits are filed with this report:
Exhibit Number Description
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2.0 Agreement of Merger, dated as
of March 10, 1998, by and
among RGFC, Premier and
Fajardo
10.1 Plan of Merger, dated as of
March 10, 1998, between
Premier and Fajardo (attached
as Exhibit A to the Agreement,
which is attached hereto as
Exhibit 2.0)
10.2 Option Agreement, dated as of
March 10, 1998, between RGFC
and Fajardo (attached as
Exhibit B to the Agreement,
which is attached hereto as
Exhibit 2.0)
10.3 Stockholder Agreement, dated
as of March 10, 1998, between
the directors of Fajardo and
RGFC (attached as Exhibit C to
the Agreement, which is
attached hereto as Exhibit 2.0)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R&G FINANCIAL CORPORATION
Date: March 19, 1998 By: /s/ Victor J. Galan
--------------------
Victor J. Galan
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Description
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2.0 Agreement of Merger, dated as
of March 10, 1998, by and
among RGFC, Premier and
Fajardo
10.1 Plan of Merger, dated as of
March 10, 1998, between
Premier and Fajardo (attached
as Exhibit A to the Agreement,
which is attached hereto as
Exhibit 2.0)
10.2 Option Agreement, dated as of
March 10, 1998, between RGFC
and Fajardo (attached as
Exhibit B to the Agreement,
which is attached hereto as
Exhibit 2.0)
10.3 Stockholder Agreement, dated
as of March 10, 1998, between
the directors of Fajardo and
RGFC (attached as Exhibit C to
the Agreement, which is
attached hereto as Exhibit 2.0)
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AGREEMENT OF MERGER
among
R&G FINANCIAL CORPORATION,
R-G PREMIER BANK OF PUERTO RICO
and
FAJARDO FEDERAL SAVINGS BANK
dated as of March 10, 1998
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AGREEMENT OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................ 1
ARTICLE II THE MERGER......................................... 5
2.1 The Merger......................................... 5
2.2 Effective Time; Closing............................ 6
2.3 Conversion of Shares .............................. 6
2.4 Elections.......................................... 7
2.5 Allocation of Merger Consideration................. 8
2.6 Exchange Procedures................................ 9
2.7 No Fractional Shares............................... 11
2.8 Withholding Rights................................. 11
2.9 Dissenting Shares.................................. 11
2.10 Additional Actions................................. 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FAJARDO.......... 12
3.1 Capital Structure.................................. 12
3.2 Organization, Standing and Authority of Fajardo.... 13
3.3 No Fajardo Subsidiaries............................ 13
3.4 [Reserved]......................................... 13
3.5 Authorized and Effective Agreement................. 13
3.6 Documents and Regulatory Reports................... 14
3.7 Financial Statements............................... 15
3.8 Material Adverse Change............................ 15
3.9 Environmental Matters.............................. 16
3.10 Allowance for Loan Losses, Real Estate Owned
and Other Repossessed Assets....................... 16
3.11 Tax Matters........................................ 16
3.12 Legal Proceedings.................................. 17
3.13 Compliance with Laws............................... 18
3.14 Deposit Insurance and Other Regulatory Matters..... 18
3.15 Certain Information................................ 18
3.16 Employee Benefit Plans............................. 19
3.17 Certain Contracts.................................. 19
3.18 Brokers and Finders................................ 20
3.19 Insurance.......................................... 20
3.20 Properties......................................... 20
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3.21 Labor................................................. 21
3.22 Transactions with Affiliated Persons and Affiliates... 21
3.23 Required Vote......................................... 21
3.24 Disclosures........................................... 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF RGFC
AND PREMIER......................................... 22
4.1 Capital Structure of RGFC............................. 22
4.2 Organization, Standing and Authority of RGFC.......... 22
4.3 Ownership of Premier
and Mortgage......................................... 22
4.4 Organization, Standing and Authority of the Bank and
Mortgage............................................. 23
4.5 Authorized and Effective Agreement.................... 23
4.6 Securities Documents and Regulatory Reports........... 24
4.7 Financial Statements.................................. 25
4.8 Material Adverse Change............................... 25
4.9 Environmental Matters................................. 26
4.10 Allowance for Loan Losses and Real Estate Owned....... 26
4.11 Tax Matters........................................... 27
4.12 Legal Proceedings..................................... 27
4.13 Compliance with Laws.................................. 28
4.14 Deposit Insurance and Other Regulatory Matters........ 28
4.15 Certain Information................................... 29
4.16 Employee Benefit Plans................................ 29
4.17 Certain Contracts..................................... 30
4.18 Brokers and Finders................................... 31
4.19 Insurance............................................. 31
4.20 Properties............................................ 31
4.21 Labor................................................. 32
4.22 Transactions with Affiliated Persons and Affiliates .. 32
4.23 Disclosures........................................... 32
ARTICLE V COVENANTS............................................. 32
5.1 Reasonable Best Efforts............................... 32
5.2 Shareholder Meeting................................... 33
5.3 Regulatory Matters.................................... 33
5.4 Investigation and Confidentiality..................... 34
5.5 Press Releases........................................ 35
5.6 Business of the Parties............................... 35
5.7 Current Information................................... 38
5.8 Indemnification; Insurance............................ 38
5.9 Directors, Officers and Employees..................... 39
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5.10 Certain Policies; Integration..........................40
5.11 Restrictions on Resale.................................41
5.12 Disclosure Supplements.................................41
5.13 Failure to Fulfill Conditions..........................41
ARTICLE VI CONDITIONS PRECEDENT...................................41
6.1 Conditions Precedent - RGFC, Premier
and Fajardo..........................................41
6.2 Conditions Precedent - Fajardo.........................43
6.3 Conditions Precedent - RGFC and Premier................44
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT......................45
7.1 Termination............................................45
7.2 Effect of Termination..................................46
7.3 Survival of Representations, Warranties and Covenants..46
7.4 Waiver.................................................46
7.5 Amendment or Supplement................................47
ARTICLE VIII MISCELLANEOUS..................................................47
8.1 Expenses...............................................47
8.2 Entire Agreement.......................................47
8.3 No Assignment..........................................48
8.4 Notices................................................48
8.5 Alternative Structure..................................49
8.6 Interpretation.........................................49
8.7 Counterparts...........................................50
8.8 Governing Law..........................................50
8.9 Agreement with Respect to Infusion of Capital by
Fajardo's Directors..................................50
Exhibit A Form of Plan of Merger between R&G Premier Bank
of Puerto Rico and Fajardo
Exhibit B Form of Fajardo Stock Option Agreement
Exhibit C Form of Fajardo Stockholder Agreement
Exhibit D Form of Company Affiliate Letter
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AGREEMENT OF MERGER
Agreement of Merger (the "Agreement"), dated as of March 10, 1998, by
and among R&G Financial Corporation (the "RGFC"), a Puerto Rico corporation, R-G
Premier Bank of Puerto Rico ("Premier"), a Puerto Rico-chartered commercial bank
and wholly-owned subsidiary of RGFC, and Fajardo Federal Savings Bank
("Fajardo"), a federally-chartered savings bank.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of RGFC, Premier and Fajardo have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of Fajardo with and into Premier, subject to
the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to RGFC's willingness to enter
into the Agreement, (i) Fajardo intends to enter into the Option Agreement with
RGFC as of the date hereof (the "Fajardo Stock Option Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which Fajardo
intends to grant to RGFC the option to purchase shares of Fajardo Common Stock
(as defined herein) under certain circumstances and (ii) certain stockholders of
Fajardo intend to enter into a Stockholder Agreement with RGFC (the "Fajardo
Stockholder Agreement"), in substantially the form attached hereto as Exhibit C,
pursuant to which, among other things, such stockholders will agree to vote
their shares of Fajardo Common Stock in favor of this Agreement and the
transactions contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Bank Merger Agreement" shall have the meaning set forth in Section 2.1
hereof.
"Class A Shares" shall mean the class of RGFC Common Stock, all of
which is owned by the RGFC Chairman of the Board and Chief Executive Officer.
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"Class B Shares" shall mean the class of RGFC Common Stock which is
registered under the Exchange Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Commissioner" shall mean the Commissioner of Financial Institutions of
Puerto Rico or any successor thereto.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental
Entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (2) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fajardo Common Stock" shall mean the common stock, par value $1.00 per
share, of Fajardo.
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"Fajardo Dissenting Shares" shall have the meaning set forth in Section
2.9 hereof.
"Fajardo Financial Statements" shall mean (i) the audited statements of
financial condition (including related notes and schedules, if any) of Fajardo
as of September 30, 1997 and 1996 and the statements of income, stockholders'
equity and cash flows (including related notes and schedules, if any) of Fajardo
for each of the three years ended September 30, 1997, 1996 and 1995, and (ii)
the statements of financial condition of Fajardo (including related notes and
schedules, if any) and the statements of income, stockholders' equity and cash
flows (including related notes and schedules, if any) of Fajardo with respect to
the quarterly and annual periods ended subsequent to September 30, 1997.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by RGFC in connection with the
issuance of shares of RGFC Common Stock pursuant to the Merger, including the
Proxy Statement which forms a part thereof, as amended and supplemented.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
"Governmental Entity" shall mean any federal, state or Puerto Rico
court, administrative agency or commission or other governmental authority or
instrumentality.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of Fajardo with and into Premier
pursuant to the terms hereof.
"Merger Consideration" shall mean the consideration for the Fajardo
Common Stock, defined in Section 2.3(c).
"Mortgage" shall mean R&G Mortgage Corp., a wholly-owned mortgage
banking subsidiary of RGFC.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
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"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) in a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.12 hereof.
"Proxy Statement" shall mean the joint prospectus/proxy statement
contained in the Form S-4, as amended or supplemented, and to be delivered to
shareholders of Fajardo in connection with the solicitation of their approval of
this Agreement and the transactions contemplated hereby.
"Puerto Rico Banking Law" means the Banking Act of the Commonwealth of
Puerto Rico.
"Puerto Rico Corporate Law" means the 1995 General Corporation Law of
the Commonwealth of Puerto Rico.
"Puerto Rico Tax Code" shall mean the Puerto Rico Internal Revenue Code
of 1994, as amended.
"RGFC Average Market Value" shall have the meaning set forth in Section
2.3.
"RGFC Common Stock" shall mean the common stock, par value $.01 per
share, of RGFC, which is comprised of Class A Shares and Class B Shares.
"RGFC Employee Plans" shall have the meaning set forth in Section
4.16(a) hereof.
"RGFC Employee Stock Benefit Plan" shall mean the 1996 Stock Option
Plan.
"RGFC Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of RGFC
as of December 31, 1997 and 1996 and the consolidated statements of earnings,
stockholders' equity and cash flows (including related notes and schedules, if
any) of RGFC for each of the three years ended December 31, 1996, 1995 and 1994
as filed by RGFC in its Securities Documents, and (ii) the consolidated
statements of financial condition of RGFC (including related notes and
schedules, if any) and the consolidated statements of earnings, stockholders'
equity and cash flows (including related notes and schedules, if any) of RGFC
included in the Securities Documents filed by RGFC with respect to the quarterly
and annual periods ended subsequent to December 31, 1996.
"RGFC Preferred Stock" shall mean the shares of preferred stock, par
value $.01 per share, of RGFC.
"Real Estate Owned" shall mean real estate acquired by foreclosure or
by deed-in-lieu of foreclosure, real estate in judgment and subject to
redemption and in-substance foreclosures under generally accepted accounting
principles.
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"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests in the entity.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated pursuant to such laws.
"Subsidiary" shall mean any corporation, bank, savings association,
partnership, joint venture or other organization more than 10% of the stock or
ownership interest of which is owned, directly or indirectly, by an entity.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), Fajardo shall be merged with
and into Premier (the "Merger") in accordance with the Plan of Merger between
Premier and Fajardo, the form of which is attached as Exhibit A hereto (the
"Bank Merger Agreement") and applicable provisions of the Puerto Rico Banking
Law. Premier shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") of the Merger, and shall continue its corporate
existence under the laws of Commonwealth of Puerto Rico. The name of the
Surviving Corporation shall continue to be "R&G Premier Bank of Puerto Rico" and
the Surviving Corporation will continue to operate as a wholly-owned subsidiary
of RGFC. Upon consummation of the Merger, the separate corporate existence of
Fajardo shall terminate.
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 15 of the Puerto Rico Banking Law.
(c) The Articles of Incorporation and Bylaws of Premier, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and Bylaws of the Surviving
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Corporation, respectively, until altered, amended or repealed in accordance with
their terms and applicable law.
(d) Upon consummation of the Merger, (i) the directors of RGFC shall
consist of all of the directors of RGFC immediately prior to the Effective Time
and (ii) the executive officers of RGFC shall be the executive officers of RGFC
immediately prior to the Effective Time.
(e) Upon consummation of the Merger (i) the directors of Premier shall
consist of all of the directors of Premier immediately prior to the Effective
Time and (ii) the executive officers of Premier shall be the executive officers
of Premier immediately prior to the Effective Time. Directors and officers of
Premier shall serve for such terms as are specified in the Bank Merger Agreement
and the Articles of Incorporation and Bylaws of Premier.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
the Bank Merger Agreement with the Secretary of State of the Commonwealth of
Puerto Rico pursuant to the Puerto Rico Banking Law, (the "Effective Time"). A
closing (the "Closing") shall take place immediately prior to the Effective Time
at 10:00 a.m., Eastern Time, on or before the fifth business day following the
satisfaction or waiver, to the extent permitted hereunder, of the conditions to
the consummation of the Merger specified in Article VI of this Agreement (other
than the delivery of certificates, opinions and other instruments and documents
to be delivered at the Closing), at the principal executive offices of RGFC in
San Juan, Puerto Rico, or at such other place, at such other time, or on such
other date as the parties may mutually agree upon. At the Closing, there shall
be delivered to RGFC and Fajardo the opinions, certificates and other documents
required to be delivered under Article VI hereof.
2.3 Conversion of Shares
At the Effective Time, by virtue of the Merger and without any action
on the part of a holder of shares of Fajardo Common Stock:
(a) Each share of RGFC Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger.
(b) All shares of Fajardo Common Stock owned by Fajardo (including
treasury shares) or RGFC shall be cancelled and retired and shall not represent
capital stock of the Surviving Corporation and shall not be exchanged for the
Merger Consideration.
(c) RGFC and Fajardo have agreed that to the extent the RGFC Average
Market Value (defined below) is equal to $27.00, RGFC will pay $5,914,000 in
consideration for all of the issued and outstanding shares of Fajardo Common
Stock. Consequently, subject to Sections 2.5, 2.7 and 2.9, each share of Fajardo
Common Stock issued and outstanding at the Effective Time
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(other than shares to be cancelled in accordance with Section 2.3(b)) shall, by
virtue of this Agreement and without any action on the part of the holder
thereof, be converted into the right to receive, at the election of the holder
thereof (i) $37.80 in cash (the "Cash Consideration") or (ii) the number of
shares of RGFC Class B Shares which is equal to (A) if the RGFC Average Market
Value is equal to or less than $30.50 but equal to or greater than $24.00, 1.40
shares, (B) if the RGFC Average Market Value is greater than $30.50, the
quotient determined by dividing (x) $42.70 by (y) such RGFC Average Market Value
or (C) if the RGFC Average Market Value is less than $24.00, the quotient
determined by dividing (x) $32.91 by (y) such RGFC Average Market Value (the
"Stock Consideration") (collectively, the "Merger Consideration").
