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EXHIBIT 2.1
PURCHASE AGREEMENT
AGREEMENT dated as of this 26th day of June, 2000, by and between
ORIENTAL BANK AND TRUST, a banking institution organized and existing under the
laws of the Commonwealth of Puerto Rico, (hereinafter referred to as "Seller")
and BANCO POPULAR DE PUERTO RICO, a banking institution organized and existing
under the laws of the Commonwealth of Puerto Rico (hereinafter referred to as
"Purchaser").
WITNESSETH:
WHEREAS, Seller is engaged in the business of making and/or purchasing
personal loans secured and unsecured; and
WHEREAS, Seller desires to sell a portfolio of unsecured personal loans
generated or acquired by it to Purchaser and Purchaser is willing to purchase
substantially all of Seller's portfolio of unsecured personal loans;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the parties agree as follows:
SECTION 1. DEFINITIONS: Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings, and additional capitalized terms shall have the meanings
assigned elsewhere in this Agreement:
1.1 AGREEMENT shall mean this Purchase Agreement.
1.2 CLOSING DATE shall mean June 30, 2000.
1.3 CREDIT FILE shall mean the reports, documents and
instruments kept by the Seller on file for each Eligible Receivable.
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1.4 DOCUMENTS shall mean the originals of the following:
(i) the credit application of the Obligors of the Eligible Receivables; (ii) the
promissory notes or instruments evidencing the Eligible Receivables, and (iii)
the certificates of credit life insurance and credit disability insurance issued
with respect to any Obligors of the Eligible Receivables (or to the extent such
insurance certificates are not existent any other records or documents
acceptable to Purchaser that evidence such credit life insurance and credit
disability insurance).
1.5 FINAL NET ELIGIBLE RECEIVABLES AMOUNT shall mean the
Net Eligible Receivables Amount computed as of the Closing Date.
1.6 ELIGIBLE RECEIVABLES shall mean all unsecured
personal loans ("Loans") of the Seller, except for the following items:
(a) Loans delinquent 90 or more days;
(b) Loans on which any of the Obligors are
disputing the balance owed or payments posted, or Loans which should have been
paid in full, but remain in Seller's system due to posting errors;
(c) Loans on which Seller is aware that any
Obligor is subject to bankruptcy proceedings;
(d) Loans subject to an existing legal
proceeding in the courts;
(e) Loans on which a credit life insurance claim
is in process;
(f) Loans on which a credit disability insurance
claim is in process and with respect to which any one of the following
requirements has not been met: (i) all parties
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required to complete the credit disability insurance claim forms have completed
such forms; (ii) the credit disability insurance claim forms have been filed
with the insurance company; and (iii) the insurance company is not disputing the
credit disability insurance claim; and
(g) Loans on which any employee of Seller or any
affiliate thereof is an Obligor (other than those listed in Schedule 1.6(g)
hereto).
1.7 NET ELIGIBLE RECEIVABLES AMOUNT shall mean the sum of
the following amounts:
(i) the total principal outstanding
balance under the Eligible Receivables;
(ii) the total amount of accrued
interest receivable under the Eligible Receivables; and
(iii) the total amount of late charges
legally owed by the Obligors under the Eligible Receivables.
1.8 OBLIGOR shall mean borrower, co-borrower, or
co-signor of an Eligible Receivable.
1.9 PRELIMINARY NET ELIGIBLE RECEIVABLE AMOUNT shall mean
Net Eligible Receivables Amount computed as of seven (7) days prior to the
Closing Date.
1.10 PURCHASE PRICE shall mean the total price to be paid
by Purchaser for the purchase of the Eligible Receivables, as described in
Section 2 hereof.
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1.11 FINAL CLOSING AND SETTLEMENT DATE shall mean a date
which is a Friday and which complies with both of the following requirements:
(i) no earlier than seven (7) days following the Closing Date, and (ii) no later
than the fifth business day following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the final consummation of the purchase
and sale specified in Section 3.3 of this Agreement.
1.12 ESCROW RATE shall be the rate determined by the
escrow agent (or the party paying such interest) based on the offered quotation
for the rate of interest on three-month deposits of United States dollars in the
London interbank market, as published by Telerate Systems, Inc. (currently on
page 3750 of the financial information reporting services published
electronically by Telerate Systems, Inc.) at approximately 11:00 a.m. (London
Time) on the date of the initial deposit of funds in an escrow account (or the
date when the obligation to pay interest commences hereunder), plus 2%.
SECTION 2. SALE AND PURCHASE OF ELIGIBLE RECEIVABLES; TERMINATION.
2.1 SALE AND PURCHASE OF ELIGIBLE RECEIVABLES. Seller
agrees to sell, convey, assign, transfer and deliver to Purchaser, and Purchaser
agrees to purchase from Seller, subject to the terms and conditions hereinafter
set forth, all of the Eligible Receivables free and clear of all liens and
encumbrances. Seller will not guarantee the collectibility of the Eligible
Receivables, and, with the exception of any amounts that could become payable by
Seller to Purchaser pursuant to the indemnification provisions included in
Section 7 hereto, the sale, conveyance, assignment and delivery to Purchaser of
the Eligible Receivables shall be without recourse to Seller.
