<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FIRST FINANCIAL CARIBBEAN CORPORATION
(Name of Issuer)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
320214 10 9
(CUSIP Number)
with a copy to:
MR. DAVID H. CHAFEY, JR. MR. JULIO PIETRANTONI
Executive Vice President McConnell Valdes
BanPonce Corporation 270 Munoz Rivera Avenue
Banco Popular Center Hato Rey, Puerto Rico 00918
209 Munoz Rivera Avenue (809) 250-5664
Hato Rey, Puerto Rico 00918
(809) 753-0335
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 25, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with this statement
[x]. (A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than five percent of
such class. See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
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SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP NO. 320214 10 9
<S> <C>
1. NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BanPonce Corporation
I.R.S. Identification No. SS 660416582
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (See Instructions)
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OR ORGANIZATION
Puerto Rico
7. SOLE VOTING POWER
571,428
NUMBER OF
SHARES 8. SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON WITH 571,428
10. SHARED DISPOSITIVE POWER
-0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
571,428
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (See Instructions) [ ]
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.3%
TYPE OF REPORTING PERSON (See Instructions)
CO
</TABLE>
<PAGE> 3
Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Statement") relates to the common
stock, par value $1.00 per share (the "Common Stock"), of First Financial
Caribbean Corporation, a Puerto Rico corporation (the "Company"). The address
of the principal executive offices of the Company is 1159 Franklin Delano
Roosevelt Avenue, San Juan, Puerto Rico 00920.
BanPonce Corporation ("BanPonce") would have the right to acquire the
number of shares of Common Stock that are the subject of this Statement upon
conversion of $10,000,000 aggregate principal amount of the Company's 8.25%
Convertible Subordinated Debentures Due January 1, 2006 (the "Debentures"). As
further described in Item 6, BanPonce purchased Debentures in a principal
amount of $6,645,905 on September 25, 1995, and will purchase additional
Debentures in a principal amount $3,354,095 upon receipt of regulatory
approval. The Debentures are convertible at any time on or prior to December
1, 2005, at a conversion price of $17.50 per share, subject to customary
anti-dilution adjustments.
Item 2. Identity and Background.
BanPonce is a bank holding company registered under the Bank Holding
Company Act of 1956 and incorporated under the laws of the Commonwealth of
Puerto Rico. The principal business of BanPonce is banking, which it carries
out through its principal wholly owned subsidiary, Banco Popular de Puerto
Rico, a bank organized under the laws of Puerto Rico, and through other bank
subsidiaries. BanPonce also engages in various non-banking activities through
several subsidiaries. The address of the principal business of BanPonce is
Banco Popular Center, 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918.
The name, residence or business address, present principal occupation
or employment, and the name, principal business and address of any corporation
or other organization in which such employment is conducted of each of the
executive officers and directors of BanPonce are set forth in Schedule A
attached hereto and incorporated herein by reference. All persons named in
Schedule A are citizens of the United States of America. For purposes of
Regulation 13D, BanPonce is controlled only by its Board of Directors.
During the last five years, neither BanPonce nor, to BanPonce's
knowledge, any person listed on Schedule A (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding, was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
<PAGE> 4
Item 3. Source and Amount of Funds or Other Consideration.
The Debentures purchased on September 25, 1995 were purchased by
BanPonce with internally generated funds in the amount of $6,645,905. BanPonce
intends to purchase the remaining Debentures with internally generated funds in
the amount of $3,354,095.
Item 4. Purpose of Transaction.
BanPonce acquired the Debentures for purposes of investment. Although
BanPonce believes that the Debentures are an attractive investment at this
time, it intends continuously to monitor and evaluate this investment in light
of pertinent factors, including the following: (i) the Company's business,
operations, assets, financial condition and prospects, (ii) market, general
economic and other conditions, and (iii) other investment opportunities
available to BanPonce. In light of the foregoing factors and the plans and
requirements of BanPonce from time to time, BanPonce may determine to (i)
acquire additional securities of the Company, including through one or more
transactions in the open market, (ii) dispose of some or all of the Debentures
or, assuming conversion of some or all of the Debentures, dispose of some or
all of the shares of Common Stock into which the Debentures are convertible,
(iii) dispose of some or all of the shares of Common Stock that BanPonce may
acquire upon exercise of the Right described in Item 6, (iv) assuming
conversion of some or all of the Debentures, increase or decrease BanPonce's
participation in the determination of the Company's management and policies or
(v) propose a merger, consolidation, joint venture or other business
combination involving the Company or its subsidiaries or divisions, a sale or
purchase of assets or securities of the Company or its subsidiaries or
divisions, a recapitalization, reorganization or liquidation involving the
Company or its subsidiaries or divisions or other similar actions. BanPonce
reserves the right to determine in the future to take or cause to be taken one
or more of the foregoing actions. Any sale or disposition of Debentures or
shares of Common Stock by BanPonce may be made by means of privately negotiated
sales, registered offerings or other transactions or by seeking to cause the
Company to effect one or more of the transactions set forth above.
Except as set forth in this Statement or as contemplated by the
Debenture Purchase Agreement described in Item 6, neither BanPonce nor, to
BanPonce's knowledge (without having undertaken any investigation to this
effect), any person listed on Schedule A, has any other present plans or
proposals which would result in or which are related to (a) the acquisition by
any person of additional securities of the Company, or the disposition of
securities of the Company; (b) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries; (c) a sale or transfer of a material amount of assets of the
Company or of any of its subsidiaries; (d) any change in the present board of
directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board; (e) any material change in the present capitalization or dividend policy
of the Company; (f) any other material change in the Company's business or
corporate structure; (g) changes in the Company's charter, by-laws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be
<PAGE> 5
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity securities of the
Company becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to
any of those enumerated above. However, based on its continuing review of the
factors referred to above, BanPonce may discuss one or more of the foregoing
matters with the management, directors or shareholders of the Company or may
formulate a plan or proposal relating to one or more of the foregoing matters.
Item 5. Interest in Securities of the Issuer.
(a) As of September 25, 1995, BanPonce beneficially owned 571,428
shares of Common Stock, none of which are presently outstanding and all of
which are issuable upon conversion of the Debentures, representing
approximately 7.3% of the sum of (i) the 7,215,570 shares of Common Stock
outstanding on the date hereof and (ii) such 571,428 shares of Common Stock
issuable upon conversion of the Debentures. On September 25, 1995, BanPonce
acquired Debentures in an aggregate principal amount of $6,645,905, initially
convertible into 379,766 shares of Common Stock, representing just under 5% of
the sum of (i) the outstanding shares of Common Stock of the Company and (ii)
such 379,766 shares. The sale of the remaining Debentures in an aggregate
principal amount of $3,354,095, initially convertible into 191,662 shares of
Common Stock, will be consummated upon and subject to receipt by BanPonce of
the required approval of the Federal Reserve Board, which BanPonce expects to
receive within 90 days after the date of the Debenture Purchase Agreement. As
described in Item 6, BanPonce has the right to acquire up to 200,000 additional
shares of Common Stock under certain circumstances upon the issuance of
additional shares by the Company, but only to the extent necessary for BanPonce
to maintain beneficial ownership of 5% of the fully diluted shares of Common
Stock. The foregoing number of outstanding shares of Common Stock is the
number of shares reported to be outstanding as of June 30, 1995, in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended on such
date. Neither BanPonce nor, to BanPonce's knowledge (without having undertaken
any investigation to this effect), any of the persons identified in Schedule A,
beneficially owns any shares of Common Stock other than the shares described
herein.
In the past, BanPonce and its affiliates, including BP Capital Markets
Inc., have provided investment banking and brokerage services to their
customers in the ordinary course of business, which have included effecting
transactions and holding positions in securities of the Company for the accounts
of their customers for whom they act as agent, and BanPonce and its affiliates
may continue these activities in the future for the account of customers in the
ordinary course of business. Beneficial ownership of these past and potential
future holdings of securities of the Company for the account of customers of
BanPonce and its affiliates is expressly disclaimed by BanPonce. BP Capital
Markets Inc. has also acted as underwriter or placement agent for the Company
in a number of transactions.
(b) Upon conversion of the Debentures, BanPonce would have the sole
power to vote or to direct the vote of, and the sole power to dispose or direct
the disposition of, all the
<PAGE> 6
shares of Common Stock into which the Debentures are convertible, as well as
all the shares of Common Stock that BanPonce may purchase upon exercise of the
Right described in Item 6.
(c) Except for the acquisition by BanPonce of the Debentures, neither
BanPonce nor, to BanPonce's knowledge (without having undertaken any
investigation to this effect), any person identified in Schedule A has effected
any transaction in shares of Common Stock during the preceding 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
On September 25, 1995, BanPonce and the Company entered into a
Debenture Purchase Agreement (the "Debenture Purchase Agreement") providing for
the issuance and sale by the Company to BanPonce in a private placement and the
purchase by BanPonce from the Company at par of $10,000,000 aggregate principal
amount of the Company's 8.25% Convertible Subordinate Debentures Due January 1,
2006, initially convertible into 571,428 shares of Common Stock, representing
approximately 7.3% of the sum of (i) the outstanding shares of Common Stock and
(ii) such 571,428 shares. On the same date, BanPonce purchased Debentures in
an aggregate principal amount of $6,645,905, initially convertible into 379,766
shares of Common Stock of the Company, representing just under 5% of the sum of
(i) the outstanding shares of Common Stock of the Company, and (ii) such
379,766 shares. The sale of the remaining Debentures in an aggregate principal
amount of $3,354,095, initially convertible into 191,662 shares of Common
Stock, will be consummated upon and subject to receipt by BanPonce of the
required approval of the Federal Reserve Board, which BanPonce expects to
receive within 90 days after the date of the Debenture Purchase Agreement.
The initial conversion price if $17.50 per share, subject to
customary anti-dilution adjustments. The Debentures are convertible at any
time before the close of business on December 1, 2005.
The Debentures may be redeemed by the Company in whole or in part
during each successive twelve-month period commencing on January 1, 2001, at
redemption prices of 102%, 101 1/2%, 101%, and 100 1/2%, respectively, of the
principal amount of the Debentures, and thereafter at par, plus in each case
accrued interest to the redemption date.
The Debenture Purchase Agreement also grants to BanPonce the
non-transferable right (the "Right") to buy up to 200,000 shares of Common
Stock at the conversion price applicable to the Debentures at any time and from
time to time on or prior to June 30, 1999, that the Company takes action to
issue additional shares of Common Stock, to the extent that, as a result of
such issuance, the sum of (i) the shares of Common Stock into which the
Debentures
<PAGE> 7
are convertible and (ii) the shares of Common Stock previously purchased by
BanPonce upon exercise of the Right would be reduced to less than 5% of the
fully diluted shares of Common Stock. In the event that less than $10,000,000
of the Debentures are issued, the 5% threshold shall be reduced proportionally.
The Company has the option, instead of issuing additional shares of Common
Stock upon exercise of the Right, to pay to BanPonce the difference between the
price at which BanPonce has the right to purchase such shares and the market
price of such shares at the time the Right is exercised. The Right expires
upon the purchase of 90% or more of the outstanding Common Stock of the Company
pursuant to a tender offer for all the outstanding shares of Common Stock or
pursuant to certain merger or consolidation transactions involving the
acquisition of the Company by a third party.
The Debentures were not registered under the Securities Act of 1933
and neither the Debentures nor the shares of Common Stock issuable upon
conversion of the Debentures or upon exercise of the Right may be sold absent
registration under the Securities Act or the availability of an exemption from
registration. Pursuant to the Debenture Purchase Agreement, BanPonce has the
right to require the Company to register for resale under the Securities Act
the Debentures, the shares of Common Stock into which the Debentures are
convertible and the shares of Common Stock issuable upon the exercise of the
Right, provided that at least $5,000,000 in principal amount of Debentures or
285,000 shares of Common Stock are requested to be registered. BanPonce also
has the right to participate in any registration initiated by the Company.
The Debenture Purchase Agreement contains various covenants by the
Company, including (i) a limitation on the amount of dividends that may be paid
or other distributions that may be made by the Company and its subsidiaries
with respect to their capital stock and on the amount that may be used by the
Company and its subsidiaries to repurchase or otherwise acquire or retire
shares of their capital stock (generally 50% of their consolidated net income)
and (ii) a prohibition on any merger or consolidation of the Company or any
sale of all or substantially all the assets of the Company in which the
surviving, resulting or transferee entity is unable to incur additional debt
under the Debenture Purchase Agreement's formula debt limitation (which
generally restricts the issuance, incurrence or assumption of debt (and, in the
case of subsidiaries, preferred stock) if the Company's adjusted debt to equity
ratio exceeds 10 to 1). The Debenture Purchase Agreement also provides that
upon the sale or other disposition by certain members of the Levis family of
shares of Common Stock representing 50% or more of the shares of Common Stock
currently held by them, BanPonce will have the right to require the Company to
repurchase at par 25% of the Debentures held by BanPonce at the time of such
sale or disposition on each of the 6th, 12th, 18th and 24th monthly
anniversaries of such sale or disposition. The Levis family currently owns
758,194 shares of Common Stock or shares convertible into Common Stock,
representing approximately 10% of the equity of the Company.
A copy of the Debenture Purchase Agreement is attached hereto as
Exhibit 1 and is incorporated herein by reference. The description of the
Debenture Purchase Agreement and of the Debentures set forth herein is
qualified in its entirety by reference to the full text thereof.
Banco Popular de Puerto Rico, a wholly-owned subsidairy of BanPonce,
has extended to the Company and to one of the Company's subsidiaries
warehousing loan facilities in the amount of $10,000,000 each. In addition, BP
Capital Markets, Inc., a wholly-owned subsidiary of BanPonce, enters into
repurchase agreements with the Company and its subsidiaries in the ordinary
course of business pursuant to which the Company and its subsidiaries may borrow
presently up to $150,000,000.
<PAGE> 8
Except as described above, elsewhere in this Statement and in the
documents described above, to BanPonce's knowledge (without having undertaken
any investigation to this effect), there exist no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities
of the Company, including but not limited to transfer or voting of any of such
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1 - Debenture Purchase Agreement dated as of September 25,
1995, between First Financial Caribbean Corporation and BanPonce Corporation,
including form of Debenture.
<PAGE> 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Statement is true, complete
and correct.
Date: September 29, 1995
BANPONCE CORPORATION
By:/s/ David H. Chafey, Jr.
-------------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
<PAGE> 10
<TABLE>
<CAPTION>
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BanPonce Corporation - Directors
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Name Residential Address Business Address Principal Present Occupation
====================================================================================================================================
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<S> <C> <C> <C>
Ballester, Alfonso F. McKinley Street #667-A, PO Box 4548, San Juan, President
Miramar, Santurce, PR 00907 Puerto Rico 00936
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Bermudez, Juan J. El Plaza Cond. Magdalena # PO Box 1213, Hato Rey, Partner
1214, Apt. #4, Condado, Puerto Puerto Rico 00919
Rico 00907
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Carreras, Francisco J. 1 Street, C-16, Villas del PO Box 362408, San Juan, Professor
Pilar, Rio Piedras, Puerto Rico Puerto Rico 00936-2408 Executive Director
00926
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Carrion, Richard L. (Refer to Executive Officers)
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Del Valle Lopez, Waldemar Generalife Street #12, La Box 1429, Ponce, Puerto Rico Attorney
Alhambra, Ponce, Puerto Rico 00733-1429
00731
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Dubon, Jr., Luis E. B-30 Ridgewood Drive, Torrimar, Royal Bank Building, 9th Attorney
Guaynabo, Puerto Rico 00966 Floor, Suite 900, Ponce de
Leon Ave. #255, Hato Rey, PR
00919
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<CAPTION>
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BanPonce Corporation - Directors
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Name Name and Title of Company Citizenship
====================================================================================================================================
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<S> <C> <C>
Ballester, Alfonso F. Ballester Hermanos (distribution) U.S.
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Bermudez, Juan J. Bermudez & Longo (contractors) U.S.
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Carreras, Francisco J. University of Puerto Rico U.S.
Fundacion Angel Ramos
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Carrion, Richard L.
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Del Valle Lopez, Waldemar Parra del Valle, Frau U.S.
& Limeres Law Firm
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Dubon, Jr., Luis E. Dubon & Dubon Law U.S.
Firm
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</TABLE>
None of the above-mentioned Directors have ever been convicted of any crime,
nor ever been found by a court of competent jurisdiction in a civil action or
by the SEC to have violated any federal or state securities law, and the
judgment in such civil action or finding by the SEC has not been reversed,
suspended or vacated.