(x) If, between the date of this Agreement and the Effective
Time, the outstanding shares of RGFC Class B Shares shall have been
changed into a different number of shares or into a different class, by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares (each, a
"Stock Adjustment"), the Stock Consideration shall be adjusted
correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(y) As used in this Section 2.3, "RGFC Average Market Value"
shall be the average of the mean between the closing high bid and low
asked prices of a share of RGFC Class B Shares, as reported on the
Nasdaq Stock Market (the "Nasdaq"), for the 10 consecutive trading days
ending five days immediately preceding the Closing.
(d) Each share of common stock of Premier that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall be unchanged by the Merger.
2.4 Elections
(a) Subject to the allocation procedures set forth in Section 2.5, each
holder of Fajardo Common Stock will be entitled, with respect to the Merger
Consideration to be received for each share of Fajardo Common Stock held by such
holder, to (i) elect to receive the Stock Consideration (a "Stock Election")
with respect to such holder's Fajardo Common Stock ("Stock Election Shares"),
(ii) elect to receive the Cash Consideration (a "Cash Election") with respect to
such holder's Fajardo Common Stock ("Cash Election Shares") or (iii) make no
election (a "No-Election") with respect to such holder's Fajardo Common Stock
("No-Election Shares"). Any dissenting shares pursuant to Section 2.9 shall be
deemed to be Cash Election Shares. Notwithstanding the foregoing, in order to
make a Stock Election, the number of shares of Fajardo Common Stock a Fajardo
stockholder elects to convert must equal or exceed 100 shares.
(b) An election form and other appropriate transmittal materials (the
"Letter of Transmittal and Election Form") will be mailed within three business
days after the Closing to each holder of record of Fajardo Common Stock as of
the Effective Time permitting such holder (or in the case of nominee record
holders, the beneficial owner through proper instructions and documentation) to
make a (i) Stock Election, (ii) Cash Election or (iii) No-Election. Holders who
hold in a variety of capacities may make a separate election in each capacity.
Any election shall
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have been properly made only if a bank or trust company designated by RGFC (the
"Exchange Agent") shall have actually received a properly completed Letter of
Transmittal and Election Form by the Election Deadline, described below. A
Letter of Transmittal and Election Form will be properly completed only if
accompanied by certificates representing all shares of Fajardo Common Stock
covered thereby. Any shares of Fajardo Common Stock with respect to which the
holder thereof shall not, as of the Election Deadline, have made such an
election by submission to and receipt by the Exchange Agent of an effective,
properly completed Letter of Transmittal and Election Form shall be deemed to be
No-Election Shares. The Exchange Agent shall have reasonable discretion to
determine when any election, modification or revocation is received and whether
any such election, modification or revocation has been properly made.
(c) The Election Deadline shall be 5:00 p.m., Eastern Time, on the 10th
business day following but not including the date of mailing of the Letter of
Transmittal and Election Form or such other date as RGFC and Fajardo shall
mutually agree upon.
2.5 Allocation of Merger Consideration
(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate Cash Consideration to be paid in the Merger shall not exceed
$1,182,633 (the "Aggregate Cash Consideration").
(b) If the number of Cash Election Shares times the Cash Consideration
per share is equal to or less than the Aggregate Cash Consideration, then:
(1) all Cash Election Shares (subject to Section 2.9 with
respect to Fajardo Common Stock) will be converted into the right to
receive cash; and
(2) the No Election Shares and the Stock Election Shares will
be converted into the right to receive RGFC Class B Shares.
(c) If the number of Cash Election Shares times the Cash Consideration
per share is greater than the Aggregate Cash Consideration, then:
(1) all Stock Election Shares and No Election Shares will be
converted into the right to receive RGFC Class B Shares;
(2) the Exchange Agent will allocate among the holders of Cash
Election Shares (by the method of allocation described below), a
sufficient number of Cash Election Shares (excluding any Fajardo
Dissenting Shares) ("Reallocated RGFC Shares") such that the number of
remaining Cash Election Shares (including Fajardo Dissenting Shares)
times the Cash Consideration per share equals the Aggregate Cash
Consideration, and all Reallocated RGFC Shares shall be converted into
the right to receive RGFC Class B Shares; and
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(3) the Cash Election Shares (subject to Section 2.9 with
respect to Fajardo Dissenting Shares) which are not Reallocated RGFC
Shares will be converted into the right to receive cash.
(d) In the event that the Exchange Agent is required pursuant to
Section 2.5(c)(2) to designate from among all holders of Cash Election Shares
the Reallocated RGFC Shares to receive RGFC Class B Shares, each holder of Cash
Election Shares shall be allocated a pro rata portion of the total Reallocated
RGFC Shares.
2.6 Exchange Procedures
(a) At and after the Effective Time, each certificate previously
representing shares of Fajardo Common Stock shall represent only the right to
receive the Merger Consideration (the "Fajardo Certificates"), except as
specifically set forth in Section 2.3.
(b) Within three business days of the Effective Time, Peoples shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of shares of Fajardo Common Stock, for exchange in
accordance with this Section 2.6, an estimated amount of cash sufficient to pay
the Aggregate Cash Consideration to be paid pursuant to Section 2.3 and the
aggregate amount of cash paid in lieu of fractional shares to be paid pursuant
to Section 2.7, and RGFC shall reserve for issuance with its Transfer Agent and
Registrar, the aggregate Stock Consideration to be issued.
(c) The Letter of Transmittal and Election Form to be mailed within
three business days of the Effective Date shall specify that delivery shall be
effected, and risk of loss and title to the Fajardo Certificates shall pass,
only upon delivery of Fajardo Certificates to the Exchange Agent, shall be in a
form and contain any other provisions as RGFC may reasonably determine and shall
include instructions for use in effecting the surrender of the Fajardo
Certificates in exchange for the Merger Consideration. Upon the proper surrender
of a Fajardo Certificate or Fajardo Certificates to the Exchange Agent, together
with a properly completed and duly executed Letter of Transmittal and Election
Form, the holder of such Fajardo Certificate or Fajardo Certificates shall be
entitled to receive in exchange therefor (i) a certificate representing that
number of whole shares of RGFC Class B Shares that such holder has the right to
receive pursuant to this Agreement and (ii) a check in the amount equal to the
cash, if any, which such holder has the right to receive pursuant to this
Agreement (including any cash in lieu of any fractional shares of RGFC Class B
Shares to which such holder is entitled to pursuant to Section 2.7 and any
dividend or other distributions to which such holder of RGFC Class B Shares is
entitled to pursuant to Section 2.6(d)). The Fajardo Certificate or Fajardo
Certificates so surrendered shall forthwith be cancelled. As soon as practicable
after completion of the allocations of the Merger Consideration and in no event
later than ten business days after the Election Deadline, the Exchange Agent
shall distribute RGFC Class B Shares and cash as provided herein. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership with
respect to the RGFC Class B Shares held by it from time to time hereunder. In
the event of a transfer of ownership of any shares of Fajardo Common Stock not
registered in
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the transfer records of Fajardo, the Cash Consideration shall be paid and the
Stock Consideration shall be issued to the transferee if the Fajardo Certificate
representing such Fajardo Common Stock is presented to the Exchange Agent,
accompanied by documents sufficient, in the reasonable judgment of RGFC and the
Exchange Agent, (x) to evidence and effect such transfer and (y) to evidence
that all applicable stock transfer taxes have been paid.
(d) No interest will be paid or accrued on the Cash Consideration. No
dividend or other distributions declared or made after the Effective Time with
respect to shares of RGFC Class B Shares shall be remitted to any person
entitled to receive shares of RGFC Class B Shares until such person surrenders
the Fajardo Certificate or Fajardo Certificates, at which time such dividends
shall be remitted to such persons, without interest.
(e) From and after the Effective Time, there shall be no transfers on
the stock transfer records of Fajardo of any shares of Fajardo Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Fajardo Certificates are presented to RGFC, they shall be
cancelled and exchanged for the Merger Consideration, deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Section 2.6.
(f) Any portion of the aggregate Cash Consideration or the proceeds of
any investments thereof that remains unclaimed by the stockholders of Fajardo
for six (6) months after the Effective Time shall be repaid by the Exchange
Agent to RGFC upon the written request of RGFC. After such request is made, any
stockholders of Fajardo who have not theretofore complied with this Section 2.6
shall look only to RGFC for payment and issuance of their Merger Consideration
deliverable in respect of each share of Fajardo Common Stock such stockholder
holds as determined pursuant to this Agreement without any interest thereon. If
outstanding certificates for shares of Fajardo Common Stock are not surrendered
or the payment for them is not claimed prior to the date on which such payments
would otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned property
and any other applicable law, become the property of RGFC (and to the extent not
in its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, none of RGFC, the Exchange Agent or any other person shall be liable
to any former holder of Fajardo Common Stock for any amount delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) RGFC and the Exchange Agent shall be entitled to rely upon
Fajardo's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any Fajardo Certificate, RGFC and the Exchange Agent shall
be entitled to deposit any consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims
thereto.
(h) In the event any Fajardo Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Fajardo Certificate to be lost,
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stolen or destroyed and, if required by the Exchange Agent, the posting by such
person of a bond in such amount as the Exchange Agent may direct as indemnity
against any claim that may be made against it with respect to such Fajardo
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Fajardo Certificate the Merger Consideration deliverable in respect
thereof pursuant to this Agreement.
2.7 No Fractional Shares
Notwithstanding any other provision of this Agreement, neither
certificates nor scrip for fractional shares of RGFC Class B Shares shall be
issued in the Merger. Each holder who otherwise would have been entitled to a
fraction of a share of RGFC Class B Shares shall receive in lieu thereof cash
(without interest) in an amount determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by $37.80. No such
holder shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share.
2.8 Withholding Rights
RGFC (through the Exchange Agent, if applicable) shall be entitled to
deduct and withhold from any amounts otherwise payable pursuant to this
Agreement to any holder of shares of Fajardo Common Stock such amounts as RGFC
is required under any provision of Commonwealth of Puerto Rico, local or foreign
tax law to deduct and withhold with respect to the making of such payment. Any
amounts so withheld shall be treated for all purposes of this Agreement as
having been paid to the holder of Fajardo Common Stock in respect of which such
deduction and withholding was made by RGFC.
2.9 Dissenting Shares
Each outstanding share of Fajardo Common Stock the holder of which has
perfected his right to dissent under applicable federal regulations and has not
effectively withdrawn or lost such right as of the Effective Time (the "Fajardo
Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consideration and the holder thereof shall be entitled only to such
rights as are granted by applicable federal regulations. Fajardo shall give RGFC
prompt notice upon receipt by Fajardo of any such written demands for payment of
the fair value of such shares of Fajardo Common Stock and of withdrawals of such
demands and any other instruments provided pursuant to the applicable federal
regulations (any shareholder duly making such demand being hereinafter called a
"Dissenting Fajardo Shareholder"). Any payments made in respect of Fajardo
Dissenting Shares shall be made by the Surviving Corporation. If any Fajardo
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at or prior to the Effective
Time, such holder's shares of Fajardo Common Stock shall be converted into a
right to receive the Merger Consideration in accordance with the applicable
provisions of this Agreement. If such holder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment after the
Effective Time, each share of Fajardo Common Stock of such holder shall be
converted into the right to receive RGFC Common Stock pursuant to the terms
hereof.
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2.10 Additional Actions
If at any time after the Effective Time the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its rights, title or interest in, to or under any
of the rights, properties or assets of Fajardo acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, or (ii)
otherwise carry out the purposes of this Agreement, Fajardo and its proper
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of Fajardo or otherwise
to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FAJARDO
Fajardo represents and warrants to RGFC as follows:
3.1 Capital Structure
The authorized capital stock of Fajardo consists of 5,000,000 shares of
Company Common Stock. There are no authorized or outstanding shares of preferred
stock of Fajardo. As of the date hereof, there are 156,433 shares of Fajardo
Common Stock issued and outstanding and no shares of Fajardo Common Stock are
directly held as treasury stock by Fajardo. All outstanding shares of Fajardo
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Fajardo Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
Except as Previously Disclosed, there are no stock options to acquire Fajardo
Common Stock outstanding of any kind whatsoever, except for shares of Fajardo
Common Stock issuable pursuant to the terms of the Fajardo Stock Option
Agreement, and there are no rights authorized, issued or outstanding with
respect to the capital stock of Fajardo.
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3.2 Organization, Standing and Authority of Fajardo
Fajardo is a savings bank duly organized, validly existing and in good
standing under the laws of the United States with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or qualification
and where the failure to be so licensed, qualified or in good standing would
have a material adverse effect on the financial condition, results of operations
or business of Fajardo. Fajardo has heretofore delivered to RGFC true and
complete copies of the Federal Stock Charter and Bylaws of Fajardo as in effect
as of the date hereof.
3.3 No Fajardo Subsidiaries
Fajardo has no direct or indirect Subsidiaries. Except for capital
stock in the FHLB of New York and securities and other interests taken in
consideration of debts previously contracted, Fajardo does not own or have the
right to acquire, directly or indirectly, any outstanding capital stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization.
3.4 [Reserved].
3.5 Authorized and Effective Agreement
(a) Fajardo has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of Fajardo's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of Fajardo, except for the approval of this
Agreement by Fajardo's shareholders. This Agreement has been duly and validly
executed and delivered by Fajardo and constitutes a legal, valid and binding
obligation of Fajardo which is enforceable against Fajardo in accordance with
its terms, subject, as to enforceability, to bankruptcy, insolvency and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger), nor
compliance by Fajardo with any of the provisions hereof (i) does or will
conflict with or result in a breach of any provisions of the Federal Stock
Charter or Bylaws of Fajardo, (ii) except as Previously Disclosed, violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Fajardo pursuant to,
any
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material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Fajardo is a party, or by
which any of its properties or assets may be bound or affected, or (iii) subject
to receipt of all required governmental and shareholder approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Fajardo.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the FDIC, the OTS and the
Commissioner, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of RGFC Class B Shares
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of Fajardo and (v) the filing of the Bank Merger
Agreement with the Secretary of State of the Commonwealth of Puerto Rico
pursuant to the Puerto Rico Banking Law in connection with the Merger, and
except for such filings, authorizations or approvals which are Previously
Disclosed, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary on the part of Fajardo
in connection with the execution and delivery by Fajardo of this Agreement and
the Bank Merger Agreement and the consummation by Fajardo of the transactions
contemplated hereby and thereby.
(d) As of the date hereof, Fajardo is not aware of any reasons relating
to Fajardo (including, without limitation, Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by RGFC after the Effective Time of the business of each of RGFC
and Fajardo as such business is carried on immediately prior to the Effective
Time, free of any conditions or requirements which, in the reasonable opinion of
Fajardo, could have a material adverse effect upon the financial condition,
results of operations or business of RGFC on a consolidated basis or Fajardo or
materially impair the value of Fajardo to RGFC.
3.6 Documents and Regulatory Reports
(a) Fajardo has previously delivered or made available to RGFC a
complete copy of all documents mailed by Fajardo to its shareholders as a class
since January 1, 1993. Such documents did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
(b) Since January 1, 1993, Fajardo has duly filed with the OTS and the
FDIC, as the case may be, in correct form the reports required to be filed under
applicable laws and regulations and such reports were in all material respects
complete and accurate and in compliance with the requirements of applicable laws
and regulations, provided that information as of a later date shall be deemed to
modify information as of an earlier date. In connection with the most recent
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examinations of Fajardo by the OTS and the FDIC, Fajardo was not required to
correct or change any action, procedure or proceeding which Fajardo believes has
not been corrected or changed as required.