2.2 PURCHASE PRICE. The Purchase Price shall be
calculated according to the formula set forth in Exhibit A hereto, which shall
be 100.75% of the Final Net Eligible Receivables Amount.
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2.3 PAYMENT OF THE PURCHASE PRICE.
(a) The Purchase Price shall be paid in two
installments. The first installment of the Purchase Price shall be paid on the
Closing Date and shall be equal to the Preliminary Net Eligible Receivables
Amount multiplied by 1.0075, less the amount of ONE MILLION DOLLARS ($1,000,000)
which shall be retained by Purchaser (the "Retained Amount").
(b) The second installment of the Purchase Price
shall be paid on the Final Closing and Settlement Date and shall be equal to the
sum of (i) Retained Amount and (ii) the difference between the Preliminary Net
Eligible Receivables Amount and the Final Net Eligible Receivables Amount
multiplied by 1.0075 (provided that if such difference is negative then the
product of such negative number and 1.0075 shall be subtracted from the Retained
Amount). Purchaser shall pay Seller together with the second installment
interest on such amount for the period from the Closing Date to the Final
Closing and Settlement Date at the Escrow Rate, or to the extent that the
difference between Preliminary Net Eligible Receivables Amount and the Final Net
Eligible Receivables Amount multiplied by 1.0075 is negative and exceeds the
Retained Amount, the payment from the Seller to the Purchaser shall be paid with
interest at the Escrow Rate.
2.4 CLOSING AND SETTLEMENT.
(a) An escrow closing of the sale and purchase
of the Eligible Receivables shall take place on the Closing Date at the Legal
Division of Popular, Inc., 209 Munoz Rivera Avenue, 9th Floor, 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. The escrow closing shall be conditioned on the
fulfillment on or prior to the Closing Date of all of the conditions set forth
in Sections 3.1 and 3.2 hereto.
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(b) Purchaser shall deposit the first
installment of the Purchase Price on the Closing Date in an escrow account with
Purchaser (the "Purchase Price Escrow Account"). Such moneys shall remain
deposited in the Purchase Price Escrow Account until the Final Closing and
Settlement Date. The Purchase Price Escrow Account shall accrue interest at the
Escrow Rate.
(c) The Eligible Receivables shall be held by
the Seller in escrow until the Final Closing and Settlement Date. All payments
received by Seller after the Closing Date from or on behalf of Obligors of the
Eligible Receivables to be purchased by Purchaser hereunder shall be deposited
by Seller in an escrow account with Seller (the "Loan Payments Escrow Account").
Such moneys shall remain deposited in the Loan Payments Escrow Account until the
Final Closing and Settlement Date. The Loan Payments Escrow Account shall accrue
interest at the Escrow Rate.
(d) The final closing and settlement of the
purchase and sale of the Eligible Receivables hereunder shall take place on the
Final Closing and Settlement Date at the Legal Division of Popular, Inc., 209
Munoz Rivera Avenue, 9th Floor, 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.
The final closing and settlement shall be conditioned only on the fulfillment of
all of the conditions set forth in Sections 3.3 hereto. On the Final Closing and
Settlement Date the parties will settle any difference between the preliminary
purchase price amount to be deposited in the Purchase Price Escrow Account on
the Closing Date and the final purchase price amount determined as of the
Closing Date, when the final figures to determine the Final Net Eligible
Receivables Amount are available.
(e) Title and beneficial ownership to the
Eligible Receivables will be transferred from the Seller to the Purchaser on the
Final Closing and Settlement Date effective as of the Closing Date once the
following payments or transfers have been made: (i) the amounts
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deposited in the Purchase Price Escrow Account are transferred to Seller; (ii)
the amounts deposited in the Loan Payments Escrow Account are transferred to
Purchaser, and (iii) Purchaser shall pay to Seller the second installment of the
Purchase Price.
(f) From the Closing Date to the Final Closing
and Settlement Date, Seller shall be obligated to receive and deposit in the
Loan Payments Escrow Account all payments and make all collections from or on
behalf of Obligors of the Eligible Receivables and pursuant to such collection
it shall execute and perform the following: (i) establish and maintain a
complete, accurate and separate account of each Eligible Receivable; (ii)
collect all amounts due with respect to each Eligible Receivable, as each
payment becomes due; (iii) apply all sums collected by it with respect to each
Eligible Receivable to the account of such Eligible Receivable and allocate such
sums to the principal, interest, late charges and other amounts due under such
Eligible Receivable; and (iv) provide any reports relating to such collection
and servicing efforts that Purchaser may reasonably request. Seller shall
conduct these collection and servicing efforts with due care and in accordance
with the same policies, procedures and processing priorities that are presently
followed by Seller with respect to the Eligible Receivables, and in accordance
with all applicable laws, rules and regulations.
