<PAGE> 1
As filed with the Securities and Exchange Commission on July 27, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DORAL FINANCIAL CORPORATION
(Exact name of co-registrant as specified in its charter)
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<TABLE>
<CAPTION>
<S> <C>
COMMONWEALTH OF PUERTO RICO 66-0312162
(State or other (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
</TABLE>
1159 FRANKLIN D. ROOSEVELT AVENUE
SAN JUAN, PUERTO RICO 00920
(787) 749-7100
(Address, including zip code, and telephone number, including area code, of
registrant's principal and executive offices)
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DORAL PROPERTIES, INC.
(Exact name of co-registrant as specified in its charter)
<TABLE>
<CAPTION>
COMMONWEALTH OF PUERTO RICO 66-0572283
<S> <C>
(State or other (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
</TABLE>
1159 FRANKLIN D. ROOSEVELT AVENUE
SAN JUAN, PUERTO RICO 00920
(787) 749-7100
(Address, including zip code, and telephone number, including area code, of
registrant's principal and executive offices)
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SALOMON LEVIS, CHIEF EXECUTIVE OFFICER
DORAL FINANCIAL CORPORATION
1159 FRANKLIN D. ROOSEVELT AVENUE
SAN JUAN, PUERTO RICO 00920
(787) 749-7100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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<S> <C> <C>
IGNACIO ALVAREZ, ESQ. JULIO L. AGUIRRE, ESQ. JULIO PIETRANTONI, ESQ.
EDUARDO J. ARIAS, ESQ. FIDDLER GONZALEZ & RODRIGUEZ, LLP O'NEILL & BORGES
PIETRANTONI MENDEZ & ALVAREZ LLP EIGHTH FLOOR AMERICAN INTERNATIONAL PLAZA, 8TH FLOOR
SUITE 1901, BANCO POPULAR CENTER 254 MUNOZ RIVERA AVENUE 250 MUNOZ RIVERA AVENUE
209 MUNOZ RIVERA AVENUE SAN JUAN, PUERTO RICO 00918 SAN JUAN, PUERTO RICO 00918
SAN JUAN, PUERTO RICO 00918 (787) 759-3181 (787) 282-5752
(787) 274-1212
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT BEING OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE
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Undivided interests in loan to Doral Properties,
Inc. made pursuant to Loan and Guaranty Agreement
among Puerto Rico Industrial, Tourist,
Educational, Medical and Environmental Control
Facilities Financing Authority ("AFICA") and
Co-registrants relating to certain AFICA
industrial revenue bonds................... $44,425,000 100%(1) $44,425,000(1)
Undivided interests in guaranty of Doral Financial
Corporation pursuant to above-mentioned Loan and
Guaranty Agreement......................... (2) (2) (2)
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<CAPTION>
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AMOUNT OF
REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED FEE
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<S> <C>
Undivided interests in loan to Doral Properties,
Inc. made pursuant to Loan and Guaranty Agreement
among Puerto Rico Industrial, Tourist,
Educational, Medical and Environmental Control
Facilities Financing Authority ("AFICA") and
Co-registrants relating to certain AFICA
industrial revenue bonds................... $12,350.15
Undivided interests in guaranty of Doral Financial
Corporation pursuant to above-mentioned Loan and
Guaranty Agreement......................... (2)
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</TABLE>
(1) Estimated solely for purposes of computing the registration fee.
(2) No additional consideration will be received for the guaranty.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS OFFICIAL STATEMENT AND PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
OFFICIAL STATEMENT AND PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
PRELIMINARY OFFICIAL STATEMENT AND PROSPECTUS DATED JULY 27, 1999
SUBJECT TO COMPLETION AND AMENDMENT
$44,425,000*
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL
AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY (AFICA)
INDUSTRIAL REVENUE BONDS, 1999 SERIES A
(DORAL FINANCIAL CORPORATION CENTER PROJECT)
The bonds have the following characteristics:
- AFICA will issue the bonds and lend the proceeds to Doral Properties,
Inc., a wholly-owned subsidiary of
[DORAL LOGO] DORAL FINANCIAL CORPORATION
- The bonds do not constitute a debt of the Government of Puerto Rico.
AFICA is required to pay the bonds solely out of loan repayments by
Doral Properties or Doral Financial.
- Doral Financial is unconditionally guaranteeing the loan repayments by
Doral Properties, which include all payments on the bonds.
- Interest on the bonds will accrue from their date of issuance and will
be payable monthly on the first day of each month, commencing on
, 1999.
- The bonds are subject to mandatory and optional redemption as
described in this official statement and prospectus.
- The bonds are not secured by a mortgage on the project.
Under most circumstances, interest on the bonds will be exempt from Puerto
Rico and United States taxes to residents of Puerto Rico. See "Taxation"
beginning on page 31 of this official statement and prospectus.
Neither Doral Properties nor AFICA intend to apply for listing of the bonds
on a securities exchange. There will likely be no secondary public market for
the bonds.
INVESTING IN THESE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5 OF THIS OFFICIAL STATEMENT AND PROSPECTUS.
<TABLE>
<CAPTION>
Proceeds,
Public Offering Underwriting before expenses,
Price Discount to Doral Properties
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<S> <C> <C> <C>
Per bond............................. * % %
Total................................ $ $ $
</TABLE>
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* The offering prices of the bonds together with their maturities and interest
rates are shown on the inside cover page hereof.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED
BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
POPULAR SECURITIES PAINEWEBBER INCORPORATED OF PUERTO RICO
DORAL SECURITIES SANTANDER SECURITIES
, 1999
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*Preliminary, subject to change.
<PAGE> 3
$44,425,000*
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL
AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY
INDUSTRIAL REVENUE BONDS, 1999 SERIES A
(DORAL FINANCIAL CORPORATION CENTER PROJECT)
$ SERIAL BONDS
<TABLE>
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PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE PRICE
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<S> <C> <C> <C>
$
$ % Term Bonds due -- Price -- %
$ % Term Bonds due -- Price -- %
</TABLE>
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* Preliminary, subject to change.
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Prospective investors may rely only on the information incorporated by
reference or contained in this official statement and prospectus. None of Doral
Properties, Doral Financial, AFICA or any underwriter has authorized anyone to
provide prospective investors with information different from that incorporated
by reference or contained in this official statement and prospectus. This
official statement and prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this official statement and prospectus
is correct only as of the date of this official statement and prospectus,
regardless of the time of the delivery of this official statement and prospectus
or any sale of these securities.
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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SUMMARY............................... 1
Doral Properties and Doral
Financial........................ 1
The Offering........................ 1
Tax Consequences.................... 2
Summary Financial and Operating
Data............................. 3
Consolidated Ratio of Earnings to
Fixed Charges.................... 4
RISK FACTORS.......................... 5
Holding company structure may result
in advantage to creditors of
Doral Financial's subsidiaries
over bondholders and other
creditors of Doral Financial..... 5
Absence of secondary market for the
bonds............................ 5
Doral Financial is not restricted
from incurring additional
borrowings or taking other
actions that could impair its
ability to pay the bonds......... 5
Redemption may adversely affect your
return on the bonds.............. 5
Doral Financial's credit ratings may
not reflect all risks of an
investment in the bonds.......... 5
Fluctuations in interest rates may
hurt Doral Financial's
business......................... 5
Doral Financial may suffer losses
from mortgage loans it sells but
retains the credit risk.......... 6
Increase in Doral Financial's
originations of commercial loans
has increased its credit risks... 6
Doral Financial is exposed to
greater risk because its business
is concentrated in Puerto Rico... 7
Doral Financial's business would be
disrupted if its computer systems
cannot work properly with year
2000 data........................ 7
FORWARD-LOOKING STATEMENTS............ 7
RECENT DEVELOPMENTS................... 7
DORAL PROPERTIES...................... 7
DORAL FINANCIAL....................... 8
USE OF PROCEEDS....................... 9
CAPITALIZATION........................ 10
SELECTED FINANCIAL DATA............... 11
DESCRIPTION OF THE BONDS.............. 14
General............................. 14
Book-Entry Only System.............. 14
Mandatory Redemption................ 17
Optional Redemption................. 17
Extraordinary Optional Redemption... 18
Notice and Effect of Redemption;
Partial Redemption............... 18
Sources of Payment and Security for
the Bonds........................ 19
</TABLE>
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PAGE
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SUMMARY OF THE LOAN AND GUARANTY
AGREEMENT........................... 19
Assignment by AFICA................. 20
Maintenance and Operation of the
Center........................... 20
Covenant as to Existence,
Consolidation, Merger or Sale.... 20
Sale, Transfer or Encumbrance of the
Center........................... 20
Assignment of Loan and Guaranty
Agreement by Doral Properties.... 21
Covenant as to Maintenance of Source
of Income........................ 21
Limitations on Liens and Disposition
of Stock of Principal Mortgage
Banking Subsidiaries............. 21
Indemnity........................... 23
Events of Default and Remedies...... 23
SUMMARY OF THE TRUST AGREEMENT........ 25
Construction Fund................... 25
Bond Fund........................... 25
Investment of Funds................. 25
Events of Default................... 26
Acceleration of Maturities.......... 26
Enforcement of Remedies............. 27
Holders of Majority in Principal
Amount of Bonds May Control
Proceedings...................... 27
Restrictions Upon Action by
Individual Bondholder............ 27
Supplemental Trust Agreements....... 28
Amendments and Supplements to the
Loan and Guaranty Agreement...... 28
Defeasance.......................... 29
The Trustee......................... 29
AFICA................................. 30
General............................. 30
Governing Board..................... 30
Outstanding Revenue Bonds and Notes
of AFICA......................... 31
GOVERNMENT DEVELOPMENT BANK FOR PUERTO
RICO................................ 31
TAXATION.............................. 31
RATING................................ 33
LEGAL INVESTMENT...................... 33
PLAN OF DISTRIBUTION.................. 33
CONTINUING DISCLOSURE COVENANT........ 34
WHERE YOU CAN FIND MORE INFORMATION... 36
LEGAL MATTERS......................... 37
EXPERTS............................... 37
Appendix A: Proposed Form of Opinion
of Bond Counsel..................... A-1
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<PAGE> 5
SUMMARY
This summary highlights information contained elsewhere in this official
statement and prospectus. You should read the entire official statement and
prospectus, including the information incorporated by reference into this
official statement and prospectus, and the "Risk Factors" section beginning on
page 5.
DORAL PROPERTIES AND DORAL FINANCIAL
Doral Properties is a wholly-owned subsidiary of Doral Financial. Doral
Properties was organized to own, develop and operate the Doral Financial
Corporation Center, which will be the new headquarters of Doral Financial.
Doral Financial is the leading mortgage banking institution in Puerto Rico
based on the volume of origination of first mortgage loans secured by single
family residences and the size of its mortgage servicing portfolio. Doral
Financial's loan production amounted to $2.3 billion and $702.3 million for the
year ended December 31, 1998 and the quarter ended March 31, 1999, respectively.
Doral Financial had a mortgage servicing portfolio of $6.6 billion as of March
31, 1999.
Doral Financial is also engaged in the commercial banking and securities
business. As of March 31, 1999, Doral Financial had total banking assets of $1.0
billion and deposits of $649.4 million.
Doral Financial is a bank holding company subject to regulation and
supervision by the Federal Reserve Board. Unlike many bank holding companies,
Doral Financial has significant operations at the holding company level. As of
March 31, 1999, Doral Financial had assets of $1.6 billion at the holding
company level.
Doral Financial's principal executive offices are located at 1159 Franklin
D. Roosevelt Avenue, San Juan, Puerto Rico, and its telephone number is (787)
749-7100.
THE OFFERING
Issuer..................... AFICA, a Puerto Rico government instrumentality.
Bonds are limited
obligations of AFICA....... AFICA is required to pay the bonds solely out of
payments of principal and interest made by Doral
Properties or Doral Financial to AFICA under a loan
and guaranty agreement. AFICA acts as a pass-
through entity so that under most circumstances,
interest on the bonds will be tax free to Puerto
Rico residents. The bonds do not constitute an
indebtedness of the Government of Puerto Rico or of
any of its political subdivisions.
Use of proceeds............ AFICA will lend the bond proceeds to Doral
Properties, a wholly-owned subsidiary of Doral
Financial. Doral Properties will use the loan
proceeds to finance in part the construction and
equipping of its new headquarters building and
related facilities, to be known as the Doral
Financial Corporation Center (the "Center").
Guarantor.................. Doral Financial is unconditionally guaranteeing the
payments by Doral Properties under the loan and
guaranty agreement.
Interest on the bonds...... Interest on the bonds will be paid to you monthly
on the first day of each month, commencing on
, 1999. Additionally, interest
will be paid to you at maturity or redemption.
Interest will be computed using a 360-day year of
twelve 30-day months. Interest will accrue from the
date of issuance of the bonds.
1
<PAGE> 6
Book-entry system.......... The bonds will be registered in the name of The
Depository Trust Company's (DTC) nominee under
DTC's book-entry only system. This means that you
will not receive a certificate for any bonds you
purchase.
Mandatory redemption of
bonds...................... A portion of the term bonds will be periodically
redeemed as part of the amortization requirements
of the bonds. For a schedule of term bond
amortizations, see "The Bonds -- Mandatory
Redemption." All of the bonds will be redeemed if
(1) Doral Properties fails to comply with certain
tax covenants and as a result the interest on the
bonds becomes subject to federal taxation for
Puerto Rico residents or (2) if the Center is not
operated in accordance with AFICA's enabling law.
In addition, a portion of the bonds will be
redeemed from unused bond proceeds, if any.
Optional redemption of
bonds...................... Doral Properties has the right to redeem all or a
portion of the bonds on and after
, 2004, at the following
prices, expressed as a percentage of the
outstanding principal of the bonds, plus interest
to the redemption date:
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REDEMPTION PERIOD PRICE
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<S> <C>
, 2004 to , 2005....................... 102%
, 2005 to , 2006....................... 101%
, 2006 and thereafter........................ 100%
</TABLE>
Also, Doral Properties has the right to redeem some
or all of the bonds, without premium, if the Center
is damaged or expropriated by the government or if,
as a result of changes in law, Doral Properties'
operation of the Center or its obligations under
the loan and guaranty agreement are adversely
impacted.
Trustee.................... The bonds will be issued pursuant to a trust
agreement between AFICA and Citibank, N.A., as
trustee.
Ratings.................... Doral Financial has applied for ratings on the
bonds from Standard & Poor's, Duff & Phelps and
Moody's.
TAX CONSEQUENCES
Provided Doral Properties complies with the source of income covenants in
the loan and guaranty agreement, it is the opinion of Fiddler Gonzalez &
Rodriguez, LLP, bond counsel, that the bonds and the interest on the bonds are
exempt from or not subject to:
(1) Puerto Rico income taxes and municipal property and license taxes,
(2) under certain circumstances, Puerto Rico gift and estate taxes, and
(3) United States income tax when received by:
(a) individuals who are bona fide residents of Puerto Rico during the
entire taxable year in which such interest is received, or
(b) foreign corporations, including Puerto Rico corporations, and the
interest is not effectively connected with the conduct of a trade
or business in the United States by the corporation, the
corporation is not a foreign personal holding company, a
controlled foreign corporation or a passive foreign investment
company under the U.S. internal revenue code, and the corporation
is not treated as a domestic corporation for the purposes of the
U.S. internal revenue code.
2
<PAGE> 7
SUMMARY FINANCIAL AND OPERATING DATA
You should read the summary financial information presented below together
with Doral Financial's consolidated financial statements and notes which are
incorporated by reference into this official statement and prospectus and with
the historical financial information of Doral Financial included under "Selected
Financial Data" beginning on page 11 of this official statement and prospectus.
Net income for 1994 includes the cumulative effect of a change in the
method of accounting for unrealized gains and losses on trading securities. When
Doral Financial adopted this new accounting pronouncement in 1994, it classified
approximately $132 million of mortgage-backed securities as trading securities
and recognized a net unrealized gain of $1.2 million.
Net income for the year ended December 31, 1997 reflects a non-cash
extraordinary charge to earnings of $12.3 million. The charge resulted from the
issuance by Doral Financial to Popular, Inc., a bank holding company
headquartered in San Juan, Puerto Rico, of shares of convertible preferred stock
in exchange for the cancellation of $8.5 million of Doral Financial's
subordinated convertible debentures owned by Popular, Inc. The charge was equal
to the excess of the fair value of the preferred stock on the date of the
exchange over the net carrying amount of the debentures on Doral Financial's
financial statements. For the year ended December 31, 1997, the return on
average assets ratio computed on income before this extraordinary item would
have been 2.19% and the return on average common equity ratio would have been
19.29%.
The return on average assets ratio is computed by dividing net income by
average total assets for the period. The return on average common equity ratio
is computed by dividing net income by average common stockholders' equity for
the period. Both ratios have been computed using month end averages. These
ratios for the three month periods ended March 31, 1999 and 1998 have been
presented on an annualized basis.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net income.............. $ 15,671 $ 11,097 $ 52,832 $ 20,231 $ 27,041 $ 19,560 $ 17,430
Cash dividends paid..... $ 3,133 $ 2,191 $ 9,975 $ 7,199 $ 6,008 $ 4,374 $ 3,943
BALANCE SHEET DATA:
Total assets............ $3,138,122 $2,254,379 $2,918,113 $1,857,789 $1,106,083 $ 917,922 $ 768,019
Stockholders' equity.... $ 347,690 $ 236,395 $ 269,559 $ 186,955 $ 150,531 $ 129,017 $ 90,496
OPERATING DATA:
Mortgage loans
originated and
purchased............. $ 702,000 $ 387,000 $2,313,000 $1,037,000 $ 817,000 $ 636,000 $ 824,000
Loan servicing
portfolio............. $6,566,000 $4,810,000 $6,186,000 $4,655,000 $3,068,000 $2,668,000 $2,644,000
SELECTED RATIOS:
Return on average
assets................ 2.13% 2.16% 2.17% 1.37% 2.68% 2.32% 2.78%
Return on average common
equity................ 21.64% 20.97% 21.65% 11.99% 19.35% 17.82% 20.82%
</TABLE>
3
<PAGE> 8
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is a measure of Doral Financial's
ability to generate sufficient earnings to pay the fixed charges or expenses of
its debt. The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. These computations involve Doral Financial and its
subsidiaries. For purposes of computing the ratio, earnings consist of pretax
income from continuing operations plus fixed charges and amortization of
capitalized interest, less interest capitalized. Fixed charges consist of
interest expensed and capitalized, amortization of debt issuance costs, and
Doral Financial's estimate of the interest component of rental expense. The
ratio is presented both including and excluding interest on deposits.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
-------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
Including Interest on Deposits............... 1.55x 1.51x 1.61x 1.66x 1.50x 1.78x
Excluding Interest on Deposits............... 1.69 1.61x 1.72x 1.75x 1.54x 1.82x
</TABLE>
4
<PAGE> 9
RISK FACTORS
You should carefully consider the following factors and other information
in this official statement and prospectus, including the information
incorporated by reference in this official statement and prospectus, before
deciding to invest in the bonds.
HOLDING COMPANY STRUCTURE MAY RESULT IN ADVANTAGE TO CREDITORS OF DORAL
FINANCIAL'S SUBSIDIARIES OVER BONDHOLDERS AND OTHER CREDITORS OF DORAL FINANCIAL
Although Doral Financial has operations and assets at the parent company
level, a significant portion of its assets is in its subsidiaries. The claims of
creditors and preferred stockholders of Doral Financial's subsidiaries will have
a priority over Doral Financial's equity rights in such subsidiaries and the
rights of Doral Financial's creditors. This means that if any of Doral
Financial's subsidiaries were liquidated, the creditors of the subsidiary would
have the right to get paid before any of the creditors of Doral Financial,
including bondholders.
ABSENCE OF SECONDARY MARKET FOR THE BONDS
There is currently no secondary market for the bonds, and there can be no
assurance that a secondary market will be developed, or if it does develop, that
it will provide bondholders with liquidity for their investment or that it will
continue for the life of the bonds.
DORAL FINANCIAL IS NOT RESTRICTED FROM INCURRING ADDITIONAL BORROWINGS OR TAKING
OTHER ACTIONS THAT COULD IMPAIR ITS ABILITY TO PAY THE BONDS
The loan and guaranty agreement between AFICA, Doral Properties and Doral
Financial does not restrict Doral Financial from borrowing additional money,
making capital expenditures, making acquisitions, transferring or creating liens
over its assets, paying dividends or engaging in transactions with affiliates,
among others. Doral Financial could take any of these actions in a way that
could affect its ability to repay the bonds or result in a downgrade of the
rating of the bonds.
REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE BONDS
Doral Financial may choose to, in the case of optional redemption, or must,
in the case of mandatory redemption, redeem some or all of the bonds at times
when prevailing interest rates may be relatively low. If this happens, you
generally will not be able to reinvest the redemption proceeds in a comparable
security at an effective interest rate as high as that of the bonds.
DORAL FINANCIAL'S CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN
THE BONDS
Doral Financial's credit ratings are an assessment of its ability to pay
its obligations. Consequently, real or anticipated changes in Doral Financial's
credit ratings will generally affect the market value of your bonds. Doral
Financial's credit ratings, however, may not reflect the potential impact of all
risks related to market or other factors discussed above on the value of your
bonds.
FLUCTUATIONS IN INTEREST RATES MAY HURT DORAL FINANCIAL'S BUSINESS
Interest rate fluctuations is the primary market risk affecting Doral
Financial. Changes in interest rates affect the following areas of its business:
- the number of mortgage loans originated and purchased;
- the interest income earned on loans and securities;
- gain on sale of loans;
- the value of securities holdings; and
- the value of its servicing asset.
5
<PAGE> 10
Increases in Interest Rates Reduce Demand for Mortgage Loans. Higher
interest rates increase the cost of mortgage loans to consumers and reduce
demand for mortgage loans, which hurts Doral Financial's profits. Reduced demand
for mortgage loans results in reduced loan originations by Doral Financial and
lower mortgage origination income. Demand for refinance loans is particularly
sensitive to increases in interest rates. Doral Financial has for many years
relied on refinance loans for a significant portion of its mortgage loan
production. For the three months ended March 31, 1999, refinance loans
represented approximately 64% of Doral Financial's total dollar volume of loans
originated (excluding loans purchased from third parties).
Increases in Interest Rates Reduce Net Interest Income. Increases in
short-term interest rates reduce net interest income, which is an important part
of Doral Financial's earnings. Net interest income is the difference between the
interest received by Doral Financial on its assets and the interest paid on its
borrowings. Most of Doral Financial's assets, like its mortgage loans and
mortgage-backed securities, are long-term assets with fixed interest rates. In
contrast, most of Doral Financial's borrowings are short-term. When interest
rates rise, Doral Financial must pay more in interest while interest earned on
its assets does not rise as quickly. This causes profits to decrease.
Increases in Interest Rates May Reduce or Eliminate Gain on Sale of
Mortgage Loans. If long-term interest rates increase between the time Doral
Financial commits to or establishes an interest rate on a mortgage loan and the
time it sells the loan, Doral Financial may realize a reduced gain or a loss on
such sale.
Increases in Interest Rates May Reduce the Value of Mortgage Loans and
Securities' Holdings. Increases in interest rates may reduce the value of Doral
Financial's financial assets and have an adverse impact on its earnings and
financial condition. Doral Financial owns a substantial portfolio of mortgage
loans, mortgage-backed securities and other debt securities with fixed interest
rates. The market value of an obligation with a fixed interest rate generally
decreases when prevailing interest rates rise.
