<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act
of 1934
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ TO ______________
For Quarter Ended __________________ Commission file number 1-4753
------
PUERTO RICAN CEMENT COMPANY, INC.
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO 51-A-66-0189525
--------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PO Box 364487 - San Juan, P.R. 00936-4487
------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(809) 783-3000
--------------
(Registrant's telephone number, including area code)
NONE
----
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the Registrant (1) has filed
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
------- -------
COMMON STOCK -$1.00 PAR VALUE 5,767,899 SHARES
<PAGE> 2
PUERTO RICAN CEMENT COMPANY, INC.
INDEX
PAGE NO.
Part I - Financial Information
Consolidated Balance Sheet as of
September 30, 1994 and December 31, 1993 1 - 2
Consolidated Statement of Income
Third quarter ended on
September 30, 1994 and 1993 3
Consolidated Statement of Cash Flows
Nine months ended on
September 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5 - 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6 - 8
PART II - Other Information 9
Signatures 10
<PAGE> 3
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
ASSETS 30, 1994 31, 1993
------------ ------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 296,696 $ 431,293
Short-term investments 1,097,898
------------ ------------
Cash and Cash Equivalents 1,394,594 431,293
------------ ------------
Other short-term investments 1,594,195 520,000
------------ ------------
Notes and accounts receivable-net of allowance
for doubtful accounts of $1,094,997 in 1994
and $1,121,601 in 1993 17,150,607 13,626,159
------------ ------------
Inventories:
Finished products 1,991,966 2,127,413
Work in process 3,308,731 6,231,167
Raw materials 2,939,350 3,276,157
Maintenance & operating supplies 18,462,351 20,855,519
Land held for sale including development costs 594,666 651,580
------------ ------------
Total inventories 27,297,064 33,141,836
------------ ------------
Prepaid expenses 5,092,019 3,488,276
------------ ------------
TOTAL CURRENT ASSETS 52,528,479 51,207,564
------------ ------------
PROPERTY, PLANT & EQUIPMENT - Net of accumulated
depreciation, depletion and amortization
of $53,951,662 in 1994 and $48,804,646 in 1993 111,158,501 107,968,603
------------ ------------
OTHER ASSETS
Long-term investments 40,422,577 32,512,367
Other long-term assets 1,563,584 1,595,062
------------ ------------
41,986,161 34,107,429
------------ ------------
TOTAL $205,673,141 $193,283,596
============ ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
LIABILITIES AND STOCKHOLDERS' EQUITY 30, 1994 31, 1993
------------ ------------
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 6,178,571 $ 7,491,735
Accounts payable 5,466,537 4,656,496
Accrued liabilities 6,681,960 4,500,812
Income taxes payable 344,823 624,263
------------ ------------
TOTAL CURRENT LIABILITIES 18,671,891 17,273,306
LONG-TERM LIABILITIES
Long-term debt, less current portion 32,492,132 26,633,080
Deferred income taxes 28,729,734 26,028,233
Postretirement benefit liability 2,574,968 2,673,947
------------ ------------
63,796,834 55,335,260
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 2,000,000
shares of $5.00 par value each; none issued
Common stock authorized 20,000,000
shares of $1.00 par value each; issued
6,000,000 shares, outstanding 5,634,100 shares 6,000,000 6,000,000
Additional paid-in capital 14,367,927 14,367,927
Retained earnings 109,835,735 101,891,599
------------ ------------
130,203,662 122,259,526
Less: 365,900 (1993-192,300) shares of common
stock in treasury, at cost 6,999,246 1,584,496
------------ ------------
STOCKHOLDERS' EQUITY NET 123,204,416 120,675,030
------------ ------------
TOTAL $205,673,141 $193,283,596
============ ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $23,541,842 $21,651,250 $70,816,788 $63,276,210
Revenue from real estate operations 24,273 24,273 72,821 629,447
----------- ----------- ----------- -----------
23,566,115 21,675,523 70,889,609 63,905,657
Cost of sales 16,570,557 13,257,982 46,551,693 40,153,566
----------- ----------- ----------- -----------
Gross margin 6,995,558 8,417,541 24,337,916 23,752,091
Selling, general & administrative expenses 2,957,582 2,544,349 8,362,105 7,842,254
----------- ----------- ----------- -----------
Income from operations 4,037,976 5,873,192 15,975,811 15,909,837
----------- ----------- ----------- -----------
Other charges (credits):
Interest and financial charges 592,808 702,964 1,748,300 2,152,965
Interest income (620,512) (361,455) (1,660,513) (902,782)
Other income (30,068) (27,556) (91,429) (91,698)
----------- ----------- ----------- -----------
Total (57,772) 313,953 (3,642) 1,158,485
----------- ----------- ----------- -----------
Income before income tax 4,095,748 5,559,239 15,979,453 14,751,352
Tax provision 1,235,965 2,101,105 5,455,017 4,960,874
----------- ----------- ----------- -----------
Income before cumulative effect of changes
in accounting principles 2,859,783 3,458,134 10,524,436 9,790,478
Effect of a change in accounting for
postretirement benefits (net of tax -
$1,020,600) (1,409,400)
Cumulative effect of a change in accounting
for income taxes 853,410
----------- ----------- ----------- -----------
Net income $ 2,859,783 $ 3,458,134 $10,524,436 $9,234,488
=========== =========== =========== ===========
Income (loss) per share:
Income before cumulative effect of
changes in accounting $0.50 $0.60 $1.82 $1.68
Effect of a change in accounting for
postretirement benefits (0.24)
Cumulative effect of a change in
accounting for income taxes 0.15
----------- ----------- ----------- -----------
Net income $0.50 $0.60 $1.82 $1.59
=========== =========== =========== ===========
Common Shares Outstanding 5,767,899 5,807,700 5,767,899 5,807,700
=========== =========== =========== ===========
</TABLE>
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<PAGE> 6
PUERTO RICAN CEMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $10,524,436 $ 9,234,488
----------- -----------
Adjustments to reconcile net income to
cash flows from operating activities:
Effect of a change in accounting for
postretirement benefits 1,409,400
Cumulative effect of a change in accounting
for income taxes (853,410)
Depreciation, depletion and amortization 5,209,702 5,184,071
Provision for deferred income taxes 2,701,501 2,708,929
Postretirement benefit cost (98,979) 292,500
Changes in assets and liabilities:
Increase in notes & accounts receivable (3,524,448) (4,458,061)
Decrease in inventories 5,844,772 2,392,660
Increase in prepaid expenses (1,603,743) (1,583,163)
Increase in accounts payable 836,111 956,055
Increase in accrued liabilities 2,181,148 1,549,342
Decrease in income taxes payable (279,440) (174,386)
Decrease in other long-term assets 31,478 60,032
----------- -----------
Total adjustments 11,298,102 7,483,969
----------- -----------
Cash provided by operations 21,822,538 16,718,457
----------- -----------
Cash flows from investing activities:
Capital expenditures (8,399,600) (5,675,812)
Increase in other short-term investments (1,074,195) (743,471)
Purchase of long-term investments (7,910,210) (14,778,244)
----------- -----------
Cash used in investing activities (17,384,005) (21,197,527)
----------- -----------
Cash flows from financing activities:
Payment of principal on long-term debt (10,892,859) (8,541,592)
Proceeds from loan 15,438,747 10,506,015
Dividends paid (2,606,370) (1,451,925)
Purchase of treasury stocks (5,414,750)
----------- -----------
Cash (used in) provided by financing activities (3,475,232) 512,498
----------- -----------
Increase (decrease) in cash and cash equivalents $ 963,301 ($3,966,572)
=========== ===========
Cash and cash equivalents - beginning of year $ 431,293 $ 5,473,502
Cash and cash equivalents - end of period 1,394,594 1,506,930
----------- -----------
Increase (decrease) in cash and cash equivalents $ 963,301 ($3,966,572)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Registrant, the accompanying unaudited
financial statements contain all adjustments necessary to present
fairly its financial position at September 30, 1994 and December 31,
1993, and the results of operations and cash flows for the nine
months period ended on September 30, 1994 and 1993. The results of
operations are not necessarily indicative of the results to be
expected for the full year.