2.5 TERMINATION OF AGREEMENT. This Agreement may, by
giving prior notice, be terminated:
(a) (i) on or before the Closing Date, by
Purchaser if any of the conditions in Section 3.1 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Purchaser to comply with its obligations
under this Agreement) and Purchaser has not waived such condition on or before
the Closing Date; or (ii) on or before the Closing Date by Seller, if any of the
conditions in Section 3.2 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Seller to comply with its obligations under this
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Agreement) and the Seller has not waived such condition on or before the Closing
Date; (iii) on or before the Final Closing and Settlement Date, by either
Purchaser or Seller if any of the conditions in Section 3.3 has not been
satisfied as of the Final Closing and Settlement Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of the
party terminating the Agreement to comply with its obligations under this
Agreement);
(b) by mutual consent of Purchaser and Seller;
or
(c) by either Purchaser or Seller if the Final
Closing and Settlement Date has not occurred (other than through the failure of
any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before July 31, 2000, or such later date
as Purchaser and Seller may agree upon.
2.6 EFFECT OF TERMINATION. Each party's right of
termination under Section 2.5 is in addition to any other rights it may have
under this Agreement or otherwise, and the exercise of a right of termination
will not be an election of remedies. If this Agreement is terminated pursuant to
Section 2.5, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Section 7 will survive. If the
termination takes place after the Closing Date, then the obligations of the
parties hereunder shall terminate after the following payments and transfers
have been made: (i) the amounts deposited in the Purchase Price Escrow Account
are transferred to Purchaser; (ii) the amounts deposited in the Loan Payments
Escrow Account are transferred to Seller, and (iii) the escrow maintained by
Seller of the Eligible Receivables shall terminate.
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SECTION 3. CONDITIONS OF PURCHASE.
3.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to purchase the Eligible Receivables hereunder shall be
subject to the fulfillment of the following conditions on or prior to the
Closing Date:
(a) The representations and warranties of Seller
contained in Section 4.1 hereof shall be true and correct in all material
respects as of the Closing Date as though such representations and warranties
had been made on and as of the Closing Date.
(b) Seller shall have performed all obligations
and covenants required to be observed and performed by Seller hereunder on or
prior to the Closing Date.
(c) Seller must have delivered to Purchaser a
certificate executed by Seller representing and warranting to Purchaser that
each of Seller's representations and warranties in this Agreement was accurate
in all respects as of the date of this Agreement and is accurate in all respects
as of the Closing Date as if made on the Closing Date and stating that all
obligations and covenants required to be performed by Seller hereunder on or
prior to the Closing Date have been performed.
(d) Seller shall deliver to Purchaser a
certificate of resolution approved by its Board of Directors authorizing the
execution of this Agreement and the consummation of the transactions
contemplated hereby without any further approvals being required.
3.2 CONDITION PRECEDENT TO OBLIGATIONS OF SELLER. The
obligations of Seller to sell the Eligible Receivables hereunder shall be
subject to the fulfillment of the following conditions on or prior to the
Closing Date:
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(a) The representations and warranties of
Purchaser contained in Section 4.2 shall be true and correct in all material
respects as of the Closing Date as though such representations and warranties
had been made on and as of the Closing Date.
(b) Purchaser shall have performed all
obligations and covenants required to be observed and performed by Purchaser
hereunder on or prior to the Closing Date.
(c) Purchaser must have delivered to Seller a
certificate executed by Purchaser representing and warranting to Seller that
each of Purchaser's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date and stating that
all obligations and covenants required to be performed by Purchaser hereunder on
or prior to the Closing Date have been performed.
(d) Purchaser shall deliver to Seller a
certificate of resolution approved by its Board of Directors authorizing the
execution of this Agreement and the consummation of the transactions
contemplated hereby without any further approvals being required.
3.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
PURCHASER. The obligations of Seller and Purchaser set forth herein shall be
subject to the fulfillment of the following conditions prior to the Final
Closing and Settlement Date:
(a) The regulatory approvals referred to in
Section 5.8, if any, shall have been secured and shall not have been withdrawn.
(b) The waiting period referred to in Section
5.8 shall have expired or been terminated.
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SECTION 4. REPRESENTATIONS AND WARRANTIES.
4.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller makes
the following representations and warranties to Purchaser. Purchaser's knowledge
of any breach of the representations or warranties contained herein shall not
void any of the representations or warranties or Seller's obligation to
indemnify Purchaser for any such breach as provided in Section 7 hereto;
provided, however, that Purchaser shall inform Seller if Purchaser becomes aware
prior to the Closing Date of any breach by Seller of the representations and
warranties contained herein:
(a) Seller is a banking institution, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Puerto Rico, and has the power to own its assets and to transact
the business in which it is presently engaged.
(b) Seller has all requisite corporate power and
authority to carry on its business as it is now presently conducted, to enter
into this Agreement and perform the transactions contemplated hereunder.
