<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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)
DECEMBER 22, 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 [ ].
(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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Page 1 of pages
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SCHEDULE 13D
CUSIP NO. 320214 10 9
<TABLE>
<S> <C> <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
466,999
NUMBER OF
SHARES 8. SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON WITH 466,999
10. SHARED DISPOSITIVE POWER
-0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
466,999
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (See Instructions) [ ]
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.0%
TYPE OF REPORTING PERSON (See Instructions)
CO
</TABLE>
Page 2 of pages
<PAGE> 3
BanPonce Corporation hereby amends its Statement on Schedule 13D dated
September 29, 1995, relating to the Common Stock, par value $1.00 per share, of
First Financial Caribbean Corporation, as follows:
Item 1. Security and Issuer.
BanPonce hereby restates the second paragraph of Item 1 as follows:
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 $8,172,482.50 aggregate principal amount of the Company's 8.25%
Convertible Subordinated Debentures Due January 1, 2006, Series A (the "Series
A Debentures"). As further described in Item 6, BanPonce purchased Series A
Debentures in a principal amount of $6,645,905 on September 25, 1995, and
purchased additional Series A Debentures in a principal amount $1,526,577.50 on
December 22, 1995, after receipt of certain required regulatory approvals. The
Series A 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. In addition to the Series A Debentures, BanPonce
also purchased on December 22, 1995, $1,827,517.50 aggregate principal amount
of the Company's 8.25% Convertible Subordinated Debentures Due January 1, 2006,
Series B (the "Series B Debentures" and, together with the Series A Debentures,
the "Debentures"). The Series B Debentures are identical to the Series A
Debentures but are not convertible until January 1, 1999. In addition, the
Series A Debentures may not be redeemed by the Company until the Series B
Debentures have been redeemed. The aggregate principal amount of the
Debentures is $10,000,000.
Item 5. Interest in Securities of the Issuer.
BanPonce hereby restates the first paragraph of Item 5(a) as follows:
(a) As of December 22, 1995, BanPonce beneficially owned 466,999
shares of Common Stock, none of which are presently outstanding and all of
which are issuable upon conversion of the Series A Debentures, representing
approximately 5.0% of the sum of (i) the 8,872,988 shares of Common Stock
outstanding on the date hereof and (ii) such 466,999 shares of Common Stock
issuable upon conversion of the Series A Debentures. As of December 22, 1995,
BanPonce also owned Series B Debentures convertible on and after January 1,
1999, into an additional 104,429 shares of Common Stock. If all Debentures
were converted, BanPonce would own 571,428 shares of Common Stock, which
represent approxi- mately 6.1% of the sum of (i) the 8,872,988 shares of Common
Stock outstanding on the date hereof and (ii) such 571,428 shares. 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.
Page 3 of pages
<PAGE> 4
The foregoing number of outstanding shares of Common Stock is the number of
shares that the Company represented to be outstanding as of December 22, 1995.
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.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
BanPonce hereby restates the first, second, third and seventh
paragraphs of Item 6 as follows:
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. 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, was subject to receipt by
BanPonce of certain required regulatory approvals.
On December 15, 1995, in order to facilitate the obtention of such
regulatory approvals, BanPonce and the Company amended the Debenture Purchase
Agreement to provide for the issuance of two series of Debentures: Series A
and Series B. The Series A Debentures and the Series B Debentures are
identical in all respects except that the Series A Debentures are immediately
convertible into shares of Common Stock while the Series B Debentures are
convertible only on and after January 1, 1999. In addition, no Series A
Debentures may be redeemed until all Series B Debentures have been redeemed.
The Debentures purchased on September 25, 1995, were designated Series A
Debentures. The amended Debenture Purchase Agreement provided that, upon
receipt of the required regulatory approvals, BanPonce would purchase (i)
Series A Debentures that, together with the Debentures purchased on September
25, 1995, would be convertible into just under 5% of the outstanding shares of
Common Stock and (ii) Series B Debentures in an aggregate principal amount
equal to the difference between $10,000,000 and the aggregate principal amount
of the Series A Debentures.
On December 21, 1995, BanPonce received the required regulatory
approvals. On December 22, 1995, BanPonce purchased Series A Debentures in a
principal amount of $1,526,577.50 which, together with the $6,645,905 of Series
A Debentures purchased on September 25, 1995, totaled $8,172,482.50 of Series A
Debentures, convertible into 466,999 shares of Common Stock, representing just
under 5% of the sum of (i) the outstanding shares
Page 4 of pages
<PAGE> 5
of Common Stock and (ii) such 466,999 shares. On December 22, 1995, BanPonce
also purchased Series B Debentures in an aggregate principal amount of
$1,827,517.50, convertible on and after January 1, 1999, into an additional
104,429 shares of Common Stock.
