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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13
or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): October 7, 1999
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Doral Financial Corporation
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(Exact name of registrant as specified in this charter)
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Puerto Rico 0-17224 66-0312162
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(State or other jurisdiction of (Commission File No.) (IRS Employer Identification No.)
incorporation)
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1159 Franklin D. Roosevelt Avenue, San Juan, Puerto Rico 00920
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (787) 749-7100
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ITEM 5. OTHER EVENTS
Doral Financial Corporation (the "Company"), on October 7, 1999, released
its unaudited earnings for the quarter and nine months ended September 30, 1999.
The Company's press release also included certain unaudited balance sheet and
operational data as of September 30, 1999. A copy of the press release
disclosing the Company's unaudited earnings for such period is attached as an
exhibit to this Current Report on Form 8-K and incorporated herein by reference.
On September 19, 1999, the Company issued $29,000,000 of unsecured senior
notes with varying maturities from August 31, 2004 through August 31, 2007. The
notes were privately placed with two institutional investors. The notes were not
registered or required to be registered under the Securities Act of 1933 and may
not be offered or sold absent registration under the Securities Act or an
applicable exemption from the registration requirements. A copy of the Note
Purchase Agreement is being filed as an exhibit to this current report on Form
8-K.
Under cover of this current report on Form 8-K a copy of a Master
Repurchase Agreement between the Company and Bear Stearns Marketing Capital
Corporation is also being filed as an exhibit.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA, FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
10.88 Note Purchase Agreement dated September 17, 1999 (including
Form of Senior Note)
10.89 Master Repurchase Agreement, dated as of June 4, 1999, between
the Company and Bear Sterns Mortgage Capital Corporation.
99 Press Release dated October 7, 1999.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DORAL FINANCIAL CORPORATION
By: /s/ Mario S. Levis
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Mario S. Levis
Executive Vice President
and Treasurer
Date: October 8, 1999
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EXHIBIT 10.88
DORAL FINANCIAL CORPORATION
$29,000,000
$5,000,000 8.35% SENIOR NOTES DUE 2004
$8,000,000 8.45% SENIOR NOTES DUE 2005
$7,000,000 8.50% SENIOR NOTES DUE 2006
$9,000,000 8.55% SENIOR NOTES DUE 2007
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NOTE PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 17, 1999
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TABLE OF CONTENTS
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ARTICLE 1 - Definitions and Rules of Construction................................................1
SECTION 1.1. Definitions...............................................................1
SECTION 1.2. Other Definitions.........................................................6
SECTION 1.3. Rules of Construction.....................................................6
ARTICLE 2 - The Securities.......................................................................6
SECTION 2.1. Form and Dating...........................................................6
SECTION 2.2. Execution and Authentication..............................................7
SECTION 2.3. Registrar and Paying Agent................................................7
SECTION 2.4. Paying Agent To Hold Money in Trust.......................................7
SECTION 2.5. Transfer and Exchange.....................................................7
SECTION 2.6. Replacement Securities....................................................8
ARTICLE 3 - Covenants............................................................................8
SECTION 3.1. Payment of Securities.....................................................8
SECTION 3.2. SEC Reports...............................................................8
SECTION 3.3. Corporate Existence.......................................................9
SECTION 3.4. Limitation Upon Creation of Liens
on Voting Stock Principal Mortgage
Banking Subsidiaries......................................................9
SECTION 3.5. Limitation Upon Disposition of
Voting Stock of Principal Mortgage
Banking Subsidiaries.....................................................10
SECTION 3.6. Further Instruments and Acts.............................................11
ARTICLE 4 - Successor Company...................................................................11
SECTION 4.1. When Company May Merge or
Transfer Assets..........................................................11
ARTICLE 5 - Defaults and Remedies...............................................................12
SECTION 5.1. Events of Default........................................................12
SECTION 5.2. Acceleration.............................................................13
SECTION 5.3. Other Remedies...........................................................14
SECTION 5.4. Waiver of Past Defaults..................................................14
SECTION 5.5. Rights of Holders to Receive Payment.....................................14
SECTION 5.6. Waiver of Stay or Extension Laws.........................................14
ARTICLE 6 - Amendments..........................................................................15
SECTION 6.1. Amendment of Agreement...................................................15
SECTION 6.2. Revocation and Effect of Consents
and Waivers..............................................................15
SECTION 6.3. Notation on or Exchange of Securities....................................16
ARTICLE 7 - Representations of Holders and Restrictions
on Transfer of Securities...........................................................16
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SECTION 7.1. No Registration under Securities Act......................................16
ARTICLE 8 - Representations and Warranties.......................................................19
SECTION 8.1. Corporate Existence; Compliance with
Law and Contractual Obligations..........................................19
SECTION 8.2. Corporate Power; Authorization;
Enforceable Obligations..................................................19
SECTION 8.3. No Legal or Contractual Bar..............................................19
SECTION 8.4. Financial Information....................................................20
SECTION 8.5. No Material Litigation...................................................20
SECTION 8.6. Taxes....................................................................21
SECTION 8.7. Investment Company Act...................................................21
SECTION 8.8. Use of Proceeds..........................................................21
SECTION 8.9. ERISA....................................................................21
SECTION 8.10. Rank of the Securities...................................................22
SECTION 8.11. No Registration Under the Act............................................22
ARTICLE 9 - Conditions Precedent.................................................................23
SECTION 9.1. Conditions Precedent to Initial Sale......................................23
ARTICLE 10 - Miscellaneous.......................................................................24
SECTION 10.1. Notices..................................................................24
SECTION 10.2. Statements or Opinion....................................................25
SECTION 10.3. When Treasury Securities Disregarded.....................................25
SECTION 10.4. Legal Holidays...........................................................26
SECTION 10.5. Governing Law............................................................26
SECTION 10.6. Successors...............................................................26
SECTION 10.7. Multiple Originals.......................................................26
SECTION 10.8. Table of Contents; Headings..............................................26
SECTION 10.9. Representations and Covenants
by the Initial Purchasers................................................26
SECTION 10.10. Survival of Certain Provisions...........................................27
EXHIBIT A - FORM OF SECURITY
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NOTE PURCHASE AGREEMENT dated as of September 17, 1999,
between DORAL FINANCIAL CORPORATION, a Puerto Rico corporation (the
"Company"), and the several parties named in Schedule I hereto (the
"Initial Purchasers").
On the basis of the representations, warranties and covenants and
subject to the conditions contained herein, each Initial Purchaser hereby
agrees, severally and not jointly, to purchase from the Company, and the
Company hereby agrees to issue and sell to each Initial Purchaser, at a
purchase price of 100% of the principal amount thereof, the principal amount
set forth opposite such Initial Purchaser's name on Schedule I hereto of the
Company's $5,000,000 aggregate principal amount of 8.35% Senior Notes Due
August 31, 2004, $8,000,000 aggregate principal amount of 8.45% Senior Notes
Due August 31, 2005, $7,000,000 aggregate principal amount of 8.50% Senior
Notes Due August 31, 2006 and $9,000,000 aggregate principal amount of 8.55%
Senior Notes Due August 31, 2007 (collectively, the "Securities").
The closing of the sale of Securities shall be held on September 17,
1999 or on such later day as may be agreed to by the parties. Delivery of the
Securities shall be made to the several Initial Purchasers against payment by
the several Initial Purchasers of the purchase price thereof to or upon the
order of the Company by wire transfer payable in same-day funds to the account
specified by the Company.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of the
Securities:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. DEFINITIONS.
"Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
"Affiliate" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or
any Subsidiary; (ii) any spouse, immediate family member or other relative who
has the same principal residence as any person described in clause (i) above or
clause (iv) below; (iii) any corporation, trust or other organization or entity
of which persons described in clauses (i)
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or (ii) above individually or collectively own more than 10% of the equity or
other beneficial or ownership interests; and (iv) any person who is a director
or officer of the Company or any Subsidiary or of any person described in
clause (i) or (iii) above. For purposes of this definition (1) control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person, whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing; and (2) beneficial ownership of 10% or more of the voting common
equity (on a fully diluted basis assuming conversion of all outstanding
securities convertible into voting stock, whether or not currently convertible,
and the exercise of all outstanding options, warrants and other rights to
purchase voting stock, whether or not currently exercisable) of a person shall
be deemed to be control of such person.
"Agreement" means this Agreement as amended or supplemented
from time to time.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock, including any Preferred
Stock.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Company" means the party named as such in this Agreement until a
successor replaces it and, thereafter, includes the successor.
"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Debt" means (1) any obligation of the Person for (a) the repayment of
borrowed money, whether or not evidenced by bonds, debentures, notes or other
written instruments or for the payment of the deferred purchase price of
property or assets (other than Trade Payables), or (b) for the payment of money
relating to a lease that is required to be classified as a capitalized lease
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obligation in accordance with generally accepted accounting principles; (2) any
liability of others described in the preceding clause (1) that the Person has
guaranteed, that is recourse to such Person or that is otherwise its legal
liability; and (3) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses (1)
and (2) above.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
state, commonwealth or other political subdivision or instrumentality thereof,
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Lien" means any mortgage, pledge, security interest, conditional sale
or other title retention agreement or other similar lien.
"Majority Holders" means the Holders of Securities representing in the
aggregate a majority in aggregate outstanding principal amount of the
Securities.
"Material Adverse Effect" shall mean a material adverse effect with
respect to (a) the business, operations or financial condition of the Company,
(b) the ability of the Company to pay and perform its obligations hereunder and
under the Securities, or (c) the validity or enforceability of this Agreement
or the Securities or the rights and remedies of the Holders hereunder or
thereunder.
"Material Amount" means, at any time, ten percent (10%) of the
Company's consolidated stockholders' equity, as set forth in the most recent
annual or quarterly financial statements of the Company delivered to the
Holders.