Seller's board of directors has authorized the execution of this Agreement, and
the sale, conveyance, assignment, transfer and delivery to Purchaser of the
Eligible Receivables, and no approval of Seller's shareholders is required.
(c) Except as set forth in Section 5.8 hereof
with respect to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, no consent of any other party and no consent, license, approval or
authorization of, or registration, or declaration with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement or the sale
of the Eligible Receivables.
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(d) The execution, delivery and performance of
this Agreement and the sale of the Eligible Receivables will not violate any
provision of any existing law or regulation or any order or decree of any court
or the Articles of Incorporation or the By-laws of Seller or of any mortgage,
indenture, contract or other agreement to which Seller is party or by which
Seller and any of its property or assets may be bound.
(e) No litigation or administrative proceeding
of or before any court, tribunal, or governmental body is presently pending, or,
to the knowledge of Seller, threatened against Seller or any of its properties
or with respect to this Agreement, which, if adversely determined, would, in the
opinion of Seller have the effect of enjoining or preventing consummation of the
transactions contemplated by this Agreement.
(f) Seller will not incur any liability for any
broker's or finder's fees or commissions or similar charges in connection with
the transactions contemplated by this Agreement.
(g) Each Eligible Receivable complies with the
requirements set forth in Section 1.6.
(h) Seller is the sole owner of the Eligible
Receivables free and clear of any and all liens or encumbrances and the Eligible
Receivables are not subject to any claims by third parties. None of the Eligible
Receivables are presently serviced by third parties.
(i) The notes and other evidences of
indebtedness for Eligible Receivables are correct in original amount, and such
notes and other evidences of indebtedness were given for valid consideration and
constitute legally binding and enforceable obligations of the Obligors thereof
(except as enforceability may be limited by bankruptcy, insolvency and other
laws relating to creditors' rights generally or by general equitable principles)
for the full amounts
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shown on the books and records of Seller. To the best knowledge of Seller, the
notes and other evidences of indebtedness for Eligible Receivables are genuine
as to signatures of the Obligor(s).
(j) The balances, interest and other charges
represented to be due and owing from the Obligors on the Eligible Receivables
are correct, and reflect all payments made to Seller on such Eligible
Receivables by the respective Obligors or their representatives. Except as set
forth in a Schedule to be provided by Seller to Purchaser at least one (1) day
prior to the Closing Date, the terms of the Eligible Receivables are consistent
in all material respects with the terms set forth in the promissory note and the
loan disclosure documents for each such Eligible Receivable and there has been
no material modification to, release, or waiver of such terms. During the period
from the Closing Date to the Final Closing Date and Settlement Date, Purchaser
shall have the opportunity to review the Credit Files of the Loans listed in the
Schedule and exclude from the Eligible Receivables to be purchased hereunder
such Loans it does not wish to acquire.
(k) Each of the Eligible Receivables complied at
the time it was made, and each Eligible Receivable will comply at the Closing
Date, with the requirements of all applicable federal, state or local laws,
rules and regulations, including, without limitation, usury, truth-in-lending,
consumer credit protection, equal credit opportunity, debt collection, credit
billing or disclosure laws and regulations.
(l) Seller has conducted its business with
respect to the Eligible Receivables, including but not limited to the
origination, collection and administration of the Eligible Receivables, in
accordance with all applicable laws, rules and regulations. The delinquency of
the Eligible Receivables is accurately stated in the servicing system of Seller,
based on standard contractual delinquency parameters.
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(m) Seller is in compliance with all the
promises, covenants and undertakings assumed by it under each Eligible
Receivable.
(n) Seller is not aware of any claims or
defenses to the enforcement of any Eligible Receivable have been asserted by the
Obligors or acts or omissions that would give rise to any claim or right of
rescission, setoff, counterclaim or defense by Obligors to perform under any
related Eligible Receivables documents.
(o) The information to be set forth in the
Closing Schedule (as defined herein) and the Settlement Schedule (as defined
herein) will be true and accurate as of the dates reflected in such schedules.
4.2 PURCHASER'S REPRESENTATION AND WARRANTIES. Purchaser
hereby makes the following representations and warranties to Seller. Seller's
knowledge of any breach of the representations or warranties contained herein
shall not void any of the representations or warranties or Purchaser's
obligation to indemnify Seller for any such breach as provided in Section 7
hereto provided, however, that Seller shall inform Purchaser if Seller becomes
aware prior to the Closing Date of any breach by Purchaser of the
representations and warranties contained herein:
(a) Purchaser is a banking institution, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Puerto Rico, and has the power to own its assets and to transact
the business in which it is presently engaged.
(b) Purchaser has all requisite corporate power
and authority to carry on its business as it is now presently conducted, to
enter into this Agreement and perform the transactions contemplated hereunder.
Seller's board of directors has authorized the execution of
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this Agreement and the purchase of the Eligible Receivables from the Seller, and
no approval of Purchaser's shareholders is required.