3.7 Financial Statements
(a) Fajardo has previously delivered or made available to RGFC accurate
and complete copies of Fajardo Financial Statements which, in the case of the
statements of financial condition of Fajardo as of September 30, 1997 and 1996
and the statements of operations, changes in stockholders' equity and cash flows
for each of the three years ended September 30, 1997, 1996 and 1995, are
accompanied by the audit reports of KPMG Peat Marwick LLP, independent public
accountants with respect to Fajardo. The Fajardo Financial Statements referred
to herein, as well as the Fajardo Financial Statements to be delivered pursuant
to Section 5.7 hereof, fairly present or will fairly present, as the case may
be, the financial condition of Fajardo as of the respective dates set forth
therein, and the results of operations, changes in stockholders' equity and cash
flows of Fajardo for the respective periods or as of the respective dates set
forth therein in accordance with generally accepted accounting principles.
(b) Each of Fajardo Financial Statements referred to in Section 3.7(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of Fajardo have been conducted in all
material respects in accordance with generally accepted auditing standards. The
books and records of Fajardo are being maintained in material compliance with
applicable legal and accounting requirements.
(c) Except to the extent (i) reflected, disclosed or provided for in
the statement of financial condition of Fajardo as of September 30, 1997
(including related notes) and (ii) of liabilities incurred since September 30,
1997 in the ordinary course of business, Fajardo has not incurred any
liabilities, whether absolute, accrued, contingent or otherwise, material to the
financial condition, results of operations or business of Fajardo.
3.8 Material Adverse Change
(a) There has not been any material adverse change in the business,
operations, assets or financial condition of Fajardo since September 30, 1997
and, except as Previously Disclosed, no fact or condition exists which Fajardo
reasonably expects will cause or is reasonably likely to cause such a material
adverse change in the future.
(b) Except as Previously Disclosed, Fajardo has not taken or permitted
any of the actions set forth in Section 5.6(a) hereof between September 30, 1997
and the date hereof.
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3.9 Environmental Matters
(a) To the best of Fajardo's knowledge, Fajardo is in compliance with
all Environmental Laws, except for any violations of any Environmental Law which
would not, singly or in the aggregate, have a material adverse effect on the
financial condition, results of operations or business of Fajardo. Fajardo has
not received any written communication alleging that Fajardo is not in such
compliance and, to the best knowledge of Fajardo, there are no present
circumstances that would prevent or interfere with the continuation of such
compliance.
(b) To the best of Fajardo's knowledge, none of the properties owned,
leased or operated by Fajardo has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which would not
singly or in the aggregate have a material adverse effect on the financial
condition, results of operations or business of Fajardo.
(c) To the best of Fajardo's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against Fajardo or against any person or
entity whose liability for any Environmental Claim Fajardo has or may have
retained or assumed either contractually or by operation of law, except such
which would not have a material adverse effect on the financial condition,
results of operations or business of Fajardo.
(d) Except as Previously Disclosed, Fajardo has not conducted any
environmental studies during the past five years with respect to any properties
owned by it as of the date hereof.
3.10 Allowance for Loan Losses, Real Estate Owned and Other Repossessed
Assets
The allowance for loan losses reflected on Fajardo's statements of
financial condition included in the September 30, 1997 Fajardo Financial
Statements is, or will be in the case of subsequently delivered Fajardo
Financial Statements, as the case may be, in the opinion of Fajardo's
management, adequate in all material respects as of their respective dates under
the requirements of generally accepted accounting principles to provide for
reasonably estimated losses on outstanding loans net of recoveries. The Real
Estate Owned and other repossessed assets reflected on the consolidated
statements of financial condition included in the September 30, 1997 Fajardo
Financial Statements is, or will be in the case of subsequently delivered
Company Financial Statements, as the case may be, carried at net realizable
value, as required by generally accepted accounting principles.
3.11 Tax Matters
(a) Fajardo has timely filed (taking into account permissible
extensions) all federal, Commonwealth of Puerto Rico and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be
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filed by it (including, without limitation, estimated tax returns, income tax
returns, information returns and withholding and employment tax returns) and has
paid, or where payment is not required to have been made, has set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. Fajardo will not have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, Commonwealth of Puerto Rico and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns filed by Fajardo are complete and accurate in all
material respects. Fajardo is not delinquent in the payment of any tax,
assessment or governmental charge, and none of them has requested any extension
of time within which to file any tax returns in respect of any fiscal year or
portion thereof which have not since been filed. Except as Previously Disclosed,
the federal, Commonwealth of Puerto Rico and local income tax returns of Fajardo
have been examined by the applicable tax authorities (or are closed to
examination due to the expiration of the applicable statute of limitations) and
no deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against Fajardo as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to Fajardo to extend
the period of limitations for the assessment or collection of any tax. As of the
date hereof, no audit, examination or deficiency or refund litigation with
respect to such returns are pending or, to the best of Fajardo's knowledge,
threatened.
(c) Except as Previously Disclosed, Fajardo (i) is not a party to any
agreement providing for the allocation or sharing of taxes or (ii) is not
required to include in income any adjustment by reason of a voluntary change in
accounting method initiated by Fajardo (nor does Fajardo have any knowledge that
any taxing authority has proposed any such adjustment or change of accounting
method).
3.12 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of Fajardo, threatened against Fajardo or against any asset, interest
or right of Fajardo, or against any officer, director or employee of Fajardo
that in any such case, if decided adversely, would have a material adverse
effect on the financial condition, results of operations or business of Fajardo.
Fajardo is not a party to any order, judgment or decree which has or could
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of Fajardo.
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3.13 Compliance with Laws
(a) Fajardo has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its business as it is
presently being conducted and the absence of which could reasonably be expected
to have a material adverse effect on the financial condition, results of
operations or business of Fajardo; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect; and to the best
knowledge of Fajardo, no suspension or cancellation of any of the same is
threatened.
(b) Fajardo is not in violation of its Federal Stock Charter or Bylaws,
or of any applicable federal, Commonwealth of Puerto Rico or local law or
ordinance or any order, rule or regulation of any federal, commonwealth, local
or other governmental agency or body (including, without limitation, all banking
(including, without limitation, all regulatory capital requirements),
securities, municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of Fajardo; and Fajardo
has not received any written notice or communication from any federal,
Commonwealth of Puerto Rico or local governmental authority asserting that
Fajardo is not in violation of any of the foregoing which could reasonably be
expected to have a material adverse effect on the financial condition, results
of operations or business of Fajardo. Except as Previously Disclosed, Fajardo is
not subject to any regulatory or supervisory cease and desist order, agreement,
written directive, memorandum of understanding or written commitment (other than
those of general applicability to all commercial banks issued by governmental
authorities), and Fajardo has not received any written communication requesting
that it enter into any of the foregoing.
3.14 Deposit Insurance and Other Regulatory Matters
(a) The deposit accounts of Fajardo are insured to the maximum extent
permitted by the FDIA, and Fajardo has paid all premiums and assessments
required by the FDIA and the regulations thereunder.
(b) Fajardo is a member in good standing of the FHLB of New York and
owns the requisite amount of stock in the FHLB of New York.
3.15 Certain Information
None of the information relating to Fajardo supplied or to be supplied
for inclusion or incorporation by reference in (i) the Form S-4 will, at the
time the Form S-4 and any amendment thereto becomes effective under the
Securities Act, contain any untrue statement of a material fact
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or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (ii)
the Proxy Statement, as of the date(s) such Proxy Statement is mailed to
shareholders of Fajardo and up to and including the date(s) of the meeting of
Fajardo shareholders to which such Proxy Statement relates, will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by Fajardo to its shareholders in connection with the meeting of shareholders at
which this Agreement will be considered by such shareholders will comply as to
form in all material respects with the information required to be included by it
the rules and regulations for Form S-4.
3.16 Employee Benefit Plans
(a) Fajardo has Previously Disclosed its stock option plans and has no
other employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, any fringe benefit, incentive, deferred compensation,
consultant, bonus or group insurance contract, plan or arrangement, or any other
welfare plan (as defined under Section 3(1) of ERISA), employee pension benefit
plan (as defined under Section 3(2) of ERISA) or agreement maintained for the
benefit of employees or former employees of Fajardo (the "Fajardo Employee
Plans").
(b) Fajardo does not participate in nor has it incurred any liability
under Section 4201 of ERISA for a complete or partial withdrawal from a
multi-employer plan (as such term is defined in ERISA).
3.17 Certain Contracts
(a) Except as Previously Disclosed, Fajardo is not a party to, is not
bound or affected by, does not receive, or is not obligated to pay, benefits
under (i) any agreement, arrangement or commitment, including without limitation
any agreement, indenture or other instrument, relating to the borrowing of money
by Fajardo or the guarantee by Fajardo of any obligation, (ii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or former director,
officer or employee of Fajardo, (iii) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of
Fajardo upon execution of this Agreement or upon or following consummation of
the transactions contemplated by this Agreement (either alone or in connection
with the occurrence of any additional acts or events), (iv) any agreement,
arrangement or understanding pursuant to which Fajardo is obligated to indemnify
any director, officer, employee or agent of Fajardo, (v) any agreement,
arrangement or understanding to which Fajardo is a party or by which any of the
same is bound which limits the freedom of Fajardo to compete in any line of
business or with any person, or (vi) except as Previously Disclosed in Schedule
3.13(b), any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease
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and desist order or condition of any regulatory order or decree with or by the
OTS, the FDIC or any other regulatory agency.
(b) Fajardo is not in default or in non-compliance, which default or
non-compliance could reasonably be expected to have a material adverse effect on
the financial condition, results of operations or business of Fajardo or the
transactions contemplated hereby, under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party
or by which its assets, business or operations may be bound or affected, whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that with the lapse of time or the
giving of notice, or both, would constitute such a default or non-compliance.
3.18 Brokers and Finders
Except as Previously Disclosed, neither Fajardo nor any of its
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
3.19 Insurance
Fajardo is insured for reasonable amounts with financially sound and
reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable laws and
regulations. Fajardo has not received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default under
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion.
3.20 Properties
All real and personal property owned by Fajardo or presently used by
Fajardo in its business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on the business of Fajardo in the ordinary
course of business consistent with past practices. Fajardo has good and
marketable title free and clear of all liens, encumbrances, charges, defaults or
equities (other than equities of redemption under applicable foreclosure laws)
to all of the material properties and assets, real and personal, reflected on
the statement of financial condition of Fajardo as of September 30, 1997
included in the Fajardo Financial Statements or acquired after such date, except
(i) liens for current taxes not yet due or payable, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as reflected on the
statement of financial condition of Fajardo as of September 30, 1997 included in
the Fajardo Financial Statements. All real and personal property which is
material to Fajardo's business and leased or licensed by Fajardo is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and
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such leases will not terminate or lapse prior to the Effective Time. Fajardo has
Previously Disclosed an accurate listing of each such lease or license referred
to in the immediately preceding sentence pursuant to which Fajardo acts as
lessor (other than month-to-month leases) or lessee, including the expiration
date and the terms of any renewal options which relate to the same, as well as a
listing of each material real property owned by Fajardo and used in the conduct
of its business.
3.21 Labor
No work stoppage involving Fajardo is pending or, to the best knowledge
of Fajardo, threatened. Fajardo is not involved in, or threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding involving the employees of Fajardo which could have a material
adverse effect on the financial condition, results of operations or business of
Fajardo. Employees of Fajardo are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of Fajardo's knowledge, there have been no efforts to
unionize or organize any employees of Fajardo during the past five years.
3.22 Transactions with Affiliated Persons and Affiliates
Except as Previously Disclosed, (i) no "affiliate" of Fajardo, as
defined in 12 U.S.C. Section 1828(j)(1)(B), has engaged in any transaction with
Fajardo since January 1, 1993 which was not in compliance with applicable laws
and regulations and (ii) as of the date hereof there is no loan or extension of
credit outstanding to any of the same which is not in compliance with applicable
laws and regulations.
3.23 Required Vote
(a) The affirmative vote of the holders of a sixty-six and two-thirds
percent (66 2/3%) of the issued and outstanding shares of Fajardo Common Stock
is necessary to approve this Agreement and the transactions contemplated hereby
on behalf of Fajardo.
3.24 Disclosures
None of the representations and warranties of Fajardo or any of the
written information or documents furnished or to be furnished by Fajardo to RGFC
in connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, under which it was made,
not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RGFC
AND PREMIER
RGFC and Premier represent and warrant to Fajardo as follows:
4.1 Capital Structure of RGFC
The authorized capital stock of RGFC consists of 25,000,000 shares of
RGFC Common Stock (10,000,000 of which are authorized Class A Shares and
15,000,000 of which are authorized Class B Shares) and 10,000,000 shares of RGFC
Preferred Stock. As of the date hereof, there are 9,220,278 and 4,924,474 Class
A Shares, and Class B Shares, respectively, of RGFC Common Stock issued and
outstanding, no shares of RGFC Common Stock are directly or indirectly held as
treasury stock by RGFC and there are no shares of RGFC Preferred Stock issued
and outstanding. All outstanding shares of RGFC Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and none of
the outstanding shares of RGFC Common Stock have been issued in violation of the
preemptive rights of any person, firm or entity. Except for shares of RGFC
Common Stock issuable pursuant to the RGFC Stock Option Plan, now or hereafter,
there are no rights authorized, issued or outstanding with respect to the
capital stock of RGFC.
4.2 Organization, Standing and Authority of RGFC
RGFC is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Puerto Rico with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification and where the failure to be so licensed, qualified or in good
standing would have a material adverse effect on the financial condition,
results of operations or business of RGFC on a consolidated basis. RGFC is duly
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. RGFC has heretofore delivered to Fajardo true and complete copies of
the Certificate of Incorporation and Bylaws of RGFC as in effect as of the date
hereof.
4.3 Ownership of Premier and Mortgage
The only direct or indirect subsidiaries of RGFC are Premier and
Mortgage. Except as Previously Disclosed and except for capital stock of Premier
and Mortgage, stock in the FHLB of New York, securities and other interests
taken in consideration of debts previously contracted, RGFC does not own or have
the right to acquire, directly or indirectly, any outstanding capital stock or
other voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The outstanding
shares of capital stock of Premier and Mortgage have been duly authorized and
validly issued, are fully paid and
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nonassessable, and are directly or indirectly owned by RGFC free and clear of
all liens, claims, encumbrances, charges, pledges, restrictions or rights of
third parties of any kind whatsoever. No rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
Premier and Mortgage and there are no agreements, understandings or commitments
relating to the right of RGFC to vote or to dispose of said shares or other
ownership interests.
4.4 Organization, Standing and Authority of Premier and Mortgage
Premier is a commercial bank and Mortgage is a mortgage banking
corporation, in each case, duly organized, validly existing and in good standing
under the laws of the Commonwealth of Puerto Rico. Premier and Mortgage (i) have
full power and authority to own or lease all of their properties and assets and
to carry on their business as now conducted, and (ii) are duly licensed or
qualified to do business and are in good standing in each jurisdiction in which
their ownership or leasing of property or the conduct of their business requires
such qualification and where the failure to be so licensed, qualified or in good
standing would have a material adverse effect on the financial condition,
results of operations or business of RGFC on a consolidated basis. RGFC has
heretofore delivered to Fajardo true and complete copies of the Articles of
Incorporation and Bylaws of Premier and Mortgage as in effect as of the date
hereof.