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"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, or an Assistant Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Holders. The counsel may be an employee of or counsel to the
Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Principal Mortgage Banking Subsidiary" means any Subsidiary,
including its Subsidiaries, which (1) is principally engaged in the mortgage
banking business, and (2) meets any of the following conditions: (i) the
Company's and its other Subsidiaries' investments in and advances to the
Subsidiary exceed 30 percent of the total assets of the Company and its
Subsidiaries consolidated as of the end of the most recently completed fiscal
year; (ii) the Company's and its other Subsidiaries' proportionate share of the
total assets (after intercompany eliminations) of the Subsidiary exceeds 30
percent of the total assets of the Company and its Subsidiaries consolidated as
of the end of the most recently completed fiscal year; or (iii) the Company'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
the Company and its Subsidiaries consolidated for the most recently completed
fiscal year; provided, however, that any Subsidiary chartered as a banking
corporation or as a savings association under the laws of the United States,
any State or the Commonwealth shall not be considered a Principal Mortgage
Banking Subsidiary unless the Company shall, after the date of this
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Indenture, transfer the mortgage banking business currently conducted by Doral
Mortgage Corporation or the Company's HF Mortgage Bankers Division to such
banking corporation or savings association.
"Requirements of Law" shall mean, as to any Person, the Articles or
Certificate of Incorporation and By-laws or other organizational or governing
documents of such Person, any law, treaty, rule or regulation, and any final
and binding determination of an arbitrator or determination of a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"SEC" means the Securities and Exchange Commission or any
successor to such entity's functions.
"Securities" means the Securities issued under this
Agreement.
"Significant Subsidiary" means a Subsidiary, including its
Subsidiaries, which meets any of the following conditions: (i) the Company's
and its other Subsidiaries' investments in and advances to the Subsidiary
exceed 10 percent of the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year; (ii) the
Company's and its other Subsidiaries' proportionate share of the total assets
(after intercompany eliminations) of the Subsidiary exceeds 10 percent of the
total assets of the Company and its Subsidiaries consolidated as of the end of
the most recently completed fiscal year; or (iii) the Company'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 the Company
and its Subsidiaries consolidated for the most recently completed fiscal year.
"Stated maturity", when used with respect to any security or any
installment of interest thereon, means the date specified in such security as
the fixed date on which the principal of such security or such installment of
interest is due and payable.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the
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Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed in the ordinary
course of business in connection with the obtaining of materials or services.
"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, provided that, for the purposes of such
definition, capital stock which carries only the right to vote conditioned on
the happening of an event shall not be considered voting stock whether or not
such event shall have happened.
"Wholly Owned Subsidiary" means a Subsidiary (i) all the Capital Stock
of which (other than non-voting non-convertible Preferred Stock) is owned by
the Company or one or more Wholly Owned Subsidiaries; and (ii) all the
non-voting, non-convertible Preferred Stock of which is owned by the Company,
one or more Wholly Owned Subsidiaries, or persons or entities that are not
otherwise Affiliates of the Company.
SECTION 1.2. OTHER DEFINITIONS.
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DEFINED
TERM IN SECTION
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"Bankruptcy Law"........................................... 5.1
"Custodian"................................................ 5.1
"Event of Default"......................................... 5.1
"Legal Holiday"............................................ 10.4
"Paying Agent"............................................. 2.3
"Registrar"................................................ 2.3
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SECTION 1.3. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
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(4) "including" means including, without limitation; and
(5) words in the singular include the plural and words in the
plural include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.1. FORM AND DATING. The Securities shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Company). Each
Security shall be dated the date of its issuance. The terms of the Securities
set forth in Exhibit A are part of the terms of this Agreement and are
incorporated herein by reference as if fully set forth herein.
SECTION 2.2. EXECUTION AND AUTHENTICATION. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form. If an Officer whose signature is on a
Security no longer holds that office at the time the Security is issued, the
Security shall be valid nevertheless.
SECTION 2.3. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more coregistrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or coregistrar not a party to this Agreement. The
agreement shall implement the provisions of this Agreement that relate to such
agent. The Company shall notify the Holders of the name and address of any such
agent. The Company or any Subsidiary or Affiliate may itself act as Paying
Agent, Registrar, coregistrar or transfer agent.
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The Company will initially act as Registrar and Paying Agent in
connection with the Securities.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. On or prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Securityholders all money held by the Paying Agent for the payment of principal
of or interest on the Securities and shall notify the Holders of any default by
the Company in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent.
SECTION 2.5. TRANSFER AND EXCHANGE. The Securities shall be
issued in registered form without coupons in denominations of $5,000 and
integral multiples thereof and shall be transferable only upon the surrender of
a Security for registration of transfer. When a Security is presented to the
Registrar or a coregistrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of applicable law
are met. When Securities are presented to the Registrar or a coregistrar with a
request to exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested if the same
requirements are met. To permit registration of transfers and exchanges, the
Company shall execute Securities at the Registrar's or coregistrar's request.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Paying Agent, the Registrar or any coregistrar may
deem and treat the person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, and none of the Company, the Paying Agent, the Registrar or any
coregistrar shall be affected by notice to the contrary.
SECTION 2.6. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
a replacement Security if the requirements of applicable law are met. If
required by the Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company to protect the Company,
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the Paying Agent, the Registrar and any coregistrar from any loss which any of
them may suffer if a Security is replaced.
Every replacement Security is an additional obligation of the Company.
ARTICLE 3
COVENANTS
SECTION 3.1. PAYMENT OF SECURITIES. The Company shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Agreement. Principal and interest
shall be considered paid on the date due if on such date the Paying Agent holds
in accordance with this Agreement money sufficient to pay all principal and
interest then due and the Paying Agent is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of this Agreement.
SECTION 3.2. SEC REPORTS. The Company shall provide
Securityholders within 10 days after it files them with the SEC copies of its
annual report and of the information, documents and other reports which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. In the event the Company is at any time no longer subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall
provide the Securityholders audited financial statements of the type that the
Company would have been required to file with the SEC. In such event, such
financial statements shall be provided at the time the Company would have been
required to provide such audited financial statements had it continued to have
been subject to such reporting requirements.
SECTION 3.3. CORPORATE EXISTENCE. Subject to the provisions of
Article 4 hereof, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect the corporate existence, rights
(charter and statutory) and franchises of the Company and each Significant
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right or franchise or maintain the corporate existence of any
Significant Subsidiary if the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company or
of the applicable Significant Subsidiary and that the loss thereof is not
disadvantageous in any material respect to the Holders.
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SECTION 3.4. LIMITATION UPON CREATION OF LIENS ON VOTING STOCK
PRINCIPAL MORTGAGE BANKING SUBSIDIARIES. The Company will not, and it will not
permit any Subsidiary at any time directly or indirectly to, incur, issue,
assume or guarantee any Debt for borrowed money secured by a pledge of, lien on
or security interest in any shares of Voting Stock of any Principal Mortgage
Banking Subsidiary without making effective provision whereby the outstanding
Securities (and, if the Company so elects any other Debt of the Company ranking
on a parity with the Securities) shall be secured equally and ratably with such
secured Debt; provided, however, that the foregoing covenant shall not apply to
any Debt 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; and provided further, however, that the foregoing covenant
shall not be applicable to liens for taxes or assessments or governmental
charges or levies not then due and delinquent or the validity of which is being
contested in good faith or which are less than $5,000,000 in amount, liens
created by or resulting from any litigation or legal proceeding which is
currently being contested in good faith by appropriate proceedings or which
involve claims of less than $5,000,000, or deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds.
If the Company shall hereafter be required to secure the Securities
equally and ratably with any other Debt of the Company pursuant to this
Section, the Company will promptly deliver to the Securityholders an Officers'
Certificate stating that the foregoing covenant has been complied with, and an
Opinion of Counsel stating that in the opinion of such counsel the foregoing
covenant has been complied with and that any instruments executed by the
Company or any Subsidiary in the performance of the foregoing covenant comply
with the requirements of the foregoing covenant.
SECTION 3.5. LIMITATION UPON DISPOSITION OF VOTING STOCK OF
PRINCIPAL MORTGAGE BANKING SUBSIDIARIES. Subject to Article 4, the Company 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 the Company) 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:
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(1) are for fair market value on the date thereof, as determined by
the Board of Directors of the Company (which determination shall be conclusive)
and, after giving effect to such disposition and to any possible dilution, the
Company 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;
(2) 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 the Company, 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;
(3) 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
Securities; or
(4) are made to the Company or any Wholly-Owned Subsidiary if such
Wholly-Owned Subsidiary agrees to be bound by this covenant and the Company
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,
the Commonwealth or the District of Columbia if, after giving effect to such
merger or consolidation, the Company 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 this Indenture, no Default has occurred and is
continuing.
SECTION 3.6. FURTHER INSTRUMENTS AND ACTS. Upon request of any
Holder, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Agreement.
<PAGE> 15
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ARTICLE 4
SUCCESSOR COMPANY
SECTION 4.1. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. (a) The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (if not the
Company) shall be a organized and existing under the laws of the
Unites States of America, any State thereof, the Commonwealth of
Puerto Rico or the District of Columbia and such Person shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to each Holder, in form satisfactory to each Holder, all the
obligations of the Company under the Securities and this Agreement;
(ii) immediately after giving effect to such transaction, no
Default shall have happened and be continuing; and
(iii) the Company shall have delivered to each Holder an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental agreement
(if any) comply with this Agreement.