<PAGE> 11
<TABLE>
<CAPTION>
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BanPonce Corporation - Directors
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Name Residential Address Business Address Principal Present Occupation
====================================================================================================================================
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<S> <C> <C> <C>
Ferre, Antonio Luis Vista Linda Street # A-3, Urb. PO Box 297, San Juan, Puerto President and Editor
La Lomita, Guaynabo, Puerto Rico 00902
Rico 00966
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Gonzalez, Hector R. Lindaraja Street #1, La PO Box 204, Mercedita, President and Chief Executive
Alhambra, Ponce, Puerto Rico Puerto Rico 00715-0204 Officer
00731
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Junquera, Jorge A. (Refer to Executive Officers)
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Mathias, Franklin, A. L-6 Street, Villa Caparra, N/A Retired
Guaynabo, Puerto Rico 00966
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Morales, Jr. Manuel Palma Real Cond. Penthouse F, PO Box 195434, San Juan, President
Madrid Street #2, Santurce PR Puerto Rico 00919-5434 President
00907
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Paracchini, Alberto M. Hoare Street #550, Miramar, N/A Retired
Santurce, Puerto Rico 00907
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Perez, Jr. Francisco La Ranada Street ND-22, Mansion Box 2632, San Juan, Puerto Chairman of the Board and
del Norte, Rio Hondo, Bayamon, Rico 00902 President
Puerto Rico 00949
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<CAPTION>
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BanPonce Corporation - Directors
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Name Name and Title of Company Citizenship
====================================================================================================================================
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<S> <C> <C>
Ferre, Antonio Luis El Nuevo Dia (newspaper) U.S.
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Gonzalez, Hector R. TPC Communications of U.S.
PR, Inc. and TelePonce
Cable TV, Inc. (cable TV)
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Junquera, Jorge A.
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Mathias, Franklin, A. N/A U.S.
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Morales, Jr. Manuel Selarom Capital Group, Inc. (consulting)
Parkview Realty, Inc.
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Paracchini, Alberto M. N/A U.S.
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Perez, Jr. Francisco Sucrs. Jose Lema & U.S.
Co., Inc. (La Favorita) (retailing)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
None of the above-mentioned Directors have ever been convicted of any crime,
nor ever been found by a court of competent jurisdiction in a civil action or
by the SEC to have violated any federal or state securities law, and the
judgment in such civil action or finding by the SEC has not been reversed,
suspended or vacated.
<PAGE> 12
<TABLE>
<CAPTION>
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BanPonce Corporation - Directors
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Name Residential Address Business Address
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rexach, Jr., Francisco M. 4 H 6 Street, Mansiones de Box 1909, Carolina, Puerto
Garden Hills, Guaynabo, Puerto Rico 00966
Rico 00966
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Serralles, Felix J. El Monte B-64, Ponce, Puerto Box 93, Mercedita, Puerto
Rico 00731 Rico 00715
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Venegas, Emilio Jose Avenue H, # 418, Esq. 5, La Marvesa Building, Of. 201,
Rambla, Ponce, Puerto Rico La Rambla, Ponce, Puerto
00731 Rico 00731
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Vizcarrondo, Jr., Julio E. Luchetti Street #1403, Apt. 7, Diez de Andino Street #207,
Condado, Puerto Rico 00907 Esq. Marginal Baldorioty de
Castro, Santurce, Puerto
Rico 00908
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<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name Principal Present Occupation Name and Title of Company Citizenship
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rexach, Jr., Francisco M. President Ready Mix Concrete, Inc. U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Serralles, Felix J. President and Chief Executive Empresas Serralles, Inc. (liquor) U.S.
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Venegas, Emilio Jose President Sanson Corporation (contractors) U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Vizcarrondo, Jr., Julio E. President/Partner and Chief Desarrollos Metropolitanos, U.S.
Executive Officer S.E., VMW Enterprises Corp. (contractors)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
None of the above-mentioned Directors have ever been convicted
nor ever been found by a court of competent jurisdiction in a civil
action or by the SEC to have violated any federal or state securities law,
judgment in such civil action or finding by the SEC has not been
suspended or vacated.
<PAGE> 13
<TABLE>
<CAPTION>
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BanPonce Corporation - Executive Officers
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Name Residential Address Business Address
====================================================================================================================================
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<S> <C> <C>
Carrion, Richard L. Sol Street #112 PO Box 362708, San Juan, Puerto
San Juan, PR 00901 Rico 00936-2708
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Chafey, David H. Jr. 1 H5 Street Urb. Parques de San PO Box 362708, San Juan, Puerto
Ignacio, Rio Piedras, PR 00921 Rico 00936-2708
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Jordan, Amilcar El Prado #68, Urb. Gran Vista, PO Box 362708, San Juan, Puerto
Gurabo, Puerto Rico 00778 Rico 00936-2708
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Junquera, Jorge A. G-27 Street, Villa Caparra, PO Box 362708, San Juan, Puerto
Guaynabo, PR 00966 Rico 00936-2708
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Kesler, Larry B. Segovia Street 11-28, Urb. PO Box 362708, San Juan, Puerto
Torrimar, Guaynabo, Puerto Rico Rico 00936-2708
00657
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Martin, Humberto Street 2 #30, Garden Hills PO Box 362708, San Juan,
Estate, Guaynabo, Puerto Rico Puerto Rico 00936-2708
00966
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P. de Burckhart, Maria I. Hernandez Street 650-C, PO Box 362708, San Juan, Puerto
Miramar, Santurce, PR 00907 Rico 00936-2708
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Pinero, Emilio E. El Campeador Cond. Apt. 11-B, PO Box 362708, San Juan, Puerto
Cervantes Street #86 Esq. Rico 00936-2708
Luchetti, Condado PR 00907
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<CAPTION>
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BanPonce Corporation - Executive Officers
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Name Principal Present Occupation Name and Title of Company Citizenship
====================================================================================================================================
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<S> <C> <C> <C>
Carrion, Richard L. Chairman, President and CEO BanPonce Corporation U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Chafey, David H. Jr. Executive Vice President BanPonce Corporation U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Jordan, Amilcar Senior Vice President and BanPonce Corporation U.S.
Comptroller
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Junquera, Jorge A. Executive Vice President BanPonce Corporation U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Kesler, Larry B. Executive Vice President BanPonce Corporation U.S.
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Martin, Humberto Executive Vice President BanPonce Corporation U.S..
- ------------------------------------------------------------------------------------------------------------------------------------
P. de Burckhart, Maria I. Executive Vice President BanPonce Corporation U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Pinero, Emilio E. Executive Vice President BanPonce Corporation U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
None of the above-mentioned Directors have ever been convicted of any crime,
nor ever been found by a court of competent jurisdiction in a civil action or
by the SEC to have violated any federal or state securities law, and the
judgment in such civil action or finding by the SEC has not been reversed,
suspended or vacated.
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DOCUMENT SEQUENTIAL PAGE NUMBER
-------------- -------- ----------------------
<S> <C> <C>
1 Debenture Purchase Agreement dated as of
September 25, 1995, between First Financial
Caribbean Corporation and BanPonce Corporation,
including form of Debenture
</TABLE>
<PAGE> 15
EXHIBIT 1
================================================================================
FIRST FINANCIAL CARIBBEAN CORPORATION
$10,000,000
8.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE
JANUARY 1, 2006
----------------------------------
DEBENTURE PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 25, 1995
----------------------------------
================================================================================
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 Definitions and Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.3. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 2 The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.2. Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.4. Paying Agent To Hold Money in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.5. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.6. Replacement Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.1. Selection of Securities To Be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.2. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.3. Effect of Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.4. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.5. Securities Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.1. Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.2. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.3. Limitation on Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.4. Limitation on Put Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.5. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.6. Limitation on Secured Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.7. Limitation on Sale and Leaseback
Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.8. Limitation on Sales of Assets and
Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.9. Maintenance of Consolidated Tangible
Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.10. Maintenance of Minimum Debt Service
Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.11. Limitation on Transactions with
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.12. Limitation on Subordinated Debt
Ranking Senior to the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.13. Limitation on the Issuance or Transfer
</TABLE>
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of Capital Stock of Certain Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.14. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.15. Significant Management Stock
Disposition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.16. Source of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.17. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.18. Further Instruments and Acts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5 Successor Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.1. When Company May Merge or Transfer
Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 6 Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.2. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.3. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.4. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.5. Rights of Holders to Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.6. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.1. Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.2. Revocation and Effect of Consents
and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.3. Notation on or Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.1. Agreement to Subordinate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.2. Liquidation, Dissolution, Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.3. Default on Senior Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.4. Acceleration of Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.5. When Distribution Must Be Paid Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.6. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.7. Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.8. Subordination May Not Be Impaired by
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.9. Rights of Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.10. Distribution or Notice to
Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.11. Article 8 Not To Prevent Events of
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Default or Limit Right To Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.12. Securityholders Entitled to Rely. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.13. Reliance by Holders of Senior Debt
on Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.14. Proof of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 9 Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 9.1. Reservation, Listing and Issuance of
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 9.2. Adjustments of Conversion Price and
Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 10 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10.1. Registration of Securities and Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 11 Right to Purchase Additional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 11.1. Right to Purchase Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 11.2. Registration Rights and Certain
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 12 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 12.1. Corporate Existence; Compliance with
Law and Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 12.2. Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . 55
SECTION 12.3. No Legal or Contractual Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 12.4. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 12.5. No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 12.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.7. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.11. Agency Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 12.12. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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ARTICLE 13 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.1. Conditions Precedent to Initial Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 13.2. Conditions Precedent to Subsequent Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 14 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 14.2. Statements or Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 14.3. When Treasury Securities Disregarded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 14.4. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 14.5. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.6. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.7. Multiple Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.8. Table of Contents; Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.9. Representations and Covenants by
BanPonce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 14.10 Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
EXHIBIT A FORM OF SECURITY
SCHEDULE 12.5 Socorro Milagros Rivera v.
Doral Mortgage Corporation and Manuel Vargas
<PAGE> 20
DEBENTURE PURCHASE AGREEMENT dated as of September
25, 1995, between FIRST FINANCIAL CARIBBEAN CORPORATION,
a Puerto Rico corporation (the "Company"), and BANPONCE
CORPORATION, a Puerto Rico corporation ("BanPonce").
On the basis of the representations, warranties and covenants and
subject to the conditions contained herein, BanPonce hereby agrees to purchase
from the Company, and the Company hereby agrees to issue and sell to BanPonce,
$10,000,000 aggregate principal amount of the Company's 8.25% Convertible
Subordinated Debentures due January 1, 2006 (the "Securities") at a price per
Security equal to its par value.
The closing of the sale of Securities in an aggregate principal amount
of $6,645,905, convertible (at the Conversion Price specified in paragraph 9 of
the Securities) into 379,766 shares of common stock of the Company,
representing 4.99% of the sum of (i) the shares of common stock of the Company
outstanding on the date hereof, which the Company hereby represents to be
7,215,570 shares, plus (ii) such 379,766 shares of common stock, shall be held
on the date hereof.
The closing of the sale of the remaining Securities shall be held on a
date mutually agreed by the parties, which shall be no later than 10 Business
Days (as defined below) after the condition specified in Section 13.2(b) is
met. If such condition is not met on or before 90 days after the date hereof,
the agreement to purchase and sell such remaining Securities shall terminate.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of the
Securities (except for Article 11 and Sections 4.14 and 4.16, which are for the
exclusive benefit of BanPonce):
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. DEFINITIONS.
"Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
"Adjusted Consolidated Debt" means, at any date, the remainder of (i)
the sum of (A) the total Debt of the Company and its Subsidiaries on a
consolidated basis, but including
<PAGE> 21
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any Debt of the Company to Doral Federal or any Subsidiary of Doral Federal and
excluding any Debt of Doral Federal and any Subsidiary of Doral Federal, plus
(B) the aggregate liquidation preference of all outstanding shares of Preferred
Stock of the Company's Subsidiaries (other than Doral Federal and its
Subsidiaries) minus (ii) to the extent reflected in (i), the Debt of the
Company and its Subsidiaries (other than Doral Federal and its Subsidiaries)
evidenced by Eligible Repurchase Agreements.
"Affiliate" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or
any Subsidiary; (ii) any spouse, immediate family member or other relative who
has the same principal residence as any person described in clause (i) above or
clause (iv) below; (iii) any corporation, trust or other organization or entity
of which persons described in clauses (i) or (ii) above individually or
collectively own more than 10% of the equity or other beneficial or ownership
interests; and (iv) any person who is a director or officer of the Company or
any Subsidiary or of any person described in clause (i) or (iii) above. For
purposes of this definition (1) control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such person, whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing; and (2) beneficial
ownership of 10% or more of the voting common equity (on a fully diluted basis
assuming conversion of all outstanding securities convertible into voting
stock, whether or not currently convertible, and the exercise of all
outstanding options, warrants and other rights to purchase voting stock,
whether or not currently exercisable) of a person shall be deemed to be control
of such person.
"Agreement" means this Agreement as amended or supplemented from time
to time.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Subsidiary (other than directors' qualifying
shares), property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Subsidiaries (other
than (i) a disposition by a Subsidiary to the Company or by the Company or a
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of property or
assets (including, without limitation, mortgage-backed securities, mortgage
servicing rights and mortgage servicing rights contracts, and mortgage loans,
with or without servicing released) at fair market value in the ordinary course
of business, (iii) a disposition of obsolete assets in the ordinary course of
business and (iv) a disposition subject to
<PAGE> 22
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Section 4.7), including any disposition by means of a merger, consolidation or
similar transaction.
"Average Life" means, as of the date of determination, with respect to
any Debt, the quotient obtained by dividing (i) the sum of the products of the
numbers of years from the date of determination to the dates of each successive
scheduled principal payment of such Debt multiplied by the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Debt" means any and all amounts payable under the Credit
Agreement dated June 30, 1995, between the Company, Doral, the lenders party
thereto and Bankers Trust Company, as Agent, as amended or supplemented from
time to time, or, after the termination of such Credit Agreement, any single
other Debt of the Company, governed by a single agreement or instrument,
designated by the Company as the "Bank Debt" hereunder.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock, including any Preferred
Stock.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Company" means the party named as such in this Agreement until a
successor replaces it and, thereafter, includes the successor.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated subsidiaries determined on a consolidated basis in
accordance with GAAP;
<PAGE> 23
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provided, however, that there shall not be included in such Consolidated Net
Income
(i) any net income of any person if such person is not
a Subsidiary, except that (A) the Company's equity in the net income
of any such person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such person during such period to the Company or a
Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such person for such period shall be
included in determining such Consolidated Net Income;
(ii) any net income of any person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
(iii) except for purposes of Section 4.10, any net income
of any Subsidiary if such Subsidiary is subject to restrictions (other
than the giving of any notice) on the payment of dividends or the
making of distributions by such Subsidiary to the Company, except that
(A) the Company's equity in the net income of any such Subsidiary for
such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash that was or could have been actually
distributed by such Subsidiary during such period to the Company or
another Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to another Subsidiary, to
the limitation contained in this clause) and (B) the Company's equity
in a net loss of any such Subsidiary for such period shall be included
in determining such Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or
other disposition of any property, plant or equipment of the Company
or its consolidated subsidiaries which is not sold or otherwise
disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock
of any Subsidiary; and
(v) the cumulative effect of a change in accounting
principles.
"Consolidated Net Worth" of any person means the total of the amounts
shown on the balance sheet of such person and its
<PAGE> 24
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consolidated subsidiaries, determined on a consolidated basis in accordance
with GAAP, as (i) the par or stated value of all outstanding Capital Stock of
such person plus (ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit, (B) any amounts attributable to Redeemable Stock and (C)
any amounts attributable to Exchangeable Stock.
"Consolidated Tangible Net Worth" of a person means the Consolidated
Net Worth of such person less the net book value of all Intangible Assets of
such person and its consolidated subsidiaries.
"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Conversion Price" means the price payable for Shares upon conversion
of a Security, set forth in paragraph 9 of the Securities, as such price may be
adjusted from time to time pursuant to Section 9.2.