4.5 Authorized and Effective Agreement
(a) Each of RGFC and Premier has all requisite corporate power and
authority to enter into this Agreement and (subject to receipt of all necessary
governmental approvals and the approval of RGFC's shareholders of this
Agreement) to perform all of its obligations under this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of RGFC and Premier, except for
the approval of this Agreement by RGFC as sole shareholder of Premier. This
Agreement has been duly and validly executed and delivered by each of RGFC and
Premier and constitutes a legal, valid and binding obligation of RGFC and
Premier which is enforceable against RGFC and Premier in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger), nor
compliance by RGFC or Premier with any of the provisions hereof (i) does or will
conflict with or result in a breach of any provisions of the Certificate of
Incorporation, Articles of Incorporation or Bylaws of RGFC, Premier or Mortgage,
(ii) except as Previously Disclosed, violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of RGFC, Premier or Mortgage pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other
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instrument or obligation to which RGFC, Premier or Mortgage is a party, or by
which any of their respective properties or assets may be bound or affected, or
(iii) subject to receipt of all required governmental and shareholder approvals,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to RGFC, Premier or Mortgage.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the FDIC, the OTS and the
Commissioner, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of RGFC Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of Fajardo and by RGFC as sole shareholder of Premier
and (v) the filing of the Bank Merger Agreement with the Secretary of State of
the Commonwealth of Puerto Rico pursuant to the Puerto Rico Banking Law in
connection with the Merger, and except for such filings, authorizations or
approvals as are Previously Disclosed, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of RGFC or Premier in connection with (i) the execution and delivery
by RGFC and Premier of this Agreement and the Bank Merger Agreement and the
consummation by RGFC and Premier of the transactions contemplated hereby and
thereby.
(d) As of the date hereof, none of RGFC or Premier is aware of any
reasons relating to RGFC or Premier (including, without limitation, Community
Reinvestment Act compliance) why all consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the transactions
contemplated by this Agreement as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement and the Bank Merger Agreement and
(ii) the continuation by RGFC and Premier after the Effective Time of the
business of each of RGFC, Premier and Fajardo as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which, in the reasonable opinion of RGFC, could have a material adverse effect
upon the financial condition, results of operations or business of RGFC on a
consolidated basis or materially impair the value of Fajardo to RGFC.
4.6 Securities Documents and Regulatory Reports
(a) RGFC has previously delivered or made available to Fajardo a
complete copy of all Securities Documents filed by RGFC pursuant to the
Securities Laws or mailed by RGFC or Premier to its respective shareholders as a
class since January 1, 1993. RGFC has timely filed with the Commission all
Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respect with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date.
(b) Since January 1, 1993, each of RGFC and Premier has duly filed with
the FDIC, the Commissioner and the OTS, as the case may be, in correct form the
reports required to be
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filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations, provided that information as of a later date
shall be deemed to modify information as of an earlier date; and RGFC has
previously delivered or made available to Fajardo accurate and complete copies
of all such reports. In connection with the most recent examinations of RGFC and
Premier by the Commissioner and the FDIC, neither RGFC nor Premier was required
to correct or change any action, procedure or proceeding which RGFC or Premier
believes has not been corrected or changed as required.
4.7 Financial Statements
(a) RGFC has previously delivered or made available to Fajardo accurate
and complete copies of RGFC Financial Statements which, in the case of the
statements of financial condition as of December 31, 1996 and 1995 and the
statements of income, stockholders' equity and cash flows for each of the three
years ended December 31, 1996, 1995 and 1994, are accompanied by the audit
reports of Price Waterhouse, independent public accountants with respect to RGFC
and Premier. The RGFC Financial Statements referred to herein, as well as the
RGFC Financial Statements to be delivered pursuant to Section 5.7 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of RGFC as of the respective dates set forth therein, and the
consolidated results of operations, stockholders' equity and cash flows of RGFC
for the respective periods or as of the respective dates set forth therein.
(b) Each of RGFC Financial Statements referred to in Section 4.7(a) has
been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of RGFC, Premier and Mortgage have been
conducted in all material respects in accordance with generally accepted
auditing standards. The books and records of RGFC, Premier and Mortgage are
being maintained in material compliance with applicable legal and accounting
requirements, and all such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of RGFC, Premier and Mortgage.
(c) Except to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of RGFC as of September 30,
1997 (including related notes) and (ii) of liabilities incurred since September
30, 1997 in the ordinary course of business, none of RGFC, Premier or Mortgage
has any liabilities, whether absolute, accrued, contingent or otherwise,
material to the financial condition, results of operations or business of RGFC
on a consolidated basis.
4.8 Material Adverse Change
There has not been any material adverse change in the business,
operations, prospects, assets or financial condition of RGFC on a consolidated
basis since June 30, 1997 and or is reasonably likely to cause no fact or
condition exists which RGFC believes will cause such a material adverse change
in the future.
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4.9 Environmental Matters
(a) To the best of RGFC's knowledge, RGFC, Premier and Mortgage are in
compliance with all Environmental Laws, except for any violations of any
Environmental Law which would not, singly or in the aggregate, have a material
adverse effect on the financial condition, results of operations or business of
RGFC on a consolidated basis. None of RGFC, Premier or Mortgage has received any
written communication alleging that RGFC, Premier or Mortgage is not in such
compliance and, to the best knowledge of RGFC, there are no present
circumstances that would prevent or interfere with the continuation of such
compliance.
(b) To the best of RGFC's knowledge, none of the properties owned,
leased or operated by RGFC, Premier or Mortgage has been or is in violation of
or liable under any Environmental Law, except any such violations or liabilities
which would not singly or in the aggregate have a material adverse effect on the
financial condition, results of operations or business of RGFC on a consolidated
basis.
(c) To the best of RGFC's knowledge and except as Previously Disclosed,
there are no past or present actions, activities, circumstances, conditions,
events or incidents that could reasonably form the basis of any Environmental
Claim or other claim or action or governmental investigation that could result
in the imposition of any liability arising under any Environmental Law against
RGFC, Premier or Mortgage or against any person or entity whose liability for
any Environmental Claim RGFC, Premier or Mortgage has or may have retained or
assumed either contractually or by operation of law, except such which would not
have a material adverse effect on the financial condition, results of operations
or business of RGFC on a consolidated basis.
(d) Except as Previously Disclosed, RGFC has not conducted any
environmental studies during the past five years with respect to any properties
owned by it, Premier or Mortgage as of the date hereof.
4.10 Allowance for Loan Losses and Real Estate Owned
The allowance for loan losses reflected on RGFC's statements of
financial condition included in the September 30, 1997 RGFC Financial Statements
is, or will be in the case of subsequently delivered RGFC Financial Statements,
as the case may be, in the opinion of RGFC's management adequate in all material
respects as of their respective dates under the requirements of generally
accepted accounting principles to provide for reasonably anticipated losses on
outstanding loans net of recoveries. The Real Estate Owned reflected on the
statements of financial condition included in the September 30, 1997 RGFC
Financial Statements is, or will be in the case of subsequently delivered RGFC
Financial Statements, as the case may be, carried at the lower of cost or fair
value, less estimated costs to sell, as required by generally accepted
accounting principles.
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4.11 Tax Matters
(a) RGFC, Premier and Mortgage, and each of their predecessors, have
timely filed all federal, Commonwealth of Puerto Rico and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. None of RGFC, Premier or
Mortgage will have any material liability for any such taxes in excess of the
amounts so paid or reserves or accruals so established.
(b) All federal, Commonwealth of Puerto Rico and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns filed by RGFC, Premier and Mortgage are complete
and accurate in all material respects. None of RGFC, Premier or Mortgage is
delinquent in the payment of any tax, assessment or governmental charge, and
neither of them has requested any extension of time within which to file any tax
returns in respect of any fiscal year or portion thereof which have not since
been filed. Except as Previously Disclosed, the federal, Commonwealth of Puerto
Rico and local income tax returns of RGFC, Premier and Mortgage have been
examined by the applicable tax authorities (or are closed to examination due to
the expiration of the applicable statute of limitations) and no deficiencies for
any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against RGFC, Premier or Mortgage as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to RGFC, Premier or
Mortgage to extend the period of limitations for the assessment or collection of
any tax. As of the date hereof, no audit, examination or deficiency or refund
litigation with respect to such return is pending or, to the best of RGFC's
knowledge, threatened.
(c) Except as Previously Disclosed, none of RGFC, Premier or Mortgage
(i) is a party to any agreement providing for the allocation or sharing of
taxes, (ii) is required to include in income any adjustment by reason of a
voluntary change in accounting method initiated by RGFC, Premier or Mortgage
(nor does RGFC have any knowledge that any taxing authority has proposed any
such adjustment or change of accounting method).
4.12 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of RGFC, threatened against RGFC, Premier or Mortgage or against any
asset, interest or right of RGFC, Premier or Mortgage, or against any officer,
director or employee of any of them that in any such case, if
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decided adversely, would have a material adverse effect on the financial
condition, results of operations or business of RGFC on a consolidated basis.
None of RGFC, Premier or Mortgage is a party to any order, judgment or decree
which has or could reasonably be expected to have a material adverse effect on
the financial condition, results of operations or business of RGFC on a
consolidated basis.
4.13 Compliance with Laws
(a) Each of RGFC, Premier and Mortgage has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of RGFC on a consolidated
basis; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of RGFC, no
suspension or cancellation of any of the same is threatened.
(b) None of RGFC, Premier or Mortgage is in violation of its respective
Certificate of Incorporation, Articles of Incorporation or Bylaws, or of any
applicable federal, Commonwealth of Puerto Rico or local law or ordinance or any
order, rule or regulation of any federal, Commonwealth of Puerto Rico, local or
other governmental agency or body (including, without limitation, all banking
(including, without limitation, all regulatory capital requirements),
securities, municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a material adverse effect on the
financial condition, results of operations or business of RGFC on a consolidated
basis; and none of RGFC, Premier or Mortgage has received any written notice or
communication from any federal, state or local governmental authority asserting
that RGFC, Premier or Mortgage is in violation of any of the foregoing which
could reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of RGFC on a consolidated basis.
None of RGFC, Premier or Mortgage is subject to any regulatory or supervisory
cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general applicability
to all savings institutions or holding companies thereof issued by governmental
authorities), and none of them has received any written communication requesting
that it enter into any of the foregoing.
4.14 Deposit Insurance and Other Regulatory Matters
(a) The deposit accounts of Premier are insured to the maximum extent
permitted by the FDIA, and Premier has paid all premiums and assessments
required by the FDIA and the regulations thereunder.
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(b) Premier is a member in good standing of the FHLB of New York and
owns the requisite amount of stock in the FHLB of New York.
4.15 Certain Information
None of the information relating to RGFC, Premier and Mortgage to be
included or incorporated by reference in (i) the Form S-4 will, at the time the
Form S-4 and any amendment thereto becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.16 Employee Benefit Plans
(a) RGFC has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
fringe benefit, incentive, deferred compensation, consultant, bonus or group
insurance contract, plan or arrangement, or any other welfare plan (as defined
in Section 3(1) of ERISA), employee pension benefit plan (as defined under
Section 3(2) of ERISA) or agreement maintained for the benefit of employees or
former employees of RGFC, Premier or Mortgage (the "RGFC Employee Plans"), and
RGFC has previously furnished or made available to Fajardo accurate and complete
copies of the same together with (i) the most recent actuarial and financial
reports prepared with respect to any qualified plans, (ii) the most recent
annual reports filed with any governmental agency, and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
to any qualified plan.
(b) Except as Previously Disclosed, none of RGFC, Premier, Mortgage,
any pension plan maintained by either of them and qualified under Section 401 of
the Code and/or Section 1165 of the Puerto Rico Tax Code or, to the best of
RGFC's knowledge, any fiduciary of such plan has incurred any material liability
to the PBGC or the United States Internal Revenue Service with respect to any
employees of RGFC, Premier or Mortgage. Except as Previously Disclosed, to the
best of RGFC's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) None of RGFC, Premier or Mortgage participates in or has incurred
any liability under Section 4201 of ERISA for a complete or partial withdrawal
from a multi-employer plan (as such term is defined in ERISA).
(d) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each RGFC Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any RGFC
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Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any RGFC Pension Plan.
(e) RGFC Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, the Puerto
Rico Tax Code, all regulations, rulings and announcements promulgated or issued
thereunder and all other applicable governmental laws and regulations.
(f) There are no pending or, to the best knowledge of RGFC, threatened
claims (other than routine claims for benefits) by, on behalf of or against any
of RGFC Employee Plans or any trust related thereto or any fiduciary thereof.
4.17 Certain Contracts
(a) Except as Previously Disclosed, none of RGFC, Premier or Mortgage
is a party to, is bound or affected by, receives, or is obligated to pay,
benefits under (i) any agreement, arrangement or commitment, including without
limitation any agreement, indenture or other instrument, relating to the
borrowing of money by RGFC, Premier or Mortgage or the guarantee by RGFC,
Premier or Mortgage of any obligation, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, officer or
employee of RGFC, Premier or Mortgage, (iii) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of
RGFC, Premier or Mortgage upon execution of this Agreement or upon or following
consummation of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events), (iv) any
agreement, arrangement or understanding pursuant to which RGFC, Premier or
Mortgage is obligated to indemnify any director, officer, employee or agent of
RGFC, Premier or Mortgage, (v) any agreement, arrangement or understanding to
which RGFC, Premier or Mortgage is a party or by which any of the same is bound
which limits the freedom of RGFC, Premier or Mortgage to compete in any line of
business or with any person, and (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the Commissioner or the
FDIC or any other regulatory agency.
(b) None of RGFC, Premier or Mortgage is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a material adverse effect on the financial condition, results of operations
or business of RGFC on a consolidated basis or the transactions contemplated
hereby, under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party or by which its assets,
business or operations may be bound or affected, whether entered into in the
ordinary course of business or otherwise and whether written or oral, and there
has not occurred any event that with the lapse of time or the giving of notice,
or both, would constitute such a default or non-compliance.
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4.18 Brokers and Finders
Except as Previously Disclosed, none of RGFC, Premier or Mortgage, nor
any of their respective directors, officers or employees, has employed any
broker or finder or incurred any liability for any broker or finder fees or
commissions in connection with the transactions contemplated hereby.
4.19 Insurance
RGFC and Premier are insured for reasonable amounts with financially
sound and reputable insurance companies against such risks as companies engaged
in a similar business would, in accordance with good business practice,
customarily be insured and has maintained all insurance required by applicable
laws and regulations. Neither RGFC nor Premier has received any notice of
cancellation or notice of a material amendment of any such insurance policy or
bond or is in default under such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely fashion.
4.20 Properties
All real and personal property owned by RGFC, Premier or Mortgage or
presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on its
business in the ordinary course of business consistent with their past
practices. RGFC, Premier and Mortgage have good and marketable title free and
clear of all liens, encumbrances, charges, defaults or equities (other than
equities of redemption under applicable foreclosure laws) to all of the material
properties and assets, real and personal, reflected on the statement of
financial condition of RGFC as of September 30, 1997 included in RGFC Financial
Statements or acquired after such date, except (i) liens for current taxes not
yet due or payable, (ii) pledges to secure deposits and other liens incurred in
the ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) as reflected on the statement of financial condition of RGFC as
of September 30, 1997 included in RGFC Financial Statements. All real and
personal property which is material to RGFC's business on a consolidated basis
and leased or licensed by RGFC, Premier or Mortgage is held pursuant to leases
or licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
RGFC has Previously Disclosed an accurate listing of each such lease or license
referred to in the immediately preceding sentence pursuant to which RGFC,
Premier or Mortgage acts as lessor (other than month-to-month leases) or lessee,
including the expiration date and the terms of any renewal options which relate
to the same, as well as a listing of each material real property owned by RGFC,
Premier or Mortgage and used in the conduct of its business.