Decreases in Interest Rates May Adversely Affect Value of Servicing
Asset. Decreases in interest rates lead to increases in the prepayment of
mortgages by borrowers, which may reduce the value of Doral Financial's
servicing asset. The servicing asset is the estimated present value of the fees
Doral Financial expects to receive on the mortgages it services over their
expected term. Doral Financial assigns this value based on what other persons
have paid for similar servicing rights in recent transactions. If prepayments
increase above expected levels, the value of the servicing asset decreases
because the amount of future fees expected to be received by Doral Financial
decreases. Doral Financial may be required to recognize this decrease in value
by taking a charge against its earnings, which causes its profits to decrease.
DORAL FINANCIAL MAY SUFFER LOSSES FROM MORTGAGE LOANS IT SELLS BUT RETAINS THE
CREDIT RISK
Doral Financial often retains all or part of the credit risk on sales of
mortgage loans that do not qualify for the guarantee programs of GNMA, FNMA or
FHLMC and may suffer losses on these loans. Doral Financial suffers losses on
these arrangements when foreclosure sale proceeds of the property underlying a
defaulted mortgage loan are less than the outstanding principal balance of these
loans and the cost of holding and disposing of the related property. As of March
31, 1999, Doral Financial's maximum obligation on mortgage loans it had sold but
retained all or part of the credit risk was $541.3 million.
INCREASE IN DORAL FINANCIAL'S ORIGINATIONS OF COMMERCIAL LOANS HAS INCREASED ITS
CREDIT RISKS
Doral Financial's recent increase in originations of mortgage loans secured
by income producing residential buildings and commercial properties has
increased its credit risks. These loans involve greater credit risks than
residential mortgage loans because they are larger in size and more risk is
concentrated in a single borrower. The properties securing these loans are also
harder to dispose of in foreclosure. For the three month period ended March 31,
1999, Doral Financial originated approximately $51.8 million in mortgage loans
secured by income producing residential buildings and commercial properties.
6
<PAGE> 11
DORAL FINANCIAL IS EXPOSED TO GREATER RISK BECAUSE ITS BUSINESS IS CONCENTRATED
IN PUERTO RICO
Because most of Doral Financial's mortgage loans are secured by properties
located in Puerto Rico, Doral Financial is exposed to a greater risk of
delinquency or default on these mortgage loans resulting from adverse economic,
political or business developments and natural hazard risks that affect Puerto
Rico, including hurricanes and earthquakes. If Puerto Rico's real estate market
experiences an overall decline in property values, the rates of delinquency,
foreclosure, bankruptcy and loss on the mortgage loans would probably increase
substantially. This would cause Doral Financial's profitability to decrease.
DORAL FINANCIAL'S BUSINESS WOULD BE DISRUPTED IF ITS COMPUTER SYSTEMS CANNOT
WORK PROPERLY WITH YEAR 2000 DATA
Doral Financial could experience a significant disruption to its business
operations that could have an adverse effect on its profitability if its
computer systems and the computer systems provided by third party vendors on
which it relies are not able to properly perform data calculations in the year
2000. Doral Financial is taking steps that it believes are adequate to make sure
this does not happen. However, Doral Financial cannot assure you that these
efforts will be completely successful. Problems suffered by providers of basic
services, such as telephone, water, sewer and electricity could also have an
adverse impact on Doral Financial's daily operations. Doral Financial has
revised its existing business interruption contingency plans to address any
interruptions of these basic services.
FORWARD-LOOKING STATEMENTS
This official statement and prospectus, including information incorporated
in this official statement and prospectus by reference, contains certain
"forward-looking statements" concerning Doral Financial's operations,
performance and financial condition, including its future economic performance,
plans and objectives and the likelihood of success in developing and expanding
its business. These statements are based upon a number of assumptions and
estimates which are subject to significant uncertainties, many of which are
beyond the control of Doral Financial. The words "may," "would," "could,"
"will," "expect," "anticipate," "believe," "intend," "plan," "estimate" and
similar expressions are meant to identify these forward-looking statements.
Actual results may differ materially from those expressed or implied by these
forward-looking statements.
RECENT DEVELOPMENTS
On July 7, 1999, Doral Financial released its unaudited earnings for the
quarter and six months period ended June 30, 1999. Doral Financial reported net
income of $17.3 million or $0.38 per diluted share for the second quarter of
1999, compared to net income of $13.0 million or $0.31 per diluted share for the
second quarter of 1998.
For the six months ended June 30, 1999, Doral Financial reported net income
of $32.9 million or $0.73 per diluted share, compared to net income of $24.1
million or $0.58 per diluted share for the first six months of 1998.
Doral Financial's mortgage loan origination and purchases were $751 million
for the quarter ended June 30, 1999 and $1.5 billion for the six months ended
June 30, 1999, compared to $544 million for the quarter ended June 30, 1998 and
$931 million for the six months ended June 30, 1998. Doral Financial's servicing
portfolio totaled $7.0 billion as of June 30, 1999.
DORAL PROPERTIES
Doral Properties is a wholly-owned subsidiary of Doral Financial organized
on July 21, 1999, under the laws of the Commonwealth of Puerto Rico. Doral
Properties was organized for the purpose of owning, developing and operating the
Doral Financial Corporation Center.
7
<PAGE> 12
DORAL FINANCIAL
Doral Financial Corporation is a bank holding company organized under the
laws of the Commonwealth of Puerto Rico. Its main lines of business are
described below.
- Mortgage banking -- Doral Financial is the leading mortgage banking
institution in Puerto Rico based on the volume of origination of first
mortgage loans secured by single family residences and the size of its
mortgage servicing portfolio. Doral Financial conducts this business in
Puerto Rico primarily through a division of Doral Financial, HF Mortgage
Bankers, and its subsidiaries, Doral Mortgage Corporation and Centro
Hipotecario, Inc. Doral Financial also conducts mortgage banking
activities in the mainland United States through Doral Mortgage and its
second tier subsidiary, Doral Money, Inc.
- Commercial Banking -- Doral Financial conducts this business in Puerto
Rico through its subsidiary, Doral Bank. Doral Financial is in the
process of opening a new federal savings bank subsidiary in the New York
City metropolitan area which it expects will commence operations during
the third quarter of 1999.
- Securities services -- Doral Financial conducts this business in Puerto
Rico through its broker-dealer subsidiary, Doral Securities, Inc.
Because Doral Financial is a holding company, the claims of creditors and
any preferred stockholders of Doral Financial's subsidiaries will have a
priority over Doral Financial's equity rights and the rights of Doral
Financial's creditors, including the holders of the bonds, and preferred
stockholders to participate in the assets of the subsidiary upon the
subsidiary's liquidation.
Doral Financial's subsidiaries that operate in the banking and securities
business can only pay dividends if they are in compliance with the applicable
regulatory requirements of federal and state bank regulatory authorities and
securities regulators. Doral Financial must also maintain the required capital
levels of a bank holding company before it may pay dividends on its stock.
There are various statutory and regulatory limitations on the extent to
which Doral Bank or any other banking subsidiary (including a federal savings
association) can finance or otherwise transfer funds to Doral Financial or its
nonbanking subsidiaries, either in the form of loans, extensions of credit,
investments or asset purchases.
- Such transfers by Doral Bank or any other banking subsidiary to Doral
Financial or any nonbanking subsidiary are limited to 10% of the banking
subsidiary's capital and surplus, and with respect to Doral Financial and
all such nonbanking subsidiaries, to an aggregate of 20% of the banking
subsidiary's capital and surplus.
- Furthermore, loans and extensions of credit are required to be secured in
specified amounts and are required to be on terms and conditions
consistent with safe and sound banking practices.
In addition, there are regulatory limitations on the payment of dividends
directly or indirectly to Doral Financial by its subsidiaries. Federal and
Puerto Rico authorities also have the right to further limit Doral Bank's
payment of dividends.
Under the policy of the Board of Governors of the Federal Reserve System, a
bank holding company is required to act as a source of strength to its
subsidiary banks and to commit resources to support such banks. As a result of
that policy, Doral Financial may be required to commit resources to Doral Bank
or any other banking subsidiary created in the future in circumstances in which
it might not do so absent such policy. Further, federal bankruptcy law provides
that in the event of the bankruptcy of Doral Financial, any commitment by Doral
Financial to regulators to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to priority of payment.
8
<PAGE> 13
USE OF PROCEEDS
The bonds will be issued to finance, in part, the development, construction
and equipping of the Doral Financial Corporation Center. The Center will be a
nine-floor, 193,709 square feet commercial office building with an adjacent five
and a half floor parking structure. It will be located on a 1.89 cuerdas site in
the Puerto Nuevo ward of the municipality of San Juan, Puerto Rico, in the
commercial sector of Franking D. Roosevelt Avenue.
The principal offices of Doral Financial and its subsidiaries Doral Bank,
Doral Mortgage and Doral Securities will be located in the Center and the
remaining space will be available for rent. At present, the available rent space
is expected to be offered principally to entities who provide legal, consulting
and other professional services to Doral Financial. Construction and equipping
of the Center is expected to be substantially complete by the fourth quarter of
2001.
Set forth below are the estimated sources and uses of the proceeds of the
bonds.
<TABLE>
<S> <C>
SOURCES OF FUNDS
Gross AFICA bond proceeds................................... $44,425,000
Cash contribution by Doral Properties (1)................... 171,000
-----------
Total Sources..................................... $44,596,000
===========
USES OF FUNDS
Repayment of land loan...................................... $ 2,135,000
Construction fund........................................... 36,464,570
Capitalized interest fund (2)............................... 4,713,732
Costs of issuance........................................... 393,754
Underwriter's discount...................................... 666,819
AFICA fee................................................... 222,125
-----------
Total Uses........................................ $44,596,000
===========
</TABLE>
- ---------------
(1) Represents costs of issuance in excess of 2% of the bonds' par amount.
(2) Represents interest on bonds during the construction of the Center.
9
<PAGE> 14
CAPITALIZATION
The following table shows the unaudited indebtedness and capitalization of
Doral Financial at March 31, 1999, on an actual basis and as adjusted to give
effect to the issuance of the bonds and the issuance on July 8, 1999 of $200
million of Doral Financial's 8.5% Medium Term Senior Notes due July 8, 2004. In
addition to the indebtedness reflected below, Doral Financial had deposits of
$649.4 million as of March 31, 1999. This table should be read together with
Doral Financial's Consolidated Financial Statements and related notes
incorporated by reference into this official statement and prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term borrowings
Loans payable............................................. $ 392,949 $ 392,949
Short-term portion of notes payable....................... 69,739 69,739
Short-term portion of securities sold under agreements to
repurchase............................................. 1,107,685 1,107,685
---------- ----------
Total short-term borrowings....................... $1,570,373 $1,570,373
========== ==========
Long-term borrowings
Long-term portion of notes payable........................ $ 54,723 $ 54,723
Long-term portion of securities sold under agreements to
repurchase............................................. 145,366 145,366
Advances from the Federal Home Loan Bank.................. 55,500 55,500
Senior Notes due 2006..................................... 75,000 75,000
Medium Term Senior Notes due 2004......................... -- 200,000
AFICA bonds............................................... -- 44,425
---------- ----------
Total Long-term Borrowings........................ $ 330,589 $ 575,014
========== ==========
Stockholders' Equity
Serial preferred stock, $1 par value, 2,000,000 shares
authorized; 8,460 shares of 8% Convertible Cumulative
Preferred Stock issued and outstanding and 1,495,000
shares of 7% Noncumulative Monthly Income Preferred
Stock, Series A issued and outstanding................. $ 1,503 $ 1,503
Common Stock, $1.00 par value, 50,000,000 shares
authorized; 40,484,920 shares issued and 40,428,920
outstanding(1)......................................... 40,485 40,485
Paid-in capital........................................... 140,822 140,822
Legal Surplus............................................. 2,499 2,499
Retained earnings......................................... 168,853 168,853
Accumulated other comprehensive income, net of taxes(2)... (6,416) (6,416)
Treasury Stock at par value, 56,000 shares held........... (56) (56)
---------- ----------
Total stockholders' equity........................ $ 347,690 $ 347,690
========== ==========
</TABLE>
- ---------------
(1) Does not include up to 1,933,714 shares of Common Stock issuable upon
conversion of outstanding shares of 8% Convertible Cumulative Preferred
Stock or 435,600 shares of Common Stock subject to stock options.
(2) Consists of unrealized losses on securities available for sale, net of
deferred tax.
10
<PAGE> 15
SELECTED FINANCIAL DATA
The following table shows certain selected consolidated financial and
operating data of Doral Financial on a historical basis as of and for the
three-month periods ended March 31, 1999 and 1998, and for each of the five
years in the period ended December 31, 1998. This information should be read
together with Doral Financial's Consolidated Financial Statements and the
related notes incorporated by reference in this official statement and
prospectus. Financial information for the three-month periods ended March 31,
1999 and 1998 is derived from unaudited financial statements, which, in the
opinion of management, include all adjustments necessary for a fair presentation
of the results for those periods. These adjustments consist only of normal
recurring accruals. Results for the three-month period ended March 31, 1999, are
not necessarily indicative of results for the full year. Doral Financial has
made certain reclassifications to data for years prior to 1998 to conform to
1998 classifications.
Net income for 1994 includes the cumulative effect of a change in the
method of accounting for unrealized gains and losses on trading securities. When
Doral Financial adopted this new accounting pronouncement in 1994, it classified
approximately $132 million of mortgage-backed securities as trading securities
and recognized a net unrealized gain of $1.2 million.
Net income for the year ended December 31, 1997, reflects a non-cash
extraordinary charge to earnings of $12.3 million resulting from the issuance to
Popular, Inc., of shares of convertible preferred stock in exchange for the
cancellation of $8.5 million of Doral Financial's subordinated debentures owned
by Popular, Inc. The charge represented the excess of the fair value of the
preferred stock on the date of the exchange over the net carrying amount of the
debentures on Doral Financial's financial statements. The return on average
assets computed on income before this extraordinary item for the year ended
December 31, 1997, would have been 2.19% and the return on average common equity
would have been 19.29%.
The return on average assets ratio is computed by dividing net income by
average assets for the period. The return on average common equity ratio is
computed by dividing net income by average common stockholders' equity for the
period. The average common equity to average assets ratio is computed by
dividing average common stockholders' equity by average assets for the period.
All ratios have been computed using month end averages. The return on average
assets and average common equity ratios for the three-month periods ended March
31, 1999 and 1998, have been presented on an annualized basis. All per share
information shown in the table has been adjusted to reflect two-for-one stock
splits effected on August 28, 1997 and May 20, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- --------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME
STATEMENT DATA:
Interest income....... $ 41,738 $ 31,044 $ 148,051 $ 90,131 $ 66,987 $ 61,907 $ 46,508
Interest expense...... 31,876 23,202 114,786 61,438 46,443 43,380 23,252
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income... 9,862 7,842 33,265 28,693 20,544 18,527 23,256
Provision for loan
losses.............. 295 218 883 792 797 352 300
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income
after provision for
loan losses......... 9,567 7,624 32,382 27,901 19,747 18,175 22,956
Non-interest income... 29,792 16,470 88,340 45,286 40,846 29,930 25,535
Non-interest
expense............. 21,555 11,504 60,883 35,390 29,314 26,045 29,746
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before taxes,
cumulative effect
and extraordinary
item................ 17,804 12,590 59,839 37,797 31,279 22,060 18,745
Income taxes.......... 2,133 1,493 7,007 5,249 4,238 2,500 2,530
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- --------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Income before
cumulative effect
and extraordinary
item................ 15,671 11,097 52,832 32,548 27,041 19,560 16,215
Cumulative effect of
change in accounting
principle........... -- -- -- -- -- -- 1,215
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before
extraordinary
item................ 15,671 11,097 52,832 32,548 27,041 19,560 17,430
Extraordinary item --
non-cash loss on
extinguishment of
debt................ -- -- -- 12,317 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.... $ 15,671 $ 11,097 $ 52,832 $ 20,231 $ 27,041 $ 19,560 $ 17,430
=========== =========== =========== =========== =========== =========== ===========
Cash dividends
paid........ $ 3,133 $ 2,191 $ 9,975 $ 7,199 $ 6,008 $ 4,374 $ 3,943
=========== =========== =========== =========== =========== =========== ===========
SELECTED BALANCE SHEET
DATA:
Mortgage loans held
for sale............ $ 886,329 $ 516,168 $ 883,048 $ 404,672 $ 260,175 $ 243,678 $ 262,209
Securities held for
trading, net........ 646,901 655,084 606,918 620,288 436,125 418,348 327,960
Securities held to
maturity............ 185,426 137,000 190,778 143,534 107,222 77,945 66,804
Security available for
sale................ 617,233 457,073 408,888 240,876 12,007 14,579 --
Loans receivable,
net................. 175,073 132,152 166,987 133,055 128,766 51,355 34,809
Total assets.......... 3,138,122 2,254,379 2,918,113 1,857,789 1,106,083 917,922 768,019
Loans payable and
securities sold
under agreements to
repurchase.......... 1,646,000 1,309,090 1,624,032 1,076,912 568,840 573,754 538,740
Notes payable......... 199,462 164,542 199,733 164,934 152,126 51,682 17,055
Deposits accounts..... 649,378 328,419 533,113 300,494 158,902 95,740 66,471
Stockholders'
equity.............. 347,690 236,395 269,559 186,955 150,531 129,017 90,496
NET INCOME PER COMMON
SHARE:
Basic:
Income before
cumulative effect
and extraordinary
item.............. $ 0.37 $ 0.285 $ 1.31 $ 0.89 $ 0.75 $ 0.67 $ 0.58
Cumulative effect... -- -- -- -- -- -- 0.04
Extraordinary
item.............. -- -- -- (0.34) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.... $ 0.37 $ 0.285 $ 1.31 $ 0.55 $ 0.75 $ 0.67 $ 0.62
=========== =========== =========== =========== =========== =========== ===========
Diluted:
Income before
cumulative effect
and extraordinary
item.............. $ 0.36 $ 0.275 $ 1.26 $ 0.85 $ 0.71 $ 0.64 $ 0.54
Cumulative effect... -- -- -- -- -- -- 0.04
Extraordinary
item.............. -- -- -- (0.32) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.... $ 0.36 $ 0.275 $ 1.26 $ 0.53 $ 0.71 $ 0.64 $ 0.58
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- --------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER PER SHARE DATA:
Cash dividends:
Common Stock........ $ 0.06 $ 0.05 $ 0.23 $ 0.195 $ 0.165 $ 0.145 $ 0.13
10 1/2% Preferred
Stock............. -- -- -- -- $ 0.3825 $ 1.05 $ 1.05
8% Convertible
Cumulative
Preferred Stock... $ 20.00 $ 20.00 $ 80.00 $ 15.33 -- -- --
7% Noncumulative
Preferred Stock..... $ 0.36 -- -- -- -- -- --
Weighted average
common shares
outstanding:
Basic............... 40,428,920 38,450,408 39,941,068 36,680,158 36,266,244 29,231,680 27,770,936
Diluted............. 42,447,389 40,384,124 41,928,186 38,728,632 38,725,072 31,040,540 30,307,856
OPERATING DATA:
Mortgage loans
originated and
purchased........... $ 702,000 $ 387,000 $ 2,313,000 $ 1,037,000 $ 817,000 $ 636,000 $ 824,000
Loan servicing
portfolio......... $ 6,566,000 $ 4,810,000 $ 6,186,000 $ 4,655,000 $ 3,068,000 $ 2,668,000 $ 2,644,000
SELECTED RATIOS:
Return on average
assets.............. 2.13% 2.16% 2.17% 1.37% 2.68% 2.32% 2.78%
Return on average
common equity....... 21.64% 20.97% 21.65% 11.99% 19.35% 17.82% 20.82%
Average common equity
to average assets... 10.74% 10.48% 10.00% 11.39% 13.81% 13.02% 13.35%
</TABLE>
13
<PAGE> 18
DESCRIPTION OF THE BONDS
GENERAL
The bonds will be issued under a trust agreement between AFICA and
Citibank, N.A., as trustee. The bonds will be dated the date of their issuance
and will bear interest at such rates and will mature, subject to the rights of
redemption described below, in such amounts on and
of such years, as set forth on the inside front cover page
of this official statement and prospectus. Interest on the bonds will be paid to
you on the first day of each month commencing on , 1999 until
maturity or prior redemption. Additionally, interest will be paid to you at
maturity or redemption. Interest will be computed using a 360-day year of twelve
30-day months.
The bonds will be issued as fully registered bonds without coupons in
denominations of $5,000 or any integral multiple thereof. The bonds will be
registered under the DTC book-entry only system described below. Therefore, you
will not receive a certificate for any bonds you purchase. The principal or
redemption price of and interest on the bonds will be payable as described below
under "Book-Entry Only System."
BOOK-ENTRY ONLY SYSTEM
The following information concerning DTC and DTC's book-entry system has
been obtained from DTC. AFICA, Doral Financial, Doral Properties and the
Underwriters do not take any responsibility for the accuracy thereof.
DTC will act as securities depository for the bonds. The bonds will be
issued as fully registered bonds in the name of Cede & Co., DTC's partnership
nominee. One fully registered bond will be issued for each maturity of the bonds
in the aggregate principal amount of such maturity, and will be deposited with
DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants (the "Direct Participants") deposit with
DTC. DTC also facilitates the settlement of securities transactions among Direct
Participants, such as transfers and pledges, in deposited securities through
electronic book-entry changes in accounts of the Direct Participants, thereby
eliminating the need for physical movement of securities. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of the
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as banks, brokers, dealers
and trust companies that clear transactions through or maintain a custodial
relationship with a Direct Participant either directly or indirectly (the
"Indirect Participants;" and together with the Direct Participants, the
"Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of bonds under the DTC system must be made by or through Direct
Participants which will receive a credit for the bonds on DTC's records. The
ownership interest of each actual purchaser of each bond ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the
bonds are to be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the bonds, except in the event that
use of the DTC system for the bonds is discontinued.
14
<PAGE> 19
To facilitate subsequent transfers, all bonds deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of bonds with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the bonds. DTC's records reflect only the identity of the
Direct Participants to whose accounts such bonds are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
bonds of any maturity are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant in such maturity to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the bonds.
Under its usual procedures, DTC mails an "Omnibus Proxy" to AFICA as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
bonds are credited on the record date, identified in a listing attached to the
Omnibus Proxy.
Principal of and redemption premium, if any, and interest payments on the
bonds will be made to DTC. DTC's practice is to credit Direct Participants'
accounts on each Payment Date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payment on such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, the trustee, Doral Financial, Doral Properties or AFICA, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Each person for which a Participant acquires an interest in the bonds, as
nominee, may desire to make arrangements with such Participant to receive a
credit balance in the records of such Participant, and may desire to make
arrangements with such Participant to have all notices of redemption or other
communications to DTC, which may affect such persons, forwarded in writing by
such Participant and to have notification made of all interest payments.
DTC may discontinue providing its services as securities depository with
respect to the bonds at any time by giving reasonable notice to AFICA or the
trustee. In such event, AFICA will try to find a substitute securities
depository and, if unsuccessful, definitive bonds will be printed and delivered.
In addition, AFICA, in its sole discretion and without the consent of any other
person, may terminate the services of DTC as securities depository with respect
to the bonds if AFICA determines that Beneficial Owners of such bonds shall be
able to obtain definitive bonds. In such event, definitive bonds will be printed
and delivered as provided in the trust agreement and registered in accordance
with the instructions of the Beneficial Owners.