(b) Notwithstanding the provisions of subsection 4.1(a), any Wholly
Owned Subsidiary may merge or consolidate with the Company so long as the
Company shall be the surviving or continuing corporation.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.1. EVENTS OF DEFAULT. An "Event of Default" means any
one of the following events:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, and such default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated
Maturity, upon declaration or otherwise;
<PAGE> 16
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(3) the Company fails to comply with any of its covenants or
agreements in the Securities or this Agreement and such failure
continues for 90 days after receipt by the Company of the notice
specified below;
(4) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed or under any mortgage,
indenture or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness for money borrowed
by the Company or any Significant Subsidiary in excess of $5,000,000,
whether such indebtedness now exists or shall hereafter be created,
which default shall have resulted in such indebtedness becoming or
being declared due and payable prior to the date on which it would
otherwise have become due and payable, without such acceleration
having been rescinded or annulled within a period of 30 days after
receipt by the Company of the notice specified below; provided,
however, that if such default shall be remedied or cured by the
Company or the Significant Subsidiary or waived by the holders of such
indebtedness, then the Event of Default hereunder by reason thereof
shall be deemed likewise to have been thereupon remedied, cured or
waived without any action on the part of the Holders;
(5) the entry of a decree or order for relief in respect of
the Company or any Significant Subsidiary by a court having
jurisdiction in the premises in an involuntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal, State of Commonwealth bankruptcy, insolvency or
other similar law, or a decree or order adjudging the Company or any
Significant Subsidiary a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any
Significant Subsidiary under any applicable Federal, State or
Commonwealth law, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the
Company or any Significant Subsidiary or of any substantial part of
its property, or ordering the winding up liquidation of its affairs,
and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(6) the commencement by the Company or any Significant
Subsidiary of a voluntary case under the Federal bankruptcy laws, as
now or hereafter constituted, or any other applicable Federal, State
or Commonwealth bankruptcy, insolvency or other similar law, or the
consent by it to the entry of an order for relief in an involuntary
case under
<PAGE> 17
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any such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official)
of the Company or any Significant Subsidiary or of any substantial
part of its property, or the making by it of an assignment for the
benefit of its creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Significant Subsidiary in
furtherance of any such action.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal, Commonwealth or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (3) and (4) is not an Event of Default until a
Holder notifies the Company of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice
must specify the Default, demand that it be remedied and state that such notice
is a "Notice of Default".
The Company shall deliver to the Holders, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (3) or (4), its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 5.2. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 5.1(5) or (6) with respect to the
Company) occurs and is continuing and is not waived as provided in Section 5.4,
each Holder by notice to the Company may declare the principal of and accrued
interest on all the Securities held by such Holder to be due and payable. Upon
such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 5.1(5) or (6) with
respect to the Company occurs and is continuing, the principal of and interest
on all the Securities shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of any
Securityholders.
SECTION 5.3. OTHER REMEDIES. If an Event of Default occurs and is
continuing, each Holder may pursue any available remedy to collect the payment
of principal of and interest on the Securities or to enforce the performance of
any provision of the Securities or this Agreement.
<PAGE> 18
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A delay or omission by any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 5.4. WAIVER OF PAST DEFAULTS. The Majority Holders by
notice to the Company may waive an existing Default and its consequences except
(1) a Default in the payment of the principal of or interest on a Security or
(2) a Default in respect of a provision that under Section 6.1 cannot be
amended without the consent of each Securityholder affected. When a Default is
waived, it is deemed cured, but no such waiver shall extend to any subsequent
or other Default or impair any consequent right.
SECTION 5.5. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Agreement, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 5.6. WAIVER OF STAY OR EXTENSION LAWS. The Company (to
the extent it may lawfully do so) shall not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Agreement; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Holders, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE 6
AMENDMENTS
SECTION 6.1. AMENDMENT OF AGREEMENT. The Company and the Majority
Holders may amend this Agreement or the Securities by an instrument in writing
executed by the Company and the Majority Holders. However, without the consent
of each Securityholder affected, an amendment may not:
<PAGE> 19
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(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the fixed maturity of
any Security;
(4) make any Security payable in money other than that stated
in the Security; or
(5) make any change in Section 5.4, 5.5, or this Section.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 6.2. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Company receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent
or take any other action described above. Such record date may not be earlier
than 30 days after notice thereof is given to Securityholders. If a record date
is fixed, then notwithstanding the immediately preceding paragraph, those
persons who were Securityholders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such persons continue to be Holders after such record date. No consent shall be
valid or effective for more than 120 days after such record date.
SECTION 6.3. NOTATION ON OR EXCHANGE OF SECURITIES. If an
amendment changes the terms of a Security, the Company may
<PAGE> 20
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require the Holder of the Security to deliver it to the Company. The Company
may place an appropriate notation on the Security regarding the changed terms
and return it to the Holder. Alternatively, if the Company so determines, the
Company in exchange for the Security shall issue a new Security that reflects
the changed terms. Failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment.
ARTICLE 7
REPRESENTATIONS OF HOLDERS AND RESTRICTIONS
ON TRANSFER OF SECURITIES
SECTION 7.1. NO REGISTRATION UNDER SECURITIES ACT. The Securities
have not been registered under the Act. Each Initial Purchaser, by acceptance
of a Security, represents that:
(1) it is acquiring the Securities for its own account or for
an account with respect to which it exercises sole investment
discretion, that it or such account is a Qualified Institutional Buyer
("QIB") under Rule 144A under the Act, and that it is acquiring the
Securities for investment purposes and not for distribution;
(2) it acknowledges that the Securities have not been
registered under the Act and may not be sold except as permitted
below;
(3) it understands and agrees (x) that such Securities are
being offered only in a transaction not involving any public offering
within the meaning of the Act, and (y) that (A) if within two years
after the date of original issuance of the Securities or if within
three months after it ceases to be an affiliate (within the meaning of
Rule 144 under the Act) of the Company, it decides to resell, pledge
or otherwise transfer such Securities on which the legend set forth
below appears, such Securities may be resold, pledged or transferred
only (i) to the Company, (ii) so long as such security is eligible for
resale pursuant to Rule 144A, to a person whom the Seller reasonably
believes is a QIB that purchases for its own account or for the
account of a QIB to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A (as indicated by the
box checked by the transferor on the Certificate of Transfer on the
reserve of the Security), (iii) in minimum aggregate principal amounts
of $100,000 to an Institutional Accredited Investor, as defined in
Rule 501(a)(1), (2), (3) or (7)
<PAGE> 21
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under the Act (as indicated by the box checked by the transferor on
the Certificate of Transfer on the reverse of the Security), that is
acquiring the Securities for investment purposes and not for
distribution, and a certificate which may be obtained from the Company
is delivered by the transferee to the Company, (iv) pursuant to an
exemption from the registration requirements of the Act provided by
Rule 144 (if applicable) under the Act, (v) pursuant to an effective
registration statement under the Act, or (vi) pursuant to an opinion
of counsel acceptable to the Company that registration is not required
under the Act, in each case in accordance with any applicable state or
Puerto Rico securities laws, (B) the purchaser will, and each
subsequent Holder is required to, notify any purchaser of Securities
from it of the resale restrictions referred to in (A) above, if then
applicable, and (C) with respect to any transfer of Securities to or
by an Institutional Accredited Investor, such Holder will deliver to
the Company such certificates and other information as it may
reasonably require to confirm that the transfer by it complies with
the foregoing restrictions;
(4) it understands that the notification requirement referred
to in (3) above will be satisfied by virtue of the fact that the
following legend will be placed on the Securities unless otherwise
agreed to by the Company.
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
UNDER THE PUERTO RICO UNIFORM SECURITIES ACT OR ANY OTHER
STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS
SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
(X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF
(OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE
OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE
<PAGE> 22
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TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY), (3) IN MINIMUM AGGREGATE PRINCIPAL AMOUNTS OF
$100,000 TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE SIDE
OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY, (4) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES
ACT, (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR (6) PURSUANT TO AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE U.S. AN
INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY
AGREES IT WILL FURNISH TO THE COMPANY SUCH CERTIFICATES AND
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT ANY TRANSFER TO OR BY IT OF THIS SECURITY COMPLIES WITH
THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3)
or (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION."
(5) it (i) is able to fend for itself in the transactions
contemplated by this Agreement; (ii) has such knowledge and experience
in financial and business matters as to be capable of evaluating the
merits and risks of its prospective investment in the Securities; and
(iii) has the ability to bear the economic risks of its prospective
investment and can afford the complete loss of such investment;
(6) it acknowledges that it has had access to such financial
and other information and has been afforded the opportunity to ask
questions of the Company and receive
<PAGE> 23
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answers thereto, as it deemed necessary in connection with its
decision to purchase the Securities; and
(7) it understands that the Company and others will rely upon
the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that if any of the
acknowledgments, representations and agreements deemed to have been
made by its purchase of the Securities are no longer accurate, it
shall promptly notify the Company; and if it is acquiring the
Securities as a fiduciary or agent for one or more investor accounts,
it represents that it has sole investment discretion with respect to
each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of such
account.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
As an inducement to the Initial Purchasers to enter into this
Agreement and to purchase the Securities, the Company represents and warrants
to the Initial Purchasers that:
SECTION 8.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW AND
CONTRACTUAL OBLIGATIONS. The Company (a) is duly organized, validly existing
and in good standing as a corporation under the laws of the Commonwealth of
Puerto Rico and in each jurisdiction where its ownership of property or conduct
of business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; (b) has the corporate power
and authority and the legal right to own and operate its property and to
conduct business in the manner in which it does and proposes so to do; and (c)
is not in violation of any Requirement of Law or any Contractual Obligation if
such violation could have a Material Adverse Effect.
SECTION 8.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. The Company has the corporate power and authority to execute,
deliver and perform this Agreement and the Securities and has taken all
necessary corporate actions to authorize such execution, delivery and
performance. This Agreement and the Securities, when issued, have been or will
have been duly executed and delivered on behalf of the Company and constitute
or will constitute legal, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and other
similar laws
<PAGE> 24
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affecting creditors' rights generally and by general principles of
equity.
SECTION 8.3. NO LEGAL OR CONTRACTUAL BAR. The execution, delivery
and performance of this Agreement and the Securities, including the use of the
proceeds of the Securities, do not and will not (a) violate any Requirement of
Law or any Contractual Obligation of the Company or any of its Subsidiaries,
(b) require any license, consent, authorization, approval or any other action
by, or any notice to or filing or registration with, any Governmental Authority
or any other Person, or (c) result in the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries.