(c) Except as otherwise set forth in Section 5.8
hereof with respect to the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended, no consent of any other party and no consent, license, approval or
authorization of, or registration, or declaration with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement on the
purchase of the Eligible Receivables.
(d) The execution, delivery and performance of
this Agreement and the purchase of the Eligible Receivables will not violate any
provision of any existing law or regulation or any order or decree of any court
or the Articles of Incorporation or the By-laws of Purchaser or of any mortgage,
indenture, contract or other agreement to which Purchaser is a party or by which
Purchaser and any of its property may be bound.
(e) No litigation or administrative proceeding
of or before any court, tribunal, or governmental body is presently pending, or,
to the knowledge of Purchaser, threatened against Purchaser or any of its
properties or with respect to this Agreement, which, if adversely determined,
would in the opinion of Purchaser have the effect of enjoining or preventing
consummation of the transactions contemplated by this Agreement.
(f) Purchaser will not incur in any liability
for any broker's or finder's fees or commissions or similar charges in
connection with the transactions contemplated by this Agreement.
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SECTION 5. COVENANTS
5.1 DELIVERY OF CLOSING SCHEDULE AND SETTLEMENT SCHEDULE.
Seller shall deliver to Purchaser on the Closing Date a schedule (the "Closing
Schedule") showing the following information for each of the Eligible
Receivables to be purchased hereunder: (i) the name of the Obligor(s) and the
loan number assigned to such Eligible Receivable by Seller; (ii) the principal
outstanding balance of the Eligible Receivable as of seven (7) days immediately
prior to the Closing Date; (iii) the interest rate and remaining term on the
Eligible Receivable; (iv) the total accrued interest receivable of the Eligible
Receivable as of seven (7) days immediately prior to the Closing Date; (v) the
total amount of late charges owed by the Obligor(s) under the Eligible
Receivable as of seven (7) days immediately prior to the Closing Date; and (vi)
the days past due of the Eligible Receivable as of seven (7) days immediately
prior to the Closing Date. Seller shall also deliver to Purchaser on the Final
Closing and Settlement Date a schedule (the "Settlement Schedule") showing the
following information for each of the Eligible Receivables to be purchased
hereunder: (i) the name of the Obligor(s) and the loan number assigned to such
Eligible Receivable by Seller; (ii) the principal outstanding balance of the
Eligible Receivable as of the Closing Date; (iii) the interest rate and
remaining term on the Eligible Receivable; (iv) the total accrued interest
receivable of the Eligible Receivable as of the Closing Date; and (v) the total
amount of late charges owed by the Obligor(s) under the Eligible Receivable as
of the Closing Date; and (vi) days past due of the Eligible Receivable as of the
Closing Date.
5.2 NOTICES TO OBLIGORS. No later than five (5) days
after the Final Closing and Settlement Date, Seller and Purchaser shall jointly
send notices to the Obligors, in a form mutually approved by the parties,
informing the Obligors, among other things, of this transaction (and the fact
that this transaction does not affect the terms and conditions of their Loans)
and instructing them to forward future payments on the Eligible Receivables to
Purchaser. The costs and expenses related to the preparation and mailing of such
joint notices shall be shared equally by the parties.
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5.3 INSURANCE. Some of the Obligors under the Eligible
Receivables purchased credit life or credit life and credit disability insurance
when their Loans were made. Whenever a refund of a portion of the credit
insurance premium is due to an Obligor on any of the insured Eligible
Receivables, the insurance company named on the credit insurance policy is
responsible to pay a portion of the pre-payment insurance refund, and Seller is
responsible for the difference (based on its contract with each insurance
company). Subject to the assignment described in Section 6 below, the insurance
companies will pay their portions of prepayment cancellation refunds directly to
Purchaser. After the close of each calendar month, Purchaser will provide
information to each insurance company and Seller regarding prepayment refunds
made by Purchaser to Obligors under the Eligible Receivables, and will bill
Seller for Seller's portion of said refunds on a monthly basis. Seller shall pay
Purchaser on a quarterly basis, within twenty (20) business days of the end of
each calendar quarter, the amounts billed by Purchaser during the three months
of such quarter together with interest on the average daily balance of such
amount during the quarter at the Escrow Rate.
5.4 PAYMENTS AFTER THE FINAL CLOSING AND SETTLEMENT DATE.
All payments received by Seller from Obligors of Eligible Receivables purchased
by Purchaser hereunder after the Final Closing and Settlement Date, including,
but not limited to mail, ACH or Seller's branches, or any other electronic or
digital method, will be kept by Seller only as a trustee. In order to assure
prompt credit to Obligors' Eligible Receivables, no later than the business day
following the date of receipt by Seller, Seller will provide information to
Purchaser regarding the payments received by Seller from Obligors of Eligible
Receivables and remit such payments to Purchaser. If any such payment is
received by Seller after a period of ninety (90) days from the Final Closing and
Settlement Date, Purchaser shall pay Seller a service fee equal to 2% of the
amount of the payments received by Seller and forwarded to Purchaser after such
ninety (90) day period.