Cash and cash equivalents of approximately $1.4 million as of
September 30, 1994 consisted principally of short-term obligations of
the U.S. Federal Government or its agencies. Other short-term, and
long-term investments were principally obligations of the U.S.
Federal Government or its agencies with maturities ranging from over
3 months to up to 7 years. These investments resulted from excess
funds generated from operations.
As of September 30, 1994, notes and accounts receivable totaled
$17.1 million, an increase of $3.5 million from the $13.6 million
balance at December 31, 1993. The increase reflects principally the
higher demand for cement we have been experiencing this year as a
result of favorable weather conditions, which has permitted
construction projects to maintain an uninterrupted pace. Receivables'
turnover has been maintained within normal historical levels, with an
average collection period below 60 days.
The decrease of $5.8 million in consolidated inventories was due
principally to a decline in the work-in-process (clinker) and
maintenance & operating supply inventories. Clinker inventory
declined, albeit a slightly higher level of production of this
intermediate product, due to an increase in its consumption as more
material was used in the production of cement to provide for the
higher sales experienced during this period. The decrease in
maintenance & operating supplies was mainly due to major maintenance
and replacement of worn interchangeable machinery parts performed
during this quarter.
Prepaid expenses increased 46% when compared to December 1993 as
the result of prepaid property tax payments scheduled for this period
and an increase in the prepaid pension plan.
Net property, plant & equipment increased by $3.2 million due to
capital expenditures related principally to the mill conversion
project of $8.4 million offset by $5.2 million in accumulated
depreciation and depletion during the reporting period.
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<PAGE> 8
Accounts payable increased 17% when compared to December 1993
due mostly to purchases of materials and equipment used in the mill
conversion project. Accrued liabilities increased $2.2 million due
mainly to the increase in property tax accrual and other accruals.
Under the Puerto Rico income tax law the Registrant may exercise
the option to claim accelerated depreciation to defer current income
tax liability to future periods. Such depreciation, however, is
limited to an amount not greater than income before taxes (determined
without taking into consideration the depreciation deduction).
Benefits available under this accelerated depreciation method are
limited by the alternative minimum tax (AMT) provisions of the income
tax law. In Management's opinion, the Registrant will be subject to
the AMT provisions of the income tax law during the current year.
At its September 28, 1994 meeting, the Board of Directors of the
Registrant declared a 15 cents per share dividend on its common
stock, payable on November 11, 1994 to stockholders of record on
October 11, 1994. As of September 30, 1994, the Registrant has
5,634,100 shares of common stock issued and outstanding. This
compares with 5,807,700 shares outstanding as of September 30, 1993.
During the third and second quarter 133,600 and 40,000 shares,
respectively, were purchased.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1994 and December 31, 1993 the Company had
working capital of $33.9 million for both periods, with current
ratios of 2.81 to 1 and 2.96 to 1, respectively.
Cash provided by operations for the period ended in September
1994 totaled $21.8 million. This cash provided by operating
activities was used by the Company to purchase short and long-term
investments, pay dividends, finance portions of the capital
expenditure's program and reacquire outstanding shares of the
Company.
The Company has available credit facilities with commercial
banks for short-term financing and discount of trade paper from
customers in the aggregate amount of $12,600,000. At September 30,
1994 no amount was outstanding under this credit facility.
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<PAGE> 9
The Company believes that its cash balance, short and long-term
investments, short-term borrowing facilities and operating cash flows
are sufficient to meet its operating liquidity needs in the future.
Total long-term debt increased $4.5 million reflecting the net
effect of proceeds of $15.4 million in new loans offset by payments
of $10.9 million. During this period, some of these new borrowings
were used to finance the mill conversion project. Other portions were
used in the restructuring of an existing loan to take advantage of
lower interest rates and its resulting interest cost savings.
Approximate aggregate maturities of long-term debt for the
remaining of 1994 and thereafter are as follows:
1994 $ 2,428,571
1995 10,242,132
1996 6,178,571
1997 2,821,429
1998 7,000,000
1999 10,000,000
-----------
Totals $38,670,703
===========
The above schedule of maturities of long-term debt includes as
payable in 1994 and 1995, borrowing under the interim financing that
are convertible to permanent financing at the completion of the mill
conversion project.
Loan agreements with term lenders contain certain restrictions
concerning working capital, indebtedness, dividends, investments and
certain advances, among others.
Results of Operations
Consolidated net sales for the third quarter reported an
increase of 8.7% when compared to the same period of the prior year,
due mainly to an increase of 569,000 bags, or 12%, in total cement
sales (5,230,000 bags in 1994 - 4,671,000 in 1993). For the
nine-month period ended on September 30, 1994 the value of reported
net sales reached a total of $70.8 million against $63.3 million for
the same period of 1993, an increase of $7.5 million. Sales of
cement, in bags, went from 13,877,000 as of September 30, 1993 to
15,702,000 as of September 30, 1994, an increase of 1,825,000 bags.
This responds to a 9.3% increase in local cement consumption as a
result of the prevailing dry weather brought by the drought
experienced on the Island over the year 1994 which has permitted the
acceleration of construction projects.
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<PAGE> 10
On the contrary, the drought in combination with product
substitution used for water purification by the government owned
Aqueducts and Sewer Authority, has caused a decline in total sales
for our Florida Lime subsidiary during the nine months period ended
on September 30, 1994. Sales on the lime subsidiary declined 18.3%
from $3.2 million in 1993 to $2.6 million in 1994. In the paper and
bag division sales decreased 4.7%.
Revenue from real estate decreased because no real estate has
been sold in 1994, while in 1993 a land lot was sold during the first
quarter.
Cost of sales for the third quarter of 1994 as well as for the
year to date figure increased 25% and 16%, respectively, when
compared to the prior year. The increase was due mainly to major
overall maintenance and replacement work performed during the third
quarter at a cost of approximately $2.3 million which was not
previously anticipated. According to experts consulted in regards to
operation of dry process systems, this kind of work is not recurrent
on an annual basis but should be expected to take place every three
to five years.
This increase in cost of sales, caused a drop in gross margin
from 38.8% in the third quarter of 1993 to 29.7% in the third quarter
of 1994. Eliminating the impact that the $2.3 million maintenance
work performed during this quarter had on cost of sales, gross margin
for this quarter would have had increased to 39.5%, slightly higher
than last year's third quarter figure.
Selling and administrative expenses were $8.4 million for 1994
compared to $7.8 million for 1993. The 6.6% increase was principally
the result of general inflationary increases in salaries, wages and
related fringe benefits.
For the third quarter of 1994 as well as for the nine months
period ended on September 30, 1994, interest and financial charges
decreased 15.7% and 18.8%, respectively. This decline was due mainly
to the capitalization of interest related to the financing of the
mills' conversion project plus lower average interest rates on term
debt.
Interest income for the period reflects an increase of $758,000
over the 1993 figure. A higher balance in long-term investments,
which totaled $40.4 million at September 30, 1994, was the principal
reason of this increase.
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<PAGE> 11
Part II. OTHER INFORMATION.
Item 2. NONE
Item 5. The 1994 Puerto Rico Tax Reform Bill has been approved by
both the Houses of Representatives and the Senate, and signed by the
Governor. The effective date of this Legislation is June 30, 1995,
with the full effect of the changes taking place in taxable years
1996 and thereafter.
The new bill, among its many changes, provides for a reduction
in the tax rate for corporations and a new accelerated method of
depreciation. It also repeals the reserve method for bad debts as
well as the deduction for flexible depreciation for property acquired
after December 31, 1995.