So long as Cede & Co., as nominee of DTC, or any other nominee of DTC, is
the registered owner of the bonds, all references herein to the bondholders or
registered owners of the bonds, other than under the heading "Taxation", shall
mean Cede & Co., or such other nominee, in the capacity of nominee for DTC, and
shall not mean the Beneficial Owners of the bonds.
When reference is made to any action which is required or permitted to be
taken by the Beneficial Owners, such reference shall only relate to those
permitted to act, by statute, regulation or otherwise, on behalf of such
Beneficial Owners for such purposes. When notices are given, they shall be sent
by AFICA or the trustee to DTC only.
15
<PAGE> 20
For every registration of transfer or exchange of the bonds, the Beneficial
Owner may be charged a sum sufficient to cover any tax, fee or other
governmental charge that may be imposed in relation thereto.
AFICA, THE TRUSTEE, DORAL PROPERTIES AND DORAL FINANCIAL SHALL HAVE NO
RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT OR ANY BENEFICIAL OWNER WITH
RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT
PARTICIPANT OR INDIRECT PARTICIPANT, AS DESCRIBED ABOVE; (2) THE PAYMENT OR
TIMELINESS OF PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT
OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OR
REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (3) THE DELIVERY OR TIMELINESS OF
DELIVERY BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE
TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE
TRUST AGREEMENT TO BE GIVEN TO BONDHOLDERS; (4) THE SELECTION OF THE BENEFICIAL
OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS;
OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
In the event that the book-entry only system is discontinued and the
Beneficial Owners become registered owners of the bonds, the following
provisions will apply: The principal of the bonds and premium, if any, thereon
when due will be payable upon presentation of the bonds at the corporate trust
office of the trustee in San Juan, Puerto Rico, and interest on the bonds will
be paid by check mailed to the persons who were the registered owners as of the
15th day of the month immediately preceding the related interest payment date,
as provided in the trust agreement. Bonds may be exchanged for an equal
aggregate principal amount of bonds in other authorized denominations and of the
same maturity and interest rate, upon surrender thereof at the trustee's
corporate trust office in San Juan, Puerto Rico. The transfer of any bond may be
registered only upon surrender thereof to the trustee along with a duly executed
assignment in form satisfactory to the trustee. Upon any such registration of
transfer, a new bond or bonds of authorized denominations in an equal aggregate
principal amount, of the same maturity, bearing interest at the same rate and
registered in the name of the transferee will be executed by AFICA and
authenticated by the trustee. No charge may be made to the bondholders for any
exchange or registration of transfer of the bonds, but any bondholder requesting
any such exchange shall pay any tax or other governmental charge required to be
paid with respect to such exchange or registration of transfer. The trustee will
not be required to exchange or to register the transfer of any bond during the
period of 15 days preceding the date of giving of notice of redemption or after
any bond or portion thereof has been selected for redemption.
Year 2000 Matters. DTC management is aware that some computer systems for
processing data ("Systems") that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000 problems."
DTC has informed its Participants and other members of the financial community
(the "Industry") that it has developed and is implementing a program so that its
Systems, as the same relate to the timely payment of distributions, including
principal and interest payments, to security holders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which is
complete. Additionally, DTC's program includes a testing phase, which is
expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as Direct Participants, Indirect Participants and third party vendors from
whom DTC licenses software and hardware, and third party vendors on whom DTC
relies for information or the provision of services, including telecommunication
and electrical utility service providers, among others. DTC has informed the
Industry that it is contacting, and will continue to contact, third party
vendors from whom DTC acquires services to: (1) impress upon them the importance
of such services being Year 2000 compliant; and (2) determine the extent of
their efforts for Year 2000 remediation and, as appropriate, testing, of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
16
<PAGE> 21
MANDATORY REDEMPTION
Under the trust agreement, Doral Properties is subject to certain
amortization requirements which require it to redeem a specified principal
amount of term bonds each year commencing on . Pursuant to these
amortization requirements, some of the term bonds will be redeemed semiannually
at a price equal to the principal amount thereof plus accrued interest to the
redemption date beginning , in the case of the term bonds due
, and , in the case of the term bonds due
. The principal amount to be redeemed and the date of redemption
is the following:
<TABLE>
<CAPTION>
TERM BONDS DUE TERM BONDS DUE
- ----------------------------- ---------------------------
DATE AMOUNT DATE AMOUNT
- ---- ------ ---- ------
<S> <C> <C> <C>
</TABLE>
Taking into account the above amortization requirements, the average life
of the term bonds due will be years and the average life of the
term bonds due will be years.
Doral Properties or Doral Financial, at their option, may direct the
trustee to credit against the bonds of any maturity required to be redeemed the
principal amount of bonds of the same maturity purchased by Doral Properties or
Doral Financial and delivered to the trustee for cancellation, or redeemed
pursuant to the optional redemption provisions of the trust agreement.
The bonds are further subject to mandatory redemption in whole at a price
equal to the principal amount thereof plus accrued and unpaid interest to the
redemption date upon the failure of Doral Properties to comply with the covenant
described under "Covenant as to Maintenance of Source of Income" on page 21 of
this official statement and prospectus and as a result the interest on the bonds
becomes subject to federal taxation for Puerto Rico residents. No such mandatory
redemption shall be required as a result of a change in the tax laws in force on
the date of issuance of the bonds.
The bonds will also be redeemed at a price equal to the principal amount
thereof plus accrued interest to the redemption date as follows: (1) some of the
bonds will be redeemed with any bond proceeds that have not been used at the end
of construction, and (2) all of the bonds will be redeemed if the Center ceases
to operate as an Industrial Facility for purposes of AFICA's enabling law.
OPTIONAL REDEMPTION
The bonds may be redeemed by Doral Properties at its option, in whole or in
part, at any time on or after , 2004, on any date selected by
Doral Properties occurring not less than 45 days from the date the notice of
redemption is received by the trustee, and in the order of maturity determined
by Doral Properties, at the redemption prices set forth below (expressed as
percentages of the principal amount of such bonds), plus accrued interest to the
redemption date:
<TABLE>
<CAPTION>
REDEMPTION PERIOD REDEMPTION
(ALL DATES INCLUSIVE) PRICE
- ------------------------------------------------------------ ----------
<S> <C>
, 2004 to , 2005........................ 102%
, 2005 to , 2006........................ 101%
, 2006 to and thereafter................ 100%
</TABLE>
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<PAGE> 22
EXTRAORDINARY OPTIONAL REDEMPTION
The bonds may be redeemed by Doral Properties at its option, in whole or in
part, and if in part, in such order of maturity as directed by Doral Properties,
on any date occurring not less than 45 days after Doral Properties has mailed
notice of such redemption to the trustee, at a redemption price equal to the
principal amount thereof, without premium, plus accrued interest to the date
fixed for redemption, if any of the following events shall have occurred:
(a) The Center shall have been damaged or destroyed to such an extent
that in the opinion of Doral Properties it cannot be reasonably restored or
repaired within a period of six months, or Doral Properties is thereby
prevented or will likely be prevented from causing its normal operation for
a period of six months or more, or its restoration and repair would not be
economically feasible; or
(b) Use or control of the Center shall have been taken under the
exercise of the power of eminent domain to such an extent that Doral
Properties is, or in its opinion would likely be, thereby prevented from
causing the normal operation of the Center for a period of six months or
more; or
(c) As a result of any change in the Constitution or laws of the
United States of America or Puerto Rico or of legislative or administrative
action of the United States of America or Puerto Rico or any political
subdivision, or any judicial action or regulatory action or inaction, the
loan and guaranty agreement or the trust agreement, in the opinion of Doral
Properties, shall have become void or unenforceable or impossible of
performance in any material respect, or use or occupancy of all or a
significant part of the Center shall, in the opinion of Doral Properties,
have been legally curtailed for six months or more, or, in the opinion of
Doral Properties, unreasonable burdens or excessive liabilities with
respect to the Center or the bonds shall have been imposed.
NOTICE AND EFFECT OF REDEMPTION; PARTIAL REDEMPTION
At least 30 days before any redemption date, notice thereof will be sent by
the trustee via first-class mail, postage prepaid, to DTC, or if the book-entry
only system is discontinued as described above, by first-class mail, postage
prepaid, to the registered owners of the bonds to be redeemed. If less than all
of the bonds are called for redemption, the particular bonds or portions thereof
to be redeemed will be selected as provided below, except that so long as the
book-entry only system shall remain in effect, in the event of any such partial
redemption, DTC shall reduce the credit balances of the applicable DTC
Participants in respect of the bonds, and such Participants shall in turn select
those beneficial owners whose ownership interests are to be extinguished by such
partial redemption, each by such method as DTC or such Participants, as the case
may be, in their sole discretion deem fair and appropriate.
Each notice of redemption shall set forth:
(1) the redemption date;
(2) the redemption price;
(3) if fewer than all of the bonds then outstanding shall be called for
redemption, the distinctive numbers and letters, if any, of such bonds to be
redeemed and, in the case of bonds to be redeemed in part only, the portion of
the principal amount thereof to be redeemed;
(4) that on the date fixed for redemption such redemption price will become
due and payable upon each bond or portion thereof called for redemption, and
that interest thereon shall cease to accrue on and after said redemption date;
and
(5) the place where such bonds or portions thereof called for redemption
are to be surrendered for payment of such redemption price.
In case any bond is to be redeemed in part only, the notice of redemption
shall state also that on or after the redemption date, upon surrender of such
bond, a new bond or bonds in principal amount equal to the unredeemed portion of
such bonds will be issued. Failure to mail such notice to any bondholder or any
18
<PAGE> 23
defect in any notice so mailed shall not affect the validity of the proceedings
for the redemption of the bonds of any other bondholders.
Except with respect to the mandatory redemption of the term bonds in
accordance with the amortization requirements described above, if less than all
of the outstanding bonds shall be called for redemption, Doral Properties shall
determine the principal amount of each maturity of the bonds to be redeemed. If
less than all bonds of one maturity are to be redeemed, the bonds, or portions
thereof, to be redeemed will be selected by the trustee by such method as it
deems fair and appropriate in integral multiples of $5,000.
If notice of redemption is given and if sufficient funds are on deposit
with the trustee to provide for the payment of the principal of and premium, if
any, and interest on the bonds to be redeemed, then the bonds so called for
redemption will, on the redemption date, cease to bear interest and shall no
longer be deemed outstanding or be entitled to any benefit or security under the
trust agreement.
SOURCES OF PAYMENT AND SECURITY FOR THE BONDS
Bonds Limited Obligations of AFICA. The bonds are limited obligations of
AFICA payable solely from monies derived pursuant to the loan and guaranty
agreement. The bonds will not constitute a charge against the general credit of
AFICA and will not constitute an indebtedness of the government of Puerto Rico
or any of its political subdivisions other than AFICA.
The Loan and Guaranty Agreement. Under the loan and guaranty agreement,
Doral Properties will agree to deposit with the trustee in a bond fund
established under the trust agreement amounts sufficient to pay, together with
the amounts then on deposit therein, principal of and premium, if any, and
interest on the bonds. Such deposit must be made on the business day immediately
preceding the day on which the corresponding amounts of principal, premium, if
any, and interest are due and payable. Pursuant to the trust agreement, AFICA
will assign its interest in the loan agreement, except certain rights of AFICA
to indemnification, exemption from liabilities, notices and the payment of costs
and expenses, to the trustee as security for the bonds.
Guaranty of Doral Financial. Under the loan and guaranty agreement, Doral
Financial has agreed to guarantee the payments required to be made by Doral
Properties, which include payment of principal of, premium, if any, and interest
on the bonds, when and as the same become due and payable. The guarantee is
absolute and unconditional, and not subject to any circumstance that might
otherwise constitute a legal or equitable discharge of a guarantor. Holders of
the bonds may proceed directly against Doral Financial in the event of default
under the bonds without first proceeding against Doral Properties. The guaranty
will rank on an equal rank with other unsecured and unsubordinated obligations
of Doral Financial.
SUMMARY OF THE LOAN AND GUARANTY AGREEMENT
The following briefly summarizes the material provisions of the loan and
guaranty agreement among AFICA, Doral Properties and Doral Financial. This
summary is not complete. You should read the more detailed provisions of the
loan and guaranty agreement for provisions that may be important to you. A copy
of the loan and guaranty agreement is filed as an exhibit to the registration
statement of which this official statement and prospectus is a part.
Pursuant to the loan and guaranty agreement, AFICA will loan the proceeds
from the sale of the bonds to Doral Properties to finance a portion of the cost
of construction of the Center. Doral Properties will agree to make payments
directly to the trustee which, together with amounts then held in the bond fund
established under the trust agreement will be sufficient to make the payments of
principal of and premium, if any, and interest on the bonds as the same become
due at maturity, upon redemption or acceleration. Such deposit must be made on
the business day immediately preceding the date on which the corresponding
amounts of principal, premium, if any, and interest are due and payable.
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<PAGE> 24
ASSIGNMENT BY AFICA
AFICA will assign all of its rights, title and interest in the loan and
guaranty agreement and will pledge and assign to the trustee any payments,
receipts and revenues receivable by it under or pursuant to the loan and
guaranty agreement and the income earned by the investment of funds held under
the trust agreement, as security for payment of the principal of and premium, if
any, and interest on the bonds. Except as provided in the preceding sentence,
AFICA will not sell, assign or otherwise dispose of its interest in the loan and
guaranty agreement.
MAINTENANCE AND OPERATION OF THE CENTER
Doral Properties will cause the Center to be operated as an Industrial
Facility, as defined in the Act, and to be maintained, preserved and kept in
good repair, working order and condition and will from time to time cause to be
made all reasonably necessary and proper repairs, replacements and renewals;
provided, however, that Doral Properties will have no obligation to cause to be
maintained, preserved, repaired, replaced or renewed any element or unit of the
Center, the maintenance, repair, replacement or renewal of which becomes
uneconomic to Doral Properties because of damage or destruction or obsolescence,
or change in economic or business conditions or change in government standards
and regulations. Doral Properties shall not permit, commit or suffer any waste
of the whole or any major part of the Center and shall not use or permit the use
of the Center, or any part thereof, for any unlawful purpose or permit any
nuisance to exist thereon.
COVENANT AS TO EXISTENCE, CONSOLIDATION, MERGER OR SALE
Doral Properties and Doral Financial will maintain their existence, will
not dispose of all or substantially all of their assets and will not acquire,
consolidate with or merge into another person; provided, however, that Doral
Properties or Doral Financial may acquire, consolidate with or merge into
another person, or transfer to another person all or substantially all of their
assets and thereafter dissolve, if:
(1) the successor or transferee is solvent and irrevocably and
unconditionally assumes in writing all the obligations of Doral Properties
or Doral Financial, as the case may be, under the loan and guaranty
agreement and the trust agreement; and
(2) immediately after such consolidation, merger or transfer none of
Doral Properties, such successor or transferee, if other than Doral
Properties, or Doral Financial shall be in default in the performance or
observance of any duties, obligations or covenants under the loan and
guaranty agreement, including the Source of Income Requirements discussed
below under "Covenant as to Maintenance of Source of Income."
SALE, TRANSFER OR ENCUMBRANCE OF THE CENTER
Doral Properties may sell or otherwise transfer or encumber the Center, in
whole or in part, without the consent of AFICA or the trustee, if it meets the
following requirements:
(1) Doral Properties shall, prior to such sale, transfer or
encumbrance of the Center, notify AFICA and the trustee; and
(2) prior to the proposed sale, transfer or encumbrance of the Center,
AFICA and the trustee are provided with proof satisfactory to them by Doral
Properties that the proposed transaction will not adversely affect the
income tax treatment of interest received on the bonds by bondholders.
No sale or other transfer or encumbrance of the Center shall relieve Doral
Properties or Doral Financial of the obligation to make the payments required by
the loan and guaranty agreement.
20
<PAGE> 25
ASSIGNMENT OF LOAN AND GUARANTY AGREEMENT BY DORAL PROPERTIES
Doral Properties may, by operation of law or otherwise, assign its interest
in the loan and guaranty agreement, in whole or in part, without the consent of
AFICA or the trustee, if it meets the following requirements:
(1) Doral Properties shall, prior to such assignment of the loan and
guaranty agreement, notify AFICA and the trustee;
(2) prior to the proposed assignment, the trustee is provided with
proof satisfactory to it by Doral Properties that such assignment or the
terms thereof will not affect adversely affect the income tax treatment of
interest received on the bonds by bondholders;
(3) the assignee shall, in a certificate delivered to AFICA and the
trustee, which certificate shall be in a form reasonably satisfactory to
AFICA and the trustee, expressly agree to pay and to perform all of the
obligations of Doral Properties under the loan and guaranty agreement; and
(4) the assignee shall deliver to AFICA and the trustee a certificate
executed by its chief financial officer (or other executive officer
performing similar functions) stating that none of the obligations,
covenants and performances under the loan and guaranty agreement assumed by
it will conflict with or constitute on the part of such assignee a breach
of, or default under, any indenture, mortgage, agreement or other
instrument to which such assignee is a party or by which it is bound, or
under any existing law, rule, regulation, judgment, order or decree to
which such assignee is subject.
The provisions of clauses (3) and (4) above shall not apply to any
assignment of the loan and guaranty agreement in which all the parties consist
of Doral Properties, Doral Financial or any of their respective subsidiaries.
Notwithstanding any of the foregoing, no assignment of the loan and
guaranty agreement shall relieve Doral Properties or Doral Financial of the
obligation to make the payments required by the loan and guaranty agreement.
COVENANT AS TO MAINTENANCE OF SOURCE OF INCOME
Doral Properties will covenant under the loan and guaranty agreement that
during each taxable year while the bonds are outstanding it will comply with the
requirements of the Code so that all interest paid or payable on the bonds will
constitute income from sources within Puerto Rico under the general source of
income rules of the Code as in effect on the date of issuance of the bonds (the
"Source of Income Requirements").
Under the loan and guaranty agreement, Doral Properties will be required to
cause its independent accountants to submit, no later than the 90th day after
the close of each of its taxable years, a report stating whether in connection
with their audit of the books and records of Doral Properties, Doral Properties
failed to comply with any of the Source of Income Requirements during the
taxable year just ended or such other applicable period. If the independent
accountants' report should state that in the course of their audit Doral
Properties failed to comply with any of the Source of Income Requirements during
the immediately preceding taxable year or such other applicable period or if
Doral Properties provides the trustee with a certificate that indicates that
Doral Properties failed to comply with the Source of Income Requirements, the
trustee shall within five business days from the date of receipt of such
independent accountant's report or certificate of Doral Properties, send written
notice thereof to Doral Properties and each person who was a bondholder during
the preceding taxable year thereof.
LIMITATIONS ON LIENS AND DISPOSITION OF STOCK OF PRINCIPAL MORTGAGE BANKING
SUBSIDIARIES
The loan and guaranty agreement provides that Doral Financial will not, and
will not permit any Subsidiary to, incur, issue, assume or guarantee any
indebtedness for money borrowed if such indebtedness is secured by a pledge of,
lien on, or security interest in any shares of Voting Stock of any Principal
Mortgage Banking Subsidiary, without providing that the bonds and, at Doral
Financial's option, any other
21
<PAGE> 26
indebtedness ranking equally with the bonds, shall be secured equally and
ratably with such indebtedness. This limitation shall not apply to indebtedness
secured by a pledge of, lien on or security interest in any shares of Voting
Stock of any corporation at the time it becomes a Principal Mortgage Banking
Subsidiary.
The loan and guaranty agreement also provides that Doral Financial will not
sell, assign, transfer or otherwise dispose of any shares of, securities
convertible into or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock (other than directors' qualifying shares) of any
Principal Mortgage Banking Subsidiary and will not permit any Principal Mortgage
Banking Subsidiary to issue (except to Doral Financial) any shares of,
securities convertible into or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of any Principal Mortgage Banking Subsidiary,
except for sales, assignments, transfers or other dispositions that:
- are for fair market value on the date thereof, as determined by the Board
of Directors of Doral Financial (which determination shall be conclusive)
and, after giving effect to such disposition and to any possible
dilution, Doral Financial will own not less than 80% of the shares of
Voting Stock of such Principal Mortgage Banking Subsidiary then issued
and outstanding free and clear of any security interest;
- are made in compliance with an order of a court or regulatory authority
of competent jurisdiction, as a condition imposed by any such court or
authority permitting the acquisition by Doral Financial, directly or
indirectly, of any other mortgage banking institution or entity the
activities of which are legally permissible for a bank holding company or
a subsidiary thereof to engage in, or as an undertaking made to such
authority in connection with such an acquisition;
- are made where such Principal Mortgage Banking Subsidiary, having
obtained any necessary regulatory approvals, unconditionally guarantees
payment when due of the principal of and premium, if any, and interest on
the bonds; or
- are made to Doral Financial or any wholly-owned subsidiary if such
wholly-owned subsidiary agrees to be bound by this covenant and Doral
Financial agrees to maintain such wholly-owned subsidiary as a
wholly-owned subsidiary.
Notwithstanding the foregoing, any Principal Mortgage Banking Subsidiary
may be merged into or consolidated with another mortgage banking institution
organized under the laws of the United States, any state thereof, Puerto Rico or
the District of Columbia if, after giving effect to such merger or
consolidation, Doral Financial or any wholly-owned subsidiary owns at least 80%
of the Voting Stock of such other mortgage banking institution then issued and
outstanding free and clear of any security interest and if, immediately after
giving effect thereto and treating any such resulting institution thereafter as
a Principal Mortgage Banking Subsidiary and as a Subsidiary for purposes of the
loan and guaranty agreement, no event of default, and no event that, after the
giving of notice or lapse of time or both, would become an event of default
under the loan and guaranty agreement, has occurred and is continuing.
"Principal Mortgage Banking Subsidiary" means a Subsidiary, including its
Subsidiaries, that is principally engaged in the mortgage banking business and
meets any of the following conditions:
- Doral Financial's and its other Subsidiaries' investments in and advances
to the Subsidiary exceed 30 percent of the total assets of Doral
Financial and its Subsidiaries consolidated as of the end of the most
recently completed fiscal year;
- Doral Financial's and its other Subsidiaries' proportionate share of the
total assets of the Subsidiary after intercompany eliminations exceeds 30
percent of the total assets of Doral Financial and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year; or
- Doral Financial's and its other Subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the Subsidiary
exceeds 30 percent of such income of Doral Financial and its Subsidiaries
consolidated for the most recently completed fiscal year.
22
<PAGE> 27
"Principal Mortgage Banking Subsidiary" does not include, however, any
Subsidiary that is a bank or savings association unless Doral Financial
transfers to such bank or savings association the mortgage banking business
conducted by Doral Mortgage Corporation or Doral Financial's HF Mortgage Bankers
Division as of the date of this official statement and prospectus.
"Subsidiary" means any corporation of which securities entitled to elect at
least a majority of the corporation's directors shall at the time be owned,
directly or indirectly, by Doral Financial, and/or one or more Subsidiaries.
"Voting Stock" means capital stock the holders of which have general voting
power under ordinary circumstances to elect at least a majority of the board of
directors of a corporation, except capital stock that carries only the right to
vote conditioned on the happening of an event regardless of whether such event
shall have happened.