The initial conversion price if $17.50 per share, subject to
customary anti-dilution adjustments. The Series A Debentures are convertible
at any time before the close of business on December 1, 2005. The Series B
Debenture are convertible at any time on and after January 1, 1999, and 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. No Series A Debenture may be redeemed
until all Series B Debentures have been redeemed in full.
A copy of the Debenture Purchase Agreement, as amended and restated,
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.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1 - Debenture Purchase Agreement dated as of September 25,
1995, amended and restated as of December 15, 1995, between First Financial
Caribbean Corporation and BanPonce Corporation, including forms of Series A
Debenture and Series B Debenture.
Page 5 of pages
<PAGE> 6
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: December 27, 1995
BANPONCE CORPORATION
By: /s/ David H. Chafey, Jr.
------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
Page 6 of pages
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DOCUMENT SEQUENTIAL PAGE NUMBER
-------------- -------- ----------------------
<S> <C> <C>
1 Debenture Purchase Agreement dated as of
September 25, 1995, amended and restated as of
December 15, 1995, between First Financial
Caribbean Corporation and BanPonce Corporation,
including forms of Series A Debenture and
Series B Debenture
</TABLE>
<PAGE> 8
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
AMENDED AND RESTATED AS OF DECEMBER 15, 1995
================================================================================
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE 1 Definitions and Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2. Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2 The Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.4. Paying Agent To Hold Money in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.5. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.6. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.1. Selection of Securities To Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.2. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.3. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.4. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.5. Securities Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.1. Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.2. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.3. Limitation on Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.4. Limitation on Put Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.5. Limitation on Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.6. Limitation on Secured Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.7. Limitation on Sale and Leaseback
Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.8. Limitation on Sales of Assets and
Subsidiary Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.9. Maintenance of Consolidated Tangible
Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.10. Maintenance of Minimum Debt Service
Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.11. Limitation on Transactions with
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.12. Limitation on Subordinated Debt
Ranking Senior to the Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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SECTION 4.13. Limitation on the Issuance or Transfer
of Capital Stock of Certain Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.14. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.15. Significant Management Stock
Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.16. Source of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.17. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.18. Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5 Successor Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.1. When Company May Merge or Transfer
Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6 Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.4. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.5. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.6. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 7 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.1. Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.2. Revocation and Effect of Consents
and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.3. Notation on or Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.1. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.2. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.3. Default on Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.4. Acceleration of Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.5. When Distribution Must Be Paid Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.6. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.7. Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.8. Subordination May Not Be Impaired by
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.9. Rights of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.10. Distribution or Notice to
Representative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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SECTION 8.11. Article 8 Not To Prevent Events of
Default or Limit Right To Accelerate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.12. Securityholders Entitled to Rely. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.13. Reliance by Holders of Senior Debt
on Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.14. Proof of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9 Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.1. Reservation, Listing and Issuance of
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.2. Adjustments of Conversion Price and
Number of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 10 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.1. Registration of Securities and Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 11 Right to Purchase Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.1. Right to Purchase Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.2. Registration Rights and Certain
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 12 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.1. Corporate Existence; Compliance with
Law and Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.2. Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . .
SECTION 12.3. No Legal or Contractual Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.4. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.5. No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.7. Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.8. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.11. Agency Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12.12. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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ARTICLE 13 Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 13.1. Conditions Precedent to Initial Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 13.2. Conditions Precedent to Subsequent Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 14 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.2. Statements or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.3. When Treasury Securities Disregarded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.4. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.6. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.7. Multiple Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.8. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.9. Representations and Covenants by
BanPonce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14.10 Survival of Certain Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT A FORM OF SERIES A SECURITY
EXHIBIT B FORM OF SERIES B SECURITY
SCHEDULE 12.5 Socorro Milagros Rivera v. Doral Mortgage
Corporation and Manuel Vargas
</TABLE>
<PAGE> 13
DEBENTURE PURCHASE AGREEMENT dated as of September 25, 1995
as amended and restated as of December 15, 1995, between FIRST
FINANCIAL CARIBBEAN CORPORATION, a Puerto Rico corporation (the
"Company"), and BANPONCE CORPORATION, a Puerto Rico corporation
("BanPonce").