Management estimates that the enactment of this new law will
probably result in a reduction in the deferred income tax liability
principally from the reduction in the maximum tax rate from 42% to
39%. No immediate impact is expected from the elimination of the
flexible depreciation deduction since the Company has sufficient
property available to be flexibly depreciated for various years. But
in the long-term, the Company believes that the new accelerated
depreciation method may bring an increase in total cash payments for
income tax.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Material Contracts
10.1 Loan agreement between the Registrant and Banco
Popular de Puerto Rico for the amount of $7,000,000, dated September
15, 1994, used to refinance the outstanding balance of another loan.
As provided in the loan agreement, securities with a face value of
$3.8 million has been pledged as collateral.
10.2 Letter from Banco Popular de Puerto Rico dated
July 11, 1994 whereby sections of the loan agreements dated August
20, 1993 and December 8, 1993 were amended. Both loan agreements
were filed as exhibits to Form 10-K for the year ended on December 31,
1993.
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
NONE
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<PAGE> 12
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PUERTO RICAN CEMENT COMPANY, INC.
---------------------------------
(Registrant)
Date: 10/28/94 By: /s/ Angel Amaral
--------------- -----------------------------
Angel Amaral
Vice President & Controller
Date: 10/28/94 By: /s/ Jose O. Torres
--------------- -----------------------------
Jose O. Torres
Vice President of Finance
& Treasurer
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<PAGE> 1
Exhibit 10.1
CREDIT AGREEMENT
$7,000,000.00
by and between
PUERTO RICAN CEMENT CO., INC.
and
BANCO POPULAR DE PUERTO RICO
September 15, 1994
<PAGE> 2
PROMISSORY NOTE
$7,000,000.00 San Juan, Puerto Rico
Date: September 15, 1994
FOR VALUE RECEIVED, PUERTO RICAN CEMENT COMPANY, INC., a
corporation duly organized and existing under the laws of the
Commonwealth of Puerto Rico (hereinafter referred to as the
"Borrower"), promises to pay to the order of Banco Popular de
Puerto Rico (hereinafter referred to as the "Bank"), at its
office or branch located at Hato Rey, San Juan, Puerto Rico, IN
FULL, on August 12, 1999, the principal sum of SEVEN MILLION
DOLLARS ($7,000,000.00), hereinafter referred to as the "term
loan", or, if less, the aggregate unpaid principal amount of the
term loan hereunder outstanding and due for payment on the date
this Note is presented for payment by the Bank to the Borrower.
The terms and conditions upon which the Bank shall make the
term loan to the Borrower hereunder are the following:
1. Purpose of the Term Loan
1.1. The Borrower has requested from the Bank a term loan to
be used to refinance the outstanding balance of a loan of
Scotiabank de Puerto Rico originally granted for the dry process
conversion of cement manufacturing.
<PAGE> 3
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1.2. The Bank agrees, subject to the terms and conditions
hereinafter set forth, to make the term loan available to the
Borrower in the principal amount of USD SEVEN MILLION DOLLARS
($7,000,000.00).
1.3. The obligation of the Bank to make the term loan shall
be subject to the condition precedent that:
1.3.1. The Borrower shall have executed the Master
Pledge Agreement and shall have delivered to the Bank all the
securities required to be delivered thereunder; and,
1.3.2. The Bank shall have received such other
approvals, opinions or documents as the Bank may reasonably
request.
2. Term Loan
2.1. The Borrower shall pay interest on the unpaid principal
amount from this date and until the maturity date thereof at an
interest rate equal to 7.300% per annum. Notwithstanding anything
else contained herein, the interest rate applicable to any
outstanding principal balance after the maturity date thereof
shall be equal to 8.300% per annum. Interest due shall be payable
in arrears on the first day of each month and on the date of
payment in full thereof, for the actual number of days elapsed.
<PAGE> 4
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2.2. The Borrower hereby acknowledges that the Bank intends
to fund the term loan made hereunder with 936 Funds. If at any
time (i) the Bank, in its sole discretion, or any governmental
authority determines that the term loan funded with 936 Funds does
not constitute an Eligible Activity for any reason (including,
without limitation, as a result of any change in any applicable
law or regulation, or in the interpretation thereof); (ii) the
Borrower does not permit the Bank to discharge or fulfill its
duties and obligations under Regulation 3582 or the Borrower fails
to comply with the 936 Covenants; or (iii) the Bank, in its sole
discretion, determines that it may suffer any adverse consequence
due to the fact that this term loan funded with 936 Funds is
outstanding; then, upon five (5) Business Days, notice to the
Borrower specifying the reason(s) therefor, the term loan funded
with 936 Funds shall be automatically converted to a term loan
that bear interest at a rate equal to 7.300% per annum. In the
event that such conversion is made necessary as a result of any
act or omission of the Borrower and the Bank suffers any loss or
expense as a result of such conversion, including, without
limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by
the Bank to fund the term loan so converted, the Borrower, upon
demand by the Bank, shall pay to the Bank additional amounts
sufficient to indemnify the Bank against such loss or expense. A
certificate in reasonable detail as to the amount of such loss or
expense submitted to the Borrower by the Bank, audited by
certified public accountants satisfactory to both parties at the
option of Borrower
<PAGE> 5
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and at its sole cost and expense, absent manifest error, shall be conclusive
and binding for all purposes.
2.3. The Borrower may not prepay the term loan funded with
936 Funds in whole or in part, unless the Borrower notifies the
Bank in writing at least five (5) Business Days' prior to the date
of the proposed prepayment, specifying the date of the proposed
prepayment and the amount thereof. At the time of making each
such prepayment pursuant to the provisions hereof, the Borrower
shall pay to the Bank accrued interest thereon to the date of such
prepayment and will compensate the Bank for any funding loss on
such prepayment.
2.4. All computations of interest shall be made by the Bank
on the basis of a year of 360 days for the actual number of days
elapsed.
3. Representations and Warranties.
3.1. The Borrower represents and warrants as follows:
3.1.1. The Borrower is a corporation duly organized
and existing and in good standing under the laws of the
Commonwealth of Puerto Rico.
3.1.2. The Borrower has power and authority to execute,
deliver and carry out this Note, the Master Pledge
<PAGE> 6
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Agreement, and each other instrument to be executed pursuant thereto,
and each such document has been duly authorized by all necessary action of
Borrower's Board of Directors (and of its stockholders, if required).
3.1.3. Each of this Note, the Master Pledge Agreement
and each other instrument to be executed pursuant thereto, when
delivered, will be legal, valid, binding and enforceable against
the Borrower in accordance with its respective terms.
3.1.4. The proceeds of the term loan shall be used by
the Borrower solely for the purposes set forth in Section 1.1
hereof.
4. Covenants.
4.1 So long as this Note shall remain unpaid, the Borrower
will, unless the Bank shall otherwise consent in writing:
4.1.1. Maintain proper books of record and account in
accordance with generally accepted accounting principles in which
full, true and correct entries shall be made of its dealings and
business affairs, and cause such books to be audited at the end of
each fiscal year by certified public accountants satisfactory to
both parties.
4.1.2. Furnish to the Bank, within one hundred twenty
<PAGE> 7
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(120) days after the end of each fiscal year of the Borrower, a balance
sheet and statement of profit and loss and surplus of the Borrower for such
fiscal year audited by certified public accountants of recognized standing
satisfactory to the Bank.
4.1.3. Permit any officers or qualified employees or
representatives of the Bank designated by it to visit and inspect any and
all properties of the Borrower and examine its books and discuss its
affairs, finances and accounts with the officers thereof, all at such
reasonable times and as often as the Bank may reasonably request.
4.1.4. Maintain, preserve and renew its corporate existence and
going-concern status and all rights, powers, privileges and franchises
possessed by it insofar as in the bona fide opinion of the Board of
Directors of the Borrower, such rights, privileges and franchises continue
to be advantageous to the Borrower.
4.1.5. Comply in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying and discharging all taxes, assessments and governmental charges upon
the Borrower or against its properties.
4.1.6. Maintain, preserve and keep all of its properties in
proper repair, working order and condition.