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5.5 JOINT REVIEW AND DELIVERY OF CREDIT FILES AND
DOCUMENTS. During a period of thirty (30) days following the Closing Date,
representatives of Purchaser and Seller shall jointly review all of the Credit
Files to ascertain that the Documents are included therein. At the end of such
thirty-day review period, the parties agree that: (i) Seller shall deliver to
Purchaser the Credit Files; (ii) Purchaser shall deliver to Seller a list of the
missing Documents in the Credit Files; and (iii) Seller shall deliver to
Purchaser the missing Documents within thirty (30) days after receiving the list
from Purchaser. Seller shall not be responsible for any missing Document not
requested Purchaser on the list prepared by Purchaser hereunder, or for any loss
or liability resulting from the non-existence or disappearance of any Document
not included in the list.
5.6 FURTHER ASSURANCES. Upon request by Purchaser after
the Final Closing and Settlement Date, Seller shall do, execute, acknowledge and
deliver, or shall cause to be done, executed, acknowledged and delivered, all
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably required to vest in Purchaser full
title, ownership and control of and over the Eligible Receivables. Purchaser
shall be responsible for all of the costs and expenses related to the foregoing.
5.7 COMPLIANCE WITH LAWS. Purchaser will conduct its
business with respect to the Eligible Receivables purchased hereunder, including
but not limited to, the collection and administration of the Eligible
Receivables in accordance with administration of the Eligible Receivables, in
accordance with all applicable laws, rules and regulations.
5.8 REGULATORY APPROVALS. Purchaser and Seller shall use
their best efforts to secure all regulatory approvals required to consummate the
transactions contemplated by this Agreement, including the filing of notices
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the expiration or early termination of the applicable waiting
period thereunder. Purchaser and Seller agree to cooperate fully in obtaining
any such
<PAGE> 19
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approvals and in completing any such notices or applications as shall be
necessary in connection with the transactions contemplated by this Agreement.
Purchaser shall be responsible for the fee payable under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
5.9 BEST EFFORTS. Between the date of this Agreement and
the Final Closing and Settlement Date, Purchaser and Seller will use their best
efforts to cause all of the conditions set forth in Section 3 hereto to be
satisfied.
5.10 DELIVERY OF DOCUMENTS. Between the date of this
Agreement and the Final Closing and Settlement Date, Purchaser and Seller agree
to deliver to each other any additional documents that the other party may
reasonably request for the purpose of (i) evidencing the satisfaction of any
condition referred to in Section 3 hereto, or (ii) otherwise facilitating the
consummation or performance of any of the transactions contemplated hereunder.
5.11 NON-SOLICITATION. For a period of twelve (12) months
after the Closing Date, Seller will not directly solicit and offer an unsecured
personal loan to any Obligor on any Eligible Receivable being sold by Seller to
Purchaser hereunder. In the event that Seller breaches the aforementioned
non-solicitation provision and pays off an Eligible Receivable by entering into
an unsecured personal loan with an Obligor, Seller will pay to Purchaser a
premium of 0.0250 on the then principal balance plus accrued interest and late
charges of such Eligible Receivable. During the aforementioned 12-month period
Seller shall be permitted to make an unsecured personal loan which pays off an
Eligible Receivable only if an Obligor on an unsolicited basis requests such a
loan product from Seller. In the event that Seller pays off an Eligible
Receivable by entering into an unsecured personal loan with an Obligor, Seller
will pay to Purchaser a premium of 0.0075 on the then principal balance plus
accrued interest and late charges of such Eligible Receivable. This provision
shall cease to be in effect if there is a change in control of the Seller or the
Seller's holding company. For purposes of this provision, the term
<PAGE> 20
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"control" shall be defined as such Term is defined in the Change in Bank Control
Act, as amended, and the regulations promulgated thereunder.
SECTION 6. ASSIGNMENT. Seller shall assign to Purchaser all of its
rights as a beneficiary under any credit life insurance policy or credit
disability insurance policy purchased by an Obligor of Eligible Receivables.
Seller shall deliver to Purchaser all evidence of such insurance and the
assignment forms duly executed by Seller on the Closing Date. Seller shall
execute and deliver any notice required to be given by the parties hereto to the
insurance companies regarding such assignment.
SECTION 7. INDEMNIFICATION.