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4.21 Labor
No work stoppage involving RGFC, Premier or Mortgage is pending or, to
the best knowledge of RGFC, threatened. None of RGFC, Premier or Mortgage is
involved in, or threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding involving its employees which could have a
material adverse effect on the financial condition, results of operations or
business of RGFC on a consolidated basis. Employees of RGFC, Premier and
Mortgage are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of RGFC's knowledge, there have been no efforts to unionize or organize
any employees of RGFC, Premier or Mortgage during the past five years.
4.22 Transactions with Affiliated Persons and Affiliates
Except as Previously Disclosed, (i) no "affiliate" of Premier, as
defined in 12 U.S.C. Section 1828(j)(1)(B), has engaged in any transaction with
Mortgage since January 1, 1993 which was not in compliance with applicable laws
and regulations and (ii) as of the date hereof there is no loan or extension of
credit outstanding to any of the same which is not in compliance with applicable
laws and regulations.
4.23 Disclosures
None of the representations and warranties of RGFC or any of the
written information or documents furnished or to be furnished by RGFC to Fajardo
in connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of Fajardo,
RGFC and Premier shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit
consummation of the Merger as promptly as reasonably practicable and to
otherwise enable consummation of the transactions contemplated hereby, and shall
cooperate fully with the other party or parties hereto to that end.
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5.2 Shareholder Meeting
Fajardo shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of Fajardo will recommend that the shareholders of
Fajardo approve this Agreement and the transactions contemplated hereby,
provided that the Board of Directors of Fajardo may fail to make such
recommendation, or withdraw, modify or change any such recommendation, if such
Board of Directors, after having consulted with and considered the advice of
outside counsel, has determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation, would constitute a
breach of the fiduciary duties of such directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement, with the
Commission. RGFC shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act by the Commission, as promptly as
practicable after such filing or submission, and Fajardo each shall thereafter
promptly mail the Proxy Statement to its shareholders. RGFC also shall use its
reasonable best efforts to obtain all necessary state securities law or "blue
sky" permits and approvals required to carry out the issuance of RGFC Common
Stock pursuant to the Merger and all other transactions contemplated by this
Agreement, and Fajardo shall furnish all information concerning Fajardo and the
holders of Fajardo Common Stock as may be reasonably requested in connection
with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to prepare and file within 30 days of the date of this
Agreement all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all permits,
consents, approvals and authorizations of all Governmental Entities and third
parties which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including without limitation the Merger). RGFC
and Fajardo shall have the right to review in advance, and to the extent
practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
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(c) RGFC and Fajardo shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries (in the case of RGFC),
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of RGFC,
any of its Subsidiaries or Fajardo, to any Governmental Entity in connection
with the Merger and the other transactions contemplated hereby.
(d) RGFC and Fajardo shall promptly furnish each other with copies of
written communications received by RGFC, any of its Subsidiaries or Fajardo, as
the case may be, from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated hereby.
5.4 Investigation and Confidentiality
(a) Upon reasonable notice, each of the parties hereto shall afford the
officers, employees, counsel, accountants and other authorized representatives
of each of the other parties hereto reasonable access, during normal business
hours throughout the period prior to the Closing, to its properties, books,
contracts and records and, during such period for the purpose of verifying the
representations and warranties contained in this Agreement, shall furnish
promptly to each of the other parties hereto all information concerning its
business, properties and personnel as such party may reasonably request,
provided that no investigation pursuant to this Section 5.4(a) shall affect or
be deemed to modify any representation or warranty made by any party hereto or
the conditions to the obligations of any such party to consummate the Merger.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall return to the party which
furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof by the party furnishing the information; (y) was then generally known to
the public; or (z) became known to the public through no fault of the party
receiving the information; or (ii) disclosures pursuant to a legal requirement
or in accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order shall
use its best efforts to give the other party at least ten business days prior
notice thereof.
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5.5 Press Releases
RGFC and Fajardo shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of RGFC, Fajardo shall carry on its
businesses in the ordinary course consistent with past practice. Fajardo will
use all reasonable efforts to (x) preserve its business organization intact, (y)
keep available to itself and RGFC the present services of the employees of
Fajardo and (z) preserve for itself and RGFC the goodwill of the customers of
Fajardo and others with whom business relationships exist. Without limiting the
generality of the foregoing, except with the prior written consent of RGFC or as
expressly contemplated hereby, between the date hereof and the Effective Time,
Fajardo shall not:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of Fajardo Common Stock;
(ii) issue any shares of its capital stock, other than
pursuant to the Fajardo Stock Option Agreement, or issue, grant, modify
or authorize any rights, other than the Fajardo Stock Option Agreement;
purchase any shares of Fajardo Common Stock or RGFC Common Stock; or
effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
(iii) amend its Federal Stock Charter or Bylaws;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive
to, any of its directors, officers or employees, except as Previously
Disclosed and (ii) in the case of employees who are not executive
officers, such as may be granted in the ordinary course of business
consistent with past practice;
(v) except as Previously Disclosed, enter into or, except as
may be required by law, modify any pension, retirement, stock option,
stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus,
group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors,
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officers or employees; or make any contributions to any defined benefit
or defined contribution plan not in the ordinary course of business
consistent with past practice;
(vi) except as to the leases for Fajardo's branch office and
executive office, enter into (w) any agreement, arrangement or
commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of
money by Fajardo or guarantee by Fajardo of any such obligation, except
for deposits and borrowings in the ordinary course of business
consistent with past practice, (y) any agreement, arrangement or
commitment relating to the employment of, or severance of, an employee,
or amend any such existing agreement, arrangement or commitment,
provided that Fajardo may employ an employee if necessary to operate
the business of Fajardo in the ordinary course of business consistent
with past practice and if the employment of such employee is terminable
by Fajardo and any successor at will without liability, other than as
required by law; or (z) any contract, agreement or understanding with a
labor union;
(vii) change its method of accounting in effect for the year
ended September 30, 1997, except as required by changes in laws or
regulations or generally accepted accounting principles concurred in by
its and RGFC's independent certified public accountants, or change any
of its methods of reporting income and deductions for federal income
tax purposes from those employed in the preparation of its federal
income tax return for the year ended December 31, 1996, except as
required by changes in laws or regulations;
(viii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the
ordinary course of business consistent with past practice and policies;
(ix) make any capital expenditures in excess of $2,000
individually or $10,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(x) except as to the application to relocate Fajardo's branch
office filed with the OTS, file any applications or make any contract
with respect to branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(xii) engage in any transaction with an "affiliate," as
defined in Section 3.22 hereof, other than loans to directors, officers
and employees in the ordinary course of business consistent with past
practice and which are in compliance with the requirements of
applicable laws and regulations;
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(xiii) discharge or satisfy any lien or encumbrance or pay any
material obligation or liability (absolute or contingent) other than at
scheduled maturity or in the ordinary course of business;
(xiv) change its lending, investment, deposit or asset and
liability management or other banking policies in any material respect
except as may be required by applicable law;
(xv) enter into any futures contract, option contract,
interest rate cap, interest rate floor, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes
in market rates of interest;
(xvi) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
(xvii) take any action that would result in any of the
representations and warranties of Fajardo contained in this Agreement
not to be true and correct in any material respect at the Effective
Time;
(xviii) take or cause to be taken any action which would
disqualify the Merger as a tax free reorganization under Section 1112(g) of the
Puerto Rico Tax Code;
(xix) make any loan in excess of $125,000 (in the case of
residential mortgage loans) $150,000 (in the case of commercial mortgage loans)
or $5,000 (in the case of consumer loans); or
(xx) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Fajardo, RGFC, Premier and
Mortgage shall carry on their respective businesses in the ordinary course
consistent with past practice and use all reasonable efforts to preserve intact
their present business organizations and relationships.
(c) Fajardo shall not solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, lease or purchase of
all or a substantial portion of the assets of, or any equity interest in,
Fajardo provided, however, that the Board of Directors of Fajardo may furnish
such information or participate in such negotiations or discussions if such
Board of Directors, after having consulted with and considered the advice of
outside counsel, has determined that the failure to do the same would cause the
members of such Board of Directors to breach their fiduciary duties under
applicable laws. Fajardo will promptly inform RGFC of any such request
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for information or of any such negotiations or discussions, as well as instruct
its directors, officers, representatives and agents to refrain from taking any
action prohibited by this Section 5.6(c).
5.7 Current Information
During the period from the date of this Agreement to the Effective
Time, each party shall, upon the request of the other party, cause one or more
of its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after the
date of this Agreement (other than the last quarter of each fiscal year),
Fajardo and RGFC will deliver to the other party its consolidated financial
statements. In the case of the last quarter of each fiscal year, such financial
statements shall be delivered not less than 90 days after the end of the
calendar quarter. RGFC shall provide Fajardo with copies of its quarterly and
annual reports on Forms 10-Q and 10-K, respectively, when filed with the
Commission. Within 25 days after the end of each month, Fajardo and RGFC will
deliver to the other party a consolidated statement of financial condition and a
consolidated statement of income, without related notes, for such month prepared
in accordance with generally accepted accounting principles.
5.8 Indemnification; Insurance
(a) From and after the Effective Time through the third anniversary of
the Effective Time, RGFC (the "Indemnifying Party") shall indemnify and hold
harmless each present and former director, officer and employee of Fajardo
determined as of the Effective Time (the "Indemnified Parties") against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent to which
such Indemnified Parties were entitled under the Articles of Incorporation and
Bylaws of Fajardo as in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.8(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties
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advises that there are issues which raise conflicts of interest between the
Indemnifying Party and the Indemnified Parties, the Indemnified Parties may
retain counsel which is reasonably satisfactory to the Indemnifying Party, and
the Indemnifying Party shall pay, promptly as statements therefor are received,
the reasonable fees and expenses of such counsel for the Indemnified Parties
(which may not exceed one firm in any jurisdiction unless the use of one counsel
for such Indemnified Parties would present such counsel with a conflict of
interest), (ii) the Indemnified Parties will cooperate in the defense of any
such matter, (iii) the Indemnifying Party shall not be liable for any settlement
effected without its prior written consent, and (iv) the Indemnifying Party
shall have no obligation hereunder in the event a federal or Commonwealth of
Puerto Rico banking agency or a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that indemnification of an Indemnified Party in the manner contemplated hereby
is prohibited by applicable law.
(c) In the event that RGFC or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.8, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
(d) For a period of three years after the Effective Time, Premier shall
cause to be maintained in effect a policy of directors' and officers' liability
insurance for at least the same coverage and amounts, containing terms and
conditions which are no less advantageous to such directors and officers with
respect to claims arising from facts or events which occurred before the
Effective Time. If the Surviving Corporation or any of their successors or
assigns (i) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then in
such case, proper provision shall be made so that the successors or assigns of
Premier shall assume the obligations set forth in this section.
5.9 Directors, Officers and Employees
(a) Effective as of the Effective Time, the directors of RGFC shall
continue to be those directors of RGFC on the date of this Agreement.
(b) Effective as of the Effective Time, the directors of Premier shall
continue to e the directors as of the date of this Agreement.
(c) Premier shall have the right, but not the obligation, to offer
employment, as officers and employees of Premier, immediately following the
Effective Time, to any other persons who are officers and employees of Fajardo
immediately before the Effective Time. To the extent that the employment of any
employee of Fajardo is involuntarily terminated at or
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during the one-year period following the Effective Time as a result of the
elimination of a job position, such employee will be entitled to receive
severance benefits in accordance with and to the extent the severance benefits
that an employee of Premier with similar years of service would be entitled to
in the event of termination. For purposes of determining severance benefits,
each employee whose employment is terminated will be credited with his or her
years of service with Fajardo prior to the Effective Time.
(d) RGFC will provide the employees of Fajardo who continue as
employees of Premier after the Effective Time with benefits under RGFC's or
Premier's employee benefit plans.
(e) Each current employee of Fajardo who remains an employee of RGFC
and/or Premier following the Effective Time shall be entitled to participate in
all RGFC Employee Plans on the same terms and to the same extent as similarly
situated employees of RGFC and Premier. Employees of Fajardo shall receive
credit for their years of service with Fajardo for purposes of determining
eligibility and vesting, but not benefit accrual, in all RGFC Employee Plans.
5.10 Certain Policies; Integration
(a) If requested by RGFC, on the business day immediately prior to the
Effective Time, Fajardo shall, consistent with generally accepted accounting
principles, establish such additional accruals and reserves as may be necessary
to conform Fajardo's accounting and credit loss reserve practices and methods to
those of RGFC (as such practices and methods are to be applied to Fajardo from
and after the Effective Time) and reflect RGFC's plans with respect to the
conduct of Fajardo's business following the Merger and to provide for the costs
and expenses relating to the consummation by Fajardo of the transactions
contemplated by this Agreement; provided, however, that Fajardo shall not be
required to take such action (i) if such action is prohibited by applicable law
or by generally accepted accounting principles, (ii) if such action would have a
material adverse effect on the financial condition, results of operations or
business of RGFC on a consolidated basis following consummation of the Merger or
(iii) unless RGFC informs Fajardo that all conditions to RGFC's obligations to
consummate the transactions contemplated by this Agreement set forth in Article
VI hereof have been satisfied or waived. The establishment of such accruals and
reserves shall not, in and of itself, constitute a breach of any representation
or warranty of Fajardo contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, RGFC and Fajardo shall cooperate with and assist each other in formulating
a plan of integration for RGFC, Premier and Fajardo.
5.11 Restrictions on Resale
(a) Fajardo has Previously Disclosed to RGFC a schedule of each person
that, to the best of its knowledge, is deemed to be an "affiliate" of Fajardo
(each an "Affiliate"), as that term is used in Rule 405 under the Securities
Act.
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(b) Fajardo shall use its reasonable best efforts to cause each person
who may be deemed to be an Affiliate of Fajardo to execute and deliver to RGFC
an agreement in the form attached hereto as Exhibit D.
5.12 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.13 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated hereby cannot be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party or parties. Each party will
promptly inform the other party or parties of any facts applicable to it that
would be likely to prevent or materially delay approval of the Merger by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - RGFC, Premier and Fajardo
The respective obligations of RGFC, Premier and Fajardo to effect the
transactions contemplated by this Agreement shall be subject to satisfaction of
the following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby shall have been duly and validly taken by RGFC, Premier and Fajardo,
including approval by the requisite vote of the shareholders of Fajardo of this
Agreement, and all corporate and shareholder action necessary to authorize the
execution and delivery of the Bank Merger Agreement and consummation of the
transactions contemplated thereby shall have been duly and validly taken by
Premier and Fajardo.
(b) All approvals and consents for the transactions contemplated hereby
and by the Bank Merger Agreement from the FRB, the FDIC, the Commissioner and
any other
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Governmental Entity the approval or consent of which is required for the
consummation of the Merger and the other transactions contemplated hereby shall
have been received and all statutory waiting periods in respect thereof shall
have expired; and RGFC and Fajardo shall have procured all other approvals,
consents and waivers of each person (other than the Governmental Entities
referred to above) whose approval, consent or waiver is necessary to the
consummation of the Merger and the other transactions contemplated hereby.