"Debt" of any person means, without duplication,
(i) the principal of and premium (if any) in respect of
(A) indebtedness of such person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or
liable;
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as
the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement
(but excluding trade accounts payable arising in the ordinary course
of business);
(iv) all obligations of such person issued or contracted
for as payment in consideration of the purchase by such person of the
stock or substantially all of the assets of other persons or a merger
or consolidation to which such person was a party;
(v) all obligations of such person for the
reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than
obligations described in (i), (ii),
<PAGE> 25
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(iii) and (iv) above) entered into in the ordinary course of business
of such person to the extent such letters of credit are not drawn upon
or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such person of
a demand for reimbursement following payment on the letter of credit);
(vi) the net exposure of such person with any single
person under Interest Rate Protection Agreements with such person;
(vii) all obligations of such person under repurchase
agreements or put agreements (pursuant to which such person is
obligated to repurchase securities from a third party) to the extent
such obligations constitute indebtedness under GAAP;
(viii) all obligations of the type referred to in clauses
(i) through (vii) of other persons and all dividends of other persons
for the payment of which, in either case, such person is responsible
or liable as obligor, guarantor or otherwise; and
(ix) all obligations of the type referred to in clauses
(i) through (viii) of other persons secured by any Lien on any
property or asset of such person (whether or not such obligation is
assumed by such person), the amount of such obligation being deemed to
be the lesser of the value of such property or assets or the amount of
the obligation so secured;
but excluding contingent recourse obligations or contingent recourse
liabilities related to the Company's mortgage servicing portfolio or mortgage
servicing rights of the Company and its Subsidiaries and obligations as a
servicer under mortgage servicing agreements to make advances on mortgage loans
in advance of receipt of payment from the underlying obligors.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Doral" means Doral Mortgage Corporation, a Puerto Rico corporation.
"Doral Federal" means Doral Federal Savings Bank, a federal savings
bank organized under the laws of the United States.
"Eligible Repurchase Agreement" means a repurchase obligation relating
to (i) direct obligations of, or obligations fully guaranteed as to timely
payment by, the United States of
<PAGE> 26
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America or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America, (ii) any Mortgage Security, or (iii) direct obligations of,
or obligations fully guaranteed as to timely payment by, FNMA or FHLMC, in the
case of (ii) and (iii) only if, at the time at which such repurchase obligation
is incurred, they are assigned the highest credit rating by the rating agency
rating the Securities (or, if the Securities or not then rated, by any
nationally recognized securities rating entity).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company
which is neither Exchangeable Stock or Redeemable Stock).
"Expiration Date" has the meaning set forth in paragraph 9 of the
Securities.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GNMA" means the Government National Mortgage Association.
"Governmental Authority" shall mean any nation or government, any
state, commonwealth or other political subdivision or instrumentality thereof,
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Intangible Assets" of a person means the amount of all unamortized
debt discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, organization and
developmental expenses and other similar items which are included on a balance
sheet of such person in accordance with GAAP.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial
<PAGE> 27
-8-
agreement or arrangement designed to protect the Company or any Subsidiary
against fluctuations in interest rates.
"Levis Family" means (i) Salomon Levis, David Levis, Zoila Levis,
Mario Samuel Levis and Aidiliza Levis, (ii) the spouses and lineal descendants
of the persons identified in (i), (iii) any trust for the exclusive benefit of
persons identified in (i) or (ii), and (iv) any corporation or other entity at
least 75% of the equity or other ownership interests of which are owned by
persons or entities identified in (i), (ii) or (iii).
"Lien" means any mortgage, pledge, security interest, conditional sale
or other title retention agreement or other similar lien.
"Majority Holders" means the Holders of Securities representing in the
aggregate a majority in aggregate outstanding principal amount of the
Securities.
"Material Adverse Effect" shall mean a material adverse effect with
respect to (a) the business, operations or financial condition of the Company
or Doral, (b) the ability of the Company to pay and perform its obligations
hereunder and under the Securities, or (c) the validity or enforceability of
this Agreement or the Securities or the rights and remedies of the Holders
hereunder or thereunder.
"Material Amount" means, at any time, ten percent (10%) of the
Company's consolidated stockholders' equity, as set forth in the most recent
annual or quarterly financial statements of the Company delivered to the
Holders.
"Mortgage Security" means any security (including, without limitation,
any participation certificate) guaranteed by GNMA or issued by FNMA or FLHMC.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any nonconvertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into nonconvertible common
stock of such corporation; provided, however, that Non-Convertible Capital
Stock shall not include any Redeemable Stock or Exchangeable Stock.
<PAGE> 28
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"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Holders. The counsel may be an employee of or counsel to the
Company.
"Pari passu", as applied to the ranking of any Debt of a Person in
relation to other Debt of such Person, means that each such Debt either (i) is
not subordinated in right of payment to any Debt or (ii) is subordinate in
right of payment to the same Debt as is the other, and is so subordinate to the
same extent, and is not subordinate in right of payment to each other or to any
Debt as to which the other is not so subordinate.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity of the Securities or is redeemable at the option of the holder
thereof at any time prior to the first anniversary of the Stated Maturity of
the Securities.
"Representative" means the trustee, agent or representative, if any,
for an issue of Senior Debt.
"Requirements of Law" shall mean, as to any Person, the Articles or
Certificate of Incorporation and By-laws or other organizational or governing
documents of such Person, any law, treaty, rule or regulation, and any final
and binding determination of an arbitrator or determination of a court or
<PAGE> 29
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other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Shares" means shares of common stock of the Company issuable upon
conversion of the Securities.
"SEC" means the Securities and Exchange Commission or any successor to
such entity's functions.
"Secured Debt" means any Debt of the Company or a Subsidiary secured
by a Lien on any property or assets of the Company or a Subsidiary.
"Securities" means the Securities issued under this Agreement.
"Senior Debt" means all Debt of the Company unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that such Debt is not superior in right of payment to the
Securities; provided, however, that Senior Debt shall not be deemed to include
(1) any obligation of the Company to any Subsidiary, (2) any liability for
Federal, state, local or other taxes owed or owing by the Company, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business or (4) any indebtedness, guarantee or obligation of the
Company which is subordinate or junior in any respect to any other
indebtedness, guarantee or obligation of the Company.
"Significant Management Stock Disposition" means any transfer or other
disposition of Capital Stock of the Company (including by merger or
consolidation) that results in members of the Levis Family owning in the
aggregate fewer than 379,097 shares of common stock of the Company or shares of
Capital Stock convertible into common stock of the Company (or such other
number of shares of common stock of the Company resulting from the subdivision
or combination of such shares after the date hereof), at any time prior to the
third anniversary of the date hereof.
"Significant Subsidiary" means (i) any domestic Subsidiary of the
Company which at the time of determination either (A) had assets which, as of
the date of the Company's most recent quarterly consolidated balance sheet,
constituted at least 3% of the Company's total assets on a consolidated basis
as of such date, or (B) had revenues for the 12-month period ending on the date
of the Company's most recent quarterly consolidated statement of income which
constituted at least 3% of the Company's total revenues on a consolidated basis
for such period,
<PAGE> 30
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(ii) any foreign Subsidiary of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's most recent
quarterly consolidated balance sheet, constituted at least 5% of the Company's
total assets on a consolidated basis as of such date, or (B) had revenues for
the 12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which constituted at least 5% of the Company's
total revenues on a consolidated basis for such period, or (iii) any group of
Subsidiaries which, if merged into each other, would at the time of
determination (A) have had assets which, as of the date of the Company's most
recent quarterly consolidated balance sheet, would have constituted at least
10% of the Company's total assets on a consolidated basis as of such date, or
(B) had revenues for the 12-month period ending on the date of the Company's
most recent quarterly consolidated statement of income which would have
constituted at least 10% of the Company's total revenues on a consolidated
basis for such period (each such determination being made in accordance with
GAAP).
"Stated maturity", when used with respect to any security or any
installment of interest thereon, means the date specified in such security as
the fixed date on which the principal of such security or such installment of
interest is due and payable.
"Subordinated Obligation" means (i) any Debt of the Company
subordinate to the Securities and (ii) any Preferred Stock of the Company.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries or (iii) one or more Subsidiaries.
"Wholly Owned Subsidiary" means a Subsidiary (i) all the Capital
Stock of which (other than non-voting non-convertible Preferred Stock) is owned
by the Company or one or more Wholly Owned Subsidiaries; and (ii) all the
non-voting, non-convertible Preferred Stock of which is owned by the Company,
one or more Wholly Owned Subsidiaries, or persons or entities that are not
otherwise Affiliates of the Company.
<PAGE> 31
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SECTION 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
---- ----------
<S> <C>
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"issue" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.4
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Payment Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5
</TABLE>
SECTION 1.3. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including, without limitation; and
(5) words in the singular include the plural and words in
the plural include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.1. FORM AND DATING. The Securities shall be substantially
in the form of Exhibit A, which is hereby incorporated in and expressly made a
part of this Agreement. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend
or endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its issuance. The terms of the Securities set forth in
Exhibit A are part of the terms of this Agreement and are incorporated herein
by reference as if fully set forth herein.
SECTION 2.2. EXECUTION AND AUTHENTICATION. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed,
<PAGE> 32
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imprinted or reproduced on the Securities and may be in facsimile form. If an
Officer whose signature is on a Security no longer holds that office at the
time the Security is issued, the Security shall be valid nevertheless.
SECTION 2.3. REGISTRAR AND PAYING AGENT. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may have one or more coregistrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or coregistrar not a party to this Agreement. The
agreement shall implement the provisions of this Agreement that relate to such
agent. The Company shall notify the Holders of the name and address of any
such agent. The Company or any Subsidiary or Affiliate may itself act as
Paying Agent, Registrar, coregistrar or transfer agent.
The Company will initially act as Registrar and Paying Agent in
connection with the Securities.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders all money held by the Paying Agent for the payment of principal
of or interest on the Securities and shall notify the Holders of any default by
the Company in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent.
SECTION 2.5. TRANSFER AND EXCHANGE. The Securities shall be issued in
registered form without coupons in denominations of $5,000 and integral
multiples thereof and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a coregistrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of applicable law
are met. When Securities are presented to the Registrar or a coregistrar with
a request to exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested if the same
requirements are met. To permit registration of transfers and
<PAGE> 33
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exchanges, the Company shall execute Securities at the Registrar's or
coregistrar's request. The Company may require payment of a sum sufficient to
pay all taxes, assessments or other governmental charges.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Paying Agent, the Registrar or any coregistrar may
deem and treat the person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, and none of the Company, the Paying Agent, the Registrar or any
coregistrar shall be affected by notice to the contrary.
SECTION 2.6. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
a replacement Security if the requirements of applicable law are met. If
required by the Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company to protect the Company, the Paying Agent, the
Registrar and any coregistrar from any loss which any of them may suffer if a
Security is replaced.
Every replacement Security is an additional obligation of the Company.
ARTICLE 3
REDEMPTION
SECTION 3.1. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than
all the Securities are to be redeemed, the Securities shall be redeemed pro
rata on the basis of the outstanding principal amount of each Security.
SECTION 3.2. NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before a date for redemption of Securities, the Company shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
<PAGE> 34
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(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to
be redeemed, the identification and principal amounts of the
particular Securities to be redeemed; and
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms hereof (including but not limited to
Article 8 hereof), interest on Securities (or portions thereof) called
for redemption ceases to accrue on and after the redemption date.
SECTION 3.3. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, the Securities (or portions thereof) called for
redemption become due and payable on the redemption date and at the redemption
price stated in the notice, subject, however, to the Holders' conversion rights
under Article 9 hereof and paragraph 9 of the Securities. Upon surrender to
the Paying Agent, such Securities (or portions thereof) shall be paid at the
redemption price stated in the notice, plus accrued interest to the redemption
date.
SECTION 3.4. DEPOSIT OF REDEMPTION PRICE. Prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on that date.
SECTION 3.5. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute for the Holder (at
the Company's expense) a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF SECURITIES. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Agreement. Principal and interest shall
be considered paid on the date due if on such date the Paying Agent holds in
accordance with this Agreement money sufficient to pay all principal and
interest then due and the Paying Agent is not prohibited from paying such money
to the Securityholders on that
<PAGE> 35
-16-
date pursuant to the terms of this Agreement (including but not limited to
Article 8 hereof).
SECTION 4.2. SEC REPORTS. The Company shall provide Securityholders
within 10 days after it files them with the SEC copies of its annual report and
of the information, documents and other reports which the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In
the event the Company is at any time no longer subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to
provide the Securityholders with reports containing substantially the same
information as would have been required to be filed with the SEC had the
Company continued to have been subject to such reporting requirements. In such
event, such reports shall be provided at the times the Company would have been
required to provide reports had it continued to have been subject to such
reporting requirements.
SECTION 4.3. LIMITATION ON DEBT. (a) The Company shall not issue,
assume, incur or otherwise become liable for (collectively, "issue"), directly
or indirectly, any Debt, and shall not permit any of its Subsidiaries to issue
any Debt or Preferred Stock, unless the ratio of (1) Adjusted Consolidated Debt
of the Company and its Subsidiaries to (2) the remainder of (x) the
Consolidated Tangible Net Worth of the Company and its Subsidiaries (excluding
Doral Federal and its Subsidiaries) minus (y) the product of 0.03 times the
aggregate outstanding amount of Debt represented by Eligible Repurchase
Agreements as of the end of the fiscal quarter immediately preceding the
issuance of such Debt or Preferred Stock is less than or equal to 10.0 to 1.0
(as shown by a pro forma consolidated balance sheet of the Company and its
Subsidiaries, other than Doral Federal and its Subsidiaries, as of the end of
the most recent fiscal quarter ending at least 30 days prior to the issuance of
such Debt or Preferred Stock after giving effect to (i) the issuance of such
Debt or Preferred Stock and (if applicable) the application of the net proceeds
thereof to refinance other Debt or Preferred Stock as if such Debt or Preferred
Stock was issued and the application of such proceeds occurred as of the end of
such quarter, (ii) the issuance and retirement of any other Debt since the last
day of the most recent fiscal quarter as if such Debt was issued or retired on
such date, (iii) the acquisition of any company or business acquired by the
Company since the last day of such quarter, including any acquisition which
will be consummated contemporaneously with the issuance of such Debt or
Preferred Stock, as if such acquisition occurred on such date and (iv) any
Asset Disposition effected since the last day of such quarter as if such Asset
Disposition occurred on such date).
<PAGE> 36
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(b) Notwithstanding Section 4.3(a), the Company and the
Subsidiaries may issue, directly or indirectly, the following Debt or Preferred
Stock:
(1) Debt of the Company or of any Wholly Owned Subsidiary
owed to and held by a Wholly Owned Subsidiary (the "creditor");
provided, however, that any subsequent issuance or transfer of any
Capital Stock or other action that results in any such creditor ceasing
to be a Wholly Owned Subsidiary or any transfer of such Debt shall be
deemed for the purposes of this Section to constitute the issuance of
such Debt by the Company;
(2) Debt of a Wholly Owned Subsidiary owed to and held by
the Company;
(3) drafts payable for payrolls and expenses incurred in
the ordinary course of business consistent with past practices;
(4) endorsements of negotiable instruments for deposit or
collection in the ordinary course of business;
(5) Debt represented by Capital Lease Obligations;
provided that the aggregate principal amount of Debt permitted under
this paragraph (5), together with the aggregate principal amount of
Debt permitted by paragraph (6) of this Section 4.3(b), may not exceed
$10,000,000 at any one time outstanding;
(6) Debt issued to finance the purchase price of any
assets acquired by the Company and its Subsidiaries; provided,
however, that (i) such Debt shall be issued and any Lien securing such
Debt shall be created within 90 days of such acquisition of such
assets and (ii) such Debt shall not be secured by a Lien on any other
assets; provided further, however, that the aggregate amount of such
Debt, together with the aggregate principal amount of Debt permitted
by paragraph (5) of this Section 4.3(b), may not exceed $10,000,000
at any one time outstanding; and
(7) Preferred Stock of Subsidiaries having an aggregate
liquidation preference at any one time of not more than $10,000,000.
SECTION 4.4. LIMITATION ON PUT OBLIGATIONS. If (i) the Company sells
mortgage-backed securities or mortgage loans and the terms of such sale
obligate the Company to repurchase (whether conditionally or unconditionally)
such mortgage-backed securities or mortgage loans (excluding any retained
recourse
<PAGE> 37
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obligations related to the Company's mortgage servicing portfolio) and (ii) the
then aggregate amount of all such repurchase obligations of the Company (in
connection with the contemplated transaction and all previous transactions)
exceeds $300,000,000, then the Company shall give notice thereof to the Holders
within five (5) Business Days of such sale. Notwithstanding the foregoing, the
Company shall obtain the prior written consent of the Majority Holders before
entering into any of the transactions described in the preceding sentence if,
in the reasonable judgment of the management of the Company, such transaction
(or the aggregate of such transaction with all previous transactions for which
obligations still exist) could result in a decrease in the Company's
Consolidated Tangible Net Worth by a Material Amount.