(a) Seller shall indemnify Purchaser and hold
Purchaser harmless from and against any and all losses, costs and expenses
(including reasonable attorneys' fees) which Purchaser may suffer, incur or
sustain arising out of or attributable to the following: (i) any
misrepresentation or any breach of any representation or warranty made by Seller
pursuant to this Agreement, (ii) any breach of any covenant or agreement to be
performed by Seller pursuant to this Agreement, (iii) any third party claim,
penalty asserted, legal action or administrative proceeding based upon any
action taken or omitted to be taken by Seller prior to the Closing Date or
resulting from any transaction or event occurring prior to the Closing Date,
relating in any such case to the Eligible Receivables, (iv) any third party
claim, penalty asserted, legal action or administrative proceeding based upon
any action taken or omitted to be taken by Seller during the period from the
Closing Date to the Final Closing and Settlement Date, relating in any such case
to its collection and servicing efforts under Section 2.4(f), or (v) the
inability of Purchaser to collect on any Eligible Receivable because of any of
the following: (1) a missing Document identified in the list to be provided by
Purchaser to Seller pursuant to Section 5.5 hereto; (2) the primary Obligor for
such Eligible Receivable was living outside the United States (provided that
this indemnity shall be limited to the Eligible Receivables listed in Schedule
<PAGE> 21
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7.1(a)(v) hereto); or (3) an Obligor of such Eligible Receivable was subject to
a bankruptcy proceeding prior to the Closing Date without Seller being aware of
such bankruptcy filing (collectively the "Purchaser's Claims").
(b) Purchaser shall indemnify Seller and hold
Seller harmless from and against any and all losses, costs and expenses
(including reasonable attorneys' fees) which Seller may suffer, incur or sustain
arising out of or attributable to the following: (i) any misrepresentation or
any breach of any representation or warranty made by Purchaser pursuant to this
Agreement, (ii) any breach of any covenant or agreement to be performed by
Purchaser pursuant to this Agreement, or (iii) any third party claim, penalty
asserted, legal action or administrative proceeding based upon any action taken
or omitted to be taken by Purchaser after the Final Closing and Settlement Date
or resulting from any transaction or event occurring after the Final Closing and
Settlement Date, relating in any such case to the Eligible Receivables
(collectively the "Seller's Claims").
(c) In order for Purchaser or Seller to be
entitled to any indemnification provided for under this Agreement, arising out
of or involving a Seller's Claim or a Purchaser's Claim, as the case may be, the
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Seller's Claim or the Purchaser's Claim, as the case
may be, within thirty (30) days after receipt by the indemnified party of
written notice of the Seller's Claim or the Purchaser's Claim; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure (except that the
indemnifying party shall not be liable for any expenses incurred during the
period following the end of such 30-day period referred to above in which the
indemnified party failed to give such notice and the date on which such notice
is given). Thereafter, the indemnified party shall deliver to the indemnifying
party within twenty (20) business days after receipt thereof, copies of all
notices and documents
<PAGE> 22
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(including court papers) received relating to the Seller's Claim or the
Purchaser's Claim, as the case may be.
The indemnifying party will be entitled to participate in the
defense of the indemnified party and, if it so chooses to assume the defense
thereof (unless the indemnified party is also a party to such Seller's Claim or
Purchaser's Claim or the indemnifying party determines in good faith that joint
representation would be inappropriate due to a potential conflict of interest)
with counsel selected by the indemnifying party and reasonably satisfactory to
the indemnified party. Should the indemnifying party be entitled under the
preceding sentence and so elects to assume such defense, the indemnifying party
will not be liable to the indemnified party for expenses subsequently incurred
by the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that indemnifying party shall control such defense (except in the
circumstances set forth in the parenthetical to the first sentence of this
paragraph). The indemnifying party shall be liable for the fees and expenses of
counsel employed by the indemnified party for any period during which the
indemnifying party has not assumed the defense thereof (other than during any
period following the 30-day period referred to in the first sentence of the
preceding paragraph in which the indemnified party shall have failed to give
notice of the Seller's Claim or the Purchasers's Claim as provided above). If
the indemnifying party chooses to defend or prosecute the Seller's Claim or the
Purchaser's Claim, as the case may be, all of the parties hereto shall cooperate
in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the indemnifying party's request) the provision to the
indemnifying party of records and information which are reasonably relevant to
such Seller's Claim and Purchaser's Claim, as the case may be, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or not
the indemnifying party shall have assumed the defense of a Seller's Claim or a
Purchaser's Claim, the indemnified party
<PAGE> 23
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shall not admit any liability with respect to, or settle, compromise or
discharge, such Seller's Claim or Purchaser's Claim, without the indemnifying
party's prior written consent (which consent shall not be unreasonably withheld
or delayed).
SECTION 8. NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be in writing and shall be deemed to have been
duly given if mailed, by registered or certified mail, return receipt requested,
or, if by other means, when received by the other party at the address set forth
below or at such other address as may be hereafter designated in writing by the
respective parties hereto:
If to Seller:
Oriental Bank & Trust
PO Box 195115
San Juan, PR 00919-5115
Attn.: Mr. Jose Enrique Fernandez
President-CEO
with copy to:
McConnell Valdes
P.O. Box 364225
San Juan, Puerto Rico 00936-4225
Attn.: Carlos O. Souffront
If to Purchaser:
Banco Popular de Puerto Rico
PO Box 362708
San Juan, PR 00936-2708
Attn.: Mr. Larry Kesler
Executive Vice President
with copy to:
<PAGE> 24
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Banco Popular de Puerto Rico
Legal Division
P.O. Box 362708
San Juan, Puerto Rico 00936-2708
Attn: Ramon D. Lloveras, Esq.