SECTION 8.4. FINANCIAL INFORMATION. (a) The consolidated balance
sheet of the Company and its consolidated Subsidiaries as at December 31, 1998
and the related consolidated statements of income, retained earnings and cash
flows for the fiscal year then ended, including in each case the related
schedules and notes, reported on by PricewaterhouseCoopers LLP, true copies of
which have been previously delivered to the Initial Purchasers, are complete
and correct and fairly present the consolidated financial condition of the
Company and its consolidated Subsidiaries as at the date thereof and the
consolidated results of operations and cash flows for such period, in
accordance with GAAP applied on a consistent basis.
(b) The unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at June 30, 1999, and the related unaudited
consolidated statements of income, retained earnings and cash flows for the
three-month and six-month periods then ended, true copies of which have been
previously delivered to the Initial Purchasers, are complete and correct and
fairly present the consolidated financial condition of the Company and its
consolidated Subsidiaries as at the date thereof and the consolidated results
of operations and cash flows for such periods in conformity with GAAP applied
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, subject to normal year-end audit adjustments.
(c) The Company does not have any material liability of any kind,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and no condition, situation or set of circumstances exists that could be
reasonably expected to result in such a liability, which is required to be
reflected in its financial statements in accordance with GAAP and that is not
reflected in the financial statements referred to in Section 8.4(a) or 8.4(b).
Any such material liability arising in
<PAGE> 25
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the future will be reflected in the financial statements delivered to the
Holders pursuant to Section 3.2.
(d) Since December 31, 1998, no material adverse change has occurred
in the business, financial condition or results of operations of the Company
and its Subsidiaries, taken as a whole.
SECTION 8.5. NO MATERIAL LITIGATION. No litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Company, threatened by or against the Company or
any of its Subsidiaries, or against any of the Company's or any such
Subsidiary's properties or revenues that, if adversely determined, could alone,
or with any other litigation, investigation or proceeding, affect the business,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, in excess of a Material Amount or could have a
Material Adverse Effect.
SECTION 8.6. TAXES. The Company and each of its Subsidiaries have
filed or caused to be filed all tax returns that are required to be filed and
have paid all taxes shown to be due and payable on such returns or on any
assessments made against them or any of their property other than taxes and
assessments that are being contested in good faith by appropriate proceedings
and as to which the Company or such Subsidiary has established adequate
reserves in conformance with GAAP.
SECTION 8.7. INVESTMENT COMPANY ACT. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and is not controlled by any "investment company."
SECTION 8.8. USE OF PROCEEDS. The proceeds of the sale of the
Securities shall be used by the Company for its general corporate purposes.
SECTION 8.9. ERISA. (a) No Prohibited Transactions, accumulated
funding deficiencies (as described in Section 302 of ERISA), withdrawals from
Multiemployer Plans or Reportable Events have occurred with respect to any
Plans or Multiemployer Plans that, in the aggregate, could subject the Company
or any of its Subsidiaries to any material tax, penalty or other liability
where such tax, penalty or liability is not covered in full, for the benefit of
the Company or such Subsidiary, by insurance; (b) no notice of intent to
terminate a Plan has been filed, nor has any Plan been terminated under Section
4041 of ERISA, nor has the Pension Benefit Guaranty Corporation instituted
proceedings
<PAGE> 26
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to terminate, or appoint a trustee to administer, a Plan and no event has
occurred or condition exists that might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Plan; (c) the present value of all benefits liabilities (as defined in
Section 4001(a)(16) of ERISA) under all Plans (based on the actuarial
assumptions used to fund the Plans) does not exceed the assets of the Plans;
and (d) the execution, delivery and performance by the Company of this
Agreement and the Securities and the use of the proceeds thereof will not
involve any Prohibited Transaction. For purposes of this Section, the following
terms shall have the following meanings:
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be supplemented or amended, and the
rules and regulations issued thereunder as from time to time in effect.
"ERISA Affiliate" shall mean each trade or business, including the
Company, whether or not incorporated, that together with the Company would be
treated as a single employer under Section 4001 of ERISA.
"Multiemployer Plan" shall mean a plan described in Section 4001(a)(3)
of ERISA to which the Company or any ERISA Affiliate is required to contribute
on behalf of any of its employees.
"Plan" shall mean any plan (other than a Multiemployer Plan) subject
to Title IV of ERISA maintained for employees of the Company or any ERISA
Affiliate (and any such plan no longer maintained by the Company or any of its
ERISA Affiliates to which the Company or any of its ERISA Affiliates has made
or was required to make any contributions during the five years preceding the
date on which such plan ceased to be maintained).
"Prohibited Transaction" shall mean any transaction described in
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or
the transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c)(1) of the Code that is not exempt by reason of
Section 4975(c)(2) or Section 4975(d) of the Code, or the transitional rules of
Section 2003(c) of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, a cessation of operations described in
Section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under
<PAGE> 27
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Section 401(a)(29) of the Code, or a failure to make a payment required by
Section 412(m) of the Code and Section 302(e) of ERISA when due.
SECTION 8.10. RANK OF THE SECURITIES. The Securities will rank
pari passu in right of payment to all existing and future unsecured senior
indebtedness of the Company, including the claims of general creditors of the
Company.
SECTION 8.11. NO REGISTRATION UNDER THE ACT. Assuming compliance
by the Initial Purchasers with their representations hereunder, it is not
necessary in connection with the sale of the Securities to the Initial
Purchasers to register the Securities under the Act.
ARTICLE 9
CONDITIONS PRECEDENT
SECTION 9.1. CONDITIONS PRECEDENT TO INITIAL SALE. It shall be a
condition precedent to the sale of Securities on the date hereof that the
Initial Purchasers shall have received the following documents and that the
following conditions shall have been satisfied:
(a) a certified copy of the resolution of the Board of Directors of
the Company approving the execution, delivery and performance of this Agreement
and the Securities and the transactions contemplated herein and therein;
(b) a certificate of the Secretary or an Assistant Secretary of the
Company certifying the names and true signatures of the officers of the Company
authorized to sign this Agreement and the Securities and the other documents
required to be executed and delivered hereunder, in each case dated the date
hereof;
(c) an opinion of Pietrantoni, Mendez & Alvarez LLP, counsel for the
Company, in form and substance acceptable to the Initial Purchasers, covering
such matters as the Initial Purchasers may reasonably request, dated the date
hereof;
(d) a copy of the Certificate of Incorporation of the Company
certified by the Secretary of State of Puerto Rico as of a recent date and by
the Secretary or Assistant Secretary of the Company on the date hereof;
<PAGE> 28
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(e) a copy of the By-laws of the Company, certified by the Secretary
or an Assistant Secretary of the Company on the date hereof as being accurate
and complete;
(f) a certificate of the applicable officer in the relevant
jurisdiction or other equivalent document certifying as of a recent date that
the Company is in good standing in the Commonwealth of Puerto Rico;
(g) evidence satisfactory to the Initial Purchasers that all acts and
conditions (including the obtaining of any necessary regulatory approvals and
the making of any required filings, recordings or registrations) required to be
done and performed and to have happened prior to the execution, delivery and
performance of this Agreement and the Securities and to constitute the same
legal, valid and binding obligations, enforceable in accordance with their
respective terms, shall have been done and performed and shall have happened in
due and strict compliance with all applicable laws;
(h) such other documents or legal opinions as the Initial Purchasers
or its counsel may reasonably request, all in form and substance reasonably
satisfactory to the Initial Purchasers;
(i) all documentation, including documentation for corporate and legal
proceedings in connection with the transactions contemplated by this Agreement
and the Securities, shall be reasonably satisfactory in form and substance to
the Initial Purchasers and its counsel;
(j) the Company shall have paid all fees required to have been paid
under this Agreement and the Securities, including the agency fee payable to
Doral Securities, Inc., prior to or on the date hereof;
(k) no default or Event of Default shall have occurred and be
continuing; and
(l) since December 31, 1998, no material adverse change shall have
occurred in the business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.
<PAGE> 29
-26-
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
If to the Company:
Doral Financial Corporation
1159 Franklin Delano Roosevelt Avenue
San Juan, Puerto Rico 00920
Attention of: Mr. Mario S. Levis
Telephone: (787) 749-7108
Telecopier: (787) 792-4025
If to the Initial Purchasers:
Puerto Rico Investors Tax Free Funds
209 Munoz Rivera Avenue
Banco Popular Center - Suite 1112
Hato Rey, Puerto Rico 00918
Attention of: Mr. Leslie Highley
Telephone: (787) 751-5871
Telecopier: (787) 751-8587
The Company or the Initial Purchasers by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE> 30
-27-
SECTION 10.2. STATEMENTS OR OPINION. Each certificate or opinion
with respect to compliance with a covenant or condition provided for in this
Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such covenant or condition has been complied with.
SECTION 10.3. WHEN TREASURY SECURITIES DISREGARDED. In
determining whether the Holders of the required principal amount of Securities
have concurred in any waiver or consent, Securities owned by the Company or by
any person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company shall be disregarded and deemed not
to be outstanding. Also, subject to the foregoing, only Securities outstanding
at the time shall be considered in any such determination.
SECTION 10.4. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not generally open in the
Commonwealth of Puerto Rico. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 10.5. GOVERNING LAW. This Agreement and the Securities
shall be governed by, and construed in accordance with, the laws of the
Commonwealth of Puerto Rico but without giving effect to applicable principles
of conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
<PAGE> 31
-28-
SECTION 10.6. SUCCESSORS. All agreements of the Company in this
Agreement and the Securities shall bind its successors.
SECTION 10.7. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Agreement. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Agreement.
SECTION 10.8. TABLE OF CONTENTS; HEADINGS. The table of contents
and headings of the Articles and Sections of this Agreement have been inserted
for convenience of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or provisions hereof.
SECTION 10.9. REPRESENTATIONS AND COVENANTS BY THE INITIAL
PURCHASERS. Each Initial Purchaser represents that (i) no part of the funds
being used by it to purchase the Securities constitute assets of any employee
benefit plan, as defined in Section 3 of ERISA and (ii) it has the corporate
power and authority to execute, deliver and perform this Agreement and has
taken all necessary corporate action to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered on behalf of
each Initial Purchaser and constitutes the legal, valid and binding obligation
of each Initial Purchaser enforceable against it in accordance with its terms,
severally and not jointly, except as enforceability may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and by general principles of equity.