INDEMNITY
Under the loan and guaranty agreement, Doral Properties will also agree to
indemnify AFICA against any claims or liabilities arising from the construction
and operation of the Center or its participation in the financing of the Center
and certain other liabilities, and will agree to pay the fees and expenses of
AFICA and the trustee.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an event of default under the loan and guaranty
agreement:
(1) failure to pay the principal of, and premium, if any, on the bonds
when the same shall become due and payable or failure to pay interest on
the bonds after the same become due and payable;
(2) failure to make any other payments (excluding payments with
respect to the principal of, premium, if any, and interest on the bonds)
required under the loan and guaranty agreement if such failure shall
continue for a period of 30 days after written notice thereof, unless a
written extension is granted by the trustee prior to its expiration;
(3) failure by Doral Properties or Doral Financial to observe or
perform certain other covenants, conditions or agreements under the loan
and guaranty agreement, other than a default described in (1) or (2) above,
and continuation of such failure for 90 days after written notice thereof,
unless a written extension thereof is granted by the trustee prior to its
expiration, provided, however, that if such failure may be cured but cannot
be corrected within such ninety-day period, it will not constitute an event
of default if corrective action is commenced by Doral Properties during
such period and diligently pursued until such failure is corrected;
(4) acceleration of any other indebtedness of Doral Financial or any
Significant Subsidiary (as defined below), in each case exceeding
$5,000,000 in an aggregate principal amount; and
(5) certain events of bankruptcy, liquidation or similar proceedings
involving Doral Properties or Doral Financial.
"Significant Subsidiary" means a Subsidiary, including its Subsidiaries,
that meets any of the following conditions:
- Doral Financial's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 10 percent of the total assets of
Doral Financial and its Subsidiaries consolidated as of the end of the
most recently completed fiscal year;
- Doral Financial's and its other Subsidiaries' proportionate share of
the total assets of the Subsidiary after intercompany eliminations
exceeds 10 percent of the total assets of Doral Financial and its
Subsidiaries consolidated as of the end of the most recently completed
fiscal year; or
23
<PAGE> 28
- Doral Financial's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items
and cumulative effect of a change in accounting principles of the
Subsidiary exceeds 10 percent of such income of Doral Financial and
its Subsidiaries consolidated for the most recently completed fiscal
year.
If by reason of "Force Majeure" (as defined in the loan agreement), Doral
Properties is unable to perform any of its obligations under (3) above, Doral
Properties will not be deemed to be in default during the continuance of such
inability, including a reasonable time for the removal of the effect thereof.
AFICA has no power to waive any default under the loan and guaranty
agreement or extend the time for the correction of any default which could
become an event of default without the consent of the trustee.
Upon the occurrence of an event of default, subject to the provisions of
the trust agreement, the trustee, as assignee of AFICA's rights, may declare all
unpaid amounts payable under the loan and guaranty agreement in respect of the
bonds to be immediately due and payable and may take any action at law or equity
necessary to enforce any obligation of Doral Properties under the loan and
guaranty agreement.
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SUMMARY OF THE TRUST AGREEMENT
The following briefly summarizes the material provisions of the trust
agreement between AFICA and Citibank, N.A. This summary is not complete. You
should read the more detailed provisions of the trust agreement for the
provisions that may interest you. A copy of the trust agreement is filed as an
exhibit to the registration statement of which this official statement and
prospectus is a part.
Under the trust agreement, AFICA will assign to the trustee for the benefit
of the bondholders all of AFICA's right, title and interest in the loan and
guaranty agreement, except for certain rights of AFICA under the loan agreement
to indemnification, exemption from liability, notices and the payment of costs
and expenses, in trust to provide for the payment of the principal of and
premium, if any, and interest on the bonds.
CONSTRUCTION FUND
The proceeds from the sale of the bonds, other than amounts to be used to
pay the fee payable to AFICA, the existing land loan and other costs of
issuance, will be deposited with the trustee in the construction fund
established under the trust agreement. Payments of the costs of the construction
of the Center will be made from the construction fund upon requisitions
presented to the trustee signed by Doral Properties and, under certain
circumstances, AFICA. Any amounts remaining in the construction fund on the
earlier of (1) the third anniversary of the date of issuance of the bonds,
subject to extension by AFICA, or (2) the receipt by the trustee of a
certificate issued by Doral Properties and approved by AFICA to the effect that
the moneys in the construction fund will not be used to pay costs of
construction of the Center, will be transferred to the bond fund and used to
redeem bonds.
BOND FUND
Doral Properties shall cause to be deposited to the credit of the bond
fund:
(1) all amounts paid pursuant to the loan and guaranty agreement with
respect to principal of and interest on the bonds, including payments with
respect to optional and mandatory prepayments of the bonds;
(2) any amount in the construction fund to be transferred to the bond
fund in accordance with the provisions of the trust agreement described
above under "Construction Fund"; and
(3) all other moneys received by the trustee pursuant to any of the
provisions of the loan and guaranty agreement or otherwise which are
permitted or required or are accompanied by directions from Doral
Properties or AFICA that such moneys are to be paid into the bond fund.
INVESTMENT OF FUNDS
Moneys held for the credit of all funds and accounts under the trust
agreement shall be invested in "Investment Obligations" in accordance with the
instructions of Doral Properties. Any such Investment Obligations shall mature
not later than the respective dates when the money held for the credit of such
funds or accounts will be required for the purposes intended.
Investment Obligations are defined as government obligations and
obligations of any agency or instrumentality of the United States of America
whose obligations are backed by the full faith and credit of the United States
of America and,
(A) the obligations of the
(1) Federal National Mortgage Association,
(2) Federal Home Loan Banks,
(3) Federal Farm Credit System,
(4) Federal Home Loan Mortgage Corporation,
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(5) Government National Mortgage Association,
(6) Federal Housing Administration, and
(7) Farmers Home Administration,
(B) repurchase agreements with financial institutions that are members of
the Federal Reserve System or primary dealers in the United States Treasury
market the short-term obligations of which institutions or dealers are rated at
least "A-2" by Standard & Poor's or PRIME-2 by Moody's or whose long-term
obligations are rated in one of the four highest rating categories by Standard &
Poor's or Moody's secured by any combination of the investments or securities
referred to in clause (A); provided, that the market value of the margin amount
required on the trade/settlement date shall always be a minimum of 102% of the
purchase price and not less than 100% of the repurchase price thereafter during
the remaining tenure of the agreement, the trustee shall be given a first
priority security interest, and such repurchase agreement shall constitute a
"repurchase agreement" within the meaning of Section 101 of the United States
Bankruptcy Code, as amended,
(C) debt obligations and commercial paper rated "A-2" or better by Standard
& Poor's or Moody's,
(D) investment agreements in the form of interest bearing time deposits,
repurchase agreements or similar arrangements rated, or guaranteed by a letter
of credit or guaranty from a financial institution rated, within the four
highest rating categories by Standard & Poor's or Moody's in respect of money in
the construction fund,
(E) money market accounts of the trustee or any state or federally
chartered bank, banking association, trust company or subsidiary trust company
that is rated or whose parent state bank is rated in one of the two highest
short-term rating categories or in one of the four highest long-term rating
categories by Standard & Poor's or Moody's, and
(F) any other investment obligations rated by Standard & Poor's or Moody's
in one of the four highest rating categories or otherwise approved in writing by
Standard & Poor's or Moody's.
Government obligations are defined as
(1) direct obligations of, or obligations the timely payment of
principal of and interest on which are fully and unconditionally guaranteed
by, the United States of America, and
(2) any certificates or other evidences of ownership interest 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 (1).
EVENTS OF DEFAULT
Each of the following events is an event of default under the trust
agreement:
(1) Doral Properties or Doral Financial shall fail to pay the
principal of and interest on the bonds when the same shall become due and
payable;
(2) the occurrence of certain events of bankruptcy, liquidation,
insolvency or similar proceedings involving Doral Properties or Doral
Financial; or
(3) any event of default under the loan and guaranty agreement shall
have occurred and such event of default shall not have been remedied or
waived.
ACCELERATION OF MATURITIES
Upon (1) the happening and continuance of an event of default specified in
paragraph (2) above, the trustee shall, and upon (2) the happening and
continuance of any other event of default specified above, the trustee may, and
upon the written request of holders of not less than 25% in aggregate principal
amount of bonds then outstanding shall, by notice in writing to AFICA, declare
the principal of all the
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<PAGE> 31
bonds to be due and payable immediately, and upon such declaration the same
shall become and be immediately due and payable. If this happens, subject to
certain conditions, the trustee may, and upon the written direction of the
holders of not less than a majority in aggregate principal amount of the bonds
then outstanding shall, by a notice in writing to AFICA and Doral Properties,
rescind and annul such declaration and its consequences, but no such rescission
or annulment shall extend to or affect any subsequent default or impair any
right consequent thereon. The trustee may not, however, rescind and annul an
acceleration made pursuant to the written request of the bondholders.
ENFORCEMENT OF REMEDIES
Upon the happening and continuance of any event of default and the
acceleration of the bonds, then and in every such case the trustee may, and upon
the written direction of the holders of not less than 25% in aggregate principal
amount of the bonds then outstanding under the trust agreement shall, proceed,
subject to the provision of indemnification satisfactory to the trustee, to
protect and enforce its rights and the rights of the bondholders under
applicable laws, under the loan and guaranty agreement and the trust agreement.
In the enforcement of any remedy under the trust agreement, the trustee in
its own name and as trustee of an express trust shall be entitled to sue for,
enforce payment of and recover judgment for, any and all amounts then or after
any default becoming, and at any time remaining, due from AFICA for principal,
premium, if any, interest or otherwise under any of the provisions of the trust
agreement or of the bonds and unpaid, with interest on overdue payments of
principal, premium, if any, and interest (to the extent permitted by law) at the
rate or rates of interest specified in the bonds, together with any and all
costs and expenses of collection and of all proceedings, without prejudice to
any other right or remedy of the trustee or of the bondholders, and to recover
and enforce any judgment or decree against AFICA, but solely as provided in the
trust agreement and in the bonds, for any portion of such amounts remaining
unpaid and interest, costs and expenses as above provided, and to collect (but
solely from moneys in the bond fund and any other moneys available for such
purpose), in any manner provided by law, the moneys adjudged or decreed to be
payable.
HOLDERS OF MAJORITY IN PRINCIPAL AMOUNT OF BONDS MAY CONTROL PROCEEDINGS
Subject to the provision of indemnification satisfactory to the trustee,
the holders of a majority in aggregate principal amount of the bonds then
outstanding shall have the right to direct the time, method and place of
conducting all remedial proceedings to be taken by the trustee under the trust
agreement or exercising any trust or power conferred upon the trustee, provided
that such direction shall not be otherwise than in accordance with law and the
provisions of the trust agreement.
RESTRICTIONS UPON ACTION BY INDIVIDUAL BONDHOLDER
No bondholder will have any right to institute any suit, action or
proceeding in equity or at law on any bond or for the execution of any trust
under the trust agreement, or for any other remedy under the trust agreement
unless: (1) such holder has previously given to the trustee notice of the event
of default on account of which such suit, action or proceeding is to be
instituted; (2) the holders of not less than 25% of the aggregate principal of
bonds then outstanding have requested of the trustee, after the right to
exercise such powers or right of action, as the case may be, has accrued, and
have afforded the trustee a reasonable opportunity, either to proceed to
exercise such powers or to institute such action, suit or proceeding in its or
their name; (3) the trustee has been offered reasonable security and indemnity
against the costs, expenses and liabilities to be incurred (including, without
limitation, indemnification for environmental liability); and (4) the trustee
has refused or neglected to comply with such request within a reasonable time.
No one or more bondholders will have any right, in any manner, to affect,
disturb or prejudice any rights under the trust agreement, or to enforce any
right thereunder, except in the manner therein provided. All suits, actions and
proceedings at law or in equity must be instituted, had and maintained in the
manner provided in the trust agreement and for the benefit of the bondholders.
Any
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<PAGE> 32
individual right of action or other right given to one or more bondholders by
law is restricted by the trust agreement to the rights and remedies therein
provided.
SUPPLEMENTAL TRUST AGREEMENTS
The trust agreement may be amended or supplemented without the consent of
the bondholders:
(1) to cure any ambiguity or to make any other provisions with respect
to matters or questions arising under the trust agreement which shall not
be inconsistent with the provisions of the trust agreement; or
(2) to grant or confer upon the trustee for the benefit of the
bondholders any additional rights, remedies, powers, benefits, authority or
security that may lawfully be so granted or conferred; or
(3) to add to the covenants of AFICA or Doral Properties for the
benefit of the bondholders or to surrender any right or power conferred
upon AFICA or Doral Properties under the trust agreement; or
(4) to permit the qualification of the bonds for sale under the
securities laws of any of the states of the United States, and to add to
the trust agreement or any supplement or amendment thereto such other
terms, conditions and provisions as may be required by the Trust Indenture
Act of 1939 or any similar federal statute.
The trust agreement may be amended or supplemented with the consent of the
holders of a majority in principal amount of the bonds at the time outstanding.
However, without the consent of each bondholder affected, no amendment to the
trust agreement may:
(1) extend the time for the payment of the principal of and premium,
if any, or the interest on any bond;
(2) reduce the principal of any bond or the redemption premium, if
any, or the rate of interest thereon;
(3) create any lien or security interest with respect to the loan and
guaranty agreement or the payments thereunder, other than the lien created
by the trust agreement;
(4) give a preference or priority to any bond or bonds over any other
bond or bonds; or
(5) reduce the aggregate principal of the bonds required for consent
to such supplement or amendment or any waiver thereunder.
The trustee is not obligated to execute any proposed supplement or
amendment if its rights, obligations and interests would be affected thereby.
Any amendment or supplement to the trust agreement other than to cure any
ambiguity, will not become effective without the consent of Doral Properties and
Doral Financial.
AMENDMENTS AND SUPPLEMENTS TO THE LOAN AND GUARANTY AGREEMENT
The loan and guaranty agreement may be amended or supplemented without the
consent of the bondholders:
(1) to identify more precisely the project being financed; or
(2) to cure any ambiguity or formal defect or omission therein or in
any supplement thereto; or
(3) to grant to or confer upon AFICA or the trustee for the benefit of
the bondholders any additional rights, remedies, powers, benefits,
authority or security that may lawfully be granted to or conferred upon
AFICA, the trustee or the bondholders; or
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<PAGE> 33
(4) to add to the covenants of Doral Properties or Doral Financial for
the benefit of the bondholders or to surrender any right or power therein
conferred upon Doral Properties or Doral Financial; or
(5) in connection with any other change which, in the judgment of the
trustee, will not restrict, limit or reduce the obligation of Doral
Properties or Doral Financial to make the payments under the loan and
guaranty agreement required to pay the principal of and premium, if any,
and the interest on the bonds or otherwise impair the security of the
bondholders under the trust agreement, provided such action shall not
materially adversely affect the interests of the bondholders.
Other than for the purposes of the above paragraph, the loan and guaranty
agreement may be amended or supplemented with the approval of the holders of not
less than a majority of the principal of the bonds at the time outstanding. No
amendment or supplement to the loan and guaranty agreement will become effective
without the consent of the trustee.
DEFEASANCE
Any bond will be deemed paid and no longer entitled to any security under
the trust agreement upon satisfaction of certain conditions and the deposit with
the trustee of sufficient funds, or Defeasance Obligations, the principal of and
the interest on which, when due, without any reinvestment thereof, will provide
moneys which will be sufficient to pay when due the principal of and premium, if
any, and interest due and to become due on such bond. If any bond is not to be
redeemed or does not mature within 60 days after such deposit, Doral Properties
must give irrevocable instructions to the trustee to give notice, in the same
manner as notice of redemption, that such deposit has been made. The bonds shall
have not been deemed paid unless the trustee shall have received an opinion of
counsel experienced in bankruptcy matters to the effect that payment to the
bondholders would not constitute a transfer which may be avoided under the
provisions of the United States Bankruptcy Code, and an opinion of counsel
experienced in tax matters under the Code to the effect that, assuming continued
compliance by Doral Properties with the Source of Income Requirements, the
deposit of said obligations or moneys would not adversely affect the interest
received by the bondholders as income from sources within Puerto Rico.
"Defeasance Obligations" means noncallable Government Obligations as
defined above under "Investment of Funds" and, to the extent from time to time
permitted by law,
(1) obligations issued or guaranteed by the Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Farm Credit System,
Federal Home Loan Banks or Student Loan Marketing Association,
(2) obligations of state, territory or local government issuers which
are rated in the highest rating category by Standard & Poor's or Moody's,
provision for the payment of the principal of and interest on which shall
have been made by deposit with the trustee or escrow agent of noncallable
Government Obligations, the maturing principal of and interest on such
Government Obligations, when due and payable, shall provide sufficient
money to pay the principal of and redemption premium, if any, and interest
on such obligations of state, territory or local government issuers, and
(3) evidences of ownership of a proportionate interest in obligations
specified in clauses (1) and (2) above held by a bank or trust company
organized and existing under the laws of the United States of America or
any state or territory thereof as custodian.
THE TRUSTEE
Citibank, N.A., the trustee under the trust agreement, is also a lender
under a loan agreement which provides a warehousing loan facility to Doral
Financial and Doral Mortgage Corporation. The trustee may have other banking
relationships with Doral Financial in the ordinary course of business.
The Trust Indenture Act imposes certain limitations on the right of the
trustee, as a creditor of Doral Financial, to obtain payment of claims in
certain cases, or to realize on certain property received in respect
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<PAGE> 34
to any such claim as security or otherwise. The trustee will be permitted to
engage in other transactions with Doral Financial or its affiliates, provided
that if it acquires a conflicting interest within the meaning of Section 310 of
the Trust Indenture Act, it must generally either eliminate such conflict or
resign.
In the case an event of default shall occur (and shall not be cured), the
trustee will be required to use the degree of care of a prudent person in the
conduct of its own affairs in the exercise of its powers.
AFICA
GENERAL
The Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority ("AFICA") is a body corporate and politic
constituting a public corporation and governmental instrumentality of Puerto
Rico. The Legislature of Puerto Rico determined that the development and
expansion of commerce, industry, and health and educational services within
Puerto Rico is essential to the economic growth of Puerto Rico and to attain
full employment and preserve the health, welfare, safety and prosperity of all
its citizens. The Legislature of Puerto Rico also determined that new methods of
financing capital investments were required to promote industry in Puerto Rico
and to provide modern and efficient medical facilities for the citizens of
Puerto Rico. Accordingly, AFICA was created under Act No. 121 of the Legislature
of Puerto Rico, approved June 27, 1977, as amended (the "Act"), for the purpose
of promoting the economic development, health, welfare and safety of the
citizens of Puerto Rico. AFICA is authorized to borrow money through the
issuance of revenue bonds and to loan the proceeds thereof to finance the
acquisition, development, construction and equipping of industrial, tourist,
educational, medical and environmental pollution control and solid waste
disposal facilities. AFICA has no taxing power. AFICA's offices are located at
Minillas Government Center, De Diego Avenue, Stop 22, San Juan, Puerto Rico
00940. AFICA's telephone number is (787) 782-4060.
GOVERNING BOARD
The Act provides that the Governing Board of AFICA shall consist of seven
members. The President of Government Development Bank for Puerto Rico ("GDB"),
the Executive Director of Puerto Rico Industrial Development Company, the
Executive Director of Puerto Rico Aqueduct and Sewer Authority, the President of
the Puerto Rico Environmental Quality Board and the Executive Director of the
Puerto Rico Tourism Company are each ex officio members of the Governing Board
of GDB. The remaining two members of the Governing Board of AFICA are appointed
by the Governor of Puerto Rico for terms of four years. As of the date of this
official statement and prospectus, the position of the Executive Director of the
Aqueduct and Sewer Authority is vacant. The following individuals are the
current members of the Governing Board of AFICA:
<TABLE>
<CAPTION>
NAME POSITION TERM OCCUPATION
- ---- ----------- ---------------- --------------------------------
<S> <C> <C> <C>
Lourdes Chairperson Indefinite President, Government
Rovira-Rizek....... Development Bank for Puerto Rico
Hector Member Indefinite President, Puerto Rico
Russe-Martinez..... Environmental Quality Board
Jorge Davila......... Member Indefinite Executive Director, Puerto Rico
Tourism Company
Xavier Romeu......... Member Indefinite Executive Director, Puerto Rico
Industrial Development Company
James Thordsen....... Member June 27, 2002 President, James Thordsen, Inc.
Jose Salas-Soler..... Member October 22, 2001 Attorney-at-Law
</TABLE>
The Act provides that the affirmative vote of four members is sufficient
for any action taken by the Governing Board.
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The following individuals are currently officers of AFICA:
Carlos Colon de Armas, Executive Director of AFICA, is also Executive Vice
President of GDB. He was appointed to these positions in February of 1999. Mr.
Colon de Armas received a PhD in finance from Purdue University in 1992. Prior
to his appointment, he was Deputy Executive Director of the Puerto Rico Highway
and Transportation Authority.
Velmarie Berlingeri, Assistant Executive Director of AFICA, is also a Vice
President of GDB. Ms. Berlingeri has been associated with GDB since 1993. She
received a Bachelor of Science in Business Administration degree from the
University of Puerto Rico in 1982. Prior to her appointment, she worked in the
investments area of a major private corporation in Puerto Rico.
Delfina Betancourt Capo, Secretary and General Counsel of AFICA, is also
Senior Vice President and General Counsel of GDB. Ms. Betancourt has been
associated with GDB since 1984. She received a law degree from Cornell
University in 1982.
OUTSTANDING REVENUE BONDS AND NOTES OF AFICA
As of April 30, 1999, AFICA had revenue bonds and notes issued and
outstanding in the principal of approximately $2.5 billion. All such bond and
note issues have been authorized and issued pursuant to trust agreements or
resolutions separate from and unrelated to the trust agreement relating to the
bonds and are payable from sources other than the payments under the loan
agreement.
Under the Act, AFICA may issue additional bonds and notes from time to time
to finance industrial, tourist, educational, medical or pollution control
facilities. However, any such bonds and notes would be authorized and issued
pursuant to other trust agreements or resolutions separate from and unrelated to
the trust agreement relating to the bonds and would be payable from sources
other than the payments under the loan agreement.
GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
As required by Act No. 272 of the Legislature of Puerto Rico, approved May
15, 1945, as amended, GDB has acted as a financial advisor to AFICA in
connection with the issuance and sale of the bonds.
GDB is a public corporation with varied governmental financial functions.
Its principal functions are to act as financial advisor to and fiscal agent for
Puerto Rico, its municipalities and its public corporations in connection with
the issuance of bonds and notes, to make advances to public corporations and to
make loans to private enterprises that will aid in the economic development of
Puerto Rico. The Underwriter has been selected by GDB to act from time to time
as underwriter of its obligations and the obligations of Puerto Rico, its
instrumentalities and public corporations. The Underwriter or its affiliates
also participate in other financial transactions with GDB.
TAXATION
In the opinion of Fiddler Gonzalez & Rodriguez, LLP, bond counsel, under
the provisions of the Acts of Congress and the laws of Puerto Rico now in force:
1. The bonds and the transfer of the bonds, including any gain derived
upon the sale of the bonds, are exempt from Puerto Rico income tax pursuant
to Article 8(b) of Act No. 121 of the Legislature of Puerto Rico.
2. Interest on the bonds is:
(A) excluded from the gross income of the recipient thereof for
Puerto Rico income tax purposes pursuant to Section 1022(b)(4)(B) of the
Puerto Rico Internal Revenue Code of 1994, as amended,
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(B) exempt from Puerto Rico income tax and alternative minimum tax
pursuant to Section 1022(b)(4)(B) of the Puerto Rico Internal Revenue
Code, as amended, Article 8(b) of Act No. 121 of the Legislature of
Puerto Rico, and Section 3 of the Puerto Rico Federal Relations Act; and
(C) exempt from Puerto Rico municipal license tax pursuant to
Section 9(25) of the Puerto Rico Municipal License Tax Act of 1974, as
amended, and Section 3 of the Puerto Rico Federal Relations Act.