Any such notice, request or demand hereunder shall be
effective when delivered to or received at the premises of the addressee (as
evidenced, in the case of registered or certified mail, by the date noted on the
return receipt).
SECTION 9. NO WAIVER; CUMULATIVE REMEDIES; AMENDMENTS. No failure to
exercise and no delay in exercising on the part of Purchaser or Seller, of any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law. No
modification or waiver of any provision of this Agreement, nor consent to any
departure by Seller or Purchaser from the provisions hereof or thereof, shall be
effective unless the same shall be in writing from Purchaser or Seller, as the
case may be, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which it is given. No notice to Seller
or Purchaser, as the case may be, shall entitle the party receiving such notice
to any other further notice in other or similar circumstances unless expressly
provided for herein. No course of dealing between Seller and Purchaser shall
operate as a waiver of any of the rights of Purchaser under this Agreement.
SECTION 10. MISCELLANEOUS PROVISIONS.
10.1 PROTECTION OF CONFIDENTIAL INFORMATION. Seller and
Purchaser will keep confidential and will not, without the other party's written
consent, divulge to any person or
<PAGE> 25
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entity the terms and conditions of this Agreement, except to the extent that in
the opinion of counsel of either party it is required to do so by any applicable
law or regulation. In the event Seller or Purchaser, as the case may be, is, in
the opinion of its counsel, required to disclose any of the information related
to the transaction contemplated herein, said party may make such disclosure
after giving notice of the terms thereof to the other party.
10.2 ENTIRE AGREEMENT. When properly executed and
delivered, this Agreement and its Exhibits, each of which is incorporated
herein, embodies all of the representations, warranties and agreements of the
parties with respect to its subject matter, and no representations, warranties,
covenants, undertakings or agreements in relation thereto exist between the
parties except as herein expressly set forth. This Agreement supersedes all
prior agreements between the parties with respect to the subject matter.
10.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns.
10.4 SEVERABILITY. The parties hereby agree that it is not
the intention of any party to violate any public policy or statutory or common
law by execution of this Agreement or consummation of the transactions
contemplated by this Agreement and that if any provision in this Agreement is
held to be invalid, illegal or unenforceable to any extent or in any
application, then the remainder of this Agreement, including such provision
except to such extent or application, shall not be affected thereby and shall
remain binding and enforceable to the extent lawfully permitted under applicable
laws.
10.5 AMENDMENTS. This Agreement may be amended or
terminated only in writing executed by both parties hereto.
<PAGE> 26
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10.6 SURVIVAL. All warranties, representations, covenants
and agreements of Seller and Purchaser set forth in this Agreement shall survive
the Closing Date, notwithstanding any investigation or inspection previously or
hereafter made by or on behalf of Purchaser or Seller, as the case may be.
10.7 INTERPRETATION AND CONSTRUCTION. The captions in this
Agreement are for convenience only and shall not be considered part of this
Agreement. This Agreement has been made in the Commonwealth of Puerto Rico and
shall be interpreted, construed and governed by and in accordance with the laws
of the Commonwealth of Puerto Rico.
10.8 EXPENSES. Except as may be otherwise provided herein,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution and performance of this Agreement,
including all fees and expenses of agents, representatives, counsel and
accountants.
10.9 NO OBLIGATIONS AS TO EMPLOYEES. It is the intention
of parties hereto to purchase and sell the Eligible Receivables pursuant to the
terms and conditions stated herein. Therefore, under no circumstances anything
herein shall be construed as imposing upon Purchaser any obligation or liability
to Seller's employees or in connection with Seller's other assets, or imposing
upon Seller any obligation or liability to Purchaser's employees or in
connection with Purchaser's other assets.
<PAGE> 27
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IN WITNESS WHEREOF, each party has caused this Agreement to be
signed and executed by its proper officers thereunto duly authorized as of the
date and year first above written.
ORIENTAL BANK AND TRUST BANCO POPULAR DE PUERTO RICO
By: By:
-------------------------------- ------------------------------
Name: Eli Diaz Name: Larry Kesler
Title: Executive Vice President Title: Executive Vice President
<PAGE> 28
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EXHIBIT A
PURCHASE PRICE CALCULATION WORKSHEET
The Purchase Price calculation is broken down as follows:
<TABLE>
<S> <C> <C>
(A) Total principal outstanding balance of the loans
PLUS
(B) Total accrued interest receivable of the loans +
PLUS
(C) Total late charges of the loans +
(D) NET ELIGIBLE RECEIVABLES =
MULTIPLIED
BY
(E) 1.0075*
1.0075
EQUAL
(F) Purchase Price (D) x (E) =
</TABLE>