SECTION 4.5. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on its Capital Stock or to
the direct or indirect holders of its Capital Stock (except dividends or
distributions payable solely in its Non-Convertible Capital Stock or in
options, warrants or other rights to purchase its Non-Convertible Capital Stock
and except dividends or distributions payable to the Company or payable by any
entity (other than the Company) to a Wholly Owned Subsidiary), (ii) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the
Company, of any direct or indirect parent of the Company or of any Affiliate of
the Company (other than a Wholly Owned Subsidiary), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment any
Subordinated Obligations or (iv) make any loan or advance to, acquire any
Capital Stock, equity interest, obligation or other security of, or make any
capital contribution to, or otherwise invest in, any Affiliate of the Company
(other than a Wholly Owned Subsidiary or a person which will become a Wholly
Owned Subsidiary as a result of any such acquisition of Capital Stock) (any
such dividend, distribution, purchase, redemption, repurchase, defeasance or
other acquisition, retirement, loan, advance, contribution or other investment
being hereinafter referred to as a "Restricted Payment") if at the time the
Company or such Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and is continuing (or
would result therefrom); or
(2) the aggregate amount of such Restricted Payment and
all other Restricted Payments since June 1, 1995, would exceed the sum
of:
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(a) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period) from June
1, 1995, to the end of the most recent fiscal quarter ending
at least 45 days prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income shall be a deficit,
100% of such deficit expressed as a negative number), computed
on a cumulative basis for such period;
(b) the aggregate Net Cash Proceeds received by
the Company from the issue or sale of its Capital Stock (other
than to a Subsidiary or an employee stock ownership plan, and
other than any Redeemable Stock or Exchangeable Stock)
subsequent to June 1, 1995; and
(c) $20,000,000.
(b) The provisions of Section 4.5(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations of the Company made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Redeemable Stock or Exchangeable Stock);
provided, however, that (A) such purchase of redemption shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale shall be excluded from
clause (2)(b) of Section 4.5(a);
(ii) the purchase or redemption of Subordinated
Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Debt of the Company
in an aggregate principal amount not exceeding the aggregate
outstanding principal amount of the Subordinated Obligations so
exchanged, purchased or redeemed; provided, however, that such Debt
(A) shall be subordinated to the Securities to at least the same
extent as the Subordinated Obligations so exchanged, purchased or
redeemed, (B) shall have a Stated Maturity later than or equal to the
Stated Maturity of the Subordinated Obligations so exchanged,
purchased or redeemed, and (C) shall have an Average Life greater than
or equal to the remaining Average Life of the Subordinated Obligations
so exchanged, purchased or redeemed; provided further, however, that
such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; and
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section; provided,
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however, that at the time of payment of such dividend, no
Default shall have occurred and be continuing (or result therefrom).
SECTION 4.6. LIMITATION ON SECURED DEBT. The Company shall not
issue, assume, incur or otherwise become liable for, directly or indirectly,
any Secured Debt that is subordinated to any other Debt of the Company unless
contemporaneously therewith effective provision is made to secure the
Securities equally and ratably with such Secured Debt for so long as such
Secured Debt is secured by a Lien.
SECTION 4.7. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The
Company shall not, and shall not permit any Subsidiary to, enter into any
arrangement with any person providing for the leasing by the Company or any
Subsidiary of any real or tangible personal property (except for leases for a
term of not more than one year or between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries), which property has been or is
to be sold or transferred by the Company or such Subsidiary to such person in
contemplation of such leasing, unless the Company or such Subsidiary would be
entitled to create a Lien on such property without equally and ratably securing
the Securities pursuant to Section 4.6.
SECTION 4.8. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. The
Company shall not, and shall not permit any Subsidiary to, effect any Asset
Disposition unless the properties, assets, stock or ownership interest conveyed
are conveyed for a consideration at least equal to the fair value thereof (as
determined by the Board of Directors). The restrictions contained in this
Section shall not apply to or prevent the consolidation or merger of a Wholly
Owned Subsidiary with, or a conveyance or transfer of its properties and assets
as an entirety or substantially as an entirety to, the Company or another then
existing Wholly Owned Subsidiary. The restrictions contained in this Section
shall not apply to any transaction or series of related transactions involving
less than $1,000,000.
SECTION 4.9. MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. The
Company shall not permit its Consolidated Tangible Net Worth to be less than
$70,000,000.
SECTION 4.10. MAINTENANCE OF MINIMUM DEBT SERVICE COVERAGE RATIO.
The Company shall not permit its ratio of Consolidated Net Income plus
depreciation, amortization and other non-cash expenses to Funded Debt Service
(as defined below) for each 12-month period ending on the last day of each of
its fiscal quarters to be less than 1.15 to 1.00. For purposes of this
definition, "Funded Debt Service" as of the end of any fiscal
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quarter means the sum of (i) scheduled payments of interest and principal due
on any Debt of the Company or any Subsidiary (excluding for this purpose
deposits) having an original term of one year or more (other than Debt owed to
the Company or any Wholly Owned Subsidiary) during the 12-month period ending
or the last day of such fiscal quarter, plus (ii) the aggregate amount of the
last four quarterly dividends paid by the Company.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company
shall not, and shall not permit any Subsidiary to, conduct any business or
enter into any transaction or series of related transactions involving more
than $1,000,000 (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate unless the terms
of such business, transaction or series of transactions are (A) set forth in
writing, in the case of any business, transaction or series of transactions not
in the ordinary course of business, (B) fair and reasonable and as favorable
to the Company or such Subsidiary as terms that would be obtainable at the time
for a comparable transaction or series of similar transactions in arm's-length
dealings with an unrelated third person and (C) in the case of any business or
transaction involving an aggregate amount greater than $5,000,000 for any
two-year period, the Board of Directors (excluding directors that are
interested in such business or transaction) has, by resolution, determined in
good faith that such business or transaction or series of transactions meets
the criteria set forth in (B) above. The restrictions of this Section shall
not apply to (i) transactions between the Company and its Wholly Owned
Subsidiaries or between Wholly Owned Subsidiaries, (ii) the existing Master
Production Agreement and Master Purchase Servicing and Collection Agreement,
each dated September 15, 1993, between the Company and Doral Federal, and (iii)
the liquidation of Puerto Rico Island Rental Limited Dividend Partnership S.E.
and the assumption of its debt by the Company in exchange for the transfer of
its assets to the Company.
SECTION 4.12. LIMITATION ON SUBORDINATED DEBT RANKING SENIOR TO THE
SECURITIES. The Company shall not issue, assume, guarantee, incur or otherwise
become liable for, directly or indirectly, any Debt subordinate or junior in
ranking in any respect to any Senior Debt unless such Debt is pari passu with
or subordinated to the Securities.
SECTION 4.13. LIMITATION ON THE ISSUANCE OR TRANSFER OF CAPITAL STOCK
OF CERTAIN SUBSIDIARIES. The provisions of Section 4.8 notwithstanding, the
Company shall not, and shall not permit any Wholly Owned Subsidiary to,
directly or indirectly, issue or transfer any shares of Capital Stock of Doral
or of any Wholly Owned Subsidiary (other than non-voting (except as
<PAGE> 41
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required by law or by the NASD or any exchange on which such shares may be
listed) non-convertible Preferred Stock) except (i) to the Company or another
Wholly Owned Subsidiary, and (ii) for directors' qualifying shares.
SECTION 4.14. LINE OF BUSINESS. The Company and its Subsidiaries
shall continue to engage in the business of mortgage banking and lending,
servicing mortgage loans and other financial services (including banking) as
their principal business and, in the case of the Company's operations in the
United States (as defined for purposes of Regulation K promulgated by the
Federal Reserve Board, as in effect on the date hereof), as their only
business. This covenant shall be for the exclusive benefit of BanPonce.
SECTION 4.15. SIGNIFICANT MANAGEMENT STOCK DISPOSITION. (a) Upon a
Significant Management Stock Disposition, each Holder shall have the right to
require that the Company repurchase, on the 6th, 12th, 18th, and 24th monthly
anniversaries of such Significant Management Stock Disposition, up to 25% in
principal amount of such Holder's Securities held on the date notice of such
Significant Management Stock Disposition is received by such Holder, at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase, in accordance
with the terms contemplated in this Section.
(b) Within 30 days following any Significant Management Stock
Disposition, the Company shall mail a notice to each Holder stating:
(1) that a Significant Management Stock Disposition has
occurred and that such Holder has the right to require the Company to
purchase such Holder's Securities, in whole or in part, at a purchase
price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase;
(2) the circumstances and relevant facts regarding such
Significant Management Stock Disposition (including information with
respect to pro forma historical income, cash flow and capitalization
after giving effect to such Significant Management Stock Disposition);
(3) the repurchase dates; and
(4) the instructions determined by the Company,
consistent with this Section, that a Holder must follow in order to
have its Securities purchased.
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(c) Holders electing to have a Security purchased will be required
to notify the Company and surrender the Security, with an appropriate form duly
completed, to the Company at the address specified in the notice at least ten
Business Days prior to the relevant purchase date. Holders will be entitled to
withdraw their election if the Company receives not later than three Business
Days prior to the relevant purchase date a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased.
(d) On each purchase date, all Securities purchased by the Company
under this Section shall be cancelled, and the Company shall pay the purchase
price plus accrued and unpaid interest, if any, to the Holders entitled
thereto.
SECTION 4.16. SOURCE OF INCOME. The Company shall do or cause to be
done all things necessary or proper within its control to ensure that interest
paid on the Securities will not constitute income from sources within the
United States or will be otherwise totally exempt from or otherwise not subject
to United States income taxes when received by BanPonce under the applicable
provisions of the Code as currently in effect. If the Company violates its
covenant set forth in this Section, the Company shall pay additional interest
to each Holder that submits a claim in writing to the Company to the effect
that it has or will be required to pay United States income taxes in respect of
interest paid or accrued on the Securities held by such Holder. The amount of
such additional interest will be equal, with respect to any period, to the sum
of (i) any additional income taxes (after deducting any taxes no longer payable
as a result of such change in the source of income) such Holder was or will be
required to pay with respect to interest paid or accrued on the Securities held
by such Holder during such period, and with respect to payments of additional
interest under this Section, after giving effect to any credit relating to such
interest that such Holder is entitled to take, and (ii) any penalties and
interest that have been or will be assessed against such Holder with respect to
the late payment of such taxes. The payment of such additional interest shall
be the exclusive remedy for violation of this covenant. This covenant shall be
for the exclusive benefit of BanPonce.
SECTION 4.17. COMPLIANCE CERTIFICATE. The Company shall deliver to
each Holder within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of
<PAGE> 43
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any Default by the Company and whether or not the signers know of any Default
that occurred during such period. If they do, the certificate shall describe
the Default, its status and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.18. FURTHER INSTRUMENTS AND ACTS. Upon request of any
Holder, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Agreement.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. (a) The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any person, unless:
(i) the resulting, surviving or transferee person (if
not the Company) shall be a organized and existing under the laws of
the Unites States of America, any State thereof, the Commonwealth of
Puerto Rico or the District of Columbia and such person shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to each Holder, in form satisfactory to each Holder, all the
obligations of the Company under the Securities and this Agreement;
(ii) immediately after giving effect to such transaction
(and treating any Debt or Preferred Stock which becomes an obligation
of the resulting, surviving or transferee person or any Subsidiary as
a result of such transaction as having been incurred or issued by such
person or such Subsidiary at the time of such transaction), no Default
shall have happened and be continuing;
(iii) immediately after giving effect to such
transaction, the resulting, surviving or transferee person would be
able to incur an additional $1.00 of Debt pursuant to Section 4.3(a)
(without giving effect to Section 4.3(b)); and
(iv) the Company shall have delivered to each Holder an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental agreement
(if any) comply with this Agreement.
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(b) Notwithstanding the provisions of subsection 5.1(a), any
Wholly Owned Subsidiary may merge or consolidate with the Company so long as
the Company shall be the surviving or continuing corporation.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on
any Security when the same becomes due and payable, whether or not
such payment shall be prohibited by Article 8, and such default
continues for a period of 10 days;
(2) the Company (i) defaults in the payment of the
principal of any Security when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article 8, and such
default continues for a period of 10 days, or (ii) fails to purchase
Securities when required pursuant to Section 4.15, whether or not such
purchase shall be prohibited by Article 8, and such default continues
for a period of 10 days;
(3) the Company fails to comply with any of its covenants
under Sections 4.3 through 4.15 or under Section 5.1;
(4) the Company fails to comply with Section 4.2, 4.16
(with respect to the payment of additional interest only), 4.17 or
4.18 and such failure continues for 30 days after the notice specified
below;
(5) the Company fails to comply with any of its
agreements in the Securities or this Agreement (other than those
referred to in (1), (2), (3) or (4) above and other than those set
forth in Section 4.16) and such failure continues for 45 days after
receipt by the Company of the notice specified below;
(6) Debt of the Company or any Significant Subsidiary is
not paid within any applicable grace period after final maturity or
the maturity thereof is accelerated, the total amount of such Debt
exceeds a Material Amount (or its foreign currency equivalent) and
such default continues unremedied for 10 days;
<PAGE> 45
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(7) the Company or any Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in
excess of a Material Amount shall be rendered against the Company or
any Significant Subsidiary and shall not be fully covered by
insurance, there is a period of 60 days following such judgment during
which such judgment or decree is not discharged, waived or the
execution thereof stayed (or such shorter period ending one day prior
to the date on which the judgment creditor could attach assets of the
Company or such Significant Subsidiary) and such judgment or decree is
not discharged, waived or the execution stayed within 10 days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal, Commonwealth or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
<PAGE> 46
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A Default under clause (4) or (5) is not an Event of Default until a
Holder notifies the Company of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice
must specify the Default, demand that it be remedied and state that such notice
is a "Notice of Default".
The Company shall deliver to the Holders, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (4) or (5), its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.2. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.1(7) or (8) with respect to the
Company) occurs and is continuing and is not waived as provided in Section 6.4,
each Holder by notice to the Company may declare the principal of and accrued
interest on all the Securities held by such Holder to be due and payable. Upon
such a declaration, such principal and interest shall be due and payable
immediately, subject to Section 8.4. If an Event of Default specified in
Section 6.1(7) or (8) with respect to the Company occurs and is continuing, the
principal of and interest on all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
any Securityholders.
SECTION 6.3. OTHER REMEDIES. If an Event of Default occurs and is
continuing, each Holder may pursue any available remedy to collect the payment
of principal of and interest on the Securities or to enforce the performance of
any provision of the Securities or this Agreement.
A delay or omission by any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. WAIVER OF PAST DEFAULTS. The Majority Holders by notice
to the Company may waive an existing Default and its consequences except (1) a
Default in the payment of the principal of or interest on a Security or (2) a
Default in respect of a provision that under Section 7.1 cannot be amended
without the consent of each Securityholder affected. When a Default is waived,
it is deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
<PAGE> 47
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SECTION 6.5. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Agreement, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
SECTION 6.6. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Agreement; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Holders, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE 7
AMENDMENTS
SECTION 7.1. AMENDMENT OF AGREEMENT. The Company and the Majority
Holders may amend this Agreement or the Securities by an instrument in writing
executed by the Company and the Majority Holders. However, without the consent
of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the fixed maturity
of any Security;
(4) reduce the premium payable upon the redemption of any
Security;
(5) make any Security payable in money other than that
stated in the Security;
(6) increase the Conversion Price payable for Shares,
except in accordance with Section 9.2;
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(7) make any change in Articles 8, 9, 10 or 11 that
adversely affects the rights of any Securityholder or holder of
Shares; or
(8) make any change in Section 4.15, 6.4, 6.5, or this
Section.
An amendment under this Section may not make any change that adversely
affects the rights under Article 8 of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (required pursuant to the
terms of such Senior Debt to give such consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 7.2. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation
of the consent or waiver is not made on the Security. However, any such Holder
or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Company receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent
or take any other action described above. Such record date may not be earlier
than 30 days after notice thereof is given to Securityholders. If a record
date is fixed, then notwithstanding the immediately preceding paragraph, those
persons who were Securityholders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such persons continue to be Holders after such record date. No consent shall
be valid or effective for more than 120 days after such record date.
SECTION 7.3. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Company may require the Holder of the
Security to deliver it to the Company. The Company may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder.