SECTION 10.10. SURVIVAL OF CERTAIN PROVISIONS. The covenants and
other provisions set forth in Articles 1, 6, 8 and 10 and in Section 3.6 shall
survive the payment of principal of the Securities. All other covenants and
provisions of the Agreement shall expire upon payment of all the Securities,
provided that rights or causes of action accrued prior to such payment shall
survive.
<PAGE> 32
-29-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
DORAL FINANCIAL CORPORATION
By: /s/ Mario S. Levis
--------------------------------
Name: Mario S. Levis
Title: Executive Vice President
PUERTO RICO INVESTORS FLEXIBLE
ALLOCATION FUND
By: /s/ Leslie Highley, Jr.
--------------------------------
Name: Leslie Highley, Jr.
Title: Authorized Signatory
By: /s/ Javier Rubio
--------------------------------
Name: Javier Rubio
Title: Authorized Signatory
PUERTO RICO INVESTORS
TAX-FREE FUND VI, INC.
By: /s/ Leslie Highley, Jr.
--------------------------------
Name: Leslie Highley, Jr.
Title: Senior Vice President
By: /s/ Javier Rubio
--------------------------------
Name: Javier Rubio
Title: Senior Vice President
<PAGE> 33
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
8.35% SENIOR 8.45% SENIOR 8.50% SENIOR 8.55% SENIOR
NOTES DUE NOTES DUE NOTES DUE NOTES DUE
2004 TO BE 2005 TO BE 2006 TO BE 2007 TO BE
INITIAL PURCHASERS PURCHASED PURCHASED PURCHASED PURCHASED
------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Puerto Rico Investors Flexible Allocation Fund.......... $3,000,000 $4,000,000 $1,000,000 $4,500,000
Puerto Rico Investors Tax-Free Fund VI, Inc............. $2,000,000 $4,000,000 $6,000,000 $4,500,000
TOTAL $5,000,000 $8,000,000 $7,000,000 $9,000,000
</TABLE>
<PAGE> 34
EXHIBIT A
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER THE PUERTO RICO
UNIFORM SECURITIES ACT OR ANY OTHER STATE SECURITIES LAW. THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF
(OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN
MINIMUM AGGREGATE PRINCIPAL AMOUNTS OF $100,000 TO AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) or
(7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE SIDE OF THIS
SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE
COMPANY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY, (4) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (6)
PURSUANT TO AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT, IN EACH CASE IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE U.S. AN
INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL
FURNISH TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS IT
MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER TO OR BY IT OF
THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER
HEREOF, BY PURCHASING THIS
<PAGE> 35
-2-
SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT
IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT AND THAT IT
IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
No._____________ $_____________
Senior Note Due
August 31, 200
Doral Financial Corporation, a Puerto Rico corporation, promises to
pay to _________________________________ or registered assigns, the principal
sum of ______________________________________________ Dollars on August 31,
200__.
Interest Payment Dates:
Record Dates:
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: September , 1999
DORAL FINANCIAL CORPORATION
By:
--------------------------
[Vice] President
By:
--------------------------
[Assistant] Secretary
<PAGE> 36
-3-
[FORM OF REVERSE SIDE OF SECURITY]
Senior Note Due
August 31, 200
1. Interest
Doral Financial Corporation, a Puerto Rico corporation (the
"Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay
interest semiannually on February 28 and August 31 of each year,
commencing on February 28, 2000. Interest on the Securities will
accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from September , 1999. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and,
with respect to any portion of a calendar month, on the basis of the
actual number of days elapsed during such portion of a calendar month.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of
Securities at the close of business on the February 15 or August 15
next preceding the relevant interest payment date even if Securities
are canceled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts (i) by wire
transfer of immediately available funds to the account of each Holder
as notified by each Holder to the Company, in the case of Holders of
$1,000,000 or more in aggregate principal amount of Securities and
(ii) by check mailed to the Holder's address, in other cases.
3. Paying Agent and Registrar
Initially, the Company will act as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent,
Registrar or coregistrar.
<PAGE> 37
-4-
4. Note Purchase Agreement
The Company issued the Securities under a Note Purchase
Agreement dated as of September , 1999 (the "Agreement"), between the
Company and the several purchasers named therein. The terms of the
Securities include those stated in the Agreement. Capitalized terms
used herein and not defined herein have the meanings ascribed thereto
in the Agreement. The Securities are subject to all such terms, which
are hereby incorporated by reference as if fully set forth herein, and
Securityholders are referred to the Agreement for a statement of those
terms.
The Securities are general unsecured obligations of the
Company.
5. No Early Redemption
The Securities may not be redeemed prior to maturity.
6. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $5,000 and whole multiples of $5,000. A Holder may
transfer or exchange Securities in accordance with the Agreement. The
Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Agreement.
7. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
8. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates
another person. After any such payment, Holders entitled to the money
must look only to the Company for payment.
<PAGE> 38
-5-
9. Amendment, Waiver
Subject to certain exceptions set forth in the Agreement, (i)
the Agreement or the Securities may be amended with the written
consent of the Holders of at least a majority in principal amount
outstanding of the Securities and (ii) certain defaults or
noncompliances with certain provisions may be waived with the written
consent of the Holders of a majority in principal amount outstanding
of the Securities.
10. Defaults and Remedies
Under the Agreement, Events of Default include (i) default
for 30 days in payment of interest on the Securities; (ii) default in
payment of principal of the Securities at maturity, upon declaration
or otherwise; (iii) failure by the Company to comply with other
agreements in the Agreement or the Securities, subject to notice and
lapse of time; (iv) certain accelerations of indebtedness of the
Company or any Significant Subsidiary if the amount accelerated
exceeds $5,000,000, subject to notice and lapse of time; and (v)
certain events of bankruptcy or insolvency. If an Event of Default
occurs and is continuing, and unless such Event of Default is of a
type which may be waived by the Majority Holders and is so waived by
the Majority Holders, each Holder may declare the Securities held by
such Holder to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in
the Securities being due and payable immediately upon the occurrence
of such Events of Default.
<PAGE> 39
-6-
- ------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to ____________________
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- ------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or Tax I.D. No.)
and irrevocably appoint ________________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
- ------------------------------------------------------------------------------
Date:_______________ Your Signature:
- ------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by
this certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
Check one box below
(1) [ ] to the Company; or
<PAGE> 40
-7-
(2) [ ] pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that purchases
for its own account or for the account of a
qualified institutional buyer to whom notice is
given that such transfer is being made in reliance
on Rule 144A, in each case pursuant to and in
compliance with Rule 144A under the Securities Act
of 1933; or
(4) [ ] to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act of 1933) that has furnished to
the Registrar a signed letter containing certain
representations and agreements (the form of which
letter can be obtained from the Registrar or the
Company); or
(5) [ ] pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933; or
(6) [ ] pursuant to an opinion of counsel acceptable to
the Company that registration is not required under
the Securities Act of 1933.
Unless one of the boxes is checked, the Registrar will refuse to
register any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however, that if box
(4) or (5) is checked, the Registrar may require, prior to registering any such
transfer of the Securities, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from or in a transaction not
subject to, the registration requirements of the Securities Act of 1933.
------------------------------
Your Signature
Signature Guarantee:
----------------------------------------------------------
<PAGE> 41
-8-
(Signature must be guaranteed by a member
firm of the New York Stock Exchange or a
commercial bank or trust company)
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:________________________ ______________________________
NOTICE: To be executed by an
executive officer
<PAGE> 1
EXHIBIT 10.89
MASTER REPURCHASE AGREEMENT
DATED AS OF JUNE 4, 1999
BETWEEN:
BEAR STEARNS MORTGAGE CAPITAL CORPORATION
DORAL FINANCIAL CORPORATION
1. Applicability
From time to time the parties hereto may enter into transactions in
which Doral Financial Corporation ("Seller") agrees to transfer to Bear Stearns
Mortgage Capital Corporation ("Buyer") Mortgage Loans against the transfer of
funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Mortgage Loans at a date certain or on demand, against the transfer of
funds by Seller. Each such transaction shall be referred to herein as a
"Transaction" and shall be governed by this Agreement, as the same shall be
amended from time to time.