<PAGE> 8
-7-
4.1.7. With respect to the term loan funded at any time with
936 Funds;
(i) conduct its business in such a manner that, insofar
as the term loan made hereunder is funded with 936 Funds,
the requirements of Regulation 3582 as to the proper use of
the proceeds thereof for an Eligible Activity by the
"ultimate recipient" of such proceeds will be complied with;
and
(ii) submit to the Bank promptly upon demand such
information as the Bank shall reasonably request from time
to time in order to verify that the proceeds of the term
loan have been, are being or will be properly applied in
accordance with the Regulation, and such other information,
statements, reports, certificates and documents as may be
reasonably requested by the Bank to comply with Regulation
3582.
4.2 The Borrower covenants that from the date hereof and
until the term loan hereunder, with interest thereon, shall not
have been fully paid, it will not, without the prior written
consent of the Bank, which consent shall not be unreasonably
withheld:
4.2.1. Make loans or advances to any of its officers,
<PAGE> 9
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directors, stockholders, affiliated companies, employees or any
other person, except in the ordinary course of business.
4.2.2. Become liable, either directly or indirectly,
for obligations of others, except in the ordinary course of
business.
4.2.3. Further encumber its assets or incur
indebtedness, except for: (i) unsecured current indebtedness in
excess of $15,000,000.00 outstanding at any time and for liens in
the form of purchase money obligations not in excess of
$10,000,000.00 in the aggregate on any real property acquired by
the Borrower and created contemporaneously with such acquisition
which secure only borrowings made to finance the purchase of such
property, provided that such lien extends only to the property
acquired and that the aggregate principal amount of indebtedness
secured by such lien and all other indebtedness secured by any
other lien on such property does not exceed in the aggregate 80%
of the fair market value thereof at the time of incurrence; or
(ii) additional funded indebtedness (as hereinafter defined) of
Borrower, provided that at the time of the issuance thereof and
after giving effect thereto, funded indebtedness shall not exceed
50% of "consolidated capitalization", which shall mean the sum of
funded indebtedness (as hereinafter defined) and "tangible net
worth", which shall mean the capital and surplus of Borrower, less
the net book value of any intangibles, both determined in
accordance with generally accepted accounting principles, arising
<PAGE> 10
-9-
subsequent to June 30, 1994. For these purposes, "funded
indebtedness" shall mean and include, as of any date as of which
the amount thereof is to be determined, (i) all indebtedness of
Borrower that matures more than one year from the date of creation
thereof; (ii) all capital lease obligations; (iii) all
indebtedness of Borrower (not included in clause (i) above) that
is extendible or renewable at the option of any party thereto to a
date more than one year from the date of creation thereof (whether
or not theretofore renewed or extended), including any such
indebtedness renewable or extendible under or payable from the
proceeds of other indebtedness that may be incurred pursuant to
the provisions of any revolving credit agreement or similar
agreement, excluding, however, in all cases any portion of such
indebtedness which is due and payable within one year from the
date on which funded indebtedness is to be determined; and (iv)
all guarantee of indebtedness described in (i) to (iii) above.
4.2.4. Pay any dividends or make any other
distribution on its capital stock (other than dividends payable
solely in stock), make any investment in any subsidiary or
affiliate, acquire any of its capital stock or make any
investment, loan or advance if the sum of all such payments
subsequent to December 31, 1986 would exceed the sum of:
(a) $500,000 plus
(b) 50% of Borrower's consolidated net
income less 100% of all consolidated
net losses, computed
<PAGE> 11
-10-
on a cumulative basis subsequent to December
31, 1986 and after immediately giving effect to
such payments Borrower is able to incur at
least $1.00 of addition funded indebtedness as
permitted under Section 4, Paragraph 4.2.3, clause
(ii) above.
4.2.5. Sell or transfer all or an amount in excess of
10% of Borrower's consolidated net assets, excluding investments
in money markets or maketable securities, sales transfers of real
estate assets held for commercial and industrial development and
not used in the manufacture of cement, multiwall paper bags, or
hydrated lime, except those usually sold in the ordinary course of
business.
4.2.6. Incur long-term leases or lease-purchase
obligation in addition to that now existing or that provided
hereunder, except those leases which are required to be
capitalized under generally accepted accounting principles, if the
total rents payable by Borrower in accordance with such leases
shall exceed 5% of consolidated "tangible net worth" on any of the
Borrower's fiscal years.
4.2.7. Merge with, or be consolidated with any other
corporation or business entity, unless the Borrower is the
surviving corporate entity.
<PAGE> 12
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4.2.8. Pay annual compensation (including gifts and
bonuses) to its officers and directors exceeding in the aggregate
and on an individual basis, such amounts which are customarily
paid to officers and directors of corporation engaged in similar
business or comparatively situated.
4.3 In the event of an irreconciliable controversy regarding
this Section 4, the Borrower shall have the option of pledging to
the Bank additional Securities provided that the Fair Market Value
(as hereinafter defined) of the Securities shall not at any time
be less than (i) with respect to Securities consisting of United
States Treasury bills or notes, 105% of the aggregate outstanding
principal amount of the Loan (the "Outstanding Principal Amount")
secured thereby, plus (ii) with respect to Securities other than
United States Treasury bills or notes, 110% of the Outstanding
Principal Amount secured thereby and in that event this Section 4
would be considered deleted. The term "Fair Market Value" as used
herein shall mean, as of any date, the bid price on such date of
the Securities being valued, as obtained from a generally
recognized source selected by the Bank or the most recent
closing bid quotation for such securities from such source.
5. Events of Default.
5.1. If any of the following events ("Events of Default")
shall occur and be continuing:
<PAGE> 13
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5.1.1. The Borrower shall fail to pay principal or
interest on the term loan within ten (10) business days after the
same becomes due and payable; or
5.1.2. Any representation or warranty made by the
Borrower (or any of its officers) hereunder or under the Master
Pledge Agreement shall prove to have been incorrect in any
material respect when made; or
5.1.3. The Borrower shall fail to perform or observe
any other term, covenant or agreement contained herein on its part
to be performed or observed if such failure shall remain
unremedied for ten (10) business days after written notice thereof
shall have been given to the Borrower by the Bank; or
5.1.4. The Borrower shall generally not pay its debts
as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by
or against the Borrower seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it
or its debt under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its
property; or the Borrower shall take action to authorize any of
the
<PAGE> 14
-13-
actions set forth above in this subsection 5.1.4; or
5.1.5. An Event of Default (as defined in the Master
Pledge Agreement) shall occur under the Master Pledge Agreement;
or
5.1.6. The Master Pledge Agreement shall for any
reason, except to the extent permitted by the terms thereof, cease
to create a valid and perfected first-priority security interest
in any of the Collateral purported to be covered thereby;
then, and in any such event, the Bank may, by notice to the
Borrower, (i) declare the obligation of the Bank to make the term
loan hereunder to be terminated, whereupon the same shall
forthwith terminate, and (ii) declare this Note and all interest
thereon to be forthwith due and payable, whereupon this Note and
all such interest shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower;
provided, however, that upon the occurrence of any of the events
described in subsection 5.1.4 above, this Note and all such
interest, plus an additional amount equal to two percent (2%) of
the then outstanding principal amount of the term loan, shall
automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
<PAGE> 15
-14-
6. Miscellaneous.
6.1. The Borrower agrees, upon demand, to indemnify and hold
harmless the Bank against and from all "1936 Indemnity Losses" (as
defined hereinbelow) arising at any time now or hereafter by
reason of any of the following:
(i) any act of commission or omission by the Borrower;
(ii) any breach of any covenant, representation,
warranty, acknowledgment or statement by the Borrower
contained in this Note or in any certificate or other
written statement provided to the Bank in connection
herewith;
(iii) any adverse determination made by the Commissioner
or any governmental authority in the United States or
the Commonwealth as to the qualification of the term
loan or any transactions related thereto as an Eligible
Activity;
(iv) any failure by the Borrower to permit the Bank to
discharge or fulfill the Bank's duties or obligations
under Regulation 3582; or
(v) any change in any relevant law or regulation, or in
the interpretation thereof, that results in any adverse
<PAGE> 16
-15-
consequence to the Bank due to the term loan funded with
936 Funds being outstanding.
For purposes of this Section 6.1, "936 Indemnity Losses"
shall mean and include any loss (including any funding loss),
cost, damage (whether general, punitive or otherwise), liability,
fine, penalty, indebtedness, claim, cause of action, judgment,
court cost and legal or other expense, including attorneys' fees,
relating directly or indirectly to Section 936 of the United
States Internal Revenue Code or Regulation 3582. In addition, all
"936 Indemnity Losses" shall be audited, at the option of Borrower
and at its sole cost and expense, by certified public accountants
satisfactory to both parties.