(c) None of RGFC, its Subsidiaries or Fajardo shall be subject to any
statute, rule, regulation, injunction or other order or decree which shall have
been enacted, entered, promulgated or enforced by any governmental or judicial
authority which prohibits, restricts or makes illegal consummation of the Merger
or any of the other transactions contemplated hereby.
(d) The Form S-4 shall have become effective under the Securities Act,
and RGFC shall have received all state securities laws or "blue sky" permits and
other authorizations or there shall be exemptions from registration requirements
necessary to issue RGFC Common Stock in connection with the Merger, and neither
the Form S-4 nor any such permit, authorization or exemption shall be subject to
a stop order or threatened stop order by the Commission or any state securities
authority.
(e) The shares of RGFC Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The parties shall have received an opinion addressed to both RGFC
and Fajardo and issued by either a law firm or accounting firm designated by
RGFC and reasonably acceptable to Fajardo, which opinion shall be reasonably
acceptable to the parties and to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated for Puerto Rico income tax purposes as part of one or more
reorganizations within the meaning of Section 1112(g) of the Puerto Rico Tax
Code, and that accordingly:
(i) no gain or loss will be recognized by RGFC, Premier or
Fajardo as a result of the Merger;
(ii) no gain or loss will be recognized by the shareholders of
Fajardo through the exchange of their Fajardo Common Stock solely for
RGFC Class B Shares pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in RGFC Class B
Shares);
(iii) the tax basis of RGFC Class B Shares received by
shareholders who exchange all of their Fajardo Common Stock solely for
RGFC Class B Shares in the Merger will be the same as the tax basis of
Fajardo Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received); and
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(iv) any shareholder of Fajardo who receives cash in exchange
for their shares of Fajardo Common Stock will recognize gain, if any,
equal to the lesser of (i) the excess of the amount of cash plus the
fair market value of any RGFC Class B Shares received in the Merger
over the shareholder's adjusted basis in their Fajardo Common Stock, or
(ii) the amount of cash received.
In rendering such opinion, such law firm or accounting firm will
require and rely upon representations contained in certificates of officers of
RGFC and Premier and upon rulings (if requested and obtained) from the Puerto
Rico Treasury Department.
6.2 Conditions Precedent - Fajardo
The obligations of Fajardo to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following conditions at
or prior to the Effective Time unless waived by Fajardo pursuant to Section 7.4
hereof.
(a) The representations and warranties of RGFC and Premier as set forth
in Article IV hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time (or
on the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the aggregate, a
material adverse effect on the financial condition, results of operations or
business of RGFC on a consolidated basis or on the ability of RGFC, Premier and
Fajardo, as applicable, to consummate the Merger.
(b) RGFC shall have entered into an agreement to sell, as of the date
of Closing: (i) for $198,214 to a person or entity designated in writing by the
Fajardo Board of Directors prior to Fajardo's distribution of its proxy
statement required by Section 5.3(a), that certain real estate owned property
carried on Fajardo's book at $198,214, provided that such transaction shall have
been prominently described in Fajardo's proxy statement to stockholders required
by Section 5.3(a) hereof and (ii) for $25,000 to a person or entity designed in
writing by the Fajardo Board of Directors prior to Fajardo's distribution of the
proxy statement required by Section 5.3(a), that certain option on Fajardo's
books to purchase land for construction of an office building (including
blueprints associated therewith), provided that such person or entity shall have
delivered to RGFC as of the Closing an agreement in writing that for five years
from the date of Closing, neither such person or entity nor any company,
partnership, trust or entity of any kind whatsoever as to which he or it is
directly or indirectly affiliated (or any company, partnership, trust or entity
of any kind whatsoever to which he may sell such option or such property) may
use such property for engaging in the business of banking or mortgage banking,
and provided further that such transaction shall have been prominently disclosed
in Fajardo's proxy statement required by Section 5.3(a) hereof. In addition,
RGFC shall have accepted, as of the date of Closing, from Rudolph Kauffmann
payment of $20,000 in full satisfaction of an account
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receivable reflected on Fajardo's books at $22,000, provided that such
transaction shall have been prominently disclosed in Fajardo's proxy statement
required by Section 5.3(a) hereof.
(c) RGFC and Premier shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by them pursuant to this Agreement on or prior to the Effective
Time.
(d) Each of RGFC and Premier shall have delivered to Fajardo a
certificate, dated the date of the Closing and signed by its President and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a), 6.2(b) and 6.2(c) have been satisfied.
(e) RGFC and/or Premier shall have furnished Fajardo with such
certificates of its respective officers or others and such other documents to
evidence fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to RGFC or Premier as Fajardo may reasonably request.
6.3 Conditions Precedent - RGFC and Premier
The obligations of RGFC and Premier to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the following
conditions at or prior to the Effective Time unless waived by RGFC or Premier
pursuant to Section 7.4 hereof.
(a) The representations and warranties of Fajardo set forth in Article
III hereof shall be true and correct as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (or on the
date when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 6.3(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
unless the failure of any of the representations or warranties to be so true and
correct would have, individually or in the aggregate, a material adverse effect
on the financial condition, results of operations or business of Fajardo or on
the ability of RGFC, Premier and Fajardo, as applicable, to consummate the
Merger.
(b) Fajardo shall have, as of the date of Closing, stockholders' equity
of not less than $3,450,000.
(c) Fajardo shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(d) Fajardo shall have delivered to RGFC a certificate, dated the date
of the Closing and signed by its Chairman and President and by its Chief
Financial Officer, to the effect that the conditions set forth in Sections
6.3(a), 6.3(b) and 6.3(c) have been satisfied.
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(e) No approval or consent referred to in Section 6.1(b) hereof shall
include any condition or requirement that, individually or in the aggregate,
would result in a material adverse effect on the financial condition, results of
operations or business of RGFC on a consolidated basis.
(f) Fajardo shall have furnished RGFC with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
Fajardo as RGFC may reasonably request.
(g) Holders of not more than 10% of the outstanding Fajardo Common
Stock shall have elected to exercise dissenters' or appraisal rights under 12
C.F.R. Section 552.14.
(h) Fajardo shall have executed a binding lease agreement with respect
to its branch office for a term of 18 months and shall have executed a binding
lease agreement with respect to its executive office for a term of one year.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by RGFC in writing
if Fajardo has, or by Fajardo in writing if RGFC or Premier has, in any material
respect, breached (i) any material covenant or undertaking contained herein or
(ii) any representation or warranty contained herein, in any case if such breach
has not been cured by the earlier of 30 days after the date on which written
notice of such breach is given to the party committing such breach or the
Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run;
(d) at any time, by any party hereto in writing, if the shareholders of
Fajardo do not approve this Agreement after a vote taken thereon at a meeting
duly called for such purpose (or at any adjournment thereof), unless the failure
of such occurrence shall be due to the failure of the party seeking to terminate
to perform or observe in any material respect its agreements set forth herein to
be performed or observed by such party at or before the Effective Time;
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(e) by either Fajardo or RGFC in writing if the Effective Time has not
occurred by the close of business on the sixth month anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date;
(f) at any time by any party hereto in writing if such party is not in
default hereunder and such party determines in good faith that any condition
precedent to such party's obligations to consummate the Merger and the other
transactions contemplated hereby is or would be impossible to satisfy, and such
condition is not waived by the other party.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d), (e) and (f)
shall not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.8), provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive RGFC, Premier or Fajardo (or any director, officer
or controlling person thereof) of any defense at law or in equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either RGFC or
Fajardo.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of RGFC, Premier and Fajardo) extend the time for
the performance of any of the obligations or other acts of the other party
hereto and may waive (i) any inaccuracies of the other party in the
representations or warranties contained in this Agreement or any document
delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, (iii) to the extent permitted by
law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other party of any of its
obligations set forth herein, provided that any such waiver granted, or any
amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of RGFC, Premier or Fajardo have
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approved this Agreement shall not modify either the amount or form of the
consideration to be provided hereby to the holders of Fajardo Common Stock upon
consummation of the Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of RGFC, Premier and Fajardo, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and authorized by
their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel.
(b) Notwithstanding any provision in this Agreement to the contrary, in
the event that any of the parties shall default in its obligations hereunder,
each of the non-defaulting parties may pursue any remedy available at law or in
equity to enforce its rights and shall be paid by the defaulting party for all
damages, costs and expenses, including without limitation legal, accounting,
investment banking and printing expenses, incurred or suffered by such
non-defaulting party in connection herewith or in the enforcement of its rights
hereunder.
(c) If the Merger shall not have occurred within six months from the
date of this Agreement for any reason other than the failure of RGFC to secure
required regulatory approvals, then in consideration of Fajardo's costs and
expenses in connection with this Agreement, RGFC shall pay Two Hundred Fifty
Thousand Dollars ($250,000) to Fajardo as an agreed-upon termination fee, in
immediately available funds, within two business days after the occurrence of
the last of such events. If RGFC timely satisfies its obligations pursuant to
this Section 8.1(c), it shall have no further liability to Fajardo whatsoever
under this Agreement.
8.2 Entire Agreement
This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective
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successors, any rights, remedies, obligations or liabilities other than as set
forth in Sections 5.8 and 5.9 hereof.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to RGFC or Premier:
R&G Financial Corporation
R&G Plaza
280 Jesus T. Pinero Avenue
Hato Rey, San Juan, Puerto Rico 00918
Attn: Victor J. Galan
President and Chief Executive Officer
Fax: 787-766-8175
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Norman B. Antin, Esq.
Fax: 202-347-2172
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If to Fajardo:
Fajardo Federal Savings Bank
Celis Aquilera #161
Fajardo, Puerto Rico 00648
Attn: Jose E. Soler
Chairman of the Board
and
Juan R. Zalduondo, Esq.
Midtown Building
Suite 101
421 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
With a required copy to:
Fiddler Gonzalez & Rodriquez
P.O. Box 363507
San Juan, Puerto Rico 00936-3507
Attn: Antonio Sifre, Esq.
Fax: (787) 759-3123
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, RGFC
may, with the written consent of Fajardo, which shall not be unreasonably
withheld, elect, subject to the filing of all necessary applications and the
receipt of all required regulatory approvals, to modify the structure of the
acquisition of Fajardo set forth herein provided that (i) the income tax
consequences of any transactions created by such modification shall not be other
than those set forth in Section 6.1(f) hereof, (ii) the consideration to be paid
to the holders of Fajardo Common Stock is not thereby changed in kind or reduced
in amount as a result of such modification and (iii) such modification will not
materially delay or jeopardize receipt of any required regulatory approvals or
any other condition to the obligations of RGFC set forth in Sections 6.1 and 6.3
hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
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8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Puerto Rico applicable to agreements made and
entirely to be performed within such jurisdiction.
8.9 Agreement with Respect to Infusion of Capital by Fajardo's Directors.
By letter dated June 26, 1996, the directors of Fajardo agreed to
purchase additional Fajardo Common Stock on a quarterly basis in the amount of
5,555 shares at a fixed price of $18.00 per share (or an aggregate of $99,990).
As of the date of this Agreement, the Fajardo directors had not made the
purchase of Fajardo Common Stock indicated in such letter for the quarters ended
December 31, 1997, March 31, 1998 or June 30, 1998. If the OTS requires such
payment to be made, Fajardo, after written notification to RGFC, shall be
permitted to issue such shares to those Fajardo directors specified in said
notice to RGFC as per the terms of such June 26, 1996 letter. If additional
capital is required for any other reason other than the one stated above, the
directors of Fajardo, subject to the prior approval of RGFC may purchase
additional Fajardo Common Stock. The parties hereto agree that under such
circumstances, such shares of Fajardo Common Stock may be issued notwithstanding
Section 5.6 (a)(ii) hereof. The parties further agree that upon the Closing, (i)
Section 2.3 shall not apply to such shares and such shares of Fajardo Common
Stock shall not be entitled to the Merger Consideration; and (ii) the holders of
such shares shall be repaid the $18.00 fixed price per share paid, plus interest
on the aggregate amount paid for such shares of Fajardo Common Stock at an
annualized rate of 6%. Such shares of Fajardo Common Stock shall be cancelled by
RGFC upon consummation of the Merger.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and attested by their
officers thereunto duly authorized, all as of the day and year first above
written.
R&G FINANCIAL CORPORATION
Attest:
/s/ Roman Prats By: /s/ Victor J. Galan
- --------------- --------------------
Name: Roman Prats Name: Victor J. Galan
Title: Vice Chairman Title: President and Chief
Executive Officer
R-G PREMIER BANK OF PUERTO RICO
Attest:
/s/ Roman Prats By: /s/ Victor J. Galan
- --------------- -------------------
Name: Roman Prats Name: Victor J. Galan
Title: Vice Chairman Title: President and Chief
Executive Officer
FAJARDO FEDERAL SAVINGS BANK
Attest:
/s/ Rene A. Lavergne By: /s/ Jose E. Soler
- -------------------- -----------------
Name: Rene A. Lavergne Name: Jose E. Soler
Title: President Title: Chairman of the Board
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EXHIBIT A
PLAN OF MERGER
THIS PLAN OF MERGER (the "Plan"), dated this 10th day of March, 1998,
is by and among R-G Premier Bank of Puerto Rico, a Puerto Rico-chartered
commercial bank ("Premier") and a wholly-owned subsidiary of R&G Financial
Corporation ("RGFC"), and Fajardo Federal Savings Bank, a federally-chartered
savings bank ("Fajardo").
W I T N E S S E T H:
WHEREAS, RGFC, Premier and Fajardo have entered into an Agreement of
Merger (the "Agreement") dated March 10, 1998, pursuant to which Fajardo will
merge with and into Premier (the "Merger"); and
WHEREAS, Premier and Fajardo desire to merge on the terms and
conditions herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section 1. The Merger
Subject to the terms and conditions of the Plan, at the Effective Time
(as defined in Section 2 below), Fajardo shall merge with and into Premier in
accordance with the applicable provisions of the Puerto Rico Banking Law.
Premier shall be the surviving corporation (the "Surviving Corporation") and
shall operate under the name "R-G Premier Bank of Puerto Rico." Upon
consummation of the Merger, the separate corporate existence of Fajardo shall
cease.
Section 2. Effective Time
The Merger shall become effective upon the occurrence of the filing of
this Plan with the Secretary of State of the Commonwealth of Puerto Rico
pursuant to the Banking Law of Puerto Rico (the "Effective Time").
Section 3. Articles of Incorporation and Bylaws
The Articles of Incorporation and Bylaws of Premier in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation.
<PAGE>
Section 4. Effects of the Merger
From and after the Effective Time, the Merger shall have the effects
set forth in Section 15 of the Puerto Rico Banking Law.
Section 5. Directors and Executive Officers
Upon consummation of the Merger:
(i) The directors of the Surviving Corporation shall consist of
twelve (12) persons, the names of which are set forth as
Appendix A to this Plan and incorporated by reference herein;
(ii) The executive officers of the Surviving Corporation shall be as
set forth in Appendix B to this Plan and incorporated herein by
reference.
Section 6. Effect on Shares of Fajardo Common Stock
At the Effective Time:
(i) Each share of common stock of Fajardo, par value, $1.00 per
share, issued and outstanding will be converted to a right to
receive the Merger Consideration from the Surviving Corporation
in accordance with Section 2.3 of the Agreement; and
(ii) Each share of Premier capital stock issued and outstanding
shall remain issued and outstanding.