On September 25, 1995, the parties executed the Debenture Purchase
Agreement, which contemplated the issuance of the Company's 8.25% Convertible
Subordinated Debentures due January 1, 2006 (the "Securities"), convertible
into shares of common stock of the Company. As a result of a regulatory
concern, the parties now wish to amend and restate the Debenture Purchase
Agreement as set forth herein to provide for the issuance of two series of
Securities, Series A and Series B, identical in all respects except that the
Series A Securities shall be immediately convertible into shares of common
stock of the Company and the Series B Securities shall be convertible into
shares of common stock of the Company on and after January 1, 1999.
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 Securities at a price per Security
equal to its par value. The Securities shall be issued in two series: Series
A and Series B. The Series A Securities and the Series B Securities shall be
identical in all respects, except that the Series A Securities shall be
immediately convertible into common stock of the Company and the Series B
Securities shall be convertible into shares of common stock of the Company on
and after January 1, 1999.
The closing of the sale of Series A Securities in an aggregate principal
amount of $6,645,905, convertible (at the Conversion Price specified in
paragraph 9 of the Series A Securities) into 379,766 shares of common stock of
the Company, representing just under 5% of the sum of (i) the shares of common
stock of the Company outstanding on September 25, 1995, which the Company
hereby represents to be 7,215,570 shares, plus (ii) such 379,766 shares of
common stock, shall be held on September 25, 1995.
The closing of the sale of (i) Series A Securities in an aggregate principal
amount such that, upon conversion at the Conversion Price specified in
paragraph 9 of the Series A Securities, such Series A Securities and the Series
A Securities issued on September 25, 1995, would be convertible in the
aggregate into shares of common stock of the Company representing
<PAGE> 14
-2-
just under 5% of the sum of (A) such shares and (B) the shares of common stock
of the Company outstanding on the date of such closing and (ii) Series B
Securities in an aggregate principal amount equal to the difference, if any,
between $10,000,000 and the aggregate principal amount of the Series A
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 approval of the
Federal Reserve Board is obtained, if such approval is required. If such
approval is not obtained on or before December 24, 1995, the agreement to
purchase and sell the Series B Securities shall terminate, and the closing of
the Series A Securities referred to in clause (i) of this paragraph shall be
held on a date mutually agreed by the parties, which shall be no later than
January 12, 1996.
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 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
<PAGE> 15
-3-
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 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.
<PAGE> 16
-4-
"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; 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
<PAGE> 17
-5-
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 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.
<PAGE> 18
-6-
"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), (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;
<PAGE> 19
-7-
(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 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
<PAGE> 20
-8-
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 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.
<PAGE> 21
-9-
"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.
"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
<PAGE> 22
-10-
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 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.
"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 Series A Securities and the Series B Securities
issuable under this Agreement.
<PAGE> 23
-11-
"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.
"Series A Securities" means the 8.25% Convertible Subordinated Debentures
due January 1, 2006, Series A, issuable under this Agreement.
"Series B Securities" means the 8.25% Convertible Subordinated Debentures
due January 1, 2006, Series B, issuable under this Agreement.
"Shares" means shares of common stock of the Company issuable upon
conversion of the Securities.
"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 September 25, 1995) at any time prior to
September 25, 1998.
"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, (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
<PAGE> 24
-12-
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> 25
-13-
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 Series A Securities and the Series B
Securities shall be substantially in the form of Exhibit A and Exhibit B,
respectively, which are 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 and Exhibit B 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
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signature. The Company's seal shall be impressed, affixed, 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 (except that two Series A Securities and one Series B
Security may be in any denomination) 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
<PAGE> 27
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other denominations, the Registrar shall make the exchange as requested if the
same requirements are met. To permit registration of transfers and 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 Series B Securities shall be redeemed first,
and no Series A Security may be redeemed until all Series B Securities are
redeemed in full. If fewer than all the Series A Securities are to be
redeemed, the Series A Securities to be redeemed shall be redeemed pro rata on
the basis of the outstanding principal amount of each Series A Security. If
fewer than all the Series B Securities are to be redeemed, the Series B
Securities to be redeemed shall be redeemed pro rata on the basis of the
outstanding principal amount of each Series B 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.
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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;
(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.
<PAGE> 29
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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 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
<PAGE> 30
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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).
(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
<PAGE> 31
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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 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) purcha- se,
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
<PAGE> 32
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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:
(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
<PAGE> 33
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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, 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.