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Alternatively, if the Company so determines, the Company in exchange for the
Security shall issue a new Security that reflects the changed terms. Failure
to make the appropriate notation or to issue a new Security shall not affect
the validity of such amendment.
ARTICLE 8
SUBORDINATION
SECTION 8.1. AGREEMENT TO SUBORDINATE. The Company agrees, and each
Securityholder by accepting a Security agrees, that the indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 8, to the prior payment of all Senior Debt and
that the subordination is for the benefit of the holders of Senior Debt. The
Securities shall in all respects rank pari passu with or senior to all
indebtedness of the Company other than Senior Debt. Only indebtedness of the
Company which is Senior Debt shall rank senior to the Securities in accordance
with the provisions set forth herein.
SECTION 8.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment
or distribution of the assets of the Company to creditors upon a total or
partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive
payment in full of the Senior Debt before Securityholders shall be
entitled to receive any payment of principal of, or premium, if any,
or interest on the Securities; and
(2) until the Senior Debt is paid in full, any
distribution to which Securityholders would be entitled but for this
Article 8 shall be made to holders of Senior Debt as their interests
may appear, except that Securityholders may receive shares of stock
and any debt securities that are subordinated to Senior Debt to at
least the same extent as the Securities.
For purposes of this Section "payment in full", as used with respect
to Senior Debt, means the receipt of cash or securities (taken at their fair
value at the time of receipt, determined as hereinafter provided) of the
principal amount of the Senior Debt and premium, if any, and interest thereon
to the date of such payment. "Fair value" means (a) if the securities are
quoted on a nationally recognized securities exchange or on NASDAQ, the
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closing price on the day such securities are received or, if there are no sales
reported on that day, the reported closing bid price on that day, and (b) if
the securities are not so quoted, a price determined by a nationally recognized
investment banking house selected by the Securityholders and the holders of
Senior Debt receiving such securities, such price to be determined as of the
date of receipt of such securities by the holders of Senior Debt.
SECTION 8.3. DEFAULT ON SENIOR DEBT. The Company may not pay
principal of, premium, if any, or interest on, the Securities (including by
set-off or otherwise) and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) principal of or interest
on any Senior Debt is not paid when due or (ii) any other default on Senior
Debt occurs and the maturity of such Senior Debt is accelerated (or notice of
acceleration shall have been transmitted to the Company) in accordance with its
terms unless, in either case, the default has been cured or waived, any such
acceleration has been rescinded or such Senior Debt has been paid in full.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Senior Debt pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Securities during any period of 179 days from the receipt by the Company of
written notice of such default from the Representative of such Senior Debt
specifying an election to effect such 179-day prohibition (a "Payment Notice").
Notwithstanding the provisions described in the immediately preceding
sentence, unless the Company shall be prohibited from paying the Securities
pursuant to the provisions contained in the first sentence of this Section, the
Company may resume payments on the Securities after the earlier of (i) the
expiration of such 179-day period and (ii) the acceleration of the Senior Debt
with respect to which the Payment Notice was given. Not more than one Payment
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Senior Debt during such period; provided,
however, that if any Payment Notice within such 360 day period is given by or
on behalf of any holders of Senior Debt other than the Bank Debt, the
Representative of the Bank Debt may give another Payment Notice within such
period.
SECTION 8.4. ACCELERATION OF PAYMENT OF SECURITIES. If payment of any
Securities is accelerated because of an Event of Default, the Company shall
promptly notify holders of Senior Debt (if any) of the acceleration. If any
Senior Debt is outstanding,
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the Company may not pay the Securities until 10 days after such notice is
received and, thereafter, may pay the Securities only if this Article 8
otherwise permits the payment at that time.
SECTION 8.5. WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution
is made to Securityholders that because of this Article 8 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Debt and pay it over to them as their interests may
appear.
SECTION 8.6. SUBROGATION. After all Senior Debt is paid in full and
until the Securities are paid in full, Securityholders shall be subrogated to
the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt. A distribution made under this Article 8 to holders of Senior
Debt which otherwise would have been made to Securityholders is not, as between
the Company and Securityholders, a payment by the Company on Senior Debt.
SECTION 8.7. RELATIVE RIGHTS. This Article 8 defines the relative
rights of Securityholders and holders of Senior Debt. Nothing in this
Agreement shall:
(1) impair, as between the Company and Securityholders,
the obligation of the Company, which is absolute and unconditional, to
pay principal of, premium, if any, and interest on the Securities in
accordance with their terms; or
(2) except as set forth in Section 8.4, prevent any
Securityholder from exercising its available remedies upon a Default,
subject to the rights of holders of Senior Debt to receive
distributions otherwise payable to Securityholders.
SECTION 8.8. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of
any holder of Senior Debt to enforce the subordination of the indebtedness
evidenced by the Securities shall be impaired by any act or failure to act by
the Company or by its failure to comply with this Agreement.
SECTION 8.9. RIGHTS OF PAYING AGENT. Notwithstanding Section 8.3, the
Paying Agent may continue to make payments on the Securities and shall not be
charged with knowledge of the existence of facts that would prohibit the making
of any such payments unless, not less than two Business Days prior to the date
of such payment, the Paying Agent receives notice satisfactory to it that
payments may not be made under this Article 8. The Company, the Registrar or
coregistrar, a Representative or a holder of Senior Debt may give the notice;
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provided, however, that, if an issue of Senior Debt has a Representative, only
the Representative may give the notice.
Each of the Paying Agent, the Registrar and coregistrar in its
individual or any other capacity may hold Senior Debt with the same rights it
would have if it were not the Paying Agent, Registrar or coregistrar.
SECTION 8.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representative (if any).
SECTION 8.11. ARTICLE 8 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities
by reason of any provision in this Article 8 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 8 shall have
any effect on the right of the Securityholders to accelerate the maturity of
the Securities, except as expressly set forth in Section 8.4.
SECTION 8.12. SECURITYHOLDERS ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 8, the Securityholders shall be entitled
to rely (i) upon any order or decree of a court of competent jurisdiction in
which any proceedings of the nature referred to in Section 8.2 are pending,
(ii) upon a certificate of the liquidating trustee or agent or other person
making such payment or distribution to the Securityholders or (iii) upon the
Representatives for the holders of Senior Debt for the purpose of ascertaining
the persons entitled to participate in such payment or distribution, the
holders of the Senior Debt and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 8. Holders may
request persons that are holders of Senior Debt to furnish evidence as to the
amount of Senior Debt held by such person, the extent to which such person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such person under this Article 8, and, if such
evidence is not furnished, Holders may defer any payment to such person pending
judicial determination as to the right of such person to receive such payment.
SECTION 8.13. RELIANCE BY HOLDERS OF SENIOR DEBT ON SUBORDINATION
PROVISIONS. Each Securityholder by accepting a Security acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to
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continue to hold, such Senior Debt and such holder of Senior Debt shall be
deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior Debt.
SECTION 8.14. PROOF OF CLAIMS. In the event that the Company is
subject to any proceeding under any Bankruptcy Law and the Securityholders fail
to file any proof of claim permitted to be filed in such proceeding with
respect to the Securities, then any Representative of Senior Debt may file such
proof of claim no earlier than the later of (i) the expiration of 15 days after
such Representative notifies the Holders of its intention to do so and (ii) 30
days preceding the last day permitted to file such claim.
ARTICLE 9
CONVERSION
SECTION 9.1. RESERVATION, LISTING AND ISSUANCE OF SHARES. The Company
will at all times have authorized, and reserve and keep available, free from
preemptive rights, for the purpose of enabling it to satisfy any obligation to
issue Shares upon the conversion of the Securities, the number of Shares
deliverable upon conversion of the Securities. The Company will, at its
expense, cause such Shares to be listed (subject to issuance or notice of
issuance of Shares) on all stock exchanges on which the common stock is listed
not later than the date such common stock is so listed. The Company agrees to
list such Shares (subject to issuance or notice of issuance) on NASDAQ-NMS
promptly after the date hereof.
Before taking any action which could cause an adjustment pursuant to
Section 9.2 reducing the Conversion Price below the then par value (if any) of
the Shares, the Company will take any corporate action which may be necessary
in order that the Company may validly and legally issue at the Conversion Price
as so adjusted Shares that are fully paid and non-assessable.
The Company covenants that all Shares will, upon issuance in
accordance with the terms hereof, be (i) duly authorized, fully paid and
non-assessable, and (ii) free from all taxes with respect to the issuance
thereof and from all liens, charges and security interests created by the
Company.
SECTION 9.2. ADJUSTMENTS OF CONVERSION PRICE AND NUMBER OF SHARES.
(a) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK. If and
whenever, after the date hereof, the Company shall issue or sell any shares of
common stock (except on conversion of one or more of the Securities or exercise
of the
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right granted in Article 11) for a consideration per share less than the Market
Price (as hereinafter defined) at the time of such issue or sale, then,
forthwith upon such issue or sale, the Conversion Price shall be reduced to the
price (calculated to the nearest cent) determined by multiplying the Conversion
Price in effect immediately prior to the time of such issue or sale by a
fraction, the numerator of which shall be the sum of (a) the number of shares
of common stock outstanding immediately prior to such issue or sale multiplied
by the Market Price immediately prior to such issue or sale plus (b) the
consideration received by the Company upon such issue or sale, and the
denominator of which shall be the product of (c) the total number of shares of
common stock outstanding immediately after such issue or sale, multiplied by
(d) the Market Price immediately prior to such issue or sale. No adjustment of
any Conversion Price, however, shall be made in an amount less than $0.01 per
share, but any such lesser adjustment shall be carried forward and shall be
made at the time of, and together with, the next subsequent adjustment which
together with any adjustments so carried forward shall amount to $0.01 per
share or more.
(b) For the purposes of subsection (b) of this Section, the
following clauses shall also be applicable:
(i) Issuance of Rights or Options. In case at any time
the Company shall grant (whether directly or by assumption in a merger
or otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of, common stock or any stock or securities
convertible into or exchangeable for common stock (such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which common stock is
issuable upon the conversion of such rights or options or upon
conversion or exchange of such Convertible Securities (determined as
provided below) shall be less than the Market Price determined as of
the date of granting such rights or options, then the total maximum
number of shares of common stock issuable upon the conversion of such
rights or options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the conversion of
such rights or options shall (as of the date of granting of such
rights or options) be deemed to be outstanding and to have been issued
for such price per share. Except as provided in clause (iii) of this
subsection, no further adjustments of any Conversion Price shall be
made upon the actual issue of such common stock or of such Convertible
Securities upon conversion of such rights or options or upon
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the actual issue of such common stock upon conversion or exchange of
such Convertible Securities. For the purposes of this clause (i), the
price per share for which common stock is issuable upon the conversion
of any such rights or options or upon conversion or exchange of any
such Convertible Securities shall be determined by dividing (a) the
total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration payable to the
Company upon the conversion of all such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (b) the total maximum
number of shares of common stock issuable upon the conversion of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the conversion of such rights or
options.
(ii) Issuance of Convertible Securities. In case the
Company shall issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which common stock is issuable upon
conversion or exchange of such Convertible Securities (determined as
provided below) shall be less than the Market Price, determined as of
the date of such issue or sale of such Convertible Securities, then
the total maximum number of shares of common stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued for such price per
share, provided that (1) except as provided in clause (iii) of this
subsection, no further adjustments of any Conversion Price shall be
made upon the actual issue of such common stock upon conversion or
exchange of such Convertible Securities, and (2) if any such issue or
sale of such Convertible Securities is made upon conversion of any
rights to subscribe for or to purchase or any option to purchase any
such Convertible Securities for which adjustments of any Conversion
Price have been or are to be made pursuant to other provisions of this
subsection (c), no further adjustment of any Conversion Price shall be
made by reason of such issue or sale. For the purposes of this clause
(ii), the price per share for which common stock is issuable upon
conversion or exchange of Convertible Securities shall be determined
by dividing (a) the total
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amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (b) the total
maximum number of shares of common stock issuable upon the conversion
or exchange of all such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any rights or options referred to in
clause (i) above, or the additional consideration, if any, payable
upon the conversion or exchange of Convertible Securities referred to
in clause (i) or (ii) above, or the rate at which any Convertible
Securities referred to in clause (i) or (ii) above are convertible
into or exchangeable for common stock, shall change (other than under
or by reason of provisions designed to protect against dilution), then
the Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Conversion Price which would have been
in effect at such time had such rights, options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold.
(iv) Expiration of Options, Rights and Other Similar
Conversion Privileges. On the expiration of any such option or right
or the termination of any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect hereunder
shall forthwith be increased to the Conversion Price which would have
been in effect at the time of such expiration or termination had such
right, option or Convertible Security, to the extent outstanding
immediately prior to such expiration or termination, never been
issued, and the common stock issuable thereunder shall no longer be
deemed to be outstanding. If the purchase price provided for in any
such right or option referred to in clause (i) above or the rate at
which any Convertible Securities referred to in clause (i) or (ii)
above are convertible into or exchangeable for common stock, shall
decrease at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then in case of the
delivery of common stock upon the conversion of any such right or
option or upon conversion or exchange of any such Convertible
Security, the Conversion Price then in effect hereunder shall
forthwith be adjusted to such respective amount as would have obtained
had such right, option or Convertible Security never been issued as to
such common stock and had adjustments been made upon the issuance of
the
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shares of common stock delivered as aforesaid, but only if as a result
of such adjustment the Conversion Price then in effect hereunder is
thereby decreased.
(v) Stock Dividends. In case the Company shall declare
a dividend or make any other distribution upon any stock of the
Company payable in common stock or Convertible Securities, any common
stock or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
(vi) Consideration for Stock. In case any shares of
common stock or Convertible Securities or any rights or options to
purchase any such common stock or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of common stock or
Convertible Securities or any rights or options to purchase any such
common stock or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value
of such consideration as determined, in good faith and in the exercise
of reasonable business judgment, by the board of directors of the
Company, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company
in connection therewith. In case any shares of common stock or
Convertible Securities or any rights or options to purchase such
shares of common stock or Convertible Securities shall be issued in
connection with any merger or consolidation in which the Company is
the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of common stock of the Company
shall be changed into or exchanged for the stock or other securities
of another corporation), the amount of consideration therefor shall be
deemed to be the fair value as determined reasonably and in good faith
by the board of directors of the Company of such portion of the assets
and business of the non-surviving corporation as such board may
determine to be attributable to such shares of common stock,
Convertible Securities, rights or options, as the case may be. In the
event of any consolidation or merger of the Company in which the
Company is not the surviving corporation or in which the previously
outstanding shares of common stock of the Company shall be changed
into or exchanged for the stock or other securities of another
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corporation or in the event of any sale of all or substantially all of
the assets of the Company for stock or other securities of any
corporation, the Company shall be deemed to have issued a number of
shares of its common stock for stock or securities or other property
of the other corporation computed on the basis of the actual exchange
ratio on which the transaction was predicated and for a consideration
equal to the fair market value on the date of such transaction of all
such stock or securities or other property of the other corporation,
and if any such calculation results in adjustment of the Conversion
Price, the determination of the number of shares of common stock
issuable upon conversion of the Securities immediately prior to such
merger, consolidation or sale, for purposes of Section 9.2(e), shall
be made after giving effect to such adjustment of the Conversion
Price.
(vii) Record Date. In case the Company shall take a
record of the holders of its common stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in common
stock or in Convertible Securities, or (B) to subscribe for or
purchase common stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
common stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date
of the granting of such right of subscription or purchase, as the case
may be.
(viii) Treasury Shares. The number of shares of common
stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of common stock for
the purposes of this subsection (b).
(ix) Definition of Market Price. "Market Price" shall
mean the average of the daily closing prices per share of the common
stock for the ten consecutive trading days immediately preceding the
day as of which "Market Price" is being determined, except that, in
the case of an underwritten bona fide public offering, "Market Price"
shall mean the initial public offering price. The closing price for
each day shall be the last sale price regular way or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices regular way, in either case on the New York Stock Exchange, or,
if shares of the common stock are not listed or admitted to trading on
the New York Stock Exchange, on the principal national securities
exchange (including for this purpose the NASDAQ-NMS) on
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which the shares are listed or admitted to trading, or if the shares
are not so listed or admitted to trading, the average of the highest
reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ or
through a similar organization if NASDAQ is no longer reporting such
information. If shares of the common stock are not listed or admitted
to trading on any exchange or quoted through NASDAQ or any similar
organization, the "Market Price" shall be deemed to be the higher of
(A) the book value of a share of the common stock as determined by any
firm of independent public accountants of recognized standing,
selected by the board of directors of the Company, as at the last day
of any month ending within sixty days preceding the date as of which
the determination is to be made or (B) the fair value thereof
determined in good faith by an independent brokerage firm or Standard
& Poor's Corporation as of a date which is within fifteen days of the
date as of which the determination is to be made (the fees and
expenses of any such independent public accountants, independent
brokerage firm or other firm engaged pursuant to subclauses (A) and
(B) of this clause (ix) to be paid by the Company).