The obligations set forth in this Section 6.1 shall
survive the repayment in full of the term loan.
6.2. This Note shall be governed by, and construed in
accordance with, the laws of the Commonwealth.
6.3. The term loan made by the Bank to the Borrower pursuant
hereto, and all payments made on account of principal hereof,
shall be recorded by the Bank.
6.4. As used in this Note, the following terms shall have the
following meanings (such meanings to be equally applicable to both
the singular and the plural forms of the terms defined):
<PAGE> 17
-16-
"Business Day" means a day of the year in which banks in
San Juan, Puerto Rico are not required or authorized to close or
are not otherwise closed to the public.
"Commissioner" means the Commissioner of Financial
Institutions of the Commonwealth.
"Commonwealth" means the Commonwealth of Puerto Rico.
"Eligible Activity" has the meaning given such term
in the Regulation.
"Eligible Funds" has the meaning given such term in
Regulation 3582.
"Master Pledge Agreement" means that certain Master
Pledge and Assignment Agreement, dated the date hereof, executed
by the Borrower in favor of the Bank to secure the repayment of
the term loan.
"936 Covenants" means the covenants set forth in Section
4.1.7 hereof.
"936 Funds" means deposits of Eligible Funds received by
Banco Popular de Puerto Rico in San Juan, Puerto Rico.
"Prime Rate" means the rate of interest designated and
<PAGE> 18
-17-
quoted by the Bank from time to time as its prime rate. The Prime
Rate does not necessarily represent, and no such representation is
hereby made, that such rate is the lowest, the best or the most
favored rate quoted by the Bank.
"Regulation 3582", means Regulation Number 3582 issued
by the Commissioner on January 29, 1988, as such regulation may be
amended from time to time, or any successor regulation issued by
said official or by any successor governmental agency.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed by its officer thereunto duly authorized, as of the date
first above written.
PUERTO RICAN CEMENT COMPANY, INC.
By: /s/ Jose O. Torres
----------------------------
Jose Osvaldo Torres
AGREED AND ACCEPTED:
BANCO POPULAR DE PUERTO RICO
By: /s/ Pedro Jose Pena Lopez
--------------------------
Pedro Jose Pena Lopez
Vice President
<PAGE> 19
EXHIBIT A
MASTER PLEDGE AND ASSIGNMENT AGREEMENT
MASTER PLEDGE AND ASSIGNMENT AGREEMENT, dated as of September
15, 1994, made by PUERTO RICAN CEMENT COMPANY, INC., a corporation
duly organized and existing under the laws of the Commonwealth of
Puerto Rico (the "Pledgor"), to BANCO POPULAR DE PUERTO RICO, a
bank duly organized and existing under the laws of the
Commonwealth of Puerto Rico (the "Bank").
WITNESSETH:
WHEREAS, on the date hereof the Pledgor have issued a certain
Promissory Note (the "Note; all terms used herein which are
defined in the Note and not otherwise defined herein shall have
the meanings set forth in the Note"), payable to the order of the
Bank, in the principal sum of SEVEN MILLION DOLLARS
($7,000,000.00), hereinafter referred to as the "Loan".
WHEREAS, it is a condition precedent to the making of the
Loan to the Pledgor by the Bank that the Pledgor pledge and assign
certain securities in favor of the Bank.
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Bank to make the Loan
to the Pledgor, the Pledgor hereby agrees with the Bank as
follows:
SECTION 1. Pledge. In order to secure the Obligations (as
<PAGE> 20
-2-
hereinafter defined), the Pledgor hereby pledges, assigns and
grants to the Bank a security interest in the securities described
in Schedule I hereto and any other securities pledged and assigned
to the Bank pursuant to Section 4 hereto (collectively the
"Securities"), and any certificates or other evidence of ownership
thereof, if any, and all interest (except to the extent that such
interest is permitted to be paid to the Pledgor pursuant to
Section 11 (a) hereof), cash, instruments and other property from
time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Securities
(collectively, the "Pledge Collateral").
SECTION 2. Security for Obligations. This Agreement secures
the payment in full of the Loan of the Pledgor with the Bank,
including principal, interest, fees, expenses or otherwise (all
such obligations of the Pledgor referred to herein as the
"Obligations").
SECTION 3. Delivery of Pledged Collateral.
(a) All certificates or instruments representing or
evidencing the Securities, if any, shall be delivered to and held
by the Bank pursuant hereto. All Securities delivered to the Bank
shall be endorsed in blank or as otherwise required by the Bank.
(b) If any of the Securities are uncertificated
securities or certificated securities whose ownership interest is
recorded in a book-entry system, the Pledgor shall provide written
<PAGE> 21
-3-
notice in the form attached hereto as Exhibit "A" of the security
interest created hereunder in favor of the Bank to the financial
intermediary on whose books the Pledgor's ownership interest in
said Securities appears recorded and the Pledgor shall take such
further action as may be required in order to perfect the Bank's
security interest in such Securities.
SECTION 4. Mark to Market.
(a) If at any time the Fair Market Value (as
hereinafter defined) of the Securities shall at any time be less
than (i) with respect to Securities consisting of United States
Treasury bills or notes, 52.5% of the aggregate outstanding
principal amount of the Loan (the "Outstanding Principal Amount")
secured thereby, plus (ii) with respect to securities other than
United States Treasury bills or notes, 55% of the Outstanding
Principal Amount secured thereby, the Pledgor, upon written notice
from the Bank, shall pledge, assign and deliver to the Bank,
within ten (10) business days of such notice, additional
Securities consisting of Eligible Collateral so that such
deficiency no longer exists. The term "Fair Market Value" as used
herein shall mean, as of any date, the bid price on such date of
the Securities being valued, as obtained from a generally
recognized source selected by the Bank or the most recent closing
bid quotation for such Securities from such source.
(b) With respect to any Securities that the Pledgor is
required to pledge, assign and deliver to the Bank after the date
of this Agreement pursuant to subsection (a) above, the Pledgor
shall:
<PAGE> 22
-4-
(i) describe such additional Securities upon a
Confirmation of Pledge, substantially in the form
of Exhibit "B" hereto (the "Confirmation of
Pledge"), that has been duly executed by the
Pledgor and authenticated before an attesting
notary of the Commonwealth of Puerto Rico.
Such Confirmation of Pledge shall be delivered to
the Bank at the time of such delivery or other
transfer of the Securities;
(ii) in the case of additional Securities that are
evidenced by certificates or instruments, deliver
to the Bank such certificates or instruments,
endorsed in blank, or as otherwise required by the
Bank; or, in the case of additional Securities that
are uncertificated, or securities whose ownership
interest is maintained in a book-entry system,
provide written notice (in the form attached hereto
as Exhibit "A") of the security interest created
hereunder in favor of the Bank to the financial
institution or intermediary on whose books the
Pledgor's ownership interest in said additional
Securities appear recorded; and
(iii) deliver such other documents, certificates,
or assignments, in form and substance acceptable to the
Bank, as the Bank may reasonably require to ensure that
the pledge of the additional Securities constitutes a
first priority security interest in favor of the Bank.