<PAGE> 34
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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 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,
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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 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 September 25, 1995), 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;
<PAGE> 36
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(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.
(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
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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 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;
<PAGE> 38
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(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.
(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
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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;
(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
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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.
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
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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.
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;
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(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;
(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
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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. 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
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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 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
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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, 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
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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;
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
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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 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 the Shares to be listed (subject to issuance or notice of
issuance of such 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 the Shares (subject to issuance or notice of issuance) on
NASDAQ-NMS promptly after September 25, 1995.
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.
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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 September 25, 1995, 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
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
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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 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
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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 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
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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 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
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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 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
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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 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.
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(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 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
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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 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
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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
(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
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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.
(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.
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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 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 securi-
ties.
(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.
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(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) 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 September 25, 1995), 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
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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.
(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.
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(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 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
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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
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.
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(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 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
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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 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
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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 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
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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 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 September 25, 1995) minus (B) the total number of shares
previously purchased by BanPonce upon exercise of the right granted in this
Section.
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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 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
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be obligated to list such shares as provided in Section 9.1 until the actual
issuance thereof.
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
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Agreement, or (c) result in the creation or imposition of any Lien on any asset
of the Company or any of its Subsidiaries.
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 September 30, 1995, and the related unaudited
consolidated statements of income, retained earnings and cash flows for the
three-month and nine-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
<PAGE> 70
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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 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
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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 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
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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.
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 Series A Securities on September 25, 1995,
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 September
25, 1995;
(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 September 25, 1995;
(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 September 25, 1995;
(e) a copy of the By-laws of the Company, certified by the Secretary or
an Assistant Secretary of the Company on September 25, 1995, as being accurate
and complete;
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(f) a certificate of the applicable officer in the relevant jurisdiction
or other equivalent document certifying as of a 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 September 25, 1995;
(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 September 25, 1995;
(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.
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SECTION 13.2. CONDITIONS PRECEDENT TO SUBSEQUENT SALE. It shall be a
condition precedent to any subsequent sale of 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, if such approval is required.
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.
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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
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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 September 25, 1995.
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
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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: /s/ Mario S. Levis
------------------
Name: Mario S. Levis
Title: Executive Vice President
BANPONCE CORPORATION
By:/s/ David H. Chafey, Jr.
------------------------
Name: David H. Chafey, Jr.
Title: Executive Vice President
<PAGE> 78
EXHIBIT A
[FORM OF FACE OF SERIES A 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, Series A
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:
FIRST FINANCIAL CARIBBEAN
CORPORATION
By:___________________________
[Vice] President
By:___________________________
[Assistant] Secretary
<PAGE> 79
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[FORM OF REVERSE SIDE OF SERIES A SECURITY]
8.25% Convertible Subordinated Debenture Due
January 1, 2006, Series A
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 the date of this Security.
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
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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 25, 1995, amended and restated as of
December , 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 issuable as Series A Securities and Series B
Securities, which shall be identical in all respects except conversion
rights. 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 (provided that no Series A Securities may be
redeemed until all Series B Securities are redeemed in full) at the
following redemption prices (expressed in percentages of principal amount),
plus accrued interest to the redemption date:
<PAGE> 81
-4-
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> 82
-5-
9. Conversion
A holder of a Series 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> 83
-6-
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> 84
________________________________________________________________________________
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> 85
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> 86
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> 87
-2-
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)
<PAGE> 88
EXHIBIT B
[FORM OF FACE OF SERIES B 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, Series B
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:
FIRST FINANCIAL CARIBBEAN
CORPORATION
By:___________________________
[Vice] President
By:___________________________
[Assistant] Secretary
<PAGE> 89
-2-
[FORM OF REVERSE SIDE OF SERIES B SECURITY]
8.25% Convertible Subordinated Debenture Due
January 1, 2006, Series B
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 the date of this Security.
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> 90
-3-
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 25, 1995, amended and restated as of
December , 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 issuable as Series A Securities and Series B
Securities, which shall be identical in all respects except conversion
rights. 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 (provided that no Series A Securities may be
redeemed until all Series B Securities are redeemed in full) at the
following redemption prices (expressed in percentages of principal amount),
plus accrued interest to the redemption date:
<PAGE> 91
-4-
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> 92
-5-
9. Conversion
A holder of a Series B Security may convert it into common stock of
the Company at any time on and after January 1, 1999, and 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> 93
-6-
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> 94
________________________________________________________________________________
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> 95
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> 96
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> 97
-2-
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)