3. The bonds are exempt from Puerto Rico personal property tax
pursuant Section 3.11 of the Puerto Rico Municipal Property Tax Act of
1991, as amended, and Section 3 of the Puerto Rico Federal Relations Act.
4. The bonds are exempt from Puerto Rico (A) gift tax with respect to
donors who are residents of Puerto Rico at the time the gift is made and
(B) estate tax with respect to estates of decedents who are residents of
Puerto Rico at the time of death, excluding, in each case, United States
citizens who acquired their United States citizenship other than by reason
of birth or residence in Puerto Rico.
In the opinion of Fiddler Gonzalez & Rodriguez, LLP, bond counsel, based
upon the provisions of the Internal Revenue Code now in force and assuming that
Doral Properties complies with the source of income covenants contained in the
loan and guaranty agreement, then:
1. interest received or accrued, or "original issue discount" within
the meaning of the Internal Revenue Code, on the bonds is excludable from
gross income for income tax purposes under the Internal Revenue Code if the
holder of the bonds is an individual who is a bona fide resident of Puerto
Rico during the entire taxable year in which such interest is received or
accrued,
2. interest received or accrued, or "original issue discount", on the
bonds is not subject to federal income taxation if the holder of the bonds
is a corporation organized under the laws of Puerto Rico or any foreign
country and the interest is not effectively connected with the conduct of a
trade or business in the United States by the corporation, the corporation
is not a foreign personal holding company, a controlled foreign corporation
or a passive foreign investment company under the U.S. internal revenue
code, and the corporation is not treated as a domestic corporation for the
purposes of the U.S. internal revenue code; and
3. interest on the bonds is not excludable from the gross income of
the recipients thereof for federal income tax purposes under Section 103(a)
of the Internal Revenue Code.
United States taxpayers, other than individuals who are bona fide residents
of Puerto Rico during the entire taxable year, will be subject to federal income
tax on any gain realized upon the sale or exchange of the bonds. Pursuant to
Notice 89-40 issued by the United States Internal Revenue Service on March 27,
1989, gain on the sale of the bonds, excluding "original issue discount" accrued
under the Internal Revenue Code as of the date of such sale or exchange, by an
individual who is a bona fide resident of Puerto Rico during the entire taxable
year and that is a resident of Puerto Rico for purposes of Section 865(g)(1) of
the Internal Revenue Code will constitute Puerto Rico source income and,
therefore, qualify for the exclusion provided in Section 933(l) of the Internal
Revenue Code, provided such bonds do not constitute inventory in the hands of
such individual.
The Puerto Rico Internal Revenue code does not provide rules with respect
to the treatment of the excess of the amount due at maturity of a bond over its
initial offering price ("original issue discount"). Under current administrative
practice followed by the Puerto Rico Treasury Department, original issue
discount is treated as interest.
You should be aware that ownership of the bonds may result in having a
portion of your interest expense allocable to interest on the bonds disallowed
for purposes of computing the regular tax and the alternative minimum tax for
Puerto Pico income tax purposes.
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The opinion of Fiddler Gonzalez & Rodriguez, LLP, bond counsel, regarding
the tax consequences under the Internal Revenue Code and the Puerto Rico
Internal Revenue Code arising from ownership or disposition of the bonds is
limited to the above.
RATING
Doral Financial has applied for ratings on the bonds from Standard & Poor's
Ratings Services, Duff & Phelps and Moody's Investors Service, Inc. There is no
assurance that any rating given to the bonds will remain in effect for any given
period or that it will not be revised downward or withdrawn entirely by Standard
& Poor's, Duff & Phelps or Moody's if, in their sole judgment, circumstances so
warrant. Any such downward revision or withdrawal of a rating may have an
adverse effect on the market prices of the bonds.
Any rating given to the bonds will reflect only the views of Standard &
Poor's, Duff & Phelps and Moody's. An explanation of the significance of any
rating may be obtained from Standard & Poor's at 55 Water St., New York, New
York 10041; from Duff & Phelps at 55 East Monroe Street, Chicago, Illinois
60608; and from Moody's at 99 Church Street, New York, New York 10007. A rating
does not constitute a recommendation to buy, sell or hold the bonds, and each
should be evaluated independently of any other rating. There is no assurance
that the rating initially assigned to the bonds will not be lowered or
withdrawn, which could adversely affect the value of and market the bonds.
Standard & Poor's, Duff & Phelps and Moody's were provided with materials
relating to Doral Properties, Doral Financial, the bonds and other relevant
information, and no application has been made to any other rating agency for
purposes of obtaining a rating on the bonds. In addition, if requested, Doral
Properties and Doral Financial shall deliver to Standard & Poor's, Duff & Phelps
and Moody's, from time to time, such documents and other relevant information
required for purposes of Standard & Poor's, Duff & Phelps and Moody's restating
or reconfirming the rating of the bonds.
LEGAL INVESTMENT
The bonds will be eligible for deposit by banks in Puerto Rico to secure
public funds and will be approved investments for insurance companies to qualify
them to do business in Puerto Rico as required by law.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of a certain bond purchase agreement to
be entered into among AFICA, Doral Properties, Doral Financial and the
underwriters named on the cover page of this official statement and prospectus
(the "bond purchase agreement"), AFICA has agreed to sell to the underwriters,
and the underwriters have agreed to purchase from AFICA, all of the bonds listed
on the inside front cover page of this official statement and prospectus. The
underwriters will purchase the bonds at the public offering price thereof less
the underwriting discount set forth below:
<TABLE>
<CAPTION>
AGGREGATE OFFERING PROCEEDS TO
PRICE OF THE UNDERWRITING DORAL
BONDS DISCOUNT PROPERTIES(1)
------------------ ------------ -------------
<S> <C> <C> <C>
Per bond................................................ % % %
Total......................................... $ $ $
</TABLE>
- ---------------
(1) Before deducting expenses of this offering payable by Doral Properties
estimated at $ .
Under the terms of the bond purchase agreement, AFICA and Doral Properties
are obligated to sell, and the underwriters are obligated to purchase, all of
the bonds shown on the inside front cover page of this official statement and
prospectus, if any bonds are purchased.
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The bonds are a new issue of securities with no established trading market.
The underwriters have advised Doral Properties that they presently intend to
make a market as permitted by applicable laws and regulations. The underwriters
are not obligated, however, to make a market in the bonds and any such market
making may be discontinued at any time at the sole discretion of the
underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the bonds.
The underwriters propose initially to offer the bonds to the public, when,
as and if issued by AFICA and accepted by the underwriters, at the initial
public offering prices set forth or derived from information shown on the inside
front cover page of this official statement and prospectus. The initial offering
prices may be changed from time to time by the underwriters. The underwriters
may offer and sell the bonds to certain dealers (including dealers depositing
bonds into investment trusts) and others at prices lower than the initial public
offering prices stated or derived from information shown on the inside front
cover page hereof.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the bonds, including stabilizing, syndicate short covering and penalty bid
transactions. Such stabilizing, if commenced, may be discontinued at any time.
The bond purchase agreement will provide that the obligations of the
underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The underwriters are committed to
purchase all of the bonds if any are purchased.
Doral Properties and Doral Financial have agreed to reimburse the
underwriters for their out of pocket expenses (including fees of their counsel)
in connection with the sale of the bonds. Doral Properties and Doral Financial
have also agreed to indemnify the underwriters and AFICA against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriters may be required to make in respect
thereof.
Doral Securities, Inc., is a wholly-owned subsidiary of Doral Financial and
an affiliate of Doral Properties. Accordingly, the offering is being conducted
in accordance with Rule 2720 of the National Association of Securities Dealers,
Inc.
Several of the underwriters have from time to time been customers of,
engaged in transactions with, or performed services for, Doral Financial and its
subsidiaries in the ordinary course of business. The underwriters may continue
to do so in the future. In addition, Popular, Inc., the parent company of
Popular Securities, Inc., one of the underwriters, owns all the outstanding
shares of Doral Financial's 8% Preferred Stock. The shares of common stock
issuable upon conversion of the 8% Preferred Stock together with other shares of
common stock owned by Popular, Inc. equal approximately 4.9% of Doral
Financial's outstanding common stock.
CONTINUING DISCLOSURE COVENANT
Doral Financial will enter into a continuing disclosure agreement with the
trustee wherein Doral Financial will covenant for the benefit of the holders and
the beneficial owners of the bonds to file within 120 days after the end of each
fiscal year with each nationally recognized municipal securities information
repository ("NRMSIR") and with any Puerto Rico state information depository
("SID"), core financial information and operating data for Doral Financial and
its consolidated subsidiaries for such fiscal year, including (1) audited
financial statements for Doral Financial prepared in accordance with generally
accepted accounting principles in effect from time to time, and (2) operating
and financial data generally found or incorporated by reference in this official
statement and prospectus. Doral Financial expects to provide this core financial
information and operating data by filing with each NRMSIR and with any Puerto
Rico SID copies of its Annual Report on Form 10-K, its annual Proxy or
Information Statement, and any documents incorporated by reference therein, as
filed with the SEC.
34
<PAGE> 39
Doral Financial will also covenant to file in a timely manner with each
NRMSIR or with the Municipal Securities Rulemaking Board ("MSRB"), and with any
Puerto Rico SID, notice of any of the following events with respect to the
bonds, if material:
(1) principal and interest payment delinquencies;
(2) non-payment related defaults;
(3) unscheduled draws on debt service reserves reflecting financial
difficulties;
(4) unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) substitution of credit or liquidity providers, or their failure to
perform;
(6) adverse tax opinions or events affecting the tax-exempt status of
the bonds;
(7) modifications to rights of bondholders;
(8) bond calls,
(9) defeasances;
(10) release, substitution, or sale of property securing repayment of
the bonds; and
(11) rating changes.
Doral Financial will also covenant to file in a timely manner with each
NRMSIR or with the MSRB, and with any Puerto Rico SID, notice of a failure to
provide the required annual financial information on or before the specified
period.
These covenants have been made in order to assist the Underwriters in
complying with paragraph (b)(5) of Rule 15c2-12 of the SEC.
Doral Financial does not undertake to provide the above-described event
notice of a scheduled redemption, not otherwise contingent upon the occurrence
of an event, if the terms, dates and amounts of redemption are set forth in
detail in this official statement and prospectus under "The Bonds -- Mandatory
Redemption."
As of the date of this official statement and prospectus, there was no
Puerto Rico SID. The nationally recognized municipal securities information
repositories are: Bloomberg Municipal Repository, P.O. Box 840, Princeton, New
Jersey 08542-0840-1 Kenny Information Systems, Inc., Attn: Kenny Repository
Service, 65 Broadway, New York, New York 10006; Thompson NRMSIR, 395 Hudson
Street New York, New York 10004, Attn: Municipal Disclosure; and DPC Data Inc.,
One Executive Drive, Fort Lee, New Jersey 07024.
Doral Financial may from time to time choose to provide notice of the
occurrence of certain other events in addition to those listed above if, in its
judgment, such other events are material with respect to the bonds, but Doral
Financial does not undertake to provide any such notice of the occurrence of any
material event except those events listed above.
No bondholder may institute any suit, action or proceeding at law or in
equity ("Proceeding") for the enforcement of the foregoing covenants or for any
remedy for breach thereof, unless such bondholder shall have filed with Doral
Financial written notice of any request to cure such breach, and Doral Financial
shall have refused to comply within a reasonable time. All Proceedings shall be
instituted only as specified in such Continuing Disclosure Agreement in any
federal or Puerto Rico court located in the Municipality of San Juan, and for
the equal benefit of all bondholders of the outstanding bonds benefitted by the
same or a substantially similar covenant, and no remedy shall be sought or
granted other than specific performance by Doral Financial of the covenant at
issue. Notwithstanding the foregoing, no challenge to the adequacy of the
information provided in accordance with the filings mentioned above may be
prosecuted by any bondholder except in compliance with the remedial and
enforcement provisions contained in the trust agreement. See "Summary of the
Trust Agreement -- Enforcement of Remedies."
35
<PAGE> 40
The above covenants may only be amended or waived if:
(1) the amendment or waiver is made in connection with a change in
circumstances that arises from a change in legal requirements, change in
law, or change in the identity, nature or status of Doral Properties and
Doral Financial, the covenants, as amended, or the provision as waived,
would have complied with the requirements of the Rule at the time of award
of the bonds, after taking into account any amendments or change in
circumstance as evidenced by the receipt of an opinion of counsel
experienced in federal securities laws acceptable to the trustee and Doral
Financial; and the amendment or waiver does not materially impair the
interests of the bondholders, as determined by the trustee or by counsel
experienced in federal securities laws acceptable to the trustee and Doral
Financial; and
(2) the annual financial information containing, if applicable, the
amended operating data or financial information will explain, in narrative
form, the reasons for the amendment or waiver and the impact of the change
in the type of operating data or financial information being provided.
WHERE YOU CAN FIND MORE INFORMATION
Doral Financial files annual, quarterly and current reports, proxy
statements and other information with the SEC. Doral Financial has also filed
with the SEC a registration statement on Form S-3, to register the securities
being offered by this official statement and prospectus. This official statement
and prospectus, which forms part of the registration statement, does not contain
all of the information included in the registration statement. For further
information about Doral Financial and the securities offered in this official
statement and prospectus, you should refer to the registration statement and its
exhibits.
You may read and copy any document filed by Doral Financial with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. Doral Financial files its SEC materials
electronically with the SEC, so you can also review Doral Financial's filings by
accessing the web site maintained by the SEC at http://www.sec.gov. This site
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
The SEC allows Doral Financial to "incorporate by reference" the
information it files with them, which means that it can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this official statement
and prospectus. Information that Doral Financial files later with the SEC will
automatically update and supersede information in this official statement and
prospectus. In all cases, you should rely on the later information over
different information included in this official statement and prospectus. Doral
Financial has previously filed the following documents with the SEC and is
incorporating them by reference into this official statement and prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999; and
- Current Reports on Form 8-K, dated January 12, 1999, February 22, 1999,
April 8, 1999, May 14, 1999 and July 7, 1999
Doral Financial also incorporates by reference, from the date of the
initial filing of the registration statement, all documents filed by it with the
SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934 after the date of this official statement and prospectus and until Doral
Financial sells all of the securities being offered by this official statement
and prospectus.
36
<PAGE> 41
You may request a copy of these filings at no cost, by writing or
telephoning Doral Financial at the following address:
Doral Financial Corporation
Attn.: Mario S. Levis, Executive
Vice President & Treasurer
1159 Franklin D. Roosevelt Avenue
San Juan, Puerto Rico 00920
(787) 749-7108
LEGAL MATTERS
Legal matters incident to the authorization, issuance and sale of the bonds
are subject to the unqualified approving opinion of Fiddler Gonzalez &
Rodriguez, LLP, San Juan, Puerto Rico, Bond Counsel. Certain legal matters will
be passed upon for Doral Properties and Doral Financial by Pietrantoni Mendez &
Alvarez LLP, San Juan, Puerto Rico, and for the Underwriter by O'Neill & Borges,
San Juan, Puerto Rico. As of the date of this official statement and prospectus,
attorneys working in Pietrantoni Mendez & Alvarez LLP owned, in the aggregate,
approximately 3,468 shares of common stock of Doral Financial.
EXPERTS
The financial statements of Doral Financial as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998
incorporated by reference in this official statement and prospectus have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
PUERTO RICO INDUSTRIAL, TOURIST,
EDUCATIONAL, MEDICAL AND
ENVIRONMENTAL CONTROL
FACILITIES FINANCING AUTHORITY
By:
--------------------------------------
Executive Director
APPROVED:
DORAL PROPERTIES, INC.
By:
- ----------------------------------------------------
37
<PAGE> 42
APPENDIX A
[PROPOSED FORM OF OPINION OF BOND COUNSEL]
, 1999
Puerto Rico Industrial, Tourist, Educational,
Medical and Environmental Control Facilities
Financing Authority
San Juan, Puerto Rico
Gentlemen:
We have examined Act No. 121 of the Legislature of Puerto Rico, approved
June 27, 1977, as amended (the "Act"), creating Puerto Rico Industrial, Medical,
Educational and Environmental Pollution Control Facilities Financing Authority
(the "Authority"), a body corporate and politic constituting a public
corporation and governmental instrumentality of Puerto Rico ("Puerto Rico").
We have also examined certified copies of the resolution of the Board of
Directors of the Authority authorizing the execution and delivery of the Trust
Agreement and the Loan Agreement hereinafter referred to, and certified copies
of the proceedings and other proofs submitted relative to the authorization,
issuance, and sale of the following bonds (the "Bonds"):
$
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL
AND ENVIRONMENTAL CONTROL
FACILITIES FINANCING AUTHORITY
INDUSTRIAL REVENUE BONDS, 1999 SERIES A
(DORAL FINANCIAL CORPORATION CENTER PROJECT)
The Bonds are issued under and pursuant to a Deed of Trust Agreement (the
"Trust Agreement"), dated the date hereof, by and between the Authority and
, San Juan, Puerto Rico, Trustee (the "Trustee").
The proceeds of the sale of the Bonds are to be used for the purpose of
financing in part the development, construction, and equipping of a commercial
office building with an adjacent parking structure to be known as the Doral
Financial Corporation Center the ("Project") to be located in the Municipality
of San Juan, Puerto Rico.
The Authority has entered into a Loan and Guaranty Agreement, dated the
date hereof (the "Loan Agreement"), with Doral Properties, Inc. (the "Borrower")
and Doral Financial Corporation (the "Guarantor") providing for the loan of the
proceeds of the sale of the Bonds to the Borrower and for repayment by the
Borrower of the loan in amounts sufficient to pay the principal of and interest
on the Bonds as the same will become due and payable. The Loan Agreement
provides that the loan repayments will be paid directly to the Trustee and will
be deposited to the credit of a special fund created by the Trust Agreement and
designated "Industrial Revenue Bonds 1999 Series A (Doral Financial Corporation
Center Project) Bond Fund" (the "Bond Fund"), which special fund is charged with
the payment of the principal of, premium, if any, and interest on the Bonds. The
obligations of the Borrower under the Loan Agreement are guaranteed by the
Guarantor. The Loan Agreement, except for certain rights of the Authority, and
the repayments thereunder, has been assigned to the Trustee.
The Bonds are subject to redemption as provided in the Trust Agreement.
As to any questions of fact material to our opinion, we have relied upon
representations of the Authority, the Borrower, and the Guarantor contained in
the Trust Agreement and the Loan Agreement,
A-1
<PAGE> 43
the certified proceedings and other certifications by officials of the
Authority, the Borrower, and the Guarantor without undertaking to verify the
same by independent investigation. For the purposes of this opinion we assume
that the Borrower and the Guarantor will comply with all provisions of the Loan
Agreement, particularly those dealings with the source of income and that the
proceeds of the Bonds will be used in accordance with the provisions of the
Trust Agreement.
We have also examined one of the Bonds as executed and authenticated.
All capitalized words and terms used in this opinion letter and not
otherwise defined herein will have the meanings ascribed to them in the Trust
Agreement.
From such examination, we are of the opinion that:
1. The Act is valid.
2. The proceedings of the Board of Directors of the Authority required
in connection with the authorization, issuance and sale of the Bonds and
the authorization, execution, and delivery of the Loan Agreement and the
Trust Agreement have been validly and legally taken.
3. The Trust Agreement and the Loan Agreement have been duly
authorized, executed and delivered by the Authority and assuming due
authorization, execution and delivery by the other parties thereto,
constitute the legal, valid, binding and enforceable obligations of the
Authority in accordance with their terms, except to the extent such
enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally, and subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4. The Bonds have been duly authorized by the Authority and constitute
legal, valid, and binding obligations of the Authority, payable solely from
the Bond Fund and entitled to the benefit of the Trust Agreement.
5. All right, title and interest of the Authority in and to the Loan
Agreement (except certain rights of the Authority including its rights to
payment of expenses indemnity) have been validly assigned to the Trustee.
6. The Bonds do not constitute an indebtedness of either Puerto Rico
or any of its political subdivisions, other than the Authority, and neither
Puerto Rico nor any of such political subdivisions, other than the
Authority, will be liable thereon.
7. The Bonds, and the transfer of the Bonds, including any gain
derived upon the sale of the Bonds, are exempt from Puerto Rico income tax
pursuant to Article 8(b) of the Act.
8. Interest on the Bonds is (i) excluded from the gross income of the
recipient thereof for Puerto Rico income tax purposes pursuant to Section
1022(b)(4)(B) of the Puerto Rico Internal Revenue Code of 1994, as amended
(the "PR-Code"); (ii) exempt from Puerto Rico income tax and alternative
minimum tax pursuant to Section 1022(b)(4)(B) of the PR-Code, Article 8(b)
of the Act, and Section 3 of the Puerto Rican Federal Relations Act (the
"PRFRA"); and (iii) exempt from Puerto Rico municipal license tax pursuant
to Section 9(25) of the Puerto Rico Municipal License Tax Act of 1974, as
amended, and Section 3 of the PRFRA.
9. The Bonds are exempt from Puerto Rico personal property tax
pursuant to Section 3.11 of the Puerto Rico Municipal Property Tax Act of
1991, as amended, and Section 3 of the PRFRA.
10. The Bonds are exempt from Puerto Rico (i) gift tax with respect to
donors who are residents of Puerto Rico at the time the gift is made and
(ii) estate tax with respect to estates of decedents who are residents of
Puerto Rico at the time of death, excluding in each case United States
citizens who acquired their United States citizenship other than by reason
of birth or residence in Puerto Rico.
A-2
<PAGE> 44
11. Assuming that the Borrower complies with the source of income
representations, warranties and covenants contained in the Loan Agreement,
then:
(A) Interest received or accrued, or "original issue discount"
(within the meaning of the Code; "OID"), on the Bonds is excludable from
gross income pursuant to Section 933(1) of the Code if the holder of the
Bonds is an individual who is a bona fide resident of Puerto Rico during
the entire taxable year in which the interest is received or accrued.
(B) Interest received or accrued, or OID, on the Bonds is not
subject to United States federal income tax if the holder of the Bonds
is a corporation organized under the laws of Puerto Rico or any foreign
country and such interest is not effectively connected with the conduct
of a trade or business in the United States by such corporation, such
corporation is not a foreign personal holding company, a controlled
foreign corporation or a passive foreign investment company under the
Code, and such corporation is not treated as a domestic corporation for
the purposes of the Code.
12. Interest on the Bonds is not excluded from the gross income of the
recipient thereof for United States federal income tax purposes under
Section 103(a) of the Code.
United States taxpayers, other than individuals who are bona fide residents
of Puerto Rico during the entire taxable year, will be subject to United States
federal income tax on gain realized upon the sale or exchange of the Bonds.
Pursuant to Notice 89-40, 1989-1 CB 681, gain on the sale of the Bonds (not
including original issue discount accruing under the Code as of the date of such
sale or exchange) by an individual who is a bona fide resident of Puerto Rico
for purposes of Section 865(g)(1) of the Code will constitute income from
sources within Puerto Rico and will qualify for the exclusion provided in
Section 933(1) of the Code, provided that the Bonds do not constitute inventory
property in such individual's hands.
The PR Code does not provide rules with respect to the treatment of the
excess of the amount due at maturity of a bond over its initial offering price
("original issue discount"). Under current administrative practice followed by
the Puerto Rico Treasury Department, original issue discount is treated as
interest.