2. Definitions
(a) "Act of Insolvency", with respect to either Buyer or Seller, (i)
the commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law, or such party seeking the appointment of a receiver, trustee, custodian or
similar official for such party or any substantial part of its property, or
(ii) the commencement of any such case or proceeding against such party, or
another seeking such an appointment, or the filing against a party of an
application for a protective decree under the provisions of the Securities
Investor Protection Act of 1970, which (A) is consented to or not timely
contested by such party, (B) results in the entry of an order for relief, such
an appointment, the issuance of such a protective decree or the entry of an
order having a similar effect, or (C) is not dismissed within 15 days, (iii)
the making by a party of a general assignment for the benefit of creditors, or
(iv) the admission in writing by a party of such party's inability to pay such
party's debts as they become due;
(b) "Additional Purchased Mortgage Loans", Mortgage Loans provided by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Agency" shall refer to GNMA, FNMA or FHLMC, as the case may be;
(d) "Agency Documentation" shall refer collectively to the Guides and
parts or chapters thereof and to GNMA, FNMA and FHLMC forms and schedules;
<PAGE> 2
(e) "Agency Registration Form" shall refer to Form HUD 11705 (Schedule
of Subscriber), Fannie Mae Form 2014 (Delivery Schedule), FHLMC Form 939
(Settlement and Information Multiple Registration Form) or FHLMC Form 987
(Warehouse Delivery Form) as applicable, on which it is indicated that the
related Agency Security shall be issued to, and in the name of, Bear, Stearns &
Co. Inc.;
(f) "Agency Security" shall refer to a GNMA Security, a FNMA Security
or a FHLMC Security;
(g) "Approvals" shall refer to the approvals of FHLMC, FNMA and GNMA
described in Paragraph 11(b)(xi) of these Supplemental Terms;
(h) "Business Day", any day other than a Saturday, Sunday and any day
on which banks located in the State of New York are authorized or required to
close for business;
(i) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage, agreed to by Buyer
and Seller prior to entering into the Transaction and specified in the related
Request/Confirmation, to the Repurchase Price for such Transaction as of such
date;
(j) "Covenant Compliance Certificate" shall have the meaning set forth
in Paragraph 13 hereof;
(k) "Custodian", the custodian named in the Custody Agreement and any
permitted successor thereto;
(l) "Custody Agreement", the Tri-Party Custody Agreement among Buyer,
Seller and the Custodian providing for the custody of records relating to the
Purchased Mortgage Loans;
(m) "Custodian" shall refer to the Custodian named in the Custody
Agreement;
(n) "Custody Receipt" shall refer to the Receipt substantially in the
form attached as an exhibit to the Custody Agreement;
(o) "FHA" shall refer to the Federal Housing Administration;
(p) "FHLMC" shall refer to the Federal Home Loan Mortgage Corporation;
(q) "FHLMC Guide" shall refer to the Freddie Mac Sellers' and
Servicers' Guide, as such Guide may hereafter from time to time be amended;
(r) "FHLMC Security" shall refer to a Mortgage Participation
Certificate issued and guaranteed by FHLMC and backed by a pool of Mortgage
Loans;
(s) "FNMA" shall refer to the Federal National Mortgage Association;
(t) "FNMA Guide" shall refer to the Fannie Mae MBS Selling and
Servicing Guide, as such Guide may hereafter from time to time be amended;
2
<PAGE> 3
(u) "FNMA Security" shall refer to a Guaranteed Mortgage Pass-Through
Certificate issued and guaranteed by FNMA and backed by a pool of Mortgage
Loans;
(v) "GAAP" shall refer to generally accepted accounting principles
consistently applied;
(w) "GNMA" shall refer to the Government National Mortgage
Association;
(x) "GNMA Guide" shall refer to the GNMA Mortgage-Backed Securities
Guide, as such Guide may hereafter from time to time be amended;
(y) "GNMA Security" shall refer to (i) fully-modified pass-through
mortgage-backed certificate guaranteed by GNMA and backed by a pool of Mortgage
Loans and (ii) Mortgage-Backed Serial Notes guaranteed by GNMA and backed by a
pool of Mortgage Loans;
(z) "Guide" shall refer to the GNMA Guide, the FNMA Guide or the FHLMC
Guide, as applicable;
(aa) "Income", with respect to any Mortgage Loan at any time, any
principal thereof then payable and all payments of interest and principal
together with other distributions thereon or proceeds thereof;
(bb) "Loan Schedule", a schedule of Mortgage Loans identifying each
Mortgage Loan: (1) in the case of all Mortgage Loans, by Seller's loan number,
Mortgagor's name and address (including the state and zip code) of the
mortgaged property, whether such Mortgage Loan bears a fixed or adjustable
interest rate, the loan-to-value ratio, the outstanding principal amount as of
a specified date, the initial interest rate borne by such Mortgage Loan, the
original principal balance thereof, the current scheduled monthly payment of
principal and interest, the maturity of the related Note, the property type,
the occupancy status, the appraised value, the original term to maturity and
whether or not the Mortgage Loan (including the related Note) has been
modified; and (2) in the case of adjustable rate Mortgage Loans, the interest
rate borne by such Mortgage Loan on the Purchase Date, the index and applicable
determination date for each adjustment period, the gross margin, the payment
adjustment period (in months), months to next payment adjustment, periodic
payment adjustment cap, lifetime payment adjustment cap, lifetime payment cap,
interest rate adjustment, periodic interest adjustment cap and lifetime
interest rate adjustment cap;
(cc) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(dd) "Market Value", with respect to any Mortgage Loans as of any
date, the fair market value of such Mortgage Loans on such date as determined
by Buyer in its reasonable business judgment from time to time and at such
times as it may elect in its sole discretion; provided, however, that a Market
Value of zero shall be assigned to (i) any Mortgage Loan that has been
delinquent for at least thirty (30) days, (ii) any Mortgage Loan that has been
subject to this Agreement for more than one hundred and eighty (180) days in
aggregate or (iii) any Mortgage Loan with respect to which there is a breach of
a representation or warranty made by Seller in this Agreement or the Custody
Agreement that materially adversely affects Buyer's interests hereunder;
3
<PAGE> 4
(ee) "Mortgage", the mortgage, deed of trust or other instrument
creating a first lien on an estate in fee simple interest in real property
securing a Note;
(ff) "Mortgage Loan", a first lien mortgage loan on single family
residential property consisting of a Note secured by a Mortgage;
(gg) "Mortgagor", the obligor on a Note;
(hh) "Note", the Note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan;
(ii) "Pooled Mortgage Loan" shall refer to an Agency Mortgage Loan
that is included in a pool designated to back an Agency Security and with
respect to which the Custodian has made an initial certification to the related
Agency;
(jj) "Prepooled Mortgage Loan" shall refer to a Mortgage Loan for
which there is no Takeout Commitment and is identified as such on the Loan
Schedule.
(kk) "Price Differential", with respect to any Transaction hereunder
as of any date, the aggregate amount obtained by daily application of the
Pricing Rate for such Transaction to the Purchase Price for such Transaction on
a 360 day per year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and ending
on (but excluding) the date of determination (reduced by any amount of such
Price Differential previously paid by Seller to Buyer with respect to such
Transaction);
(ll) "Pricing Rate", the per annum percentage rate for determination
of the Price Differential, which rate shall be specified in the related
Request/Confirmation;
(mm) "Prime Rate", the prime rate of U.S. money center commercial
banks as published in The Wall Street Journal;
(nn) "Purchase Date", the date with respect to each Transaction on
which Purchased Mortgage Loans are sold by Seller to Buyer hereunder;
(oo) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Mortgage Loans are sold by Seller to Buyer hereunder, and (ii)
thereafter, such price decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
(pp) "Purchased Mortgage Loans", the Mortgage Loans sold by Seller to
Buyer in a Transaction hereunder, and any Mortgage Loans substituted therefor
in accordance with Paragraph 9 hereof. The term "Purchased Mortgage Loans" with
respect to any Transaction at any time also shall include Additional Purchased
Mortgage Loans delivered pursuant to Paragraph 4(a);
(qq) "Replacement Mortgage Loans", the meaning specified in Paragraph
12(e)(ii) hereof;
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(rr) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Mortgage Loans from Buyer, including any date determined by
application of the provisions of Paragraphs 3(e) or 12 hereof;
(ss) "Repurchase Price", the price at which Purchased Mortgage Loans
are to be resold by Buyer to Seller upon termination of a Transaction, which
will be determined in each case (including Transactions terminable upon demand)
as the sum of the Purchase Price and the Price Differential as of the date of
such determination, increased by any amount determined by the application of
the provisions of Paragraph 12 hereof;
(tt) "Request/Confirmation", the request and confirmation
substantially in the form of Exhibit A hereto delivered pursuant to Paragraph 3
hereof;
(uu) "Security Release Form" shall refer to (i) Freddie Mac Form 996
(Warehouse Lender Release of Security Interest) in the case of a FHLMC
Security, (ii) Fannie Mae Form 2004 (Security Release Certification) in the
case of a FNMA Security and (iii) Form HUD 11711A (Release of Security
Interest) in the case of a GNMA Security.
(vv) "Takeout Assignment" shall refer to an assignment, substantially
in the form of Exhibit D hereto, executed by the Seller in favor of Buyer
assigning all of the Seller's rights under a Takeout Commitment;
(ww) "Takeout Commitment" shall refer to a trade confirmation from the
Takeout Investor to the Seller confirming the details of a forward trade
between the Takeout Investor and the Seller with respect to one or more Agency
Securities, which trade confirmation shall be valid, binding and in full force
and effect and relate to pools of Mortgage Loans that satisfy the "good
delivery standard" of the Public Securities Association as set forth in the
Public Securities Association Uniform Practices Guide;
(xx) "Takeout Investor" shall refer to a securities dealer or other
financial institution, listed in Exhibit G hereto, who has made a Takeout
Commitment. Such list may be modified from time to time by the Seller in its
sole discretion, upon written notice to the Seller, or by the Seller with the
written consent of the Seller. Such amended list shall be delivered by the
Seller to the Custodian;
(yy) "VA" shall refer to the Department of Veteran Affairs.
(zz) "Warehouse Facilities" shall refer to warehouse facilities
(relating to mortgage loans only) in excess of $10,000,000 listed on Exhibit B
hereto.
3. Initiation; Request/Confirmation; Termination; Transactions Optional
(a) Any agreement to enter into a Transaction shall be made in writing
at the initiation of Seller. In the event that Seller desires to enter into a
Transaction hereunder, Seller shall deliver to Buyer prior to 5:00 p.m., New
York City time, on the Business Day prior to the proposed Purchase Date, a
Request/Confirmation complete in every respect except for the signature of an
authorized representative of Buyer. Buyer shall, upon its receipt and approval
thereof, promptly execute and return the signed Request/Confirmation to Seller.
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(b) The Request/Confirmation shall describe the Purchased Mortgage
Loans in a manner satisfactory to Buyer (which may be by attaching a Loan
Schedule thereto), identify Buyer and Seller and set forth (i) the Purchase
Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase
Price applicable to the Transaction, and (v) any additional terms or conditions
of the Transaction mutually agreeable to Buyer and Seller.
(c) Each Request/Confirmation shall be binding upon the parties hereto
unless written notice of objection is given by the objecting party to the other
party within one (1) Business Day after Buyer has delivered the completed
Request/Confirmation to Seller.
(d) In the event of any conflict between the terms of a
Request/Confirmation and this Agreement, such Request/Confirmation shall
prevail.