(x) Determination of Market Price under Certain
Circumstances. Anything herein to the contrary notwithstanding, in
case the Company shall issue any shares of common stock or Convertible
Securities in connection with the acquisition by the Company of the
stock or assets of any other corporation or the merger of any other
corporation into the Company, the Market Price shall be determined as
of the date the number of shares of common stock or Convertible
Securities (or in the case of Convertible Securities other than stock,
the aggregate principal amount of Convertible Securities) was
determined (as set forth in a written agreement between the Company
and the other party to the transaction) rather than on the date of
issuance of such shares of common stock or Convertible Securities.
(xi) Certain Issues Excepted. Anything herein to the
contrary notwithstanding, the Company shall not be required to make
any adjustment of any Conversion Price in case of the issuance of
shares of common stock (1) upon the conversion of options or rights
relating to up to 300,000 shares of the Company's common stock granted
or provided or to be granted or provided under the Company's stock
option plan currently in effect, or (2) under the Company's restricted
stock plan, as currently in effect, up to a maximum of 250,000 shares,
and shall not be required to make any such adjustment upon the
granting of any options or
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rights referred to above if and to the extent that issuance of the
shares covered thereby is excepted by this clause.
(c) Adjustment for Certain Special Dividends. In case the Company
shall declare a dividend upon the common stock payable otherwise than out of
earnings or earned surplus, determined in accordance with GAAP, and otherwise
than in common stock or Convertible Securities, the Conversion Price in effect
immediately prior to the declaration of such dividend shall be reduced by an
amount equal, in the case of a dividend in cash, to the amount per share of the
common stock so declared as payable otherwise than out of earnings or earned
surplus or, in the case of any other dividend, to the fair value per share of
the common stock of the property so declared as payable otherwise than out of
earnings or earned surplus, as determined, reasonably and in good faith, by the
board of directors of the Company. For the purposes of the foregoing a
dividend other than in cash shall be considered payable out of earnings or
earned surplus (other than revaluation or paid-in-surplus) only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend, as determined, reasonably and in good faith, by the
board of directors of the Company. Such reductions shall take effect as of the
date on which a record is taken for the purpose of such dividend, or, if a
record is not taken, the date as of which the holders of common stock of record
entitled to such dividend are determined.
(d) Subdivision or Combination of Stock. In case the Company
shall at any time subdivide the outstanding shares of common stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of common stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
(e) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company (a) consolidates with or merges into
any other corporation and is not the continuing or surviving corporation of
such consolidation or merger, or (b) permits any other corporation to
consolidate with or merge into the Company and the Company is the continuing or
surviving corporation but, in connection with such consolidation or merger, the
common stock is changed into or exchanged for stock or other securities of any
other corporation or cash or any other assets, or (c) transfers all or
substantially all of its properties and assets to any other corporation, or (d)
effects a capital reorganization or reclassification of the capital stock of
the Company in such a way that holders of common stock shall be entitled to
receive stock, securities, cash or assets with
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respect to or in exchange for common stock, then, and in each such case, proper
provision shall be made so that, upon the basis and upon the terms and in the
manner provided in this subsection (e), the Holders, upon the conversion of
each Security at any time after the consummation of such consolidation, merger,
transfer, reorganization or reclassification, shall be entitled to receive (at
the aggregate Conversion Price in effect for all shares of common stock
issuable upon such conversion immediately prior to such consummation as
adjusted to the time of such transaction), in lieu of shares of common stock
issuable upon such conversion prior to such consummation, the stock and other
securities, cash and assets to which such Holder would have been entitled upon
such consummation if such Holder had so converted such Security immediately
prior thereto (subject to adjustments subsequent to such corporate action as
nearly equivalent as possible to the adjustments provided for in this Section
9.2).
(f) Notice of Adjustment. Upon any adjustment of the Conversion
Price, then and in each such case the Company shall promptly deliver a notice
to the registered holder of the Securities, which notice shall state the
Conversion Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(g) Other Notices. In case at any time:
(1) the Company shall declare or pay any dividend on or
make any distribution with respect to its common stock, other than
quarterly cash dividends consistent with past practice;
(2) the Company shall offer for subscription pro rata to
the holders of its common stock any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with another corporation (other than a
Subsidiary of the Company in which the Company is the surviving or
continuing corporation and no change occurs in the Company's common
stock), or sale of all or substantially all of its assets to, another
corporation;
(4) there shall be a voluntary or involuntary
dissolution, liquidation, bankruptcy, assignment for the benefit of
creditors, or winding up of the Company; or
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(5) the Company proposes to take any other action or an
event occurs which would require an adjustment of the Conversion Price
pursuant to subsection (h) of this Section 9.2;
then, in any one or more of said cases, the Company shall give written notice,
addressed to each Holder at the address of such Holder as shown on the books of
the Company, of (1) the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights,
or (2) the date (or, if not then known, a reasonable approximation thereof by
the Company) on which such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit
of creditors, winding up or other action, as the case may be, shall take place.
Such notice shall also specify (or, if not then known, reasonably approximate)
the date as of which the holders of common stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their common stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, bankruptcy, assignment for the benefit of creditors,
winding up, or other action, as the case may be. Such written notice shall be
given at least twenty days prior to the action in question and not less than
twenty days prior to the record date or the date on which the Company's
transfer books are closed in respect thereto.
(h) Certain Events. If any event occurs as to which in the
reasonable opinion of the Company, in good faith, the other provisions of this
Section 9.2 are not strictly applicable but the lack of any adjustment would
not in the opinion of the Company fairly protect the conversion rights of the
Holders in accordance with the basic intent and principles hereof, or if
strictly applicable would not fairly protect the conversion rights of the
Holders in accordance with the basic intent and principles hereof, then the
Company shall appoint a firm of independent certified public accountants (which
may be the regular auditors of the Company) of recognized national standing,
which shall give their opinion upon the adjustment, if any, on a basis
consistent with the basic intent and principles established in the other
provisions of this Section 9.2, necessary to preserve, without dilution, the
conversion rights of the Holders. Upon receipt of such opinion, the Company
shall forthwith make the adjustments described therein.
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(i) All calculations under this Section 9.2 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the case
may be.
(j) In any case in which the provisions hereof require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
Holder of any Security converted after such record date and before the
occurrence of such event the additional shares of common stock issuable upon
such conversion by reason of the adjustments required by such event over and
above the shares of common stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such Holder any amount in cash in
lieu of a fractional share of common stock; provided, however, that the Company
shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares and such cash
upon the occurrence of the event requiring such adjustment.
ARTICLE 10
REGISTRATION RIGHTS
SECTION 10.1. REGISTRATION OF SECURITIES AND SHARES. (a) No
Registration under Securities Act. Neither the Securities nor the Shares have
been registered under the Act. Each Holder, by acceptance of a Security,
represents that it is acquiring the Securities to be issued to it for its own
account for investment and not with a view to distribution thereof or with any
present intention of distributing or selling any of such Securities except in
compliance with the Act, provided that the disposition of such Holder's
property shall at all times be within its control, and agrees not to sell,
transfer, pledge or hypothecate any Securities or any Shares unless a
registration statement is effective for such Securities or Shares under the Act
or in the opinion of such Holder's counsel (a copy of which opinion shall be
delivered and shall be reasonably acceptable to the Company) such transaction
is exempt from the registration requirements of the Act; provided that
Securities and Shares issued to such Holder may be transferred to any affiliate
of such Holder, without any such registration or opinion, subject to the
foregoing restriction on any further sale, transfer, pledge or hypothecation by
such affiliate.
The Company will comply with the reporting requirements of Sections 13
and 15(d) of the Exchange Act (whether or not is shall be required to do so
pursuant to such Sections) and will comply with all other public information
reporting requirements of the SEC (including, without limitation, Rule 144
promulgated by the SEC under the Act) from time to time in effect and
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relating to the availability of an exemption from the Act for sale of
restricted securities. The Company also will cooperate with the Holders of the
Securities and with each holder of any Shares in supplying such information as
may be necessary for any such holder to complete and file any information
reporting forms presently or hereafter required by the SEC as a condition to
the availability of an exemption from the Act for the sale of restricted
securities.
(b) "Piggyback" Registration. Whenever the Company
proposes to file under the Act a registration statement relating to the
issuance or sale of any of its Capital Stock or any of its debt securities
(other than a registration statement (i) required to be filed in respect of
employee benefit plans of the Company on Form S-8 or any successor form from
time to time in effect, (ii) on Form S-4 or any successor form, (iii) with
respect to any dividend reinvestment plan of the Company, or (iv) pursuant to
subsection (c) of this Section), the Company shall at least 30 days prior to
such filing give effective written notice of such proposed filing to the
registered holder of each Security or Share. Upon receipt by the Company not
more than 15 days after such effective notice of a written request or written
requests from one or more of such holders for registration of Securities (in
the case of a proposed registration of debt securities) or Securities or Shares
(in the case of a proposed registration of Capital Stock), the Company shall
(i) include in such registration statement or in a separate registration
statement concurrently filed, and shall use its best efforts to cause such
registration statement to become effective with respect to the Securities or
the Shares as to which such holder or holders request registration and (ii) if
such proposed registration is in connection with an underwritten offering, upon
request of such holder or holders cause the managing underwriter therefor to
include in such offering the Securities or Shares as to which such holder or
holders request such inclusion, on terms and conditions comparable to those of
the other securities to be offered, provided such holders accept the terms of
the underwriting as agreed between the Company and the underwriter selected by
the Company (provided such terms are consistent with this Agreement), and
provided further that the Company shall have the right to postpone or withdraw
any registration effected pursuant to this subsection (b) without any
obligation to any holder of Securities or Shares.
(c) Demand Registration. Whenever one or more registered
holders of Securities or Shares shall make a written request to the Company to
register under the Act Securities having an aggregate outstanding principal
amount of at least $5,000,000, or (in the case of any person initially buying
at least $2,500,000 in aggregate principal amount of Securities)
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constituting all the Securities held by such holders, or at least 285,000
Shares (or such other number of shares as shall result after giving effect to
consolidations or subdivisions of the common stock of the Company after the
date hereof), or (in the case of any person initially owning at least 150,000
Shares or initially owning Securities convertible into at least 150,000 Shares)
constituting all the Shares of such holder, either issuable upon conversion of
such Securities or held by such holder or holders, the Company within five days
after such request is effective shall promptly give written notice of such
request to all registered holders of outstanding Securities or Shares other
than the holder or holders making such request, such notice stating the
estimated approximate date of filing such registration statement, and shall
thereupon promptly file a registration statement with respect to and use its
best efforts to register the Securities or Shares of or pertaining to the
holder or holders making such request and each other holder of Securities or
Shares from whom written request for registration is effective or received on
or before the later to occur of (i) the twentieth day after the effective date
of such notice by the Company or (ii) the thirtieth day prior to the estimated
date of filing specified in such notice.
The Company shall not be required to effect any registration
(other than on Form S-3 or any successor form relating to secondary offerings)
within 120 calendar days after the effective date of any other registration
statement of the Company relating to debt or equity securities of the Company
(in the case of a demand for registration of Securities) or to equity
securities of the Company (in the case of a demand for registration of Shares)
made pursuant to this subsection (c) or in which the holders of the Securities
and the Shares had the opportunity to participate pursuant to Section 10.1(b).
If at the time of any request to register Securities or Shares
pursuant to this subsection (c), the Company is engaged or has fixed plans to
engage within thirty (30) days of the time of the request in a registered
public offering as to which the holders of the Securities and the Shares may
include Securities or Shares pursuant to Section 10.1(b) or is engaged in any
other activity that, in the good faith determination of the Company's Board of
Directors, would be adversely affected by the requested registration to the
material detriment of the Company, then the Company may at its option direct
that such request be delayed for a period not in excess of 120 calendar days
from the effective date of such offering or the date of commencement of such
other material activity, as the case may be, such right to delay a request to
be exercised by the Company not more than once in any two year period.
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(d) Reduction in Number of Securities Included in
Registration. In the event that the managing underwriter of any registered
offering made pursuant to subsection (b) or (c) above notifies the Company
in writing that, in its opinion, the amount of securities to be included
in such registration exceeds the amount that can be sold in such offering
within a price range acceptable to the Company and the holders of the
securities being offered (or, in the case of a registration pursuant to
subsection (c) above, within a price range acceptable to the Securityholders
and the holders of the Shares), the Company will include in such registration
only the amount of securities that the Company is so advised can be sold in
such offering within such price range. In such event, the number of securities
to be included in such registration shall be allocated among the persons
participating in such offering as follows: (i) in the case of a registration
relating to a primary offering by the Company, first, the Company shall have
the right to include in such registration all securities proposed to be sold by
the Company and, second, all other persons participating in such registration
shall have the right to include in such registration the balance, allocated pro
rata among such persons in accordance with the number or principal amount of
securities originally proposed to be sold by them; (ii) in the case of a
registration pursuant to subsection (c) above, first, the holders of the
Securities and the Shares shall have the right to include in such registration
all Securities and Shares proposed to be sold by such holders, pro rata among
such holders in the event that not all such Securities or Shares can be
included, and, second, all other persons participating in such registration
shall have the right to include in such registration the balance; and (iii) in
all other cases, pro rata among all persons participating in the offering in
accordance with the number or principal amount of securities originally
proposed to be sold by them.
(e) Other Provisions Relating to Registration Rights. In
connection with any registration pursuant to this Section:
(i) Upon the request of the registered holder of any
Security or Shares participating in such registration, the Company
will cooperate with any underwriters (as defined in the Act) for such
holder, including, without limitation, providing such information,
certificates, comfort letters of accountants and opinions of counsel
as may be reasonably requested by such underwriters.
(ii) The Company shall not be required to maintain the
effectiveness of any registration statement under subsection (b) or
(c) of this Section for a period in excess of four months or, in the
case of any registration statement under subsection (b) or (c) of this
Section filed on a
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Form S-3 Registration Statement under the Act, for a period in excess
of six months, or in the case of an underwritten offering, such longer
period as may be required by the Act to enable the underwriters to
complete such offering.
(iii) The Company will furnish to each holder of
Securities or Shares (i) at least seven days prior to the filing
thereof with the SEC, a copy of the registration statement in the form
in which the Company proposes to file the same with the SEC and, not
later than the effective date thereof, a copy of any and all
amendments to such registration statement, (ii) within five days of
the filing thereof with the SEC, a copy of any and all post-effective
amendments to such registration statement, and (iii) at the request of
any such holder and, in the case of a registration pursuant to
subsection (c) of this Section, the Securityholders' Managers (as
defined below), a reasonable number of copies of a preliminary
prospectus and a final prospectus (each of which shall, as of their
respective dates, comply with Section 10 of the Act and shall not, as
of such dates, include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading) covering the offering and
sale by such holders of the Securities or Shares to be covered thereby
as aforesaid.
(iv) The Company will advise each of such holders of the
entry of any stop order suspending the effectiveness of such
registration statement or of the initiation of any proceeding for that
purpose, and, if such stop order should be entered, use its best
efforts promptly to cause such stop order to be lifted or removed.
(v) For such period of time (not exceeding the maximum
period of time for which the Company is required to maintain the
effectiveness of such registration statement) as any of such holders
may be required by law to deliver a prospectus in connection with a
sale of any Securities or Shares pursuant to such registration
statement, if any event shall occur as a result of which it is
necessary to amend or supplement the prospectus forming a part of such
registration statement in order to correct an untrue statement of a
material fact, or an omission to state a material fact necessary to
make the statements therein, in the light of the circumstances
existing when such prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement such
prospectus to comply with any law, the Company will forthwith prepare
and furnish to each of such holders and, in the case of a registration
pursuant to
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subsection (c) of this Section, the Securityholders' Managers, a
reasonable number of amended or supplemented prospectuses so that
statements in the prospectuses as so amended or supplemented will not,
in the light of the circumstances then existing, be misleading, or so
that such prospectuses will comply with law.