Ownership of the Bonds may result in having a portion of the interest
expense allocable to interest or original issue discount on the Bonds disallowed
for purposes of computing the regular tax and the alternative minimum tax for
Puerto Rico income tax purposes.
This opinion is limited to the above, and we express no other opinion
regarding Puerto Rico or United States tax consequences arising from ownership
or disposition of the Bonds.
This letter is furnished by us solely for the benefit of the Authority and
the holders from time to time of the Bonds and may not be relied upon by any
other person.
We hereby consent to the inclusion of this opinion as Appendix A to the
official statement and prospectus included in the registration statement. We
further consent to the reference made to us under the captions "Summary -- Tax
Consequences," "Taxation" and "Legal Matters" in the official statement and
prospectus.
Respectfully submitted,
[To be signed
"Fiddler Gonzalez & Rodriguez, L.L.P"]
A-3
<PAGE> 45
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
OFFICIAL STATEMENT AND PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AFICA, DORAL
FINANCIAL, DORAL PROPERTIES OR THE UNDERWRITER OF THE BONDS. THIS OFFICIAL
STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY THE BONDS OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT AND PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AFICA, DORAL FINANCIAL OR DORAL
PROPERTIES SINCE THE DATE HEREOF OR THAT THE OTHER INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................... 1
RISK FACTORS.............................. 5
FORWARD-LOOKING STATEMENTS................ 7
RECENT DEVELOPMENTS....................... 7
DORAL PROPERTIES.......................... 7
DORAL FINANCIAL........................... 8
USE OF PROCEEDS........................... 9
CAPITALIZATION............................ 10
SELECTED FINANCIAL DATA................... 11
DESCRIPTION OF THE BONDS.................. 14
SUMMARY OF THE LOAN AND GUARANTY
AGREEMENT............................... 19
SUMMARY OF THE TRUST AGREEMENT............ 25
AFICA..................................... 30
GOVERNMENT DEVELOPMENT BANK FOR PUERTO
RICO.................................... 31
TAXATION.................................. 31
RATING.................................... 33
LEGAL INVESTMENT.......................... 33
PLAN OF DISTRIBUTION...................... 33
CONTINUING DISCLOSURE COVENANT............ 34
WHERE YOU CAN FIND MORE INFORMATION....... 36
LEGAL MATTERS............................. 37
EXPERTS................................... 37
APPENDIX A: PROPOSED FORM OF OPINION OF
BOND COUNSEL............................ A-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$44,425,000*
AFICA
INDUSTRIAL REVENUE BONDS
1999 SERIES A
(DORAL FINANCIAL CORPORATION
CENTER PROJECT)
---------------------------
OFFICIAL STATEMENT
AND PROSPECTUS
---------------------------
POPULAR SECURITIES
PAINEWEBBER INCORPORATED
OF PUERTO RICO
DORAL SECURITIES
SANTANDER SECURITIES
- ---------------
* Preliminary. Subject to change.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 46
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering all of which will be borne by
the Registrant are as follows (all amounts are estimates except for the SEC
Registration fee):
<TABLE>
<S> <C>
SEC registration fee........................................ $ 12,350
NASD fee.................................................... 4,943
AFICA fee................................................... 222,125
Printing expenses........................................... 25,000
Legal fees and expenses..................................... 215,000
Accounting fees and expenses................................ 25,000
Trustee fees and expenses................................... 15,000
Rating Agency fees.......................................... 50,000
Miscellaneous expenses...................................... 46,460
--------
Total............................................. $615,878
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Doral Financial Corporation and Doral Properties, Inc. are Puerto Rico
corporations.
(i) Article 1.02(b)(6) of the Puerto Rico General Corporation Act (the
"PR GCA") provides that a corporation may include in its certificate of
incorporation a provision eliminating or limiting the personal liability of
members of its board of directors or governing body for breach of a
director's fiduciary duty of care. However, no such provision may eliminate
or limit the liability of a director for breaching his duty of loyalty,
failing to act in good faith, engaging in intentional misconduct or
knowingly violating a law, paying a dividend or approving a stock
repurchase which was illegal, or obtaining an improper personal benefit. A
provision of this type has no effect on the availability of equitable
remedies, such as injunction or rescission, for breach of fiduciary duty.
Article Seventh of Doral Financial's Restated Certificate of Incorporation
and Doral Properties' Certificate of Incorporation contains such a
provision.
(ii) Article 4.08 of the PR GCA authorizes Puerto Rico corporations to
indemnify their officers and directors against liabilities arising out of
pending or threatened actions, suits or proceedings to which they are or
may be made parties by reason of being directors or officers. Such rights
of indemnification are not exclusive of any other rights to which such
officers or directors may be entitled under any by-law, agreement, vote of
stockholders or otherwise. The Restated Certificate of Incorporation of
Doral Financial and the Certificate of Incorporation of Doral Properties
provide that they shall indemnify their respective directors, officers and
employees to the fullest extent permitted by law. Doral Financial also
maintains directors' and officers' liability insurance on behalf of its
directors and officers.
(b) Section 1 of Article IX of Doral Financial's By-laws (the "By-laws")
provides that Doral Financial shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of Doral Financial) by
reason of the fact that he is or was a director, officer, employee or agent of
Doral Financial or is or was serving at the request of Doral Financial as a
director, officer, employer or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Doral
Financial, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
II-1
<PAGE> 47
Section 2 of Article IX of the By-laws provides that Doral Financial shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
Doral Financial to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards set forth
in the preceding paragraph, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to Doral Financial unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication of liability, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Section 3 of Article IX of the By-laws provides that to the extent a
director or officer of Doral Financial has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
Sections 1 and 2 of Article IX of the By-laws or in the defense of any claim,
issue, or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Section 5 of Article IX of the By-laws provides that Doral Financial shall
pay expenses incurred in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding. Doral Financial must make such advanced payments if it receives an
undertaking by or on behalf of any person covered by Section 1 of Article IX of
the By-laws to repay such amounts, if it is ultimately determined that he is not
entitled to be indemnified by Doral Financial as authorized in Article IX of the
By-laws.
Sections 6 and 7 of Article IX of the By-laws provide that indemnification
provided for by Sections 1 and 2 of Article IX of the By-laws shall not be
deemed exclusive of any other rights to which the indemnified party may be
entitled; and that Doral Financial may purchase and maintain insurance on behalf
of a director or officer of Doral Financial against any liability asserted
against him or incurred by him in any such capacity or arising out of his status
as such whether or not Doral Financial would have the power to indemnify him
against such liabilities under such Sections 1 and 2 of Article IX of the By-
laws.
(c) Doral Properties' By-laws contain provisions that are identical in all
respects to those provisions of Doral Financial's By-laws described in (b)
above.
ITEM 16. LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <C> <S>
1.1* -- Bond Purchase Agreement among Doral Properties, Inc., Doral
Financial Corporation, Popular Securities, Inc., PaineWebber
Incorporated of Puerto Rico, Doral Securities, Inc.,
Santander Securities Corporation of Puerto Rico and Puerto
Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority
("AFICA")
4.1** -- Loan and Guaranty Agreement among AFICA, Doral Properties,
Inc. and Doral Financial Corporation.
4.2** -- Trust Agreement between AFICA and Citibank, N.A.
4.3** -- Serial Bond (included in Exhibit 4.2 hereof).
4.4** -- Term Bond (included in Exhibit 4.2 hereof).
4.5** -- Continuing Disclosure Agreement
5** -- Opinion of Pietrantoni Mendez & Alvarez LLP regarding
legality of securities being registered.
8** -- Opinion of Fiddler Gonzalez & Rodriguez, LLP with respect to
certain tax matters.
</TABLE>
II-2
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <C> <S>
12* -- Statement of Computation of Ratios of Earnings to Fixed
Charges.
23.1** -- Consent of Pietrantoni Mendez & Alvarez, LLP (included in
Exhibit 5).
23.2** -- Consent of Fiddler Gonzalez & Rodriguez, LLP (included in
Exhibit 8).
23.3* -- Consent of PricewaterhouseCoopers LLP.
24* -- Powers of Attorney (included at pages II-4 and II-6).
25** -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by a pre-effective amendment to this Registration Statement.
ITEM 17. UNDERTAKINGS
The undersigned Co-registrants hereby undertake that for purposes of
determining any liability under the Act, each filing of Doral Financial
Corporation's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Co-registrants pursuant to the foregoing provisions in Item 15, or otherwise,
the Co-registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Co-registrants of expenses incurred or paid by a director, officer or
controlling person of the Co-registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Co-registrants
will, unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Co-registrants hereby undertake that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by any Co-registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering hereof.
II-3
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly cause this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in San Juan, Puerto Rico, on the 23rd day of July, 1999.
DORAL FINANCIAL CORPORATION
By: /s/ SALOMON LEVIS
------------------------------------
Salomon Levis
Chairman of the Board and Chief
Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Salomon Levis and Richard F. Bonini and each of them, each with full power to
act without the other, his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for him and in his name,
place and stead in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and any
registration statement relating to the same offering as this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each of said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SALOMON LEVIS Chairman of the Board and July 23, 1999
- ----------------------------------------------------- Chief Executive Officer
Salomon Levis
/s/ RICHARD F. BONINI Senior Executive Vice President, July 23, 1999
- ----------------------------------------------------- Chief Financial Officer and
Richard F. Bonini Director
/s/ RICARDO MELENDEZ Vice President and Chief July 23, 1999
- ----------------------------------------------------- Accounting Officer
Ricardo Melendez
/s/ A. BREAN MURRAY Director July 23, 1999
- -----------------------------------------------------
A. Brean Murray
/s/ EDGAR M. CULLMAN, JR. Director July 23, 1999
- -----------------------------------------------------
Edgar M. Cullman, Jr.
Director July 23, 1999
- -----------------------------------------------------
John L. Ernst
</TABLE>
II-4
<PAGE> 50
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EFRAIM M. KIER Director July 23, 1999
- -----------------------------------------------------
Efraim M. Kier
/s/ ZOILA LEVIS Director July 23, 1999
- -----------------------------------------------------
Zoila Levis
/s/ VICTOR M. PONS, JR. Director July 23, 1999
- -----------------------------------------------------
Victor M. Pons, Jr.
</TABLE>
II-5
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Co-registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly cause this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in San Juan, Puerto Rico, on the 23rd day of July, 1999.
DORAL PROPERTIES, INC.
By: /s/ SALOMON LEVIS
------------------------------------
Salomon Levis
Chairman of the Board and Chief
Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Salomon Levis, Zoila Levis and Mario S. Levis and each of them, each with full
power to act without the other, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto each of said attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SALOMON LEVIS Chairman of the Board and July 23, 1999
- ----------------------------------------------------- Chief Executive Officer
Salomon Levis
/s/ ZOILA LEVIS President and Director July 23, 1999
- -----------------------------------------------------
Zoila Levis
/s/ MARIO S. LEVIS Executive Vice President, July 23, 1999
- ----------------------------------------------------- Treasurer
Mario S. Levis (Principal Financial Officer)
and Director
/s/ RICARDO MELENDEZ Vice President and July 23, 1999
- ----------------------------------------------------- Controller
Ricardo Melendez
</TABLE>
II-6
<PAGE> 52
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- ------- ------------------------
<C> <C> <S>
1.1* -- Bond Purchase Agreement among Doral Properties, Inc., Doral
Financial Corporation, Popular Securities, Inc., PaineWebber
Incorporated of Puerto Rico, Doral Securities, Inc.,
Santander Securities Corporation of Puerto Rico and Puerto
Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority
("AFICA")
4.1** -- Loan and Guaranty Agreement among AFICA, Doral Properties,
Inc. and Doral Financial Corporation.
4.2** -- Trust Agreement between AFICA and Citibank, N.A.
4.3** -- Serial Bond (included in Exhibit 4.2 hereof).
4.4** -- Term Bond (included in Exhibit 4.2 hereof).
4.5** -- Continuing Disclosure Agreement
5** -- Opinion of Pietrantoni Mendez & Alvarez LLP regarding
legality of securities being registered.
8** -- Opinion of Fiddler Gonzalez & Rodriguez, LLP with respect to
certain tax matters.
12* -- Statement of Computation of Ratios of Earnings to Fixed
Charges.
23.1** -- Consent of Pietrantoni Mendez & Alvarez, LLP (included in
Exhibit 5).
23.2** -- Consent of Fiddler Gonzalez & Rodriguez, LLP (included in
Exhibit 8).
23.3* -- Consent of PricewaterhouseCoopers LLP.
24* -- Powers of Attorney (included at pages II-4 and II-6).
25** -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by a pre-effective amendment to this Registration Statement.
II-7
<PAGE> 1
EXHIBIT 1.1
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL,
MEDICAL AND ENVIRONMENTAL CONTROL
FACILITIES FINANCING AUTHORITY
INDUSTRIAL REVENUE BONDS
1999 SERIES A
(Doral Financial Corporation Center Project)
BOND PURCHASE AGREEMENT
__________, 1999
Puerto Rico Industrial, Tourist,
Educational, Medical and Environmental
Control Facilities Financing Authority
Minillas Government Center
Santurce, Puerto Rico
Attention: Executive Director
Doral Financial Corporation
Doral Properties, Inc.
1159 Franklin D. Roosevelt Avenue
San Juan, Puerto Rico 00920
Attention: President
Ladies and Gentlemen:
The undersigned (hereinafter called the "Underwriters") hereby offer to enter
into this Agreement with Puerto Rico Industrial, Tourist, Educational, Medical
and Environmental Control Facilities Financing Authority (hereinafter called the
"Authority"), a body corporate and politic constituting a public corporation and
governmental instrumentality of the Commonwealth of Puerto Rico (the
"Commonwealth"), created under Act No. 121 of the Legislature of Puerto Rico,
approved June 27, 1977, as amended (the "Act"), and with Doral Financial
Corporation, a corporation organized under the
<PAGE> 2
laws of the Commonwealth ("Doral Financial") and Doral Properties, Inc., a
corporation organized under the laws of the Commonwealth and a wholly-owned
subsidiary of Doral Financial (the "Borrower"), which upon your acceptance of
this offer and of this Agreement will be binding on the Authority, Doral
Financial, the Borrower and the Underwriters. This offer is made subject to the
acceptance of this Agreement by the Authority, Doral Financial and the Borrower
on or before 6:00 P.M., Atlantic Standard time, on ___________, 1999, and if not
so accepted will be subject to withdrawal by the Underwriters upon notice
delivered to the Authority, Doral Financial and the Borrower at any time prior
to such acceptance.
1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements set forth herein, the Underwriters
hereby agree to purchase from the Authority and the Authority hereby agrees to
sell and to deliver to the Underwriters all but not less than all of the
$44,425,000 principal amount of the Authority's Industrial Revenue Bonds, 1999
Series A (Doral Financial Corporation Center Project) (hereinafter called the
"Bonds"), at an aggregate purchase price of $ consisting of the respective
public offering prices of the Bonds, as set forth or derived from information
set forth in the Official Statement and Prospectus (hereinafter mentioned)
(expressed in dollars), less underwriters' discount in an amount equal to $ ),
[plus] [minus] original issue [premium] [discount] of $______. The Bonds shall
be dated the date of delivery thereof, shall bear interest at such rates,
payable on the first day of each month in each year, commencing ______________,
1999, until maturity or prior redemption, all as described in the Official
Statement and Prospectus.
2
<PAGE> 3
2. The Bonds and the Official Statement and Prospectus.
(a) The Bonds shall be as described in the Official Statement
and Prospectus of the Authority, dated 1999. Such Official Statement and
Prospectus (including the cover page and all appendices included therein and all
information incorporated by reference therein), as amended or supplemented from
time to time, is hereinafter referred to as the "Official Statement and
Prospectus." The Bonds shall be issued and secured under and pursuant to a Trust
Agreement, to be dated as of , 1999 (the "Trust Agreement"), between the
Authority and Citibank, N.A., as trustee (the "Bond Trustee"). The Bonds shall
be payable and shall be subject to redemption as provided in the Trust
Agreement.
(b) The proceeds from the sale of the Bonds will be loaned by
the Authority to the Borrower pursuant to a Loan and Guaranty Agreement, to be
dated as of __________, 1999 (the "Loan and Guaranty Agreement"), between the
Authority, the Borrower, and Doral Financial, for the purpose, among other
things, of:
(i) financing, in part, the development,
construction and equipping of the Doral Financial Corporation Center (the
"Project"); and
(ii) paying certain expenses incurred in connection
with the issuance and sale of the Bonds.
(c) The obligations of the Borrower under the Loan and
Guaranty Agreement will be guaranteed by Doral Financial.
(d) Concurrently with its acceptance hereof, the Authority
shall deliver to the Representative (hereinafter referred to):
(i) a certified copy of the resolution or
3
<PAGE> 4
resolutions of the Authority (collectively, the "Bond Resolution") approved and
adopted by the Board of Directors of the Authority on ___________, 1999
authorizing the issuance and sale of the Bonds; and
(ii) a copy of the Official Statement and
Prospectus manually signed on behalf of the Authority by the Executive Director
or the Assistant Executive Director of the Authority, or any person authorized
to act on his behalf pursuant to the by-laws of the Authority, and approved by
the Borrower.
The Authority will provide to the Representative such additional copies of the
Bond Resolution and the Official Statement and Prospectus as the Representative
may reasonably request. As soon as practicable (but not later than two days)
after the date hereof, the Authority shall deliver to the Underwriters a
sufficient number of copies of the Official Statement and Prospectus as the
Underwriters may reasonably request so as to enable the Underwriters to comply
with the provisions of Paragraph (b)(4) of Rule 15c2-12 of the Securities
Exchange Act of 1934, as amended (the "Rule"). The Authority shall be under no
obligation to determine what number of copies of the Official Statement and
Prospectus requested by the Underwriters pursuant to the preceding sentence
shall be sufficient to enable the Underwriters to comply with the requirements
of the Rule.
The Authority has previously delivered to the Underwriters a
Preliminary Official Statement and Prospectus of the Authority, dated July __,
1999, relating to the Bonds (such Preliminary Official Statement and Prospectus,
including all appendices thereto, and all information included or incorporated
by reference therein, being herein called the "Preliminary Official Statement
and Prospectus").
4
<PAGE> 5
(e) Concurrently with its acceptance hereof, the Borrower
shall deliver to the Representative a letter signed and dated the date hereof
and addressed to the Underwriters from Pricewaterhouse Coopers LLP, independent
certified public accountants, to the effect that such accounting firm confirms
that it is an independent certified public accountant with respect to Doral
Financial and the Borrower within the meaning of Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public Accountant
and stating that on the basis of a reading of the latest available interim
unaudited financial statements made available to them, inquiries of officers of
Doral Financial and the Borrower responsible for financial and accounting
matters and other specified procedures set forth in such letter, nothing came to
their attention that caused them to believe that (A) at the date of the latest
available interim financial statements of Doral Financial and the Borrower read
by such accountants and at a subsequent specified date not more than five
business days prior to the date of such letter, there was, with respect to Doral
Financial and the Borrower, any change in the capital stock, deposits,
securities sold under agreements to repurchase, notes payable, loans payable or
any decrease in stockholders' equity of the Borrower, Doral Financial and its
subsidiaries consolidated with amounts shown as of the dates of the financial
statements of Doral Financial and the Borrower included in the Official
Statement and Prospectus or (B) for the period from December 31, 1998, to the
date of the latest available interim financial statements of Doral Financial and
the Borrower read by such accountants and the period from the date of such
interim financial statements to a specified date not more than five business
days prior to the date of such letter, there was any decrease, as compared with
the corresponding periods of the previous year, in net income, except in all
cases set forth in clauses (A) and (B) above for changes, increases or decreases
which the Official Statement and Prospectus discloses
5
<PAGE> 6
have occurred, and they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information contained in
the Official Statement and Prospectus (in each case to the extent that such
dollar amounts, percentages and other financial information are derived from the
general accounting records of Doral Financial and the Borrower subject to the
internal controls of the accounting system of Doral Financial and the Borrower
or are derived directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general accounting records
and other procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in agreement with
such results.
(f) In order to allow the Underwriters to comply with the
Rule, the Borrower will enter into a Continuing Disclosure Agreement (the
"Continuing Disclosure Agreement") with the Trustee no later than the Closing
Date.
3. Authority of the Representative. The Underwriters represent that
Popular Securities, Inc. (the "Representative") has been duly authorized by the
Underwriters to act hereunder on behalf of the other Underwriters and shall have
full authority to execute this Agreement and to take such actions as it may deem
advisable in respect of all matters pertaining to this Agreement. Any action
taken under this Agreement by the Representative will be binding upon all the
Underwriters.
4. Public Offering. The Underwriters agree to make a bona fide public
offering of the Bonds at the offering prices set forth in the Official Statement
and Prospectus. The Underwriters may offer to sell the Bonds to certain dealers
and others at prices lower
6
<PAGE> 7
than the initial public offering prices, and such offering prices may be
changed, from time to time, by the Underwriters. The Authority, Doral Financial
and the Borrower authorize the Underwriters to use copies of the Official
Statement and Prospectus and any amendments or supplements thereto and the
information contained therein and copies of the Bond Resolution, the Loan and
Guaranty Agreement and the Trust Agreement in connection with the public
offering and sale of the Bonds, and Doral Financial, the Borrower and the
Authority agree not to supplement or amend, or cause to be supplemented or
amended, the Official Statement and Prospectus, the Bond Resolution, the Loan
and Guaranty Agreement or the Trust Agreement at any time prior to the date of
delivery and payment of the Bonds pursuant to Paragraph 8 hereof (such payment
and delivery and the other actions contemplated hereby to take place at the time
of such payment and delivery being hereafter sometimes called the "Closing")
without the prior written consent of the Underwriters.