Section 7. Additional Actions
If at any time after the Effective Time, the Surviving Corporation
shall consider that any further assignments or assurances in law or any other
acts are necessary or desirable to:
(i) Vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its rights, title or interest in, to or
under any of the rights, properties or assets of Fajardo
acquired, or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of the Agreement and the Plan
of Merger,
Fajardo and its proper directors and officers shall be deemed to have granted to
the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation
A-2
<PAGE>
and otherwise to carry out the purposes of the Agreement and the Plan of Merger;
and the proper directors and officers of the Surviving Corporation are fully
authorized in the name of Fajardo or otherwise to take any and all such action.
Section 8. Counterpart
This Plan may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
agreement.
Section 9. Governing Law
(i) This Plan shall be governed in all respects, including but not
limited to, validity, interpretation, effect and performance,
by the laws of the Commonwealth of Puerto Rico.
(ii) Section headings are not to be considered part of this Plan,
are solely for convenience of reference, and shall not affect
the meaning or interpretation of this Plan or any of its
provisions.
Section 10. Amendment
Subject to applicable law and Section 7.5 of the Agreement, this Plan
may be amended, modified or supplemented only by written agreement of Premier
and Fajardo at any time prior to the Effective Time.
Section 11. Waiver
Subject to Section 7.4 of the Agreement, any of the terms of conditions
of this Plan may be waived at any time by whichever of the parties hereto is
entitled to the benefit thereof by action taken by the Board of Directors of
such waiving party.
Section 12. Assignment; Termination
This Plan may not be assigned by any party hereto without the prior
written consent of the other party. This Plan shall terminate upon the
termination of the Agreement in accordance with its terms.
A-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Plan as
of the day and year first above written:
Attest: R-G PREMIER BANK OF PUERTO RICO
/s/ Ramon Prats By: /s/ Victor J. Galan
- --------------- -------------------
Ramon Prats Victor J. Galan, President and
Vice Chairman of the Board Chief Executive Officer
FAJARDO FEDERAL SAVINGS BANK
/s/ Rene A. Lavergne By: /s/ Jose A. Soler
- -------------------- ------------------
Rene A. Lavergne Jose A. Soler, Chairman of
President the Board
A-4
<PAGE>
Plan of Merger
Appendix A
R-G Premier Bank of Puerto Rico Directors
DIRECTORS
1. Victor J. Galan
2. Ana M. Armendariz
3. Laureano Carus
4. Benigno R. Fernandez
5. Victor L. Galan
6. Eduardo McCormack
7. Ramon Prats
8. Pedro L. Ramirez
9. Gilberto Rivera-Arreaga
10. Enrique Umpierre
11. Jeanne Ubinas
12. Juan J. Diaz
A-5
<PAGE>
Plan of Merger
Appendix B
EXECUTIVE OFFICERS OF R&G PREMIER BANK OF PUERTO RICO
Victor J. Galan (Chairman of the Board, President and Chief Executive Officer)
Ramon Prats - Vice Chairman of the Board
Jose L. Ortez - Chief Financial Officer of the Bank
A-6
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EXHIBIT B
OPTION AGREEMENT
OPTION AGREEMENT, dated as of March 10, 1998, by and among R&G
Financial Corporation ("RGFC"), a Puerto Rico corporation and the parent holding
company for R-G Premier Bank of Puerto Rico ("Premier"), a Puerto Rico-chartered
commercial bank, and Fajardo Federal Savings Bank ("Fajardo"), a
federally-chartered savings bank (the "Agreement").
WITNESSETH
WHEREAS, RGFC, Premier and Fajardo have entered into an Agreement of
Merger dated as of the date hereof (the "Merger Agreement"), which is being
executed simultaneously with the execution of this Agreement; and
WHEREAS, RGFC has requested the execution of this Agreement by Fajardo
in order to increase the likelihood that the transactions contemplated by the
Merger Agreement will be consummated in accordance with its terms and as a
condition to RGFC's and Premier's obligation to complete the transactions
contemplated by the Merger Agreement and, in consideration for such obligation,
Fajardo has agreed to issue to RGFC an option entitling RGFC to purchase shares
of its common stock upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the execution of the Merger
Agreement and the premises therein and herein contained, the parties agree as
follows:
1. Grant of Option. Subject to the terms and conditions hereof, Fajardo
irrevocably grants to RGFC the option ("Option") to purchase at one time or from
time to time an aggregate of 52,116 shares of common stock, $1.00 par value per
share, of Fajardo ("Common Stock") at a price per share equal to $16.54
($3,450,000 divided by 208,549 number of shares of Fajardo Common Stock
outstanding on a pro forma basis) (the price per share is referred to below as
the "Purchase Price" and the price when used with respect to a number of shares
is referred to below as the "aggregate Purchase Price" for such shares). As used
in this Agreement, the term "Shares" means the shares of Common Stock subject to
the Option.
2. Exercise of Option.
(a) Subject to the terms and conditions hereof, RGFC may exercise the
Option, in whole at any time or in part from time to time, to the extent not
previously exercised, upon the occurrence of a Purchase Event (as defined below)
so long as the Purchase Event occurs prior to the Termination Date (as defined
below). The Termination Date shall be the first to occur of the following: (i)
the effective time of the merger of Fajardo with and into Premier pursuant to
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the Merger Agreement, (ii) 18 months following the first occurrence of a
Purchase Event (as defined below), (iii) termination of the Merger Agreement in
accordance with its terms prior to the occurrence of a Purchase Event or (iv) 12
months after the termination of the Merger Agreement by RGFC as a result of a
willful breach of any representation, warranty, covenant or agreement of
Fajardo.
(b) The term "Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) Fajardo, without having received RGFC's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined below) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the rules and regulations thereunder)
other than RGFC or any affiliate of RGFC (including Premier) (the term
"affiliate" for purposes of this Agreement having the meaning assigned
thereto in Rule 405 under the Securities Act of 1933 (the "Securities
Act")) or the Board of Directors of Fajardo shall have recommended that
the shareholders of Fajardo approve or accept any Acquisition
Transaction with any person other than RGFC or any affiliate of RGFC.
For purposes of this Agreement, "Acquisition Transaction" shall mean
(x) a merger or consolidation, or any similar transaction, involving
Fajardo, (y) a purchase, lease or other acquisition of all or
substantially all of the assets of Fajardo or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 15% or more of the voting
power of Fajardo;
(ii) Any person (other than RGFC or any affiliate of RGFC),
other than in connection with a transaction to which RGFC has given its
prior written consent, shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the Exchange Act, and the rules and regulations thereunder) and
subsequent to such acquisition, Fajardo shall have breached any
covenant or obligation contained in the Merger Agreement and such
breach would entitle RGFC to terminate the Merger Agreement or the
holders of the Common Stock shall not have approved the Merger
Agreement at the meeting of such shareholders held for the purpose of
voting on the Merger Agreement, such meeting shall not have been held
or shall have been canceled prior to termination of the Merger
Agreement or the Board of Directors of Fajardo shall have withdrawn or
modified in a manner adverse to RGFC the recommendation of the Board of
Directors of Fajardo with respect to the Merger Agreement;
(iii) Any person other than RGFC or any affiliate of RGFC,
other than in connection with a transaction to which RGFC has given its
prior written consent, shall have made a bona fide proposal to Fajardo
or its shareholders, by public announcement or written communication
that is or becomes the subject of public disclosure, to engage
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in an Acquisition Transaction (including, without limitation, any
situation in which any person other than RGFC or any affiliate of RGFC
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) a tender offer or shall have filed a registration
statement under the Securities Act with respect to an exchange offer,
to purchase any shares of Fajardo Common Stock such that, upon
consummation of such offer, such person would own or control 15% or
more of the then outstanding shares of Common Stock);
(iv) After a bona fide proposal is made by any person other
than RGFC or any affiliate of RGFC to Fajardo or its shareholders to
engage in an Acquisition Transaction, Fajardo shall have breached any
covenant or obligation contained in the Merger Agreement and such
breach would entitle RGFC to terminate the Merger Agreement or the
holders of the Common Stock shall not have approved the Merger
Agreement at the meeting of such shareholders held for the purpose of
voting on the Merger Agreement, such meeting shall not have been held
or shall have been canceled prior to termination of the Merger
Agreement or the Board of Directors of Fajardo shall have withdrawn or
modified in a manner adverse to RGFC the recommendation of the Board of
Directors of Fajardo with respect to the Merger Agreement; or
(v) Any person other than RGFC or any affiliate of RGFC, other
than in connection with a transaction to which RGFC has given its prior
written consent, shall have filed an application or notice with the
Board of Governors of the Federal Reserve System (the "FRB"), the
Federal Deposit Insurance Corporation (the "FDIC"), the Office of
Thrift Supervision (the "OTS") or other governmental authority or
regulatory or administrative agency or commission for approval to
engage in an Acquisition Transaction.
(c) Fajardo shall promptly give written notice to RGFC of the
occurrence of a Purchase Event known to Fajardo; however, the giving of such
notice by Fajardo shall not be a condition to the right of RGFC to exercise the
Option. If more than one transaction or event giving rise to a Purchase Event is
undertaken or effected, then all such transactions shall give rise to only one
Purchase Event, as applicable, which Purchase Event shall be deemed continuing
for all purposes hereunder until all such transactions or events are abandoned.
(d) Notwithstanding anything to the contrary contained in this
Agreement, Fajardo shall not be obligated to issue Shares upon exercise of the
Option (i) in the absence of any required governmental or regulatory approval or
consent necessary for Fajardo to issue the Shares or for RGFC to exercise the
Option or prior to the expiration or termination of any waiting period required
by law, (ii) in the event that RGFC is in material breach of its covenants or
obligations contained in the Merger Agreement or (iii) so long as any injunction
or other order, decree or ruling issued by any federal or state court of
competent jurisdiction is in effect which prohibits the sale or delivery of the
Shares. If the Option is otherwise exercisable but cannot be exercised prior to
termination as specified in Section 2(a) solely because of any injunction, order
or similar restraint issued by a court of competent jurisdiction, the Option
shall continue and will expire on
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the twentieth business day after such injunction, order or restraint shall have
been dissolved or when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be.
3. Notice of Exercise; Payment and Delivery of Shares.
(a) In the event that RGFC desires to exercise the Option, RGFC shall
send a written notice to Fajardo specifying the total number of Shares it will
purchase and a place and date for the closing (the "Closing") of such purchase,
which date shall be not later than 15 business days nor earlier than three
business days from the date such notice is given (the "Closing Date"). If prior
notification to or approval of the FRB or the FDIC or any other regulatory
authority is required in connection with such purchase, Fajardo shall cooperate
with RGFC in the filing of the required notice of application for approval and
the obtaining of such approval and the closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
(b) On each Closing Date, RGFC shall (i) pay to Fajardo, in immediately
available funds by wire transfer to a bank account designated by Fajardo, an
amount equal to the Purchase Price multiplied by the number of Shares to be
purchased on such Closing Date, and (ii) present and surrender this Agreement to
Fajardo at the address of Fajardo specified in Section 13(b) hereof. Fajardo
shall pay any and all stamp taxes in connection with the issuance and sale of
the Shares and in connection with the exercise of the Option, and will save RGFC
harmless against any and all liabilities with respect to such taxes.
(c) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 3(b), (i)
Fajardo shall deliver to RGFC (A) a certificate or certificates representing the
Shares to be purchased at such Closing, which Shares shall be free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever and subject
to no pre-emptive rights, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Common Stock purchasable
hereunder, and (ii) RGFC shall deliver to Fajardo a letter agreeing that RGFC
shall not offer to sell or otherwise dispose of such Shares in violation of
applicable federal and state law or the provisions of this Agreement.
(d) In addition to any other legend that is required by applicable law,
certificates for the Shares delivered at each Closing shall be endorsed with a
restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF AN OPTION
AGREEMENT DATED AS OF MARCH 10, 1998. A COPY OF SUCH AGREEMENT
WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
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CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if RGFC shall have
delivered to Fajardo a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Fajardo and its counsel, to the effect that such legend is not
required for purposes of the Securities Act.
4. Representations and Warranties of Fajardo. Fajardo hereby represents
and warrants to RGFC as follows:
(a) Due Authorization. Fajardo has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Fajardo. This Agreement has
been duly executed and delivered by Fajardo. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Fajardo with any of the provisions hereof will not (i) conflict
with or result in a breach of any provision of its Articles of Incorporation or
Bylaws or a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Fajardo is a party, by which it or
any of its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulations applicable to Fajardo or any of
its properties or assets. No consent or approval by any governmental authority,
other than compliance with applicable federal and state securities and banking
laws or regulations, is required of Fajardo in connection with the execution and
delivery by Fajardo of this Agreement or the consummation by Fajardo of the
transactions contemplated hereby.
(b) Authorized Stock. Fajardo has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Common Stock upon the
exercise of the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Common Stock necessary for RGFC
to exercise the Option, and Fajardo will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Common Stock or
other securities which may be issued pursuant to Section 6 upon exercise of the
Option. The shares of Common Stock to be issued upon due exercise of the Option,
including all additional shares of Common Stock or other securities which may be
issuable pursuant to Section 6, upon issuance pursuant hereto, shall be duly and
validly issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of Fajardo.
5. Representations and Warranties of RGFC. RGFC hereby represents and
warrants to Fajardo that:
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(a) Due Authorization. RGFC has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of RGFC. This Agreement has been duly executed and
delivered by RGFC.
(b) Purchase Not for Distribution. This Option is not being, and any
Shares or other securities acquired by RGFC upon exercise of the Option will not
be, acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
6. Adjustment upon Changes in Capitalization, etc.
(a) In the event of any change in Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that RGFC shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that RGFC would have
received in respect of Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Common Stock are issued after the date of this Agreement
(other than pursuant to employee stock options or an event described in the
first sentence of this Section 6(a)), the number of shares of Common Stock
subject to the Option shall be adjusted so that, after such issuance, it,
together with all shares of Common Stock previously issued pursuant hereto,
equals 24.99% of the number of shares of Common Stock then issued and
outstanding, giving effect to any shares subject to or issued pursuant to the
Option.
(b) In the event that Fajardo shall enter into an agreement: (i) to
consolidate with or merge into any person, other than RGFC or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than RGFC or one of
its subsidiaries, to merge into Fajardo and Fajardo shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of Fajardo or any other person or cash or any other property or the
outstanding shares of Common Stock immediately prior to such merger shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged Fajardo; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than RGFC or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that upon the consummation of any
such transaction and upon the terms and conditions set forth herein, RGFC shall
receive for each Share with respect to which the Option has not been exercised
an amount of consideration in the form of and equal to the per share amount of
consideration that would be received by the holder of one share of Common Stock
less the Purchase Price (and, in the event of an election or similar arrangement
with respect to the
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type of consideration to be received by the holders of Common Stock, subject to
the foregoing, proper provision shall be made so that the holder of the Option
would have the same election or similar rights as would the holder of the number
of shares of Common Stock for which the Option is then exercisable).