(e) In the case of Transactions terminable upon demand, such demand
shall be made by Buyer or Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior to the
Business Day on which such termination will be effective. On the date specified
in such demand, or on the date fixed for termination in the case of
Transactions having a fixed term, termination of the Transaction will be
effected by resale by Buyer to Seller or its agent of the Purchased Mortgage
Loans and any Income in respect thereof received by Buyer (and not previously
credited or transferred to, or applied to the obligations of, Seller hereunder)
against the transfer of the Repurchase Price to an account of Buyer.
(f) The adjustment mechanism and the index for any adjustable rate
Mortgage Loan must be satisfactory to Buyer in its sole discretion.
(g) Notwithstanding any provision of this Agreement or the Custody
Agreement to the contrary, the initiation of each Transaction is subject to the
approval of Buyer in its sole discretion. Buyer may, in its sole discretion,
reject any Mortgage Loan from inclusion in a Transaction hereunder for any
reason.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased
Mortgage Loans subject to all Transactions hereunder is less than the aggregate
Buyer's Margin Amount for all such Transactions (a "Margin Deficit"), then
Buyer may by notice to Seller require Seller in such Transactions, at Buyer's
option, to transfer to Buyer cash or additional Mortgage Loans reasonably
acceptable to Buyer ("Additional Purchased Mortgage Loans"), so that the cash
and aggregate Market Value of the Purchased Mortgage Loans, including any such
Additional Purchased Mortgage Loans, will thereupon equal or exceed such
aggregate Buyer's Margin Amount.
(b) If the notice to be given by Buyer to Seller under subparagraph
(a) above is given at or prior to 10:00 a.m. New York city time on a Business
Day, Seller shall transfer cash or Additional Purchased Mortgage Loans to Buyer
prior to the close of business in New York City on the date of such notice, and
if such notice is given after 10:00 a.m. New York City time, Seller shall
transfer cash or Additional Purchased Mortgage Loans prior to the close of
business in New York City on the Business Day following the date of such
notice.
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(c) Any cash transferred pursuant to this Paragraph shall be held by
Buyer as though it were Additional Purchased Mortgage Loans and, unless Buyer
shall otherwise consent, shall not reduce the Repurchase Price of the related
Transaction.
5. Income Payments
Where a particular Transaction's term extends over an Income payment
date on the Mortgage Loans subject to that Transaction, all payments and
distributions, whether in cash or in kind, made on or with respect to the
Purchased Mortgage Loans shall, unless otherwise mutually agreed by Buyer and
Seller, be paid, delivered or transferred: (a) in the case of Agency
Securities, directly to Bear, Stearns & Co. Inc. as agent for the Buyer
pursuant to the instructions set forth at Exhibit E and (b) in the case of
Mortgage Loans, so long as an Event of Default on the part of Seller shall not
have occurred and be continuing, be paid directly to Seller by the related
Mortgagor. Buyer shall not be obligated to take any action pursuant to the
preceding sentence to the extent that such action would result in the creation
of a Margin Deficit, unless prior thereto or simultaneously therewith Seller
transfers to Buyer, at Buyer's option, cash or Additional Purchased Mortgage
Loans sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are deemed to
be loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Mortgage Loans with respect to all Transactions hereunder and all proceeds
thereof. Seller shall pay all fees and expenses associated with perfecting such
security interest including, without limitation, the cost of filing financing
statements under the Uniform Commercial Code and recording assignments of
mortgage as and when required by Buyer in its sole discretion.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. All Mortgage Loans transferred by one
party hereto to the other party shall be transferred by notice to the Custodian
to the effect that the Custodian is now holding for the benefit of the
transferee the related documents and assignment forms delivered to it under the
Custody Agreement.
8. Segregation of Documents Relating to Purchased Mortgage Loans
All documents relating to Purchased Mortgage Loans in the possession
of Seller shall be segregated from other documents and securities in its
possession and shall be identified as being subject to this Agreement.
Ownership of all Purchased Mortgage Loans shall pass to Buyer and nothing in
this Agreement shall preclude Buyer from engaging in repurchase transactions
with the Purchased Mortgage Loans or otherwise pledging or hypothecating the
Purchased Mortgage Loans, but no such transaction shall relieve Buyer of its
obligations to resell and transfer Purchased Mortgage Loans to Seller pursuant
to the terms hereof.
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9. Substitution
Seller may, subject to agreement with and acceptance by Buyer,
substitute other Mortgage Loans for any Purchased Mortgage Loans. Such
substitution shall be made by transfer to Buyer of such other Mortgage Loans
and transfer to Seller of such Purchased Mortgage Loans. After substitution,
the substituted Mortgage Loans shall be deemed to be Purchased Mortgage Loans.
10. Delivery of Additional Documents
(a) The Seller shall, prior to or simultaneously with the funding of
each Transaction, deliver to Buyer through the Custodian a fully executed
Custody Receipt, and all other applicable documents required by the Custody
Agreement.
(b) The Seller shall, within ninety (90) days of a Mortgage Loan
becoming subject to this Agreement, deliver to Buyer (i) a duly authorized and
originally executed Takeout Assignment relating to a Takeout Commitment
covering such Mortgage Loan naming Buyer as the assignee, relating to a pool of
Mortgage Loans of which such Mortgage Loan forms a part and in form and
substance satisfactory to Buyer and (ii) a copy of the related Agency
Registration Form in form and substance satisfactory to Buyer.
(c) The Seller shall, simultaneously with the funding of the initial
Transaction under this Agreement relating to each type of Agency Security and
from time to time thereafter upon the request of Buyer, deliver to Buyer
evidence of the commitment of FHLMC, FNMA or GNMA, as appropriate, pursuant to
which the related Agency Securities shall be issued.
(d) The Seller shall deliver to Buyer on a monthly basis (or more
frequently if requested by Buyer), an investor commitment report, substantially
in the form attached hereto as Exhibit F, listing the existing commitments of
GNMA, FHLMC and FNMA (for securitizations and sales) relating to all
outstanding Request/Confirmations.
(e) Buyer, simultaneously with the funding of each Transaction
involving Mortgage Loans, shall cause the Custodian to be provided with an
executed Security Release Form appropriate for the related Agency Security
indicating that Seller releases its interest in the related Mortgage Loans into
one or more Agency Securities, upon the issuance of such Agency Security or
Securities. Such form shall be prepared by the Seller and provided to the
Custodian on behalf of Buyer in advance of the date on which delivery thereof
is required hereby. The Custodian shall execute such form on behalf of Buyer.
11. Representations, Warranties and Covenants
(a) Buyer and Seller each represents and warrants, and shall on and as
of the Purchase Date of any Transaction be deemed to represent and warrant, to
the other that:
(i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder and
to perform its obligations hereunder and has taken all necessary
action to authorize such execution, delivery and performance;
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(ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party
hereto, as agent for a disclosed principal);
(iii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf (or on behalf of any such disclosed
principal);
(iv) it has obtained all authorizations of any governmental body
required in connection with this Agreement and the Transactions
hereunder and such authorizations are in full force and effect; and
(v) the execution, delivery and performance of this Agreement
and the Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by which it
is bound or by which any of its assets are affected.
(b) Seller represents and warrants to Buyer, and shall on and as of
the Purchase Date of any Transaction be deemed to represent and warrant, as
follows:
(i) The documents disclosed by Seller to Buyer pursuant to this
Agreement are either original documents or genuine and true copies
thereof;
(ii) Seller is a separate and independent corporate entity from
the Custodian, Seller does not own a controlling interest in the
Custodian either directly or through affiliates and no director or
officer of Seller is also a director or officer of the Custodian;
(iii) None of the Purchase Price for any Mortgage Loan will be
used either directly or indirectly to acquire any security, as that
term is defined in Regulation T of the Regulations of the Board of
Governors of the Federal Reserve System, and Seller has not taken any
action that might cause any Transaction to violate any regulation of
the Federal Reserve Board;
(iv) Each Mortgage Loan was underwritten in accordance with the
written underwriting standards of Seller furnished by Seller to Buyer,
and no change to such underwriting standards has occurred since the
date of the last written revision to such standards was furnished to
Buyer by Seller;
(v) Seller shall be at the time it transfers to Buyer any
Mortgage Loans for any Transaction the legal and beneficial owner of
such Mortgage Loans, free of any lien, security interest, option or
encumbrance; and
(vi) Seller used no selection procedures that identified the
Mortgage Loans relating to a Transaction as being less desirable or
valuable than other comparable assets in Seller's portfolio on the
related Purchase Date.