5. Representations, Warranties and Agreements of the Authority. The
Authority hereby represents, warrants and agrees as follows:
(a) the Authority is a body corporate and politic constituting
a public corporation and governmental instrumentality of the Commonwealth duly
constituted and existing under the laws of the Commonwealth and has, and at the
date of the Closing will have, full right, power and authority (i) to enter into
this Agreement, the Trust Agreement, the Loan and Guaranty Agreement and the
Letter of Representations relating to the Bonds (the "DTC Agreement") from the
Authority and the Trustee to The Depository Trust Company, New York, New York
("DTC"), (ii) to adopt the Bond Resolution, (iii) to issue and sell the Bonds
pursuant to the Trust Agreement and to
7
<PAGE> 8
deliver or cause to be delivered the Bonds to or for the account of the
Underwriters as provided herein, (iv) to perform all of the transactions
contemplated by the Official Statement and Prospectus, the Trust Agreement, the
Loan and Guaranty Agreement, the Bond Resolution, the DTC Agreement and this
Agreement and (v) to approve, execute and deliver the Official Statement and
Prospectus;
(b) the Authority has duly adopted the Bond Resolution, has
duly authorized the execution and delivery of the Bonds, the Official Statement
and Prospectus, the Trust Agreement, the Loan and Guaranty Agreement, the DTC
Agreement and this Agreement and is duly authorized to perform the obligations
to be performed by the Authority under the Bond Resolution, the Bonds, the Trust
Agreement, the Loan and Guaranty Agreement, the Official Statement and
Prospectus, the DTC Agreement and this Agreement;
(c) the Authority is not, and at the time of the Closing will
not be, in breach of or in default under any applicable law (including, without
limitation, any administrative rulemaking law) or administrative regulation of
the Commonwealth, any applicable judgement or decree or any indenture, Loan and
Guaranty Agreement, note, resolution, agreement or other instrument to which the
Authority is a party or otherwise subject, which breach or default would in any
way materially adversely affect the Bond Resolution, this Agreement, the Trust
Agreement, the Loan and Guaranty Agreement, the DTC Agreement, the Official
Statement and Prospectus or the issuance of the Bonds, and no event has occurred
and is continuing which with the passage of time or giving of notice, or both,
would constitute such a breach or default; and the due authorization, execution
and delivery by the Authority of this Agreement, the Loan and Guaranty
Agreement, the Trust Agreement, the DTC Agreement, the Official Statement and
Prospectus and the issuance, sale and delivery of the Bonds, the adoption of the
Bond
8
<PAGE> 9
Resolution by the Authority and compliance with the provisions hereof and
thereof will not conflict with or constitute a breach of or default under any
law (including, without limitation, any administrative rulemaking law),
administrative regulation, judgement, decree or any agreement or other
instrument to which the Authority is a party or otherwise subject; nor will any
such execution, delivery, issuance, sale, adoption or compliance result in the
creation or imposition of any lien, charge, encumbrance or security interest of
any nature whatsoever upon any of the revenues, property or assets of the
Authority except as expressly provided or permitted hereby and by the Trust
Agreement, the Loan and Guaranty Agreement, the Bond Resolution, the DTC
Agreement, the Official Statement and Prospectus and the Bonds;
(d) all authorizations, approvals, licenses, consents and
orders of any governmental authority or agency having jurisdiction of the matter
which would constitute a condition precedent to, or the absence of which would
materially adversely affect, the performance by the Authority of its obligations
hereunder have been or will by the Closing be obtained;
(e) at the Closing Date (hereinafter mentioned), the Bonds,
the Bond Resolution, the Loan and Guaranty Agreement, the Trust Agreement, the
DTC Agreement and this Agreement will constitute the legal, valid and binding
obligations of the Authority enforceable in accordance with their respective
terms, except to the extent enforcement thereof may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights generally or may
be subject to general principles of equity (regardless of whether such
enforceability shall be considered in a proceeding in equity or at law);
(f) there is no action, suit, proceeding, inquiry or
9
<PAGE> 10
investigation, at law or in equity, before or by any court, public board or
body, pending or, to the knowledge of the Authority, threatened against the
Authority affecting the existence or powers of the Authority or the titles of
its officers to their respective offices or seeking to prohibit, restrain or
enjoin the issuance, sale or delivery of the Bonds, or in any way contesting or
affecting the validity or enforceability of the Bonds, the Bond Resolution, this
Agreement, the Trust Agreement, the Loan and Guaranty Agreement, the DTC
Agreement or contesting the powers of the Authority with respect to or any
authority for the issuance of the Bonds, the adoption of the Bond Resolution,
the execution, delivery or performance of this Agreement, the Trust Agreement,
the Loan and Guaranty Agreement, or the DTC Agreement, or, to the knowledge of
the Authority, is there any basis therefor, wherein an unfavorable decision,
ruling or finding would materially adversely affect the transactions
contemplated hereby or by the Official Statement and Prospectus or the validity
or enforceability of the Bonds, the Bond Resolution, this Agreement, the Trust
Agreement, the Loan and Guaranty Agreement, or the DTC Agreement;
(g) the Bonds, when sold to the Underwriters as provided
herein and issued and delivered in accordance with the Trust Agreement, will be
validly issued and outstanding obligations of the Authority entitled to the
benefits of the Trust Agreement;
(h) the information in the Official Statement and Prospectus
under the captions "AFICA," "Government Development Bank for Puerto Rico" and
"Legal Investment" does not contain any untrue or misleading statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading;
10
<PAGE> 11
(i) the Authority agrees to cooperate with the Underwriters
and their counsel in any endeavor to qualify the Bonds for offering and sale
under the securities or blue sky laws of such jurisdictions of the United States
as the Underwriters may request, provided that the Authority shall not be
required to execute a general consent to service of process or qualify to do
business in connection with any such qualification in any such jurisdiction, and
the Authority consents to the lawful use of the Preliminary Official Statement
and Prospectus and the Official Statement and Prospectus by the Underwriters in
obtaining such qualifications;
(j) if between the date of this Agreement and the date that is
twenty-five days after the end of the "underwriting period" (as defined in the
Rule) the Authority becomes aware of the existence or occurrence of any event
which would or might cause the Official Statement and Prospectus, as then
supplemented or amended, to contain any untrue statement of a material fact or
to omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, the Authority shall promptly notify the Underwriters
thereof;
(k) as of its date, the Preliminary Official Statement and
Prospectus was deemed "final" by the Authority for purposes of paragraph (b)(1)
of the Rule and omitted therefrom only such information permitted to be omitted
therefrom by the Rule; and
(l) the Authority will provide, or direct the provision of,
all information that may be required by the Securities and Exchange Commission
pursuant to the Rule and any future amendments thereto to the extent such
amendments are deemed applicable to the Authority and/or the Bonds.
11
<PAGE> 12
6. Representations, Warranties and Agreements of Doral Financial and
the Borrower. Doral Financial and the Borrower, jointly and severally, hereby
represent and warrant to, and agree with, the Authority and the Underwriters as
follows:
(a) Each of the Borrower and Doral Financial confirms its
representations, warranties and agreements set forth in the Loan and Guaranty
Agreement.
(b) A fully executed counterpart of the Loan and Guaranty
Agreement, duly executed by Doral Financial and the Borrower, shall be delivered
by Doral Financial and the Borrower at the Closing, in the form theretofore
submitted to the Underwriters and the Authority and approved by the Underwriters
and the Authority, with only such changes or modifications thereof as the
Underwriters, the Authority, Doral Financial and the Borrower shall agree upon.
(c) Doral Financial is a bank holding company registered under
the Bank Holding Company Act of 1956 and duly organized, validly existing and in
good standing under the laws of the Commonwealth, and the Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth, each with power and authority to conduct their businesses
as described in the Official Statement and Prospectus and to consummate the
transactions contemplated by the Loan and Guaranty Agreement, the Continuing
Disclosure Agreement and this Agreement.
(d) By official action of the Borrower prior to or
concurrently with the acceptance hereof, the Borrower has ratified the
distribution of the Preliminary Official Statement and
12
<PAGE> 13
Prospectus and approved the distribution of the Official Statement and
Prospectus.
(e) Doral Financial meets the requirements for the use of Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act") and the
rules and regulations (collectively referred to as the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder, and has
filed with the Commission a registration statement on such Form for registration
under the Securities Act of the offering and sale of the Bonds, including the
Official Statement and Prospectus, and has filed those amendments to such
registration statement as may have been required to the date of this Agreement.
Such registration statement has been declared effective by the Commission. The
Commission has not issued any order preventing or suspending the use of the
Official Statement and Prospectus or instituted or, to the knowledge of Doral
Financial or the Borrower, threatened any proceeding for that purpose. Copies of
such registration statement and amendments and of the Official Statement and
Prospectus have been delivered to the Representative. A final Official Statement
and Prospectus relating to the Bonds containing information permitted to be
omitted at the time of effectiveness by Rule 430A will be filed by Doral
Financial with the Commission in accordance with Rule 424(b) of the Rules and
Regulations promptly after execution and delivery of this Agreement. The term
"Registration Statement" means the registration statement as amended at the time
it became effective (the "Effective Date"), including all financial statements
and schedules and all exhibits and documents incorporated therein by reference
and all information contained in the Official Statement and Prospectus filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations and
deemed to be included therein as of the Effective Date by Rule 430A of the Rules
and Regulations and including any registration statement
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filed pursuant to Rule 462(b) of the Rules and Regulations (a "Rule 462
Registration Statement") increasing the size of the offering. References herein
to any document or other information incorporated by reference in the
Registration Statement shall include documents or other information incorporated
by reference in the Official Statement and Prospectus. References herein to the
Preliminary Official Statement and Prospectus or the Official Statement and
Prospectus shall be deemed to include all documents and information incorporated
by reference therein and shall be deemed to refer to and include any documents
and information filed after the date of such Preliminary Official Statement and
Prospectus or such Official Statement and Prospectus, as the case may be, and so
incorporated by reference under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(f) On the date that the Registration Statement containing the
Preliminary Official Statement and Prospectus was filed with the Commission, on
the date that the Official Statement and Prospectus is first filed with the
Commission pursuant to Rule 424(b), at all-times subsequent to and including the
day of the Closing and when any post-effective amendment to the Registration
Statement becomes effective or any amendment or supplement to the Official
Statement and Prospectus is filed with the Commission, the Registration
Statement, the Preliminary Official Statement and Prospectus and the Official
Statement and Prospectus (as amended or as supplemented if Doral Financial shall
have filed with the Commission any amendment or supplement thereto), including
the financial statements included or incorporated by reference in the Official
Statement and Prospectus, did or will comply with all applicable provisions of
the Securities Act and the Rules and Regulations and did or will contain all
statements required to be stated therein in accordance with the Securities Act
and the Rules and Regulations. On the Effective Date and when any post-effective
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<PAGE> 15
amendment to the Registration Statement becomes effective, no part of the
Registration Statement or any such amendment did or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. At the Effective Date, at the date the Official Statement and
Prospectus or any amendment or supplement to the Official Statement and
Prospectus is filed with the Commission, and at the day of the Closing, the
Official Statement and Prospectus did not or will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing representations and warranties in this
Section 6(f) do not apply to any statements or omissions made in reliance on and
in conformity with information relating to the Underwriters furnished in writing
to Doral Financial by the Representative specifically for inclusion in the
Preliminary Official Statement and Prospectus or the Official Statement and
Prospectus under the heading "Plan of Distribution". There are no contracts or
other documents required to be filed as exhibits to the Registration Statement
by the Securities Act or the Rules and Regulations that have not been so filed.
The documents which are incorporated by reference in any Preliminary Official
Statement and Prospectus or the Official Statement and Prospectus or from which
information is so incorporated by reference, when they became effective or were
filed with the Commission, as the case may be, complied in all material respects
with the requirements of the Securities Act and the Rules and Regulations or the
Exchange Act and the rules and regulations thereunder, as applicable, and did
not, when such documents were so filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and any documents so
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<PAGE> 16
filed and incorporated by reference subsequent to the effective date of the
Registration Statement shall, when they are filed with the Commission, conform
in all material respects with the requirements of the Securities Act and the
Rules and Regulations and the Exchange Act and the rules and regulations
thereunder, as applicable.
(g) Except as described in the Registration Statement and the
Official Statement and Prospectus, there is no action, suit, proceeding, inquiry
or investigation at law or in equity or before or by any court, public board or
body pending or, to the knowledge of Doral Financial or of the Borrower,
threatened (A) to restrain or enjoin the issuance or delivery of any of the
Bonds, the application of the proceeds thereof, or the execution, delivery or
performance of the Loan and Guaranty Agreement, the Continuing Disclosure
Agreement or this Agreement; (B) in any way contesting the corporate existence
or powers of Doral Financial or the Borrower; (C) in any way contesting or
affecting the payment, collection or application of the revenues pursuant to the
Loan and Guaranty Agreement; or (D) except as described in the Registration
Statement and the Official Statement and Prospectus, against or affecting Doral
Financial or the Borrower, wherein an unfavorable decision, ruling or finding
would materially adversely affect the transactions contemplated by this
Agreement, or the Official Statement and Prospectus, or which, in any way, would
materially adversely affect the validity or enforceability of the Bonds, the
Loan and Guaranty Agreement, the Continuing Disclosure Agreement or this
Agreement, or any other agreement or instrument to which Doral Financial or the
Borrower is a party and which is used or contemplated for use in connection with
the transactions contemplated hereby or by the Official Statement and Prospectus
or would have a material adverse effect on the condition, business, financial or
otherwise, of Doral Financial or the Borrower.
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<PAGE> 17
(h) The Loan and Guaranty Agreement, the Continuing Disclosure
Agreement and this Agreement, when executed and delivered by Doral Financial and
the Borrower, will be legal, valid and binding obligations of Doral Financial
and the Borrower enforceable in accordance with their terms, except to the
extent enforcement thereof may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights generally or by general principles of
equity (regardless of whether such enforceability shall be considered in a
proceeding in equity or at law).
(i) (i) The execution, delivery and performance by Doral
Financial and the Borrower of this Agreement, the Registration Statement, the
Official Statement and Prospectus, the Loan and Guaranty Agreement, the
Continuing Disclosure Agreement and the borrowings under the Loan and Guaranty
Agreement:
(A) have been duly authorized by all
requisite corporate action;
(B) will not violate (1) any provision of
law or any order of any court or any rule, regulation or order of any
other agency of government, (2) the Certificate of Incorporation or
by-laws of Doral Financial or of the Borrower, or (3) any indenture,
agreement or other instrument to which Doral Financial or the Borrower
is a party, or by which it or any of its properties are or may be
bound;
(C) will not be in conflict with, result in
a breach of or constitute (alone or with notice or lapse of time or
both) a default under any indenture, agreement or other instrument
referred to in clause (B)(3) above; and
(D) will not result in the creation or
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imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the property or assets of Doral Financial or the Borrower,
except as contemplated by the Registration Statement and the Official
Statement and Prospectus; and
(ii) no registration with or consent or approval of,
or other action by, any Federal, state, Commonwealth or other governmental
authority or regulatory body, foreign or domestic, is required in connection
with the execution, delivery and performance by Doral Financial or the Borrower
of this Agreement, the Loan and Guaranty Agreement or the Continuing Disclosure
Agreement.
(j) The Borrower and Doral Financial agree and consent that
the Bond Trustee shall have, pursuant to the provisions of the Trust Agreement,
a valid assignment of all payments due to, and certain other rights of, the
Authority under the Loan and Guaranty Agreement, subject to no prior rights of
other creditors.
(k) Doral Financial and the Borrower have received and there
remain currently in full force and effect all governmental consents and
approvals necessary at this time which would constitute a condition precedent
to, or the failure to obtain which would materially adversely affect, the
performance by the Borrower of its obligations under the Loan and Guaranty
Agreement, the Continuing Disclosure Agreement or this Agreement.
(l) Doral Financial and the Borrower have received and there
remain currently in full force and effect all permits, licenses, accreditations
and certifications necessary to conduct their businesses as presently being
conducted. No consent, approval, authorization or order of, or any filing or
declaration with, any governmental body is required for the consummation of the
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<PAGE> 19
transactions contemplated by this Agreement or in connection with the issuance
and sale of the Bonds, except such as have been obtained and such as may be
required under the securities laws of the Commonwealth or the various states of
the United States or the by-laws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase and
distribution by the Underwriters of the Bonds.
(m) Neither Doral Financial nor the Borrower is a party to any
contract or agreement or subject to any charter or other restriction not
disclosed in the Official Statement and Prospectus, the performance of or
compliance with which may have a material adverse effect on the condition or
business, financial or otherwise, of Doral Financial or of the Borrower.
(n) Doral Financial and the Borrower have deemed the
Preliminary Official Statement and Prospectus "final" as of its date within the
meaning of paragraph (b)(4) of the Rule and omitted therefrom only information
permitted to be omitted therefrom by the Rule.
(o) Any certificate signed by an authorized representative of
Doral Financial or of the Borrower delivered to the Authority or the
Underwriters shall be deemed a representation and warranty by Doral Financial or
the Borrower to such parties as to the statements made therein.
(p) The Borrower and Doral Financial will provide, or direct
the provision of, all information that may be required by the Commission
pursuant to the Rule and any future amendments thereto to the extent such
amendments are deemed applicable to the Borrower, Doral Financial and/or the
Bonds.
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7. Covenants of Doral Financial and the Borrower. Doral Financial and
the Borrower, jointly and severally, agree to the following:
(a) No amendment or supplement to the Registration Statement
or the Official Statement and Prospectus will be filed, either prior to the
Effective Date or thereafter, during such period as the Official Statement and
Prospectus is required by law to be delivered in connection with the sale of the
Bonds, unless a copy thereof shall first have been submitted to the
Representative within a reasonable period of time prior to the filing thereof
and the Representative shall not have objected thereto in good faith.
(b) Doral Financial will notify the Representative promptly,
and will confirm such advice in writing, (i) when any post-effective amendment
to the Registration Statement becomes effective, (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Official Statement and Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose or
the threat thereof, (iv) of the happening of any event that in the judgment of
the Doral Financial makes any statement of a material fact made in the
Registration Statement or the Official Statement and Prospectus untrue or that
requires the making of any changes in the Registration Statement or the Official
Statement and Prospectus in order to make the statements therein, in light of
the circumstances in which they are made, not misleading and (v) of receipt by
Doral Financial or the Borrower of any other communication from the Commission
relating to the Borrower, Doral Financial, the Registration Statement, any
Preliminary Official Statement and Prospectus or the Official
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<PAGE> 21
Statement and Prospectus. If at any time the Commission shall issue any order
suspending the effectiveness of the Registration Statement, Doral Financial will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible moment.
Doral Financial and the Borrower will prepare the Official Statement
and Prospectus in a form approved by the Representative and will file such
Official Statement and Prospectus pursuant to Rule 424(b) under the Securities
Act not later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act. If
Doral Financial has omitted any information from the Registration Statement
pursuant to Rule 430A, Doral Financial will use its best efforts to comply with
the provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and to notify the Representatives promptly of all such filings.
(c) If Doral Financial elects to rely upon Rule 462(b) of the
Rules and Regulations, the Company shall file the Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) of the Rules and
Regulations by [10:00 p.m.,] Washington, D.C. time, on the date of this
Agreement, and Doral Financial shall at the time of filing, either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule 111 (b) of
the Rules and Regulations.
(d) If, at any time when the Official Statement and Prospectus
relating to the Bonds is required to be delivered under the Securities Act or
the Rule, any event occurs as a result of
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<PAGE> 22
which, in the judgment of Doral Financial or the Borrower or in the opinion of
counsel for the Underwriters, the Official Statement and Prospectus, as then
amended or supplemented, would include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or the Registration Statement, as then amended or supplemented,
would include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading, or if for
any other reason it is necessary at any time to amend or supplement the Official
Statement and Prospectus or the Registration Statement to comply with the
Securities Act or the Rules and Regulations, Doral Financial will promptly
notify the Representative thereof and, subject to Section 7(a) hereof, will
prepare and file with the Commission, at Doral Financial's expense, an amendment
to the Registration Statement or an amendment or supplement to the Official
Statement and Prospectus that corrects such statement or omission or effects
such compliance.
(e) Doral Financial and the Borrower will comply with all the
provisions of all undertakings contained in the Registration Statement.
(f) The Borrower will apply the proceeds from the sale of the
Bonds as provided in and subject to all of the terms and provisions of the Loan
and Guaranty Agreement and the Official Statement and Prospectus.
(g) Between the date of this Agreement and the date of the
Closing, not, without the prior written consent of the Underwriters, to offer or
issue any industrial revenue bonds exempted to Puerto Rico residents, direct or
contingent, nor to
22
<PAGE> 23
cause any adverse change of a material nature in the financial position, results
of operations or condition, in either case, other than in the ordinary course of
business and except as disclosed in the Official Statement and Prospectus.
(h) Doral Financial and the Borrower will provide the
Underwriters with sufficient copies of any supplement or amendment to the
Official Statement and Prospectus as the Representative reasonably requests so
as to enable the Underwriters to comply with the provisions of paragraph (b)(4)
of the Rule. The Borrower shall be under no obligation to determine whether the
number of copies requested by the Representative of any amendment or supplement
to the Official Statement and Prospectus pursuant to the preceding sentence
shall be sufficient to enable the Underwriters to comply with the requirements
of the Rule. The Representative shall promptly notify the Borrower of the end of
the underwriting period (as defined in the Rule).
(i) The Borrower and Doral Financial will furnish such
information and execute such instruments as the Underwriters may reasonably
request (i) to (A) qualify the Bonds for offer and sale under the Blue Sky or
other securities laws and regulations of such states and other jurisdictions in
the United States as the Underwriters may designate and (B) determine the
eligibility of the Bonds for investment under the laws of such states and other
jurisdictions and (ii) to continue such qualifications in effect so long as
required for the distribution of the Bonds, provided that Doral Financial or the
Borrower shall not be required to execute a general consent to service of
process or qualify to do business in connection with any such qualification or
determination in any such jurisdiction.
(j) The Borrower and Doral Financial will advise the
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<PAGE> 24
Underwriters immediately of receipt by Doral Financial of the Borrower of any
notification with respect to the suspension of the qualification of the Bonds
for sale in any jurisdiction or the initiation or threat of any proceeding for
that purpose.
(k) The Borrower and Doral Financial will use their best
efforts to obtain when needed all consents, approvals, authorizations and orders
of governmental or regulatory authorities that are required for the performance
of their obligations under the Loan and Guaranty Agreement.
8. The Closing. At 10:00 a.m., Atlantic standard time, on ___________,
1999, or at such later time or date as may be mutually agreed upon by the
Authority, the Borrower and the Underwriters (such date being herein sometimes
called the "Closing Date"), the Authority will cause the Bond Trustee to deliver
the Bonds to or for the account of the Underwriters in definitive form and duly
executed and authenticated, and, subject to the terms and conditions hereof, the
Underwriters will accept such delivery and pay the purchase price for the Bonds
in immediately available funds as set forth in Paragraph 1 hereof to the Bond
Trustee. Delivery of the Bonds shall be made to DTC in such manner as shall be
mutually agreed upon by the Authority, the Borrower and the Representative.
Delivery of the other documents provided for herein to be made at the Closing
and payment for the Bonds as aforesaid shall take place at the office of
Pietrantoni, Mendez & Alvarez, San Juan, Puerto Rico, or at such other place as
shall have been mutually agreed upon by the Authority, the Borrower and the
Underwriters.
9. Conditions of Underwriters' Obligation to Purchase. The obligation
of the Underwriters to purchase and accept delivery of the Bonds is subject to
the accuracy of the representations and
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warranties of the Authority, Doral Financial and the Borrower herein and in the
Loan and Guaranty Agreement, to the accuracy of the statements of officers or
representatives of the Authority, Doral Financial and the Borrower made pursuant
to the provisions hereof, to the performance by the Authority, Doral Financial
and the Borrower of their respective obligations hereunder to be performed at or
prior to the Closing, and to the following additional conditions precedent:
(a) The Official Statement and Prospectus, the Loan and
Guaranty Agreement, this Agreement, the Trust Agreement, the Continuing
Disclosure Agreement, the DTC Agreement and the Bonds shall have been duly
authorized, executed and delivered, all in form satisfactory to the Underwriters
and shall constitute valid and binding agreements of the parties thereto.
(b) The Representative shall have received (i) evidence,
reasonably satisfactory to the Representative, of the due authorization,
execution and delivery of, and executed copies of, the documents mentioned in
clause (a) of this Paragraph 9 by the parties thereto, (ii) an opinion of
counsel for Doral Financial and the Borrower acceptable in form and substance to
the Underwriters, (iii) appropriate certificates reasonably satisfactory to the
Representative covering litigation and compliance with laws and prior
agreements, and with respect to the status of all necessary permits and
requirements, and (iv) evidence that the Registration Statement has become
effective and is effective as of the date of the Closing.
(c) The Representative shall have received a copy, duly
certified by the Secretary or an Assistant Secretary of the Authority, of the
Bond Resolution and shall also have received certified copies of any required
approvals referred to in Paragraph
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5(d) hereof.
(d) The Representative shall have received copies, duly
certified by the Secretary or an Assistant Secretary of Doral Financial and the
Borrower of the resolutions or other corporate action referred in Paragraph 6(i)
hereof.