(c) "Eligible Collateral" shall mean any of the
following:
(i) direct obligations of, or obligations the
principal of and the interest on which are unconditionally
guaranteed by, the United States of America; (ii) any certificates
or other evidences of an ownership in obligations or in specified
portions thereof (which may consist of specified portions of the
principal thereof or the interest thereon) of the character
described in clause (i); (iii) bonds, debentures or notes issued
by any of the following United States Government agencies: Banks
for Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan
<PAGE> 23
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Bank, Export-Import Bank of the United States, Government
National Mortgage Association, Federal Land Banks, the Federal
National Mortgage Association (including participation
certificates issued by such Association) or the Tennessee Valley
Authority; and (iv) all other obligations issued or
unconditionally guaranteed as to principal and interest by a
United States Government agency or person controlled or supervised
by and acting as an instrumentality of the United States of
America pursuant to authority granted by the United States
Congress; provided, however, that Eligible Collateral shall
include only such securities as have been purchased by the Pledgor
more than sixty (60) days prior to the date of the Note and as
will be held for more that fifteen (15) days after the date of
payment in full of the Note.
SECTION 5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Securities have been duly authorized and validly
issued and are fully paid.
(b) The Pledgor is the sole holder of record of the
Securities and legal and beneficial owner of the Securities, free
and clear of any liens, encumbrances, security interests, options,
warrants or other charges or rights of third parties whatsoever,
except for the security interest created in favor of the Bank by
this Agreement.
(c) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms.
<PAGE> 24
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(d) The pledge of the Pledged Collateral pursuant to
this Agreement creates a valid and perfected first priority
security interest in the Pledged Collateral, securing the payment
in full of the Obligations. All action necessary or desirable to
perfect and protect such security interest has been duly taken.
(e) No authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by
the Pledgor of the Pledged Collateral pursuant to this Agreement
or for the due execution, delivery or performance of this
Agreement by the Pledgor or (ii) for the exercise by the Bank of
its rights hereunder or the remedies granted to it in respect of
the Securities pursuant to this Agreement, except for the notices
provided in subsections 3(b) and 4(b) (ii) hereof with respect to
uncertificated Securities.
(f) The exercise by the Bank of any of its rights and
remedies hereunder will not contravene any law or any contractual
restriction binding on or affecting the Pledgor or any of its
properties.
(g) The execution, delivery and performance by the
Pledgor of this Agreement do not contravene any law or contractual
restriction binding on or affecting the Pledgor.
(h) Each of the Securities pledged to the Bank pursuant
hereto constitutes, or in the case of Securities to be pledged
hereunder after the date hereof will constitute, Eligible
Collateral.
<PAGE> 25
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SECTION 6. Further Assurances. The Pledgor agrees that at
any time and from time to time, at the expense of the Pledgor, the
Pledgor shall promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary
or desirable, or that the Bank may reasonably request, in order to
perfect and protect any security interest granted or purported to
be granted hereby or to enable the Bank to exercise and enforce
its rights and remedies hereunder with respect to any Pledged
Collateral.
SECTION 7. Transfers and other Liens. The Pledgor agrees
that it will not (i) sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral; or (ii)
create or permit to exist any lien, security interest, or other
charge or encumbrance upon or with respect to any of the Pledged
Collateral, except for the security interest created under this
Agreement. However, in the event that one of the Securities in
the Pledged Collateral reaches maturity and provided no Event of
Default exists hereunder, the Pledgor shall have the right to
replace the one that reached maturity with substitute Securities
of the same quality and value.
SECTION 8. Bank Appointed Attorney-in-Fact. The Pledgor
hereby appoints the Group Head of the Bank's Corporate Banking
Group, or any other person which said Group Head may designate to
substitute him, or any other person designated by the Bank, as the
Pledgor's attorney-in-fact, with full authority in the place and
<PAGE> 26
-8-
stead of the Pledgor and in the name of the Pledgor or otherwise,
from time to time in his discretion, upon the occurrence of an
Event of Default, to take any action and to execute any instrument
that he may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the
Pledgor representing any distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the
same. This power, being coupled with an interest, is irrevocable
so long as the Obligations remain unpaid.
SECTION 9. Bank May Perform. If the Pledgor fails to perform
any agreement contained herein, the Bank may itself perform, or
cause performance of, such agreement, and the reasonable
expenses of the Bank incurred in connection therewith shall be
payable by the Pledgor as provided under Section 14.
SECTION 10. Reasonable Care. The Bank shall be deemed to
have exercised reasonable care in the custody and preservation of
the Pledged Collateral in the Bank's possession if the Pledged
Collateral is accorded treatment substantially equal to that which
the Bank accords its own property. It is hereby understood that
the Bank shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges,
maturities, redemptions, tenders or other matters relative to any
Pledged Collateral, whether or not the Bank has or is deemed to
<PAGE> 27
-9-
have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any parties with respect to any Pledged
Collateral.
SECTION 11. Interest.
(a) So long as no Event of Default hereunder shall have
occurred and be continuing, the Pledgor shall be entitled to
receive and retain any and all interest paid in respect of the
Pledged Collateral.
(b) Upon the occurrence and continuance of an Event of Default:
(i) All rights of the Pledgor to receive the interest that it
would otherwise be authorized to receive and retain pursuant to
Section 11(a) shall immediately cease, and all such rights shall
thereupon become vested in the Bank which shall thereupon have
the sole right to receive and hold such interest as Pledged
Collateral.
(ii) All interest that is thereafter received by the Pledgor
contrary to the provisions of paragraph (i)of this Section 11(b)
and any other payments or distributions received by the Pledgor
on account of the Pledged Collateral shall be received by the
Pledgor in trust for the benefit of the Bank, shall be segregated
from other funds of the Pledgor and shall be promptly paid over
to the Bank as Pledged Collateral in the same form as received
(with any necessary endorsement).
SECTION 12. Events of Default. Any one of the following shall be an
Event of Default hereunder:
(a) Any representation or warranty herein made or any
certificate or statement furnished pursuant to the provisions of
this Agreement or pursuant to the provisions of the Note by the
Pledgor or by any other person shall prove to be false or
<PAGE> 28
-10-
misleading in any material respect as of the time made; or
(b) The Pledgor shall default in the performance of any
covenant, condition or provision, or in the performance of any
other obligation that may exist between it and the Bank, whether
now existing or arising in the future, and any such default is not
remedied within ten (10) business days after written notice
thereof shall have been given to the Pledgor by the Bank; or
(c) An Event of Default shall occur under the Note and
such default is not remedied by the Pledgor within fifteen (15)
business days after written notice thereof shall have been given
to the Pledgor by the Bank.
SECTION 13. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Bank may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies
of a pledgee on default under the laws of the Commonwealth of
Puerto Rico at the time, and the Bank may also, without notice
except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any
exchange, broker's board or at the Bank's offices or elsewhere,
for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Bank may deem commercially
reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least fifteen (15) business days'
written notice to the Pledgor of the time and place of any public
sale or the time after
<PAGE> 29
-11-
which any private sale is to be made shall constitute reasonable
notification. The Bank shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. The Bank may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefore, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Any cash held by the Bank as Pledged Collateral and
all cash proceeds received by the Bank in respect of any sale of,
collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Bank, be held by
the Bank as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Bank pursuant
to Section 14) in whole or in part by the Bank against, all or any
part of the Obligations in such order as the Bank shall elect.
Any surplus of such cash or cash proceeds held by the Bank and
remaining after payment in full of all the Obligations shall be
paid over to the Pledgor or to a court of competent jurisdiction
for its determination as to who may be lawfully entitled to
receive such surplus.
SECTION 14. Expenses. The Pledgor shall upon demand pay to
the Bank the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts
and agents, which the Bank may incur in connection with (i) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Pledged Collateral, (ii) the
<PAGE> 30
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exercise or enforcement of any of the rights of the Bank hereunder
or under the Note, and (iii) the failure by the Pledgor to perform
or observe any of the provisions hereof. The above mentioned fees
and expenses shall be equivalent to those charged by other
professionals for such services.