7. Registration of the Shares.
(a) If RGFC requests Fajardo in writing to register under the
Securities Act or any other applicable securities registration requirements
Shares which have been purchased by RGFC hereunder, Fajardo will use its best
efforts to cause the Shares so specified in such request to be registered as
soon as practicable so as to permit the sale or other distribution by RGFC of
such Shares (and to keep such registration in effect for a period of at least
180 days) and in connection therewith shall prepare and file as promptly as
reasonably possible (but in no event later than 45 days from receipt of RGFC's
request) a registration statement under the Securities Act to effect such
registration on an appropriate form, which would permit the sale of the Shares
by RGFC in the manner specified by RGFC in its request. In connection with such
registration, Fajardo shall use its best efforts to cause to be delivered to
RGFC (and any other holder whose Shares are the subject of such registration)
such certificates, opinions, accountants' letters and other documents as RGFC
(or any such other holder) shall reasonably request and are customarily rendered
in connection with the registration of securities under the Securities Act. RGFC
shall provide all information reasonably requested by Fajardo for inclusion in
any documents to be prepared hereunder. All expenses incurred by Fajardo in
complying with the provisions of this Section 7, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for Fajardo and blue sky fees and expenses shall be paid by Fajardo.
Underwriting discounts and commissions to brokers and dealers relating to the
Shares, fees and disbursements of counsel to RGFC and any other expenses
incurred by RGFC in connection with such registration shall be borne by RGFC.
Fajardo shall not be obligated to make effective more than two registration
statements pursuant to this Section 7(a).
(b) Fajardo shall notify RGFC in writing not less than ten business
days prior to filing a registration statement under the Securities Act with
respect to any Common Stock of Fajardo's intention so to file. If RGFC wishes to
have any portion of its Shares purchased hereunder included in such registration
statement, it shall advise Fajardo in writing to that effect within five
business days following receipt of such notice from Fajardo pursuant to the
preceding sentence, and Fajardo will thereupon include the number of shares
indicated by RGFC under such registration statement, provided, however, that if
the managing underwriter determines and advises Fajardo and RGFC in writing that
the inclusion in the registration statement of the number of shares indicated by
RGFC would interfere with the successful marketing of the Common Stock proposed
to be registered and sold by Fajardo, then the number of shares indicated by
RGFC to be included in the underwriting shall be reduced or eliminated pro rata
among all holders of shares of Common Stock requesting such registration, and
further provided, however, that nothing herein shall prevent Fajardo from, at
any time, abandoning or delaying any registration.
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(c) The rights provided under this Section 7 shall expire upon the
third annual anniversary of the first acquisition of Shares by RGFC hereunder.
8. Indemnification.
(a) In connection with any registration under the provisions of Section
8 hereof, Fajardo shall indemnify and hold harmless RGFC and any underwriter (as
defined in the Securities Act) for RGFC and each person who controls RGFC or
such underwriter within the meaning of the Securities Act, from and against any
and all loss, damage, liability, cost and expense to which RGFC or any such
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by or arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any preliminary or final offering prospectus contained therein or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that Fajardo will not be
liable in any such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue or alleged untrue
statement or omission so made in conformity with information furnished by RGFC
such underwriter or such controlling persons in writing specifically for use in
the preparation thereof.
(b) RGFC will indemnify and hold harmless Fajardo, any underwriter for
Fajardo and each person who controls Fajardo or such underwriter within the
meaning of the Securities Act, from and against any and all loss, damage,
liability, cost and expense to which Fajardo or any such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by or
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, any preliminary
or final offering prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue or allegedly untrue statement or omission was so made in conformity with
information furnished by RGFC in writing specifically for use in the preparation
thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of Section 8(a) or (b) of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party pursuant to the provisions of Section 8(a) or (b), promptly
notify the indemnifying party of the commencement thereof; except to the extent
of any actual prejudice to the indemnifying party, the omission to so notify the
indemnifying party will not relieve the indemnifying party from any liability
which it may have to any indemnified party otherwise hereunder. In case such
action is brought against any indemnified party and it notifies
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the indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and there is a conflict of
interests which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall have
the right to select one separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of Section 8(a) or (b) for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
(d) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as expressly specified therein, the
parties entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that contribution
is not permitted under Section 11(f) of the Securities Act. In determining the
amount of contribution to which the respective parties are entitled, there shall
be considered the parties' relative fault, knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and/or prevent any statement or omission, and any other
equitable considerations appropriate under the circumstances.
9. Quotation. If the Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation or
trading or listing on any securities exchange, Fajardo, upon the request of RGFC
after the occurrence of a Purchase Event, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of Common
Stock or other securities to be acquired upon exercise of the Option on such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
10. Division of Option. Upon the occurrence of and following a Purchase
Event, this Agreement (and the Option granted hereby) shall be exchangeable,
without expense, at the option of RGFC, upon presentation and surrender of this
Agreement at the principal office of Fajardo, for other agreements providing for
options of different denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any other agreements
and related options for which this Agreement (and the Option granted hereby) may
be exchanged. Upon receipt by Fajardo of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and in the case
of loss, theft or destruction of reasonably
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satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Fajardo will execute and deliver a new agreement of
like tenor and date.
11. Further Assurances. Fajardo agrees to execute and deliver such
documents and instruments and take such further actions as may be necessary or
appropriate or as RGFC may reasonably request in order to ensure that RGFC
receives the full benefits of this Agreement (including, without limitation, the
prompt filing of any required notice or application for approval with any
applicable federal or state regulatory agency and the expeditious processing of
the same). Prior to the Termination Date, Fajardo will refrain from taking any
action which would have the effect of preventing or interfering with the
delivery by Fajardo of the Shares (or other securities deliverable pursuant to
Section 6 hereof) to RGFC upon any exercise of the Option or from otherwise
performing its obligations under this Agreement.
12. Remedies. The parties agree that RGFC would be irreparably damaged
if for any reason Fajardo failed to issue any of the Shares (or other securities
deliverable pursuant to Section 6 hereof) upon exercise of the Option or to
perform any of its other obligations under this Agreement, and that RGFC would
not have an adequate remedy at law in such event. Accordingly, RGFC shall be
entitled to specific performance and injunctive and other equitable relief to
enforce the performance of this Agreement by Fajardo. This provision is without
prejudice to any other rights that RGFC may have against Fajardo for any failure
to perform its obligations under this Agreement.
13. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by prepaid
registered or certified mail (return receipt requested) or by cable, telegram,
telecopy or telex addressed as follows:
(i) If to RGFC, to:
R&G Financial Corporation
R&G Plaza
280 Jesus T. Pinero Avenue
Hato Rey, San Juan, Puerto Rico 00918
ATTN: Victor J. Galan
President and Chief Executive Officer
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Copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
ATTN: Norman B. Antin, Esq.
(ii) If to Fajardo, to:
Fajardo Federal Savings Bank
Celis Aquilera #161
Fajardo, Puerto Rico 00648
ATTN: Jose E. Soler
Chairman of the Board
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
(c) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
If for any reason any court or regulatory agency determines that the
Option will not permit the holder to acquire the full number of Shares, it is
the express intention of Fajardo to allow the holder to acquire such lesser
number of shares as may be permissible, without any amendment or modification
hereof, and any such delivery or deliveries of Shares by Fajardo shall be in
full satisfaction of Fajardo' obligation to deliver Shares hereunder.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Puerto Rico without giving
effect to the principles of conflicts of laws thereof.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(f) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(g) Assignment. RGFC may assign this Agreement to any wholly owned
subsidiary of RGFC. RGFC may not, without the prior written consent of Fajardo,
assign this Agreement to any other person in whole or in part, provided that
upon the occurrence of and following a
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Purchase Event, RGFC may sell, transfer, assign or otherwise dispose of its
rights and obligations hereunder in whole or in part without such consent. In
the case of any permitted sale, transfer, assignment or disposition in part of
this Option, Fajardo shall do all things necessary to facilitate the same and
the person to whom this Option is sold, transferred assigned or disposed of
shall agree in writing to the terms and conditions hereof. This Agreement shall
not be assignable by Fajardo except by operation of law. Subject to the
foregoing, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(h) Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person (other than an
assignee or transferee of RGFC pursuant to Section 13(g) hereof) any rights or
remedies of any nature whatsoever under or by any reason of this Agreement.
14. Entire Agreement. This Agreement, including the documents and other
writings referred to herein or delivered pursuant hereto, contains the entire
agreement and understanding of the parties with respect to its subject matter.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
between the parties, both written and oral, with respect to its subject matter.
B-12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
R&G FINANCIAL CORPORATION
Attest:
/s/ Ramon Prats By: /s/ Victor J. Galan
- --------------- -------------------
Ramon Prats Victor J. Galan
Vice Chairman of the Board President and Chief Executive Officer
FAJARDO FEDERAL SAVINGS BANK
Attest:
/s/ Rene A. Lavergne By: /s/ Jose E. Soler
- -------------------- -----------------
Rene A. Lavergne Jose E. Soler
President Chairman of the Board
B-13
<PAGE>
EXHIBIT C
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of March 9, 1998, by and among R&G
Financial Corporation ("RGFC"), a Puerto Rico corporation, and certain
stockholders of Fajardo ("Fajardo"), a federally-chartered savings bank, named
on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, RGFC, R-G Premier Bank of Puerto Rico, a Puerto Rico-chartered
commercial bank and a wholly-owned subsidiary of RGFC ("Premier"), and Fajardo
have entered into an Agreement of Merger, dated as of the date hereof (the
"Agreement"), which is being executed simultaneously with the execution of this
Stockholder Agreement and provides for, among other things, the merger of
Fajardo with and into Premier (the "Merger"); and
WHEREAS, in order to induce RGFC to enter into the Agreement, each of
the Stockholders agrees to, among other things, vote in favor of the Agreement
in his capacity as a stockholder of Fajardo.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Acquiror Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of Fajardo, $1.00 par value per share ("Fajardo
Common Stock"), set forth opposite such Stockholder's name on Schedule I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of Fajardo's stockholders
called for the purpose, vote, or cause to be voted, all shares of Fajardo Common
Stock in which such stockholder has the right to vote (whether owned as of the
date hereof or hereafter acquired) in favor of the Agreement and against any
plan or proposal pursuant to which Fajardo is to be acquired by or merged with,
or pursuant to which Fajardo proposes to sell all or substantially all of its
assets and liabilities to, any person, entity or group (other than to RGFC or
any affiliate thereof);
(b) except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the meeting of Fajardo's stockholders referred to in Section
2(a) hereof or the earlier termination of the Agreement in accordance with its
terms, sell, pledge, transfer or otherwise dispose of the Stockholder's shares
of Fajardo Common Stock;
<PAGE>
(c) such Stockholder shall not in his capacity as a stockholder of
Fajardo directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than RGFC or an affiliate thereof) concerning any merger, sale of
substantial assets or liabilities not in the ordinary course of business, sale
of shares of capital stock or similar transactions involving Fajardo (provided
that nothing herein shall be deemed to affect the ability of any Stockholder to
fulfill his duties as a director or officer of Fajardo); and
(d) such Stockholder shall use his reasonable best efforts to take or
cause to be taken all action, and to do or cause to be done all things,
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the agreements contemplated by this Stockholder
Agreement.
Each Stockholder further agrees that Fajardo's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Fajardo Common Stock, unless the transfer
has been effected in compliance with the terms of this Stockholder Agreement.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Fajardo Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of Fajardo's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of RGFC and that any acquiror of
such Fajardo Common Stock expressly agrees in writing to be bound by the terms
of this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to Fajardo and the Stockholders in
the manner specified in Section 8.4 of the Agreement, with all notices to the
Stockholders being provided to them at Fajardo in the manner specified in such
section.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the Commonwealth of Puerto Rico without giving effect to the principles
of conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
C-2
<PAGE>
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
C-3
<PAGE>
IN WITNESS WHEREOF, RGFC by a duly authorized officer, and each of the
Stockholders have caused this Stockholder Agreement to be executed as of the day
and year first above written.
R&G FINANCIAL CORPORATION
By: /s/ Victor J. Galan
-------------------
Name: Victor J. Galan
Title: President and
Chief Executive Officer
FAJARDO STOCKHOLDERS:
/s/ Jose E. Soler
-----------------
Jose E. Soler
/s/ Juan R. Zalduondo
---------------------
Juan R. Zalduondo
/s/ Cesar Montilla, Jr.
-----------------------
Cesar Montilla, Jr.
/s/ Rudolph Kauffman
--------------------
Rudolph Kauffman
/s/ Louis Negron
----------------
Louis Negron
/s/ Francisco Ferraiouli
------------------------
Francisco Ferraiouli
/s/ Pedro Feliciano
-------------------
Pedro Feliciano
/s/ Rene Lavergne
-----------------
Rene Lavergne
C-4
<PAGE>
SCHEDULE I
Number of Shares of
Fajardo Common Stock
Name of Stockholder Beneficially Owned
- ------------------- ------------------
Jose E. Soler 16,401
Juan R. Zalduondo 52,084(1)
Cesar Montilla, Jr. 656
Rudolph Kauffman 100
Louis Negron 378
Francisco Ferraiouli 11,206(2)
Pedro Feliciano 14,951(3)
Rene Lavergne 100
- -----------------
(1) Includes 3,400 shares, 2,100 shares, 1,352 shares and 612 shares owned
respectively by Bereira, Inc., the Juan B. Zalduondo Profit Sharing
Plan, Juan R. Zalduondo Grier and Parsital, Inc.
(2) Includes 2,830 shares, 2,223 shares and 878 shares owned respectively
by Solemar, S.E., Contech de Puerto Rico and Intertrade Caribe.
(3) Includes 11,428 shares owned by Camepe, Inc.
C-5
<PAGE>
EXHIBIT D
March 10, 1998
R & G Financial Corporation
R & G Plaza
280 Jesus T. Pinero Avenue
Hato Rey, San Juan, Puerto Rico 00918
Ladies and Gentlemen:
Pursuant to Section 5.11 of the Agreement of Merger, dated as of March
10, 1998 (the "Agreement"), among R & G Financial Corporation ("RGFC"), R-G
Premier Bank of Puerto Rico ("Premier") and Fajardo Federal Savings Bank
("Fajardo"), I hereby agree that I will comply with paragraph (d) of Rule 145
under the Securities Act of 1933, as amended ("1993 Act"), and will not sell,
transfer or otherwise dispose of any shares of RGFC Class B Shares received by
me in exchange for shares of Fajardo Common Stock pursuant to the Merger (as
defined in the Agreement), except (i) if such shares of RGFC Common Stock are
registered for resale pursuant to the provisions of the 1933 Act, (ii) in
compliance with the volume and other limitations of Rule 144 or (iii) upon my
receipt of an opinion of counsel, acceptable to RGFC, that the proposed
disposition will not violate paragraph (d) of Rule 145.
The transfer agent of RGFC shall be given an appropriate stop transfer
order and shall not be required to register any attempted transfer of shares of
RGFC Class B Shares, unless the transfer has been effected in compliance with
the terms of this letter agreement. In addition, the certificates evidencing
shares of RGFC Class B Shares acquired by me in exchange for Fajardo Common
Stock pursuant to the Merger shall bear a legend noting the restrictions on
transfer set forth in this letter agreement. I understand that the legend set
forth on the shares of RGFC Class B Shares received by me shall be removed as
well as the related stop transfer instructions when such restrictions are no
longer applicable to such shares. To the extent I believe necessary, I have
discussed this letter and any applicable limitations upon the sale or other
disposition of my shares with either my counsel or counsel for Fajardo.
Very truly yours,
_________________
Name:
Agreed and accepted this
10th day of March 1998
By: ___________________
Name:
Title:
D-1