(e) The Representative shall have received an opinion of
counsel for the Authority acceptable in form and substance to the Underwriters,
acceptable in form and substance to the Underwriters.
(f) The Representative shall have received the approving
opinion on the Bonds of Fiddler, Gonzalez & Rodriguez, LLP, Bond Counsel,
substantially in the form attached as Appendix IV to the Official Statement and
Prospectus and a supplemental opinion of Fiddler, Gonzalez & Rodriguez, LLP,
Bond Counsel, acceptable in form and substance to the Underwriters.
(g) The Representative shall have received a manually signed
copy of the letter, addressed to the Underwriters, dated the Closing Date, of
Pricewaterhouse Coopers LLP to the effect that such accounting firm reaffirms as
of such Closing Date and as though made at such date, the statements made in the
letter furnished to the Underwriters by such accountants pursuant to paragraph
2(e) hereof, except that references to the date referred to in such letter as
the most recent date through which such accountants have performed their work
will be a date not more than five (5) business days prior to the Closing Date.
(h) The Representative shall have received a certificate,
dated the Closing Date, of the Executive Director or the Assistant Executive
Director of the Authority to the effect that: (i) the Authority has duly
performed and complied with all agreements and
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<PAGE> 27
conditions and all of its obligations required to be performed at or prior to
the Closing Date, each of its representations and warranties contained herein
and in the Loan and Guaranty Agreement are true and correct as of the Closing
Date and at the time of Closing no event of default or default shall have
occurred and be continuing with respect to the Bonds; (ii) the Authority has
duly adopted the Bond Resolution and has authorized, by all necessary action,
the execution, delivery, receipt and due performance of this Agreement, the
Bonds, the Official Statement and Prospectus, the Trust Agreement, the Loan and
Guaranty Agreement, the DTC Agreement and any and all such other agreements and
documents as may be required to be executed, delivered and received by it in
order carry out, give effect to and consummate the transactions contemplated
hereby and thereby; (iii) no litigation is pending, or to his knowledge
threatened, to restrain or enjoin the issuance or sale of the Bonds or in any
way affecting as to the Authority any authority for or the validity of the
Bonds, the Official Statement and Prospectus, the Trust Agreement, the Loan and
Guaranty Agreement, this Agreement, the Bond Resolution, the DTC Agreement or in
any way contesting the Authority's existence or powers; and (iv) the adoption
and performance by the Authority of the Bond Resolution and the execution,
delivery, receipt and due performance of the Bonds, the Official Statement and
Prospectus, the Trust Agreement, the Loan and Guaranty Agreement, this
Agreement, the DTC Agreement and the other agreements contemplated hereby and
the Authority's compliance with the provisions hereof and thereof will not
conflict with or constitute on the Authority's part a breach of or a default
under any existing law, court or administrative regulation, decree or order or
any agreement, indenture, mortgage, lease or other instrument to which the
Authority is subject or by which it is or may be bound.
(i) The Representative shall have received a
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certificate, dated the Closing Date, of an authorized representative of Doral
Financial and of the Borrower to the effect that (i) each of the representations
and warranties of the Borrower contained in this Agreement, the Loan and
Guaranty Agreement and the Continuing Disclosure Agreement is true and correct
as of the Closing Date, (ii) each of the agreements of the Borrower to be
complied with and each of the obligations to be performed by Doral Financial and
the Borrower under this Agreement, the Loan and Guaranty Agreement or the
Continuing Disclosure Agreement on or prior to the Closing Date have been
complied with and performed, (iii) the conditions or acts that are disclosed in
the Official Statement and Prospectus as occurring prior to the Closing Date
have occurred, (iv) as of the Closing Date and except as may be disclosed in the
Official Statement and Prospectus, there has been no material adverse change in
the financial position of Doral Financial or the Borrower since the date of the
financial statements incorporated by reference in the Official Statement and
Prospectus, (v) no event of default under this Agreement or the Loan and
Guaranty Agreement, or event which with giving of notice or lapse of time or
both would constitute an event of default under any such document, has occurred
and is continuing or will occur as a result of the transactions to take place at
Closing, and (vi) no event affecting Doral Financial or the Borrower has
occurred since the date of the Official Statement and Prospectus that either
makes untrue or incorrect in any material respect any statement or information
concerning Doral Financial or the Borrower contained in the Official Statement
and Prospectus or is not reflected in the Official Statement and Prospectus but
should be reflected therein or that is necessary to make the statements and
information therein concerning the Borrower not misleading.
(j) The Representative shall have received an opinion of
O'Neill & Borges, counsel to the Underwriters, acceptable in form
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<PAGE> 29
and substance to the Underwriters.
(k) The Representative shall have received a copy of the
certificate of incorporation of Doral Financial and of the Borrower, as amended,
certified as of a recent date by the appropriate officer of the Commonwealth,
together with certificates dated as of a recent date from the Secretary of State
of the Commonwealth as to the existence and good standing of Doral Financial and
of the Borrower under the laws of the Commonwealth and copies of the by-laws of
Doral Financial and of the Borrower certified by the Secretary or an Assistant
Secretary of Doral Financial and the Borrower.
(l) The Representative shall have received written evidence
that the Bonds have been issued a rating of "BBB-" by Standard & Poor's Ratings
Services ("S&P"), of "BBB" by Duff & Phelps ("D&P") and of "Baa3" by Moody's
Investors Service ("Moody's").
(m) The Representative shall have received evidence as to the
good standing of Doral Financial and its banking, mortgage banking and
securities subsidiaries from the Commissioner of Financial Institutions of
Puerto Rico.
(n) The Underwriters shall have received such other
documentation, certificates and opinions as may be reasonably required by the
Underwriters.
10. Indemnification and Contribution.
(a) Doral Financial and the Borrower agree to indemnify and
hold harmless the Authority, the Underwriters, any member,
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officer, official, employee or agent of the Authority or the Underwriters, and
each person, if any, who controls the Authority or Underwriters within the
meaning of the Securities Act or the Exchange Act (collectively, for purposes of
this Section 10(a), the "Indemnified Parties"), against any and all losses,
claims, damages, liabilities or expenses, joint or several, to which any of the
Indemnified Parties may become subject, under either of said Acts or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue or misleading statement
of a material fact contained in Section 6 of this Agreement, (ii) any untrue
statement or alleged untrue statement of any material fact contained in (A) any
Preliminary Official Statement and Prospectus, the Registration Statement or the
Official Statement and Prospectus, or any amendment or supplement to the
Registration Statement or the Official Statement and Prospectus or (B) any
application or other document, or any amendment or supplement thereto, executed
by Doral Financial or the Borrower or based upon written information furnished
by or on behalf of Doral Financial or the Borrower filed in any jurisdiction in
order to qualify the Bonds under the securities or blue sky laws thereof or
filed with the Commission or any securities association or securities exchange
(each, an "Application"), or (iii) the omission or alleged omission to state in
any Preliminary Official Statement and Prospectus, the Registration Statement or
the Official Statement and Prospectus, or any amendment or supplement to the
Registration Statement or the Official Statement and Prospectus or any
Application a material fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading, including the aggregate amount paid in
settlement of any litigation commenced or threatened arising from a claim based
upon any such untrue statement or omission if such settlement is effected with
the written consent of
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Doral Financial and the Borrower, and will reimburse each such Indemnified Party
for any legal or other expenses reasonably incurred in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that (1) Doral Financial or the Borrower will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission or alleged untrue
statement or omission made in any of such documents in reliance upon and in
conformity with written information furnished to Doral Financial or the Borrower
by the Authority or the Underwriters specifically for use therein; and (2) this
indemnity shall not apply to any losses, claims, damages, liabilities or
expenses arising out of or based upon any such untrue statement or any such
omission if such statement or omission was corrected by a supplement or
amendment to the Official Statement and Prospectus delivered to the Underwriters
prior to the sale of the Bonds to the person asserting the loss. This indemnity
agreement will be in addition to any liability which Doral Financial or the
Borrower may otherwise have. Doral Financial or the Borrower will not, without
the prior written consent of each of the Underwriters, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Underwriter is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Underwriter and each member, officer, official,
employee, agent and controlling person of such Underwriter from all liability
arising out of such claim, action, suit or proceeding.
Doral Financial and the Borrower acknowledge that the
information set forth in the Official Statement and Prospectus under the caption
"Plan of Distribution" related to stabilization
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<PAGE> 32
and passive market making legends constitutes the only information furnished in
writing by or on behalf of the Underwriters specifically for use in the Official
Statement and Prospectus. In addition, Doral Financial and the Borrower
acknowledge that the information set forth in the Official Statement and
Prospectus under the captions "AFICA," "GOVERNMENT DEVELOPMENT BANK FOR PUERTO
RICO" and "LEGAL INVESTMENT" constitutes the only information furnished in
writing by or on behalf of the Authority specifically for use in the Official
Statement and Prospectus.
(b) The Underwriters agree to indemnify and hold harmless the
Authority, Doral Financial, the Borrower, any member, director, officer,
official, employee or agent of the Authority, Doral Financial or the Borrower,
and each person, if any, who controls the Authority, Doral Financial or the
Borrower within the meaning of the Securities Act or the Exchange Act
(collectively, for purposes of this Section 10(b), the "Indemnified Parties"),
against any and all losses, claims, damages, liabilities or expenses, joint or
several, to which the Indemnified Parties may become subject, under either of
said Acts or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue or
misleading statement of a material fact contained in the Preliminary Official
Statement and Prospectus, the Registration Statement or the Official Statement
and Prospectus, or any omission or alleged omission from the Preliminary
Official Statement and Prospectus, the Registration Statement or the Official
Statement and Prospectus, or any amendment or supplement to the Registration
Statement or the Official Statement and Prospectus of a material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading,
but only so far as any such statement or omission was made in reliance upon and
in conformity with written
32
<PAGE> 33
information, if any, as was furnished in writing by the Underwriters for use
therein.
(c) The Authority agrees to indemnify and hold harmless the
Underwriters, Doral Financial, the Borrower, any member, officer, official,
employee or agent of the Underwriters, Doral Financial or the Borrower, and each
person, if any, who controls the Underwriters, Doral Financial or the Borrower
within the meaning of the Securities Act of the Exchange Act (collectively, for
purposes of this Section 10(c), the "Indemnified Parties"), against any and all
losses, claims, damages, liabilities or expenses, joint or several, to which any
such Indemnified Party may become subject, under either of said Acts or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue or misleading
statement of a material fact contained in any Preliminary Official Statement and
Prospectus, the Registration Statement or the Official Statement and Prospectus,
or caused by any omission or alleged omission from any Preliminary Official
Statement and Prospectus, the Registration Statement or the Official Statement
and Prospectus, or any amendment or supplement to the Registration Statement or
the Official Statement and Prospectus of a material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading, but only to the
extent that any such statement or omission relates to the information appearing
under the captions "AFICA," "GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO" and
"LEGAL INVESTMENT".
(d) If the indemnification provided for in the above
subsections (a), (b) and (c) of this Section 10 is for any reason unavailable
(other than for a reason specified in this Section 10) or insufficient to hold
harmless an Indemnified Party under
33
<PAGE> 34
sections (a), (b) or (c) above with respect to losses covered by such
subsection, then each indemnifying party shall contribute to the damages paid by
such Indemnified Party (A) in such proportion as is appropriate to reflect the
relative benefits received by the Borrower and Doral Financial (collectively),
the Authority and the Underwriters from the offering of the Bonds or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above, but also the relative liability of the Borrower
and Doral Financial (collectively), the Authority and the Underwriters in
connection with the statements or omissions which resulted in such damages, as
well as any other relevant equitable considerations. The relative benefits
received by the Borrower and Doral Financial (collectively), the Authority and
the Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by each one bear
to each other. The relative benefits received by the Borrower and Doral
Financial shall be deemed to be equal to the total net proceeds from the
offering of the Bonds (after deducting only the underwriting discount and the
Authority's Administrative Fee). The relative benefits received by the Authority
shall be deemed to be equal to its Administrative Fee and the relative benefits
received by the Underwriters shall be deemed to be equal to their total
underwriting discount or commissions, as set forth in this Bond Purchase
Agreement. The relative liability of each Indemnified Party shall be determined
by reference to, among other things, whether the untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Borrower or Doral Financial (collectively), the Authority or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Authority, the Borrower, Doral
34
<PAGE> 35
Financial and the Underwriters agree that it would not be just and equitable if
their respective obligations to contribute pursuant to this subsection (d) were
to be determined by pro rata allocation of the aggregate damages or by any other
method of allocation which does not take into account the equitable
considerations referred to above. For purposes of this subsection (d) the term
"damages" shall include any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending against any
action or claim which is the subject of the contribution provisions of this
subsection (d). Notwithstanding the provisions of this subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
total underwriting discount received by them and the Authority shall not be
required to contribute any amounts in excess of the Administrative Fee payable
to the Authority. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation in connection with the issuance of the Bonds.
(e) In case any action shall be brought against one or more of
the Indemnified Parties based upon the Official Statement and Prospectus and in
respect of which indemnity may be sought against the indemnifying party, the
Indemnified Parties shall promptly notify the indemnifying party in writing, and
the indemnifying party may assume the defense thereof, including the employment
of counsel, the payment of all expenses and the right to negotiate and consent
to settlement, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to an Indemnified Party
otherwise than under this Section 10, unless, and only to the extent that, such
omission results in the forfeiture of substantial rights or defenses by the
35
<PAGE> 36
indemnifying parties. Any one or more of the Indemnified Parties shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Indemnified Parties unless the employment
of such counsel has been specifically authorized in writing by the indemnifying
or contributing party or parties or the indemnifying or contributing party or
parties shall not have employed counsel to assume the defense of such action
promptly after receiving notice thereof, or such Indemnified Party or
Indemnified Parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to the indemnifying or contributing party or parties (in which case
the indemnifying or contributing party or parties shall not have the right to
direct the defense of such action on behalf of the Indemnified Party), in any of
which events such fees and expenses of separate counsel for the Indemnified
Party shall be borne by the indemnifying or contributing party or parties. The
indemnifying party shall not be liable for any settlement of any such action
effected without its consent by any of the Indemnified Parties.
11. SURVIVAL OF REPRESENTATIONS AND OBLIGATIONS. The respective
agreements, representations, warranties and other statements of the Authority,
Doral Financial, the Borrower and the Underwriters and their respective officers
set forth in or made pursuant hereto will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of the Underwriters, the Borrower, Doral Financial or the
Authority, and will survive delivery of and payment for the Bonds.
36
<PAGE> 37
12. TERMINATION OF BOND PURCHASE AGREEMENT. The Representative may
terminate this Agreement, in its absolute discretion, without liability
therefor, by notice given to the Authority, Doral Financial and the Borrower
prior to the Closing if, at any time prior to the Closing:
(a) Any fact shall exist or any event shall have occurred
that, in the opinion of the Representative, makes the Registration Statement or
the Official Statement and Prospectus contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
(b) Any extraordinary event shall have occurred or shall exist
affecting current Commonwealth, national or international economic, financial or
other conditions or affecting Doral Financial or the Borrower which, in the
reasonable opinion of the Representative, materially adversely affects the
market for the Bonds or the sale, at the contemplated offering prices, by the
Underwriters of the Bonds;
(c) A war or other similar hostilities directly involving the
United States shall have occurred, which in the reasonable opinion of the
Representative, materially adversely affects the market for the Bonds or the
sale, at the contemplated offering prices, by the Underwriters of the Bonds;
(d) A general banking moratorium shall have been declared by
authorities of the United States or the Commonwealth;
(e) Any rating of the Bonds shall have been downgraded or
withdrawn by S&P, D&P or Moody's;
37
<PAGE> 38
(f) The New York Stock Exchange or other national securities
exchange, or any governmental authority, shall impose any material restrictions
not now in force or being enforced with respect to the Bonds or obligations of
the general character of the Bonds or securities generally, or shall materially
increase restrictions now in force, including those relating to the extension of
credit by, or charges to the net capital requirements of, underwriters;
(g) Any legislation, ordinance, rule or regulation shall be
introduced in, or be enacted by, any governmental body, department or agency in
the Commonwealth, or decision by any court of competent jurisdiction within the
Commonwealth shall be rendered which, in the reasonable opinion of the
Representative, materially adversely affects the market for the Bonds or the
sale, at the contemplated offering prices, by the Underwriters of the Bonds;
(h) Any amendment to the Official Statement and Prospectus is
proposed by the Borrower or Doral Financial or deemed necessary by Bond Counsel
or counsel to the Underwriters pursuant to Paragraph [ ] hereof which, in the
reasonable opinion of the Representative, materially adversely affects the
market for the Bonds or the sale, at the contemplated offering prices, by the
Underwriters of the Bonds; or
(k) The Authority, Doral Financial or the Borrower shall be
unable to satisfy the conditions to the obligations of the Underwriters to
purchase, to accept delivery of and to pay for the Bonds contained in this
Agreement.
13. EXPENSES OF THE AUTHORITY, DORAL FINANCIAL AND THE BORROWER.
Whether or not the transactions contemplated hereby
38
<PAGE> 39
shall be consummated, the Underwriters and the Authority shall be under no
obligation to pay, and Doral Financial and the Borrower shall pay, any and all
reasonable expenses incident to the performance of the obligations of the
Authority, the Underwriters, Doral Financial or the Borrower under this
Agreement and the fulfillment of the conditions imposed hereunder including but
not limited to: (i) the cost of preparing, printing and delivering the Bonds,
the Preliminary Official Statement and Prospectus, the Registration Statement
and the Official Statement and Prospectus, the Trust Agreement and the Loan and
Guaranty Agreement and any amendments or supplements thereto; (ii) the fees and
disbursements of Bond Counsel; (iii) the fees and disbursements of any counsel,
auditors, engineers, consultants or other retained by the Authority, Doral
Financial or the Borrower in connection with the transactions contemplated
herein; (iv) the fees and disbursements of the Bond Trustee and its counsel; (v)
the charges made by rating agencies for the rating of the Bonds; (vi) the
expenses incurred by the Underwriters in connection with the purchase of the
Bonds and the transactions contemplated herein, including the fees and
disbursements of legal counsel retained by or on behalf of the Underwriters; and
(vii) any and all liability with respect to amounts payable as a result of (A)
any issuance, stamp, documentary, transfer or similar taxes which may be
determined to be payable in connection with the execution and delivery of the
Bonds, this Agreement, the Registration Statement, the Official Statement and
Prospectus, the Trust Agreement, the Loan and Guaranty Agreement or any other
ancillary agreement, or any modification, amendment or alteration, of the terms
or provisions of any of the foregoing, and (B) any interest or penalties
resulting from any delays in paying any of such expenses, charges, disbursement,
liabilities or taxes. The obligations of the Borrower under this Paragraph 13
shall survive the delivery of and payment for the Bonds.
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<PAGE> 40
14. NOTICES. Any notice or other communication to be given to the
Authority, Doral Financial or the Borrower under this Agreement may be given by
delivering the same in writing at the address set forth above, and any notice or
other communication to be given to the Underwriters under this Agreement may be
given by delivering the same in writing to Popular Securities, Inc., Popular
Center Building, Suite 1020, San Juan, Puerto Rico 00918, Attention:
President.
15. PARTIES IN INTEREST. This Agreement is made solely for the benefit
of the Authority, Doral Financial, the Borrower and the Underwriters (including
the successors or assigns of the Underwriters) and no other person shall acquire
or have any right hereunder or by virtue hereof.
16. NO ORAL CHANGE. This Agreement may not be changed orally, but only
by an agreement in writing and signed by the party against whom enforcement of
any waiver, change, modification or discharge is sought.
17. EFFECTIVENESS. This Agreement shall become effective upon the
execution hereof by the Authority, Doral Financial and the Borrower and shall be
valid and enforceable as of the time of delivery of such executed copy to the
Underwriters.
18. COUNTERPART EXECUTION. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all of
which counterparts shall together constitute but one and the same instrument.
19. GOVERNING LAW. This Agreement is being made in the
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<PAGE> 41
Commonwealth and for all purposes shall be construed and enforced in accordance
with the laws of the Commonwealth.
20. SEVERABILITY. In the event any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision hereof.
Very truly yours,
POPULAR SECURITIES, INC.
PAINEWEBBER INCORPORATED
OF PUERTO RICO
DORAL SECURITIES
SANTANDER SECURITIES
BY: POPULAR SECURITIES, INC., AS
REPRESENTATIVE
By:
------------------------------------
Name:
Title:
The foregoing Bond Purchase Agreement is hereby accepted as of July __, 1999.
41
<PAGE> 42
PUERTO RICO INDUSTRIAL, TOURIST,
EDUCATIONAL, MEDICAL AND ENVIRONMENTAL
CONTROL FACILITIES FINANCING AUTHORITY
By:
------------------------------------
Name:
Title:
DORAL PROPERTIES, INC., S.E.
By:
------------------------------------
Name:
Title:
DORAL FINANCIAL CORPORATION
By:
------------------------------------
Name:
Title:
42
<PAGE> 1
DORAL FINANCIAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12
<TABLE>
<CAPTION>
QUARTER
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------- -----------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS
EARNINGS:
Pre-tax income from continuing operations $17,804 $ 59,839 $ 37,797 $31,279 $22,060 $18,745
Plus:
Fixed Charges (excluding capitalized interest) 32,214 115,894 62,269 47,130 44,442 23,996
------- -------- -------- ------- ------- -------
TOTAL EARNINGS $50,108 $175,733 $100,066 $78,409 $66,502 $42,741
======= ======== ======== ======= ======= =======
FIXED CHARGES:
Interest expensed and capitalized $31,764 $114,396 $ 60,912 $45,857 $43,380 $23,252
Amortized premiums, discounts, and capitalized
expenses related to indebtedness 148 544 526 586 372 83
An estimate of the interest component within rental expense 338 1,080 831 687 690 661
------- -------- -------- ------- ------- -------
TOTAL FIXED CHARGES $32,250 116,020 62,269 47,130 44,442 23,996
======= ======== ======== ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES 1.55 1.51 1.61 1.66 1.50 1.78
======= ======== ======== ======= ======= =======
EXCLUDING INTEREST ON DEPOSITS
EARNINGS:
Pre-tax income from continuing operations $17,804 $ 59,839 $ 37,797 $31,279 $22,060 $18,745
Plus:
Fixed Charges (excluding capitalized interest) 25,562 98,456 52,255 41,604 41,081 22,891
------- -------- -------- ------- ------- -------
TOTAL EARNINGS $43,366 $158,295 $ 90,052 $72,883 $63,141 $41,636
======= ======== ======== ======= ======= =======
FIXED CHARGES:
Interest expensed and capitalized $25,112 $ 96,916 $ 50,898 $40,331 $40,019 $22,147
Amortized premiums, discounts, and capitalized
expenses related to indebtedness 148 544 526 586 372 83
An estimate of the interest component within rental expense 338 1,080 831 687 690 661
------- -------- -------- ------- ------- -------
TOTAL FIXED CHARGES $25,598 98,540 52,255 41,604 41,081 22,891
RATIO OF EARNINGS TO FIXED CHARGES 1.69 1.61 1.72 1.75 1.54 1.82
======= ======== ======== ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.3
[PRICEWATERHOUSECOOPERS LOGO]
- -------------------------------------------------------------------------------
PricewaterhouseCoopers LLP
PO Box 363566
San Juan PR 00936-3566
Telephone (787 754-9090
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 5, 1999 relating to the
financial statements, which appears in Doral Financial Corporation's Annual
Report on Form 10-K for the year ended December 31, 1998. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Juan, Puerto Rico
July 27, 1999