SECTION 15. Security Interest Absolute. All rights of the
Bank and security interests hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Note
or any agreement between the Pledgor and the Bank, or any other
agreement or instrument relating thereto;
(b) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Obligations; or
(c) any other circumstances that might otherwise
constitute a defense available to, or a discharge of, the Pledgor
in respect of the Obligations.
SECTION 16. Amendments. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same
shall be in writing and signed by the Bank and then such waiver or
<PAGE> 31
-13-
consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 17. Notices. (a) All notices, requests, consents and
other communications required or permitted under this Agreement
shall be in writing and shall be (as elected by the person giving
the notice) hand delivered by messenger or courier service or
mailed (airmail if international) by registered or certified mail
(postage prepaid), return receipt requested, addressed to:
If to the Pledgor: PUERTO RICAN CEMENT CO., INC.
PO BOX 364487
SAN JUAN, PR 00936-4487
If to the Bank: BANCO POPULAR DE PUERTO RICO
GPO BOX 362708
SAN JUAN, PR 00936-2708
(b) Each such notice shall be deemed delivered (i) on
the date delivered, receipt acknowledged if by personal delivery,
or (ii) on the date upon which the return receipt is signed or
delivery is refused or the notice is designated by the postal
authorities as not deliverable, as the case may be, if mailed.
(c) By giving to the other party at least fifteen (15)
business days prior written notice thereof, such party and its
successors and assigns shall have the right from time to time and
at any time during the term of this Agreement to change their
respective addresses.
SECTION 18. Continuing Security Interest. This Agreement
shall create a continuing security interest in the Pledged
<PAGE> 32
-14-
Collateral and shall (i) remain in full force and effect until
payment in full of the Obligations, (ii) be binding upon the
Pledgor, its successors and assigns, and (iii) inure to the
benefit of the Bank and its successors, transferees and assigns.
SECTION 19. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth
of Puerto Rico.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
PUERTO RICAN CEMENT COMPANY
By: /s/ Jose O Torres
--------------------------
Jose Osvaldo Torres
ACCEPTED AND AGREED TO,
as of the date first above indicated:
BANCO POPULAR DE PUERTO RICO
By: /s/ PEDRO JOSE PENA LOPEZ
-----------------------------
PEDRO JOSE PENA LOPEZ
VICE PRESIDENT
<PAGE> 33
SCHEDULE I
DESCRIPTION OF SECURITIES
<TABLE>
<CAPTION>
U.S. TREASURY NOTES:
FACE MARKET
CUSIP NO. SECURITY PURCHASED MATURITY VALUE PRICE VALUE
<S> <C> <C> <C> <C> <C> <C>
912827K27 U.S. TREASURY 03-31-93 03-31-95 670,000 0.993000 665,31
912827K27 U.S. TREASURY 04-07-93 03-31-95 645,000 0.993000 640,48
OTHER SECURITIES:
<CAPTION>
FACE MARKET
CUSIP NO. SECURITY PURCHASED MATURITY VALUE PRICE VALUE
<S> <C> <C> <C> <C> <C> <C>
880591BX9 TVA 12-23-93 12-15-96 1,650,000 0.955000 1,575,7
88059IBT8 TVA 11-19-93 03-04-98 640,000 0.938400 600,5
31339KAU6 FHLB STRIP 09-28-93 08-25-98 235,000 0.763303 179,3
/s/ Jose Osvaldo Torres
------------------------------
BY: JOSE OSVALDO TORRES
PUERTO RICAN CEMENT CO. INC.
</TABLE>
<PAGE> 34
September 15, 1994
The Chase Manhattan Bank, N.A.
Custody Division - P O Box 361990
San Juan, PR 00936-1990
Re: Account No. ______________
Ladies and Gentlemen:
Reference is made to those certain uncertificated securities
or certificated securities whose record ownership is maintained in
the book-entry system, described on Schedule I hereto (the
"Securities"), which Securities are held in the above-referenced
account of the undersigned. This is to notify you that the
Securities have been pledged and assigned and a security interest
therein has been granted by the undersigned to Banco Popular de
Puerto Rico ("the Bank"), with mailing address at GPO BOX 362708,
SAN JUAN, PUERTO RICO 00936-2708, pursuant to a Master Pledge and
Assignment Agreement dated as of September 15, 1994 between the
undersigned and the Bank. Therefore, please make the necessary
transfers and/or notations to reflect the Bank's interest in the
Securities.
Kindly execute and return the enclosed copy of this letter as
your acknowledgement that you have received this notice and that
<PAGE> 35
the necessary transfers and/or notations have been made in your
records to reflect the Bank's interest in the Securities.
Sincerely yours,
PUERTO RICAN CEMENT CO., INC.
By: /s/ Jose Osvaldo Torres
----------------------------
JOSE OSVALDO TORRES
Affidavit No. -184- Vol. XIV
-----
Subscribed before me on this 15th day of September, 1994 in
San Juan, Puerto Rico, by the following person who is personally
known to me: Mr. Jose Osvaldo Torres, of legal age, married,
executive, and resident of Guaynabo, Puerto Rico, on behalf of
PUERTO RICAN CEMENT COMPANY, INC.
----------------------------
Notary Public
ACKNOWLEDGED AND CONFIRMED:
(FINANCIAL INTERMEDIARY)
By:______________________
Name:
Title:
Date: ___________________
<PAGE> 36
EXHIBIT "B"
CONFIRMATION OF PLEDGE
This document confirms and effects the pledge and assignment
of certain collateral, consisting of the securities described in
Schedule I hereto and made a part hereof (the "Securities"),
pursuant to the terms of that certain Master Pledge and Assignment
Agreement (as amended, modified or supplemented from time to time,
the "Master Pledge Agreement") entered into as of September 15,
1994 by and among the undersigned and Banco Popular de Puerto Rico
(the "Bank").
Under the terms of the Master Pledge Agreement, the
undersigned agreed to effect a pledge and assignment of such
further collateral, pursuant to a document in form and substance
equivalent to this Confirmation of Pledge, in order to pledge and
assign additional Securities to the Bank. Pursuant to such Master
Pledge Agreement, the undersigned hereby pledges, assigns and
grants to the Bank a security interest in the Securities. This
pledge, assignment and grant of a security interest is effected
pursuant and subject to the terms of the Master Pledge Agreement
and the representations and warranties contained in the Master Pledge
Agreement are hereby made by the undersigned with respect to the
Securities pledged hereunder.
<PAGE> 37
This document shall constitute an integral part of the
Master Pledge Agreement and shall be subject to the terms and
conditions thereof for all purposes. In case of a conflict
between the terms hereof and the terms of the Master Pledge
Agreement, the latter shall prevail unless otherwise expressly
agreed to the contrary in writing.
PUERTO RICAN CEMENT CO., INC.
By:
--------------------------
JOSE OSVALDO TORRES
<PAGE> 38
BORROWER'S CERTIFICATE IN CONFORMITY WITH SECTION 6.4.3. OF
REGULATION 3582 WITH RESPECT TO 936 FUNDS
The undersigned hereby acknowledges that, prior to the
granting of this loan, it was aware that the loan would be
reported to the Office of the Commissioner of Financial
Institutions as an Eligible Activity for the use of 936 Funds.
Date: September 15, 1994 PUERTO RICAN CEMENT CO., INC.
BY: /s/ Jose O. Torres
--------------------------
Jose O. Torres
The following sections should be filled out by the Financial
Institution:
1. Purpose of the loan: To refinance the outstanding
balance of a loan of Scotiabank de Puerto Rico
originally granted for the dry process conversion of
cement manufacturing.
2. Collateral: A pledge of United States Treasury
obligations or other investments acceptable to the Bank;
provided, however, that with respect to any such pledged
investment which does not constitute an Eligible
Activity under applicable regulations, such investment
must have been purchased by the Borrower more than 60
days from the date of the loan and must be held for more
than 15 days after the date of payment in full of the
loan.