(vi) At any time prior to the filing of a registration
statement pursuant to subsection (c) of this Section, the holders of
Securities or Shares making or joining in a request for such
registration may select an investment banker or bankers (collectively,
the "Securityholders' Managers") which shall be satisfactory to the
Company, and the offering pursuant to such registration statement
shall be made through the Securityholders' Managers. The Company
shall enter into an underwriting agreement in customary form with the
Securityholders' Managers and will indemnify the Securityholders'
Managers, their officers and directors, and each person, if any, who
controls the Securityholders' Managers within the meaning of the Act
to the same extent as hereinafter provided with respect to the holders
of Securities or Shares requesting such registration. Such
underwriting agreement will contain indemnification and contribution
provisions substantially identical to those set forth in clauses (ix),
(x), (xi) and (xii) below or otherwise acceptable to the underwriters.
(vii) The Company will qualify, file or register the
Securities or Shares being registered under the securities laws of
such states of the United States of America and of the Commonwealth of
Puerto Rico as may be reasonably designated by the holders of
Securities or Shares or by the Securityholders' Managers and will
obtain the consent, authorization or approval of any governmental
agency (other than any such consent, authorization or approval
required under any statute or regulation applicable to any such
holders and not applicable to investors generally) required in
connection with the issuance of the Securities or Shares being
registered or in order that such holders may publicly sell the
Securities or Shares covered by such registration statement;
provided, however, that the Company shall not be required in
connection with this subsection (vii) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
(viii) All fees, disbursements and expenses incurred by
the Company in connection with any registration pursuant to subsection
(b) or (c) of this Section shall be borne by the Company, including,
without limitation, all registration and filing fees, all costs of
preparation and printing (in
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such quantities as the holders of Securities or Shares, or the
Securityholders' Managers, may reasonably request) of any registration
statement and related prospectus and any amendments or supplements
thereto, all fees and disbursements of counsel for the Company, the
expenses of complying with applicable securities or blue sky laws, and
all costs in connection with the preparation and delivery of such
legal opinions, auditors' comfort letters or other closing documents
as the holders of Securities or Shares, or as the Securityholders'
Managers, shall reasonably request. All underwriting commissions,
expenses of the Securityholders' Managers and fees and expenses of
counsel to the selling holders of Securities or Shares shall be
allocated among the holders of Securities or Shares pro rata according
to the number of Securities or Shares being registered by each such
holder or in such other manner as such holders may agree. The Company
shall not be responsible for the fees and expenses of counsel to the
selling holders of Securities or Shares.
(ix) The Company will indemnify and hold harmless each
holder of Securities or Shares and any underwriter (as defined in the
Act) for such holder and each person or entity, if any, who controls
such holder or underwriter within the meaning of the Act or the
Exchange Act, against any losses, claims, damages, liabilities, costs
or expenses, joint or several, or actions in respect thereof to which
such holder or underwriter or controlling person or entity may become
subject under the Act, the Exchange Act, state securities or Blue Sky
laws, or otherwise, insofar as such losses, claims, damages,
liabilities, costs, expenses or actions in respect thereof arise out
of, or are based upon, or are related to, any untrue statement or
alleged untrue statement of any material fact contained in any
registration statement under which Securities or Shares of or
pertaining to such holder were registered under the Act, any
preliminary prospectus, amended preliminary prospectus, or final
prospectus contained therein, or any amendment or supplement thereto,
or arise out of, or are based upon, or are related to, the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse such holder or underwriter or
controlling person or entity for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided
that to the extent that any such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in said
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registration statement, said preliminary prospectus, said amended
preliminary prospectus or said final prospectus or any said amendment
or supplement in reliance upon, and in conformity with, written
information furnished to the Company by such holder or by any
underwriter for such holder specifically for use in the preparation
thereof, the Company will not be so liable to such holder or
underwriter.
(x) Each seller of Securities or Shares, severally and not
jointly, will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each person,
if any, who controls the Company or any such underwriter within the
meaning of the Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Company, such
directors and officers, underwriters or controlling person may become
subject under the Act, the Exchange Act, state securities or Blue Sky
laws, or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such
Securities or Shares were registered under the Act, any preliminary
prospectus or final prospectus contained in the registration
statement, or any amendment or supplement to the registration
statement, or arise out of or are based upon any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information relating to such seller furnished in writing to the
Company by or on behalf of such seller specifically for use in
connection with the preparation of such registration statement,
prospectus, amendment, or supplement.
(xi) Each party entitled to indemnification under subsection
(ix) or (x) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, the counsel for the
Indemnifying Party assuming the defense of any such claim or
litigation shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld); and provided, further, that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under
this subsection (xi). The Indemnified Party shall be entitled to
retain separate counsel at its
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own expense, provided that the Indemnifying Party shall pay the
expense of such separate counsel if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between
the Indemnified Party and any other party represented by such counsel
in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgement or enter into
settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or litigation, and
no Indemnified Party shall consent to entry of any judgement or settle
such claim or litigation without the prior written consent of the
Indemnifying Party.
(xii) If the indemnification provided for in clause (ix) or
(x) is due in accordance with its terms but is for any reason held by
a court to be unavailable, on grounds of policy or otherwise, then the
Company and the selling holders shall contribute to the aggregate
losses, claims, damages, liabilities and expenses to which the Company
and the selling holders may be subject in such proportion as is
appropriate to reflect the relative fault of the Company and of the
selling holders in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative
fault of the Company and the selling holders shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the
Company of by the selling holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the selling holders agree
that it would not be just and equitable if contribution pursuant to
this clause (xii) were determined by pro rata allocation or by any
other method of allocation which does not take account of the
equitable considerations referred to in the two immediately preceding
sentences. Notwithstanding the provisions of this clause (xii), the
selling holders shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities
or Shares owned by the selling holders were offered to the public
exceeds the amount of any damages which the selling holders have
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
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the Act) shall be entitled to contribution from any person who was not
guilty of fraudulent misrepresentation.
ARTICLE 11
RIGHT TO PURCHASE ADDITIONAL SHARES
SECTION 11.1. RIGHT TO PURCHASE ADDITIONAL SHARES. The Company
hereby grants to BanPonce the non-transferable right to buy shares of common
stock of the Company at the Conversion Price in effect from time to time (or,
in the event that the Securities shall have been converted, at the Conversion
Price that would have been in effect if any Securities were outstanding), after
giving effect to any adjustment required by Article 9, at any time and from
time to time that the Company takes action to issue additional shares of its
common stock on or prior to June 30, 1999, and as a result of which the sum of
(i) the Shares issued or issuable upon conversion of the Securities, whether or
not then held by BanPonce, and (ii) any shares of common stock of the Company
previously purchased by BanPonce pursuant to this Section (collectively, the
"BanPonce Shares") represents less than 5% of the fully diluted shares of
common stock of the Company, assuming conversion of all outstanding securities
convertible into common stock of the Company, whether or not convertible at the
time, and the exercise of all outstanding options, warrants and other rights to
purchase common stock of the Company, whether or not exercisable at the time
(the "fully diluted shares").
The maximum number of shares subject to the right granted in this
Section and issuable at any time upon exercise of the right granted in this
Section shall be equal to the lesser of (i) the remainder of (A) 0.05 (or, in
the event that less than $10,000,000 aggregate principal amount of Securities
shall be issued as a result of a failure by BanPonce to obtain any necessary
approval from the Federal Reserve Board, the product of (x) 0.05 times (y) a
fraction, the numerator of which shall be the aggregate principal amount of
Securities issued and the denominator of which shall be $10,000,000) times the
total number of fully diluted shares of common stock of the Company at such
time minus (B) the total number of BanPonce Shares and (ii) the remainder of
(A) 200,000 (adjusted for combinations and subdivisions of the common stock of
the Company after the date hereof) minus (B) the total number of shares
previously purchased by BanPonce upon exercise of the right granted in this
Section.
The right granted in this Section may be exercised by BanPonce no
later than 90 days after receipt by BanPonce of notice from the Company of a
transaction resulting in a reduction of the percentage ownership of the common
stock of the Company represented by the BanPonce Shares. In the event that
BanPonce
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shall at any time fail to exercise such right within such period of time after
such notice, the reference in clause (i)(A) above shall be changed to the
percentage ownership of the common stock of the Company represented by the
BanPonce Shares after the transaction in connection with which such notice was
given.
Upon notice from BanPonce of its intention to exercise the right
granted in this Section at any time, the Company may, at its option, instead of
issuing the number of shares to be purchased by BanPonce, pay to BanPonce with
respect to each such share an amount equal to the difference between the Market
Price (as defined in Section 9.2(b)(ix)) of such shares and the Conversion
Price in effect at the time. In such event, the reference in clause (i)(A)
above shall be changed as set forth in the preceding paragraph as if BanPonce
had not exercised its right.
The right granted in this Section shall expire upon the purchase of
90% or more of the outstanding common stock of the Company pursuant to a tender
offer for all the outstanding shares of common stock of the Company or pursuant
to a merger or consolidation of the Company in which, in both the case of a
tender offer and of a merger or consolidation, the shares of Capital Stock of
the Company shall be converted into the right to receive cash, non-convertible
debt securities, non-convertible preferred stock or shares of common stock
representing in the aggregate less than 20% of the outstanding common stock of
the surviving or resulting corporation.
No person, including any person acquiring Securities or Shares from
BanPonce, other than BanPonce or any successor entity shall have any rights
under this Article.
SECTION 11.2. REGISTRATION RIGHTS AND CERTAIN OTHER MATTERS. Holders
of shares of common stock of the Company issued upon the exercise of the right
granted in Section 11.1 shall have the same registration rights with respect to
such shares that holders of Securities or Shares have under Article 10, which
Article 10 shall apply, mutatis mutandis, to such shares issued upon the
exercise of the right granted in Section 11.1. References to "Shares" in such
Article 10 and in Section 9.1 shall be deemed to include, mutatis mutandis,
shares of common stock of the Company issued or issuable upon the exercise of
the right granted in Section 11.1, except that the Company shall not be
obligated to list such shares as provided in Section 9.1 until the actual
issuance thereof.
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ARTICLE 12
REPRESENTATIONS AND WARRANTIES
As an inducement to BanPonce to enter into this Agreement and to
purchase the Securities, the Company represents and warrants to BanPonce that:
SECTION 12.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW AND
CONTRACTUAL OBLIGATIONS. Each of the Company and Doral (a) is duly organized,
validly existing and in good standing as a corporation under the laws of the
Commonwealth of Puerto Rico and in each jurisdiction where its ownership of
property or conduct of business requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect; (b) has
the corporate power and authority and the legal right to own and operate its
property and to conduct business in the manner in which it does and proposes so
to do; and (c) is not in violation of any Requirement of Law or any Contractual
Obligation if such violation could have a Material Adverse Effect.
SECTION 12.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. The Company has the corporate power and authority to execute,
deliver and perform this Agreement and the Securities and has taken all
necessary corporate actions to authorize such execution, delivery and
performance. This Agreement and the Securities, when issued, have been or will
have been duly executed and delivered on behalf of the Company and constitute
or will constitute legal, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally and by general principles of
equity.
SECTION 12.3. NO LEGAL OR CONTRACTUAL BAR. The execution, delivery
and performance of this Agreement and the Securities, including the use of the
proceeds of the Securities, do not and will not (a) violate any Requirement of
Law or any Contractual Obligation of the Company or any of its Subsidiaries,
(b) require any license, consent, authorization, approval or any other action
by, or any notice to or filing or registration with, any Governmental Authority
or any other Person, other than the filing with the Secretary of State of the
Commonwealth of Puerto Rico of a certified copy of the resolution of the Board
of Directors approving the issuance of the Securities and the terms of this
Agreement, or (c) result in the creation or imposition of any Lien on any asset
of the Company or any of its Subsidiaries.
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SECTION 12.4. FINANCIAL INFORMATION. (a) The consolidated balance
sheet of the Company and its consolidated Subsidiaries as at December 31, 1994
and the related consolidated statements of income, retained earnings and cash
flows for the fiscal year then ended, including in each case the related
schedules and notes, reported on by Price Waterhouse, true copies of which have
been previously delivered to BanPonce, are complete and correct and fairly
present the consolidated financial condition of the Company and its
consolidated Subsidiaries as at the date thereof and the consolidated results
of operations and cash flows for such period, in accordance with GAAP applied
on a consistent basis.
(b) The unaudited consolidated balance sheet of each Borrower and
its consolidated Subsidiaries as at June 30, 1995, and the related unaudited
consolidated statements of income, retained earnings and cash flows for the
three-month and six-month periods then ended, certified by the chief financial
officer of the Company, true copies of which have been previously delivered to
BanPonce, are complete and correct and fairly present the consolidated
financial condition of the Company and its consolidated Subsidiaries as at the
date thereof and the consolidated results of operations and cash flows for such
periods in conformity with GAAP applied on a basis consistent with the
financial statements referred to in subsection (a) of this Section, subject to
normal year-end audit adjustments.
(c) Neither the Company nor Doral has any material liability of
any kind, whether accrued, contingent, absolute, determined, determinable or
otherwise, and no condition, situation or set of circumstances exists that
could be reasonably expected to result in such a liability, in each case that
is not reflected in the financial statements referred to in Section 12.4(a) or
12.4(b). Any such material liability arising in the future will be reflected
in the financial statements delivered to the Holders pursuant to Section 4.2.
(d) Since December 31, 1994, no material adverse change has
occurred in the business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.
SECTION 12.5. NO MATERIAL LITIGATION. Except as set forth on
Schedule 12.5, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Company, threatened by or against the Company or any of its Subsidiaries, or
against any of the Company's or any such Subsidiary's properties or revenues
that, if adversely determined, could alone, or with any other litigation,
investigation or proceeding, affect the business, financial condition or
results of operations of the Company and
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its Subsidiaries, taken as a whole, in excess of a Material Amount or could
have a Material Adverse Effect.
SECTION 12.6. TAXES. The Company and each of its Subsidiaries have
filed or caused to be filed all tax returns that are required to be filed and
have paid all taxes shown to be due and payable on such returns or on any
assessments made against them or any of their property other than taxes and
assessments that are being contested in good faith by appropriate proceedings
and as to which the Company or such Subsidiary has established adequate
reserves in conformance with GAAP.
SECTION 12.7. INVESTMENT COMPANY ACT. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and is not controlled by any "investment company".
SECTION 12.8. SUBSIDIARIES. The Company has no Subsidiaries other
than Doral, Doral Federal, Centro Hipotecario de Puerto Rico, Inc., RSC Corp.
and First Florida Realty Corporation. The Company owns, directly or through
another Subsidiary, one hundred percent (100%) of the stock of each such
Subsidiary, and all of the stock of each such Subsidiary has been duly issued
and is fully paid and nonassessable.
SECTION 12.9. USE OF PROCEEDS. The proceeds of the sale of the
Securities shall be used by the Company for its general corporate purposes,
including to finance its general working capital needs and to purchase mortgage
loans and mortgage servicing rights.
SECTION 12.10. ERISA. (a) No Prohibited Transactions, accumulated
funding deficiencies (as described in Section 302 of ERISA), withdrawals from
Multiemployer Plans or Reportable Events have occurred with respect to any
Plans or Multiemployer Plans that, in the aggregate, could subject the Company
or any of its Subsidiaries to any material tax, penalty or other liability
where such tax, penalty or liability is not covered in full, for the benefit of
the Company or such Subsidiary, by insurance; (b) no notice of intent to
terminate a Plan has been filed, nor has any Plan been terminated under Section
4041 of ERISA, nor has the Pension Benefit Guaranty Corporation instituted
proceedings to terminate, or appoint a trustee to administer, a Plan and no
event has occurred or condition exists that might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan; (c) the present value of all benefits liabilities (as
defined in Section 4001(a)(16) of ERISA) under all Plans (based on the
actuarial assumptions used to fund the Plans) does not exceed the assets of the
Plans; and (d) the execution, delivery and
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performance by the Company of this Agreement and the Securities and the use of
the proceeds thereof will not involve any Prohibited Transaction. For purposes
of this Section, the following terms shall have the following meanings:
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be supplemented or amended, and the
rules and regulations issued thereunder as from time to time in effect.
"ERISA Affiliate" shall mean each trade or business, including the
Company, whether or not incorporated, that together with the Company would be
treated as a single employer under Section 4001 of ERISA.
"Multiemployer Plan" shall mean a plan described in Section 4001(a)(3)
of ERISA to which the Company or any ERISA Affiliate is required to contribute
on behalf of any of its employees.