3. Amount: $7,000,000.00
Date: September 15, 1994
BANCO POPULAR DE PUERTO RICO
By: /s/ Pedro Jose Pena Lopez
-------------------------
Pedro Jose Pena Lopez
Vice President
<PAGE> 39
MAIN OFFICE
PO BOX 364487
SAN JUAN PR 00936-4487
TELEPHONES:
Main Off. 764-6000
Catano Off. 783-3000
-------------------------
PONCE OFFICE
P.O. BOX 1349
PONCE, PUERTO RICO 00731
Plant Off. Ponce 842-3000
PUERTO RICAN CEMENT COMPANY, INC.
SAN JUAN, PUERTO RICO
September 15, 1994
Banco Popular de Puerto Rico
Comercial Banking
Popular Center
Hato Rey, Puerto Rico 00918
Re: Term Loan for the principal amount of $7,000,000.00 (the
"Term Loan") pursuant to the Promissory Note dated as
September 15, 1994 (the "Note")
Gentlemen:
In order to induce you to make the term loan to us under
Regulation No. 3582 issued by the Commissioner of Financial
Institutions, as amended, or any substitute regulations therefore
("Regulation 3582"), we represent, warrant and agree that:
1. We will use the term loan funded with Eligible Funds in
our business activities in Puerto Rico only for purposes which are
"Eligible Activities" as defined in Regulation 3582.
2. Except as may be permitted by the terms of the Note, we
will not repay any obligation that you may hold evidencing the
delivery of the term loan funded with Eligible Funds to us prior
to maturity.
3. We will not re-deposit or otherwise place or transfer,
through any mechanism, the term loan funded with Eligible Funds
with a depositary institution, or with an institution engaged the
securities, brokerage and/or underwriting and security credit
lending business; nor will we use or permit the use of the
proceeds of the term loan funded with Eligible Funds for consumer
loans, or outside of Puerto Rico. We understand that this
prohibition does not apply to demand deposits maintained by us for
current operating purposes.
4. It is our intention to use the term loan funded with
Eligible Funds for the purpose of refinancing the outstanding
balance of a loan of Scotiabank de Puerto Rico originally granted
for the dry process conversion of cement manufacturing.
<PAGE> 40
5. In the event of a determination by you that the use of
the proceeds of the term loan funded with Eligible Funds does not
qualify as an "Eligible Activity", you shall have the option to
require prepayment of any obligation that you may hold evidencing
delivery of such proceeds to us in accordance with the terms of
the Note.
6. We understand that if we utilize the proceeds of the
term loan funded with Eligible Funds for any purpose that is not
an "Eligible Activity", the Commissioner of Financial Institutions
may disqualify us from further eligibility to borrow "Eligible
Funds".
Very truly yours,
PUERTO RICAN CEMENT CO., INC.
BY: /s/ Jose Osvaldo Torres
- - - ---------------------------
Jose Osvaldo Torres
AGREED AND ACCEPTED:
BANCO POPULAR DE PUERTO RICO
BY: /s/ Pedro Jose Pena Lopez
----------------------------
Pedro Jose Pena Lopez
Vice President
<PAGE> 1
Exhibit 10.2
July 11, 1994
Mr. Jose 0. Torres
Vice President and Treasurer
Puerto Rican Cement Company, Inc.
PO Box 364487
San Juan, Puerto Rico 00936-4487
Dear Mr. Torres:
Reference is made to your request for certain modifications to the
Loan Agreements executed by and between Puerto Rican Cement
Company (the Borrower) and Banco Popular de Puerto Rico (the Bank)
on August 20, 1993 and December 8, 1993 respectively.
We are pleased to inform you that the Bank is hereby amending the
following section of said loan agreements, to read as follows:
August 20, 1993 Loan Agreement:
Section 1. Term Loan:
Item C. Principal on the term loan shall be paid by BORROWER
to the BANK in (I) four (4) equal and consecutive annual
installments of Seven Hundred and Fifty Thousand Dollars
($750,000.00) each, due and payable on the first (1st) day
of August of the years 1994, 1995, 1996, 1997 and a balloon
payment of Three Million Dollars ($3,000,000.00) or 50% of
the total amount loaned to Borrower due and payable on August
1, 1998, or (II) in one (1) bullet payment due on the first
(1st.) day of August of the year nineteen hundred ninety
eight (1998), subject to the creation by the BORROWER of a
sinking fund, with a Trustee acceptable to the BANK, to
increase annually by a present value equivalent to ONE
MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,000.00) until
reaching the principal sum of SIX MILLION DOLLARS
($6,000,000.00) on or before the first (1st) day of August
of the year nineteen hundred ninety eight (1998) or (III) in
five (5) equal and consecutive annual installments of one
million Two Hundred Thousand Dollars ($1,200,000.00) each,
<PAGE> 2
Mr. Jose 0. Torres
July 11, 1994
Page 2
due and payable on the first (1st) day of August of the years
1994, 1995, 1996, 1997 and 1998. The outstanding principal
balance shall accrue interest from this date and until
payment in full, even after maturity, at a fixed annual rate
of SIX AND ONE FOURTH PERCENT (6 1/4%) based on a 360 days-
year. Interest on the decreasing balance of the principal
sum of the term loan at the rate specified shall be paid by
BORROWER monthly on the last day of each and every month.
December 8. 1993 Loan Agreement:
Section 1. Loan
Item C
Principal on the loan shall be paid by borrower to the Bank,
in one of the following terms (I) five (5) equal and
consecutive annual installments of One Million Six Hundred
Thousand dollars ($1,600,000.00) each, due and payable on the
tenth (10th) day of November of the years 1994, 1995, 1996,
1997 and 1998 or (II) in four (4) equal and consecutive
annual installments of 12.5% each of the total principal
amount loaned to Borrower, due and payable on the tenth
(10th) day of November of the years 1994, 1995, 1996, 1997
and a balloon payment of Four Million Dollars ($4,000,000.00)
or 50% of the total principal amount loaned to borrower, due
and payable on November 10, 1998, or (III) in one (1) bullet
payment due on the tenth (10th) day of November of the year
nineteen hundred ninety eight (1998), subject to the creation
by the Borrower of a sinking fund, duly pledged in favor of
the Bank, with a Trustee acceptable to the bank, to increase
annually by a present value equivalent to One Million Six
Hundred Thousand Dollars ($1,600,000.00) or by 20% of the
total loaned to Borrower until reaching the principal sum of
Eight Million Dollars ($8,000,000.00) on or before the tenth
(10th) day of November of the year nineteen hundred ninety
eight (1998). The outstanding principal balance shall accrue
interest from this date and until payment in full, even after
maturity, at a fixed annual rate of Six and One Fourth
Percent (6 1/4%) based on a 360 days year. Interest on the
decreasing balance of the principal sum of the loan, at the
rate specified, shall be paid by borrower monthly on the last
day of each month.
<PAGE> 3
Mr. Jose 0. Torres
July 11, 1994
Page 3
All other terms and conditions on said agreements will remain in
full force and effect.
Cordially yours.
/s/ Pedro J. Pena
Pedro J. Pena
Vice President
Corporate Banking Division
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF PUERTO RICAN CEMENT CO., INC. FOR NINE MONTHS ENDED
DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,394,594
<SECURITIES> 1,594,195
<RECEIVABLES> 18,245,604
<ALLOWANCES> 1,094,997
<INVENTORY> 27,297,064
<CURRENT-ASSETS> 52,528,479
<PP&E> 165,110,163
<DEPRECIATION> 53,951,662
<TOTAL-ASSETS> 205,673,141
<CURRENT-LIABILITIES> 18,671,891
<BONDS> 32,492,132
<COMMON> 6,000,000
0
0
<OTHER-SE> 117,204,416
<TOTAL-LIABILITY-AND-EQUITY> 205,673,141
<SALES> 0
<TOTAL-REVENUES> 70,889,609
<CGS> 46,651,693
<TOTAL-COSTS> 54,913,798
<OTHER-EXPENSES> (3,642)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,979,453
<INCOME-TAX> 5,455,017
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,524,436
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 0
</TABLE>