"Plan" shall mean any plan (other than a Multiemployer Plan) subject
to Title IV of ERISA maintained for employees of the Company or any ERISA
Affiliate (and any such plan no longer maintained by the Company or any of its
ERISA Affiliates to which the Company or any of its ERISA Affiliates has made
or was required to make any contributions during the five years preceding the
date on which such plan ceased to be maintained).
"Prohibited Transaction" shall mean any transaction described in
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or
the transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c)(1) of the Code that is not exempt by reason of
Section 4975(c)(2) or Section 4975(d) of the Code, or the transitional rules of
Section 2003(c) of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, a cessation of operations described in
Section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under Section 401(a)(29) of the Code, or a failure to make a payment
required by Section 412(m) of the Code and Section 302(e) of ERISA when due.
SECTION 12.11. AGENCY APPROVALS. Each of the Company and Doral is a
FHLMC approved Seller/Servicer, a HUD Direct Endorsement Lender, and a VA
approved Lender in good standing, and the Company is a FNMA approved
Seller/Servicer and a GNMA approved Issuer/Servicer.
<PAGE> 78
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SECTION 12.12. SOLVENCY. Each of the Company and Doral is able to
pay its debts as they mature. The aggregate estimated fair market value of
each of the Company's and Doral's assets is greater than the Company's or
Doral's liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities and any and all obligations hereunder and under the
Securities), respectively. Each of the Company and Doral has capital
sufficient to carry on the business and transactions in which it is engaged and
all business and transactions in which it proposes to engage.
ARTICLE 13
CONDITIONS PRECEDENT
SECTION 13.1. CONDITIONS PRECEDENT TO INITIAL SALE. It shall be a
condition precedent to the sale of Securities convertible into 4.99% of the
Company's common stock on the date hereof that BanPonce shall have received the
following documents and that the following conditions shall have been
satisfied:
(a) a certified copy of the resolution of the Board of Directors
of the Company approving the execution, delivery and performance of this
Agreement and the Securities and the transactions contemplated herein and
therein;
(b) a certificate of the Secretary or an Assistant Secretary of
the Company certifying the names and true signatures of the officers of the
Company authorized to sign this Agreement and the Securities and the other
documents required to be executed and delivered hereunder, in each case dated
the date hereof;
(c) an opinion of Pietrantoni, Mendez & Alvarez, counsel for the
Company, in form and substance acceptable to BanPonce, covering such matters as
BanPonce may reasonably request, dated the date hereof;
(d) a copy of the Certificate of Incorporation of the Company and
Doral certified by the Secretary of State of Puerto Rico as of a recent date
and by the Secretary or Assistant Secretary of the Company on the date hereof;
(e) a copy of the By-laws of the Company, certified by the
Secretary or an Assistant Secretary of the Company on the date hereof as being
accurate and complete;
(f) a certificate of the applicable officer in the relevant
jurisdiction or other equivalent document certifying as of a
<PAGE> 79
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recent date that each of the Company and Doral is in good standing in each
jurisdiction in which each such party is qualified to conduct business;
(g) an Officer's Certificate of the Company confirming compliance
with the covenants and confirming the accuracy of the representations set forth
herein as of the date hereof;
(h) evidence satisfactory to BanPonce that all acts and conditions
(including the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations) required to be done and
performed and to have happened prior to the execution, delivery and performance
of this Agreement and the Securities and to constitute the same legal, valid
and binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws;
(i) a certificate of the independent accountants of the Company
verifying the accuracy of the computation by the Company of certain financial
covenants contained in Article 4;
(j) such other documents or legal opinions as BanPonce or its
counsel may reasonably request, all in form and substance reasonably
satisfactory to BanPonce;
(k) all documentation, including documentation for corporate and
legal proceedings in connection with the transactions contemplated by this
Agreement and the Securities, shall be reasonably satisfactory in form and
substance to BanPonce and its counsel;
(l) the Company shall have paid all fees required to have been
paid under this Agreement and the Securities, including the private placement
fee payable to BP Capital Markets, prior to or on the date hereof;
(m) no default or Event of Default shall have occurred and be
continuing;
(n) since December 31, 1994, no material adverse change shall have
occurred in the business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole; and
(o) a letter from Duff & Phelps confirming that the rating of the
subordinated debt of the Company is BBB or higher.
<PAGE> 80
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SECTION 13.2. CONDITIONS PRECEDENT TO SUBSEQUENT SALE. It shall be a
condition precedent to the sale of the remaining Securities that BanPonce shall
have received the following documents and that the following conditions shall
have been satisfied:
(a) bring-down certificates and opinions to the same effect as the
certificates and opinions described in clauses (a), (c), (d), (e) and (g) of
Section 13.1; and
(b) evidence as to the matters specified in Section 13.1(h), including
the approval of the Federal Reserve Board.
ARTICLE 14
MISCELLANEOUS
SECTION 14.1. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
If to the Company:
First Financial Caribbean Corporation
1159 Franklin Delano Roosevelt Avenue
San Juan, Puerto Rico 00920
Attention of: Mr. Mario S. Levis
Telephone: (809) 749-7108
Telecopier: (809) 792-4025
If to BanPonce:
BanPonce Corporation
Banco Popular Center
Hato Rey, Puerto Rico 00918
Attention of: Mr. David H. Chafey, Jr.
Telephone: (809) 753-0335
Telecopier: (809) 751-8645
The Company or BanPonce by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE> 81
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Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 14.2. STATEMENTS OR OPINION. Each certificate or opinion
with respect to compliance with a covenant or condition provided for in this
Agreement shall include:
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such covenant or condition has been complied with.
SECTION 14.3. WHEN TREASURY SECURITIES DISREGARDED. In determining
whether the Holders of the required principal amount of Securities have
concurred in any waiver or consent, Securities owned by the Company or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be disregarded and deemed not to
be outstanding. Also, subject to the foregoing, only Securities outstanding at
the time shall be considered in any such determination.
SECTION 14.4. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not normally open in the
Commonwealth of Puerto Rico. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall
<PAGE> 82
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accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 14.5. GOVERNING LAW. This Agreement and the Securities shall
be governed by, and construed in accordance with, the laws of the Commonwealth
of Puerto Rico but without giving effect to applicable principles of conflicts
of law to the extent that the application of the laws of another jurisdiction
would be required thereby.
SECTION 14.6. SUCCESSORS. All agreements of the Company in this
Agreement and the Securities shall bind its successors.
SECTION 14.7. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Agreement.
SECTION 14.8. TABLE OF CONTENTS; HEADINGS. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 14.9. REPRESENTATIONS AND COVENANTS BY BANPONCE. (a) BanPonce
represents that (i) no part of the funds being used by it to purchase the
Securities constitute assets of any employee benefit plan, as defined in
Section 3 of ERISA and (ii) BanPonce has the corporate power and authority to
execute, deliver and perform this Agreement and has taken all necessary
corporate action to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered on behalf of BanPonce and
constitutes the legal, valid and binding obligation of BanPonce enforceable
against it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general principles of equity.
(b) BanPonce agrees to diligently pursue the approval of the
Federal Reserve Board required in order to consummate the closing of the
purchase of the Securities contemplated by Section 13.2 with a view to
obtaining such approval no later than 60 days after the date hereof.
SECTION 14.10. SURVIVAL OF CERTAIN PROVISIONS. The covenants and
other provisions set forth in Articles 1, 7, 9, 10, 11, 12 and 14 and in
Sections 4.16 (with respect to periods prior to the payment or conversion of
the Securities) and 4.18 shall survive the payment or conversion of the
Securities. All other
<PAGE> 83
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covenants and provisions of the Agreement shall expire upon payment or
conversion of all the Securities, provided that rights or causes of action
accrued prior to such payment or conversion shall survive.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
FIRST FINANCIAL CARIBBEAN
CORPORATION
By: Mario S. Levis
-------------------------------
Name: Mario S. Levis
Title: Executive Vice President
BANPONCE CORPORATION
By: David H. Chafey, Jr.
-------------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
<PAGE> 84
EXHIBIT A
[FORM OF FACE OF SECURITY]
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the Puerto
Rico Uniform Securities Act or any other state securities law. These
securities may not be sold, transferred, pledged or hypothecated in the absence
of an effective registration statement for such securities under the Securities
Act of 1933, as amended, or an opinion of counsel delivered to the Company that
registration is not required under such Act.
No._____________ $_____________
8.25% Convertible Subordinated Debenture Due
January 1, 2006
First Financial Caribbean Corporation, a Puerto Rico corporation,
promises to pay to _________________________________ or registered assigns, the
principal sum of _______________________________________________ Dollars on
January 1, 2006.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: September , 1995
FIRST FINANCIAL CARIBBEAN
CORPORATION
By:________________________________
[Vice] President
By:________________________________
[Assistant] Secretary
<PAGE> 85
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[FORM OF REVERSE SIDE OF SECURITY]
8.25% Convertible Subordinated Debenture Due
January 1, 2006
1. Interest
First Financial Caribbean Corporation, a Puerto Rico
corporation (the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The
Company will pay interest semiannually on January 1 and July 1 of each
year. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid,
from September , 1995. Interest will be computed on the basis of a
360-day year of twelve 30-day months and, with respect to any portion
of a calendar month, on the basis of the actual number of days elapsed
during such portion of a calendar month.
The Company shall pay interest on overdue principal (after the
expiration of the grace period specified in Section 6.1(2) of the
Agreement referred to below) at the higher of (i) Citibank N.A.'s
prime or base rate plus 3% per annum and (ii) the rate borne by the
Securities plus 2% per annum, and it shall pay interest on overdue
installments of interest (after the expiration of the grace period
specified in Section 6.1(1) of the Agreement referred to below) at the
same rate to the extent lawful (after such interest is capitalized, to
the extent agreed by the Holders, at their option).
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of
Securities at the close of business on the December 15 or June 15 next
preceding the relevant interest payment date even if Securities are
canceled after the record date and on or before the interest payment
date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender
for payment of public and private debts (i) by wire transfer of
immediately available funds to the account of each Holder as notified
by each Holder to the Company, in the case of Holders of $1,000,000 or
more in
<PAGE> 86
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aggregate principal amount of Securities and (ii) by check mailed to
the Holder's address, in other cases.
3. Paying Agent and Registrar
Initially, the Company will act as Paying Agent and Registrar.
The Company may appoint and change any Paying Agent, Registrar or
coregistrar.
4. Debenture Purchase Agreement
The Company issued the Securities under a Debenture Purchase
Agreement dated as of September , 1995 (the "Agreement"), between
the Company and BanPonce Corporation. The terms of the Securities
include those stated in the Agreement. Capitalized terms used herein
and not defined herein have the meanings ascribed thereto in the
Agreement. The Securities are subject to all such terms, which are
hereby incorporated by reference as if fully set forth herein, and
Securityholders are referred to the Agreement for a statement of those
terms.
The Securities are general unsecured obligations of the
Company. The Agreement, among other things, imposes certain
limitations on the issuance of debt by the Company, the issuance of
debt and preferred stock by the Subsidiaries, the issuance of secured
debt (other than secured Senior Debt) by the Company, sale and
leaseback transactions, the payment of dividends by the Company and
the Subsidiaries, the sale or transfer of assets and Subsidiary stock
and transactions with Affiliates.
5. Optional Redemption
The Securities may not be redeemed prior to January 1, 2001.
On and after that date, the Company may redeem all the Securities at
any time or some of them from time to time at the following redemption
prices (expressed in percentages of principal amount), plus accrued
interest to the redemption date:
<PAGE> 87
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If redeemed during the 12-month period beginning January 1,
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 102%
2002 101 1/2%
2003 101%
2004 100 1/2%
</TABLE>
and thereafter at 100%.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $5,000 may be redeemed in part but only in
whole multiples of $5,000. If money sufficient to pay the redemption
price of and accrued interest on all Securities (or portions thereof)
to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on
such Securities (or such portions thereof) called for redemption.
7. Put Provisions
Upon a Significant Management Stock Disposition, any Holder of
Securities will have the right to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price
equal to 100% of the principal amount of the Securities to be
repurchased plus accrued interest to the date of repurchase as
provided in, and subject to the terms of, the Agreement.
8. Subordination
The Securities are subordinated to Senior Debt, as defined in
the Agreement. To the extent provided in the Agreement, Senior Debt
must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to the
subordination.
<PAGE> 88
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9. Conversion
A holder of a Security may convert it into common stock of the
Company at any time before the close of business on December 1, 2005
(the "Expiration Date"). If the Security is called for redemption,
the holder may convert it at any time before the close of business on
the redemption date. The initial Conversion Price is $17.50 per
share, subject to adjustment in certain events as provided in Section
9.2 of the Agreement. To determine the number of Shares issuable upon
conversion of a Security, divide (a) the principal amount to be
converted by (b) the Conversion Price in effect on the conversion
date. The Company will deliver a check for any fractional share.
Interest on the converted Securities to the date of conversion shall
be paid on the date of conversion.
To convert a Security a Holder must (1) complete and sign the
conversion election on the back of the Security, (2) surrender the
Security to the Company, (3) furnish appropriate endorsements and
transfer documents if required by the Company, and (4) pay any
transfer or similar tax if required. A Holder may convert a portion
of a Security if the portion if $5,000 or a whole multiple of $5,000.
10. Registration Rights
Holders are entitled under certain circumstances and subject to
certain conditions to require the Company to register the Securities
and the Shares for resale under the Securities Act of 1933, as
amended.
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $5,000 and whole multiples of $5,000. A Holder may
transfer or exchange Securities in accordance with the Agreement. The
Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Agreement.
12. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
<PAGE> 89
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13. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates
another person. After any such payment, Holders entitled to the money
must look only to the Company for payment.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Agreement, (i)
the Agreement or the Securities may be amended with the written
consent of the Holders of at least a majority in principal amount
outstanding of the Securities and (ii) certain defaults or
noncompliances with certain provisions may be waived with the written
consent of the Holders of a majority in principal amount outstanding
of the Securities.
15. Defaults and Remedies
Under the Agreement, Events of Default include (i) default for
10 days in payment of interest on the Securities; (ii) default for 10
days in payment of principal of the Securities at maturity, upon
redemption, upon declaration or otherwise; (iii) failure by the
Company to comply with other agreements in the Agreement or the
Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace
period after final maturity) of other Debt of the Company if the
amount accelerated (or so unpaid) exceeds a Material Amount and
continues unremedied for 10 days; (v) certain events of bankruptcy or
insolvency; and (vi) certain judgments or decrees for the payment of
money in excess of a Material Amount. If an Event of Default occurs
and is continuing, and unless such Event of Default is of a type which
may be waived by the Majority Holders and is so waived by the Majority
Holders, each Holder may declare the Securities held by such Holder to
be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities
being due and payable immediately upon the occurrence of such Events
of Default.
<PAGE> 90
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ASSIGNMENT FORM
---------------
To assign this Security, fill in the form below:
I or we assign and transfer this Security to ____________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
(Insert assignee's Soc. Sec. or Tax I.D. No.)
and irrevocably appoint ________________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to
act for him.
________________________________________________________________________________
Date:_______________ Your Signature:
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed by a member firm of the New
York Stock Exchange or a commercial bank or trust company)
<PAGE> 91
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 of the Agreement, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 of the Agreement, state the amount:
$__________
Date:_______________ Your Signature:
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed by a member firm of the New
York Stock Exchange or a commercial bank or trust company)
<PAGE> 92
FORM OF ELECTION TO CONVERT
(To be executed by the Holder if the Holder desires
to convert Securities evidenced by the foregoing
Security certificate)
To [Name of Company]:
The undersigned hereby irrevocably elects to convert the principal
amount of $__________ evidenced by the foregoing Security certificate for
________________ full shares of common stock issuable upon conversion of said
principal amount, as provided for in the foregoing Security certificate and in
the Agreement referred to therein.
The undersigned requests that certificates for such shares be issued
in the name of ____________________.
Please insert social security or
tax identification number
_______________________________
______________________________
(please print name and address) _______________________________
________________________________________________________________________________
If said principal amount shall not be the entire principal amount
evidenced by the foregoing Security certificate, the
<PAGE> 93
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undersigned requests that a new Security certificate evidencing the principal
amount not so converted be issued in the name of and delivered to
________________________________________________________________________________
(please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _____________ Name of Holder
(print):
(By:)_________________________
(Title:)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed by a member firm of the New
York Stock Exchange or a commercial bank or trust company)