(vii) All information provided by the Seller to Buyer concerning
the Mortgage Loans is true and correct;
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(viii) All data and other information provided by or on behalf of the
Seller to the Custodian, whether in writing, by electronic transmission or on
computer tape or diskette or otherwise, is true and correct;
(ix) The Seller is servicing each Mortgage Loan in strict conformity
with the servicing standards described in Paragraph 14 of this Agreement;
(x) The consummation of the Transaction as contemplated herein and
in the Custody Agreement will not violate any policy, regulation or guideline
of the FHA or VA or result in the voiding or reduction of the FHA insurance, VA
guarantee or any other insurance or guarantee in respect of any Mortgage Loan,
and such insurance or guarantee is in full force and effect or shall be in full
force and effect as required by the applicable GNMA Guide, FNMA Guide or FHLMC
Guide;
(xi) The Seller is a GNMA-approved issuer, a GNMA-approved servicer,
a FHA-approved mortgagee, a VA-approved lender, a FNMA-approved issuer, a
FNMA-approved servicer and a FHLMC-approved seller/servicer in good standing
("Approvals");
(xii) Each Mortgage Loan conforms to the requirements and
specifications (including, without limitation, all representations and
warranties required in respect thereof) set forth in the GNMA Guide, FNMA Guide
or FHLMC Guide, as applicable, and is eligible to be sold to any Agency to back
an Agency Security;
(xiii) Each and every document, certificate, instrument, insurance
policy, escrow and any other item necessary to satisfy the final delivery
requirements of FHLMC, FNMA or GNMA as required by the FHLMC Guide, the FNMA
Guide or the GNMA Guide, as applicable, for the issuance of the related Agency
Security are in form and substance acceptable to FHLMC, FNMA or GNMA, as
appropriate, and have been delivered to the Custodian;
(xiv) The Seller has no notice or knowledge of any fact, event or
circumstance whatsoever on the basis of which FHLMC, FNMA or GNMA, as
applicable, may delay the issuance of, or refuse to issue, the related Agency
Security;
(xv) Each copy of the document or documents evidencing the Agency
commitment delivered to Seller through the Custodian pursuant to Paragraph
10(c) hereof is a true and correct copy, and such GNMA, FHLMC or FNMA
commitment has not been withdrawn, amended or supplemented except as has been
theretofore disclosed to Buyer in writing;
(xvi) Other than the Prepooled Mortgage Loans identified as such on
the Loan Schedule, each Mortgage Loan that is intended to back an Agency
Security conforms in all respects with all requirements of the Takeout
Commitment applicable to the Agency Security to be backed by such Mortgage
Loans;
(xvii) Each Takeout Commitment with respect to Pooled Mortgage Loans
is a legal, valid and binding obligation of the Seller enforceable against it
in accordance with
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its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);
(xviii) Each Takeout Commitment with respect to Pooled Mortgage Loans
is enforceable by the Seller against the related Takeout Investor;
(xix) Each Takeout Commitment with respect to Pooled Mortgage Loans
is, by virtue of the related Takeout Assignment, enforceable by Buyer against
the related Takeout Investor;
(xx) Each Takeout Assignment with respect to Pooled Mortgage Loans
is a legal, valid and binding obligation of the Seller enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law); and
(xxi) Each Mortgage is secured by a negotiable promissory note.
(c) Seller hereby makes to Buyer, its successors and assigns each of
the representations and warranties regarding Seller and the Mortgage Loans
which Seller makes to the Agency in connection with its issuance of Agency
Securities backed by the related Pooled Mortgage Loans.
(d) Seller covenants with Buyer, from and after the date hereof, as
follows:
(i) Seller shall immediately notify Buyer if an Event of Default shall
have occurred;
(ii) Seller shall deliver to Buyer a current Loan Schedule with
respect to all Mortgage Loans subject to this Agreement with such frequency as
Buyer may require but in no event less frequently than weekly; and
(iii) No Mortgage Loan shall be subject to this Agreement for more
than one hundred and eighty (180) days in aggregate.
(iv) The Seller shall immediately notify Buyer if any Approvals are
withdrawn or modified;
(v) The Seller shall notify Buyer of any changes in the terms of,
or the parties to, the Warehouse Facilities within one (1) Business Day of the
Seller becoming aware of such changes, whether or not such changes have yet
become effective;
(vi) In the case of a Transaction involving Mortgage Loans that will
back an Agency Security, the Seller shall not alter or amend the Agency
Registration Form relating to such Transaction following the initial
preparation thereof without the express approval of Buyer;
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(vii) Without Buyer's express prior written approval, the
Seller shall not execute, in favor of any third party, any assignment
of rights held or purportedly held by the Seller under a given Takeout
Commitment;
(viii) All financial and other covenants made by the Seller
under the Warehouse Facilities shall be deemed to be made directly to
Buyer as though fully set forth herein; provided, however, that any
such covenants that require the Seller to obtain Buyer's consent prior
to entering into financing arrangements (other than the Transactions
contemplated hereby) shall be deemed to merely require prior written
notice by the Seller to Buyer of such financing arrangements without
any requirement for the consent of Buyer;
(ix) The Seller shall be at the time it delivers any
Purchased Mortgage Loans to the Custodian or Buyer for any
Transaction, and shall continue to be, through the Purchase Date
relating to each such Transaction, the legal and beneficial owner of
such Purchased Mortgage Loans free and clear of any lien, security
interest, option or encumbrance except for the security interest
created by this Agreement;
(x) The Seller shall deliver to Buyer the Covenant
Compliance Certificate referred to in Paragraph 13 on the last day of
each calendar quarter;
(xi) The Seller shall service the Mortgage Loans in
accordance with the provisions of Paragraph 14 hereof;
(xii) The Seller shall promptly notify Buyer after the
occurrence of any change that it reasonably believes would be
contemplated by Paragraph 12 hereof;
(xiii) Notwithstanding any other provision of this Agreement,
no Mortgage Loan shall be subject to this Agreement or to the Custody
Agreement for more than ninety (90) days in aggregate unless such
Mortgage Loan is a Pooled Mortgage Loan and the Seller shall have
delivered to Buyer a Takeout Assignment relating to a Takeout
Commitment covering such Mortgage Loan; and
(xiv) Notwithstanding any other provision of this Agreement,
no Mortgage Loan shall be subject to this Agreement or to the Custody
Agreement for more than one hundred and eighty (180) days in
aggregate.
(e) With respect to each Prepooled Mortgage Loan which
becomes a Pooled Mortgage Loan, the Seller shall represent and warrant
to Buyer, and shall on and as of the date on which such Prepooled
Mortgage Loan became a Pooled Mortgage Loan be deemed to represent
each of the representations, warranties and covenants set forth in
this Section 11.
12. Events of Default; Event of Termination
(a) The following events shall constitute events of default (each an
"Event of Default") hereunder with respect to Buyer or Seller, as applicable:
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(i) Seller fails to repurchase or Buyer fails to transfer Purchased
Mortgage Loans upon the applicable Repurchase Date pursuant to the terms
hereof;
(ii) Seller or Buyer fails, after one (1) Business Day's notice, to
comply with Paragraph 4 hereof;
(iii) An Act of Insolvency occurs with respect to Seller or Buyer or
any controlling entity thereof;
(iv) Any representation or warranty made by Seller or Buyer in this
Agreement or the Custody Agreement shall have been incorrect or untrue in any
material respect when made or repeated or deemed to have been made or repeated;
provided, however, that in the case of representations and warranties made with
respect to the Purchased Mortgage Loans, such circumstance shall not constitute
an Event of Default if, after determining the Market Value of the Purchased
Mortgage Loans without taking into account the Purchased Mortgage Loans with
respect to which such circumstance has occurred, no other Event of Default
shall have occurred and be continuing;
(v) Any covenant in this Agreement or the Custody Agreement shall
have been breached in any material respect; provided, however, that in the case
of covenants made with respect to the Purchased Mortgage Loans, such
circumstance shall not constitute an Event of Default if, after determining the
Market Value of the Purchased Mortgage Loans without taking into account the
Purchased Mortgage Loans with respect to which such circumstance has occurred,
no other Event of Default shall have occurred and be continuing;
(vi) Buyer shall have reasonably determined that Seller is or will be
unable to meet its commitments under this Agreement, shall have notified Seller
of such determination and Seller shall not have responded with appropriate
information to the contrary to the satisfaction of Buyer within twenty-four
(24) hours;
(vii) This Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby;
(viii) A final judgment by any competent court in the United States of
America for the payment of money in an amount of at least $500,000 is rendered
against Seller, and the same remains undischarged for a period of sixty (60)
days during which execution of such judgment is not effectively stayed;
(ix) Any event of default or any event which with notice, the passage
of time or both shall constitute an event of default shall occur and be
continuing under any repurchase or other financing agreement for borrowed funds
or indenture for borrowed funds by which Seller is bound or affected shall
occur and be continuing;
(x) In the reasonable judgment of Buyer a material adverse change
shall have occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Seller;
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(xi) Seller shall be in default with respect to any normal
and customary covenants under any debt contract or agreement, any
servicing agreement or any lease to which it is a party, which default
(a) permits acceleration of the obligations of the Seller under such
contract or agreement by any other party thereto or (b) could
materially adversely affect the financial condition of Seller (which
covenants include, but are not limited to, an Act of Insolvency of
Seller or the failure of Seller to make required payments under such
contract or agreement as they become due);
(xii) Seller shall fail to promptly notify Buyer of (i) the
acceleration of any debt obligation or the termination of any credit
facility of Seller; (ii) the amount and maturity of any such debt
assumed after the date hereof; (iii) any adverse developments with
respect to pending or future litigation involving Seller which could
reasonably be expected to have a material adverse effect on the
financial condition of the Seller; and (iv) any other developments
which might materially and adversely affect the financial condition of
Seller; or
(xiii) Seller shall have failed to comply in any material
respect with its obligations under the Custody Agreement.
(xiv) Any Approvals of the Seller are materially adversely
modified or revoked.
(b) If an Event of Default shall have occurred and be continuing,
then, at the option of the nondefaulting party, exercised by written notice to
the defaulting party (which option shall be deemed to have been exercised, even
if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(c) In all Transactions in which the defaulting party is Seller, if
Buyer is deemed to have exercised the option referred to in subparagraph (b) of
this Paragraph, (i) Seller's obligations hereunder to repurchase all Purchased
Mortgage Loans in such Transactions shall thereupon become immediately due and
payable, (ii) to the extent permitted by applicable law, the Repurchase Price
with respect to each such Transaction shall be increased by the aggregate
amount obtained by daily application of (x) the greater of the Pricing Rate for
such Transaction and the Prime Rate to (y) the Repurchase Price for such
Transaction as of the Repurchase Date as determined pursuant to subparagraph
(b) of this Paragraph (decreased as of any day by (A) any amounts retained by
Buyer with respect to such Repurchase Price pursuant to clause (iii) of this
subparagraph, (B) any proceeds from the sale of Purchased Mortgage Loans
pursuant to subparagraph (e)(i) of this Paragraph, and (C) any amounts credited
to the account of Seller pursuant to subparagraph (f) of this Paragraph) on a
360 day per year basis for the actual number of days during the period from and
including the date of the Event of Default giving rise to such option to but
excluding the date of payment of the Repurchase Price as so increased, (iii)
all Income paid after such exercise or deemed exercise shall be payable to and
retained by Buyer applied to the aggregate unpaid Repurchase Prices owed by
Seller, and (iv) Seller shall immediately deliver or cause the Custodian to
deliver to Buyer any documents relating to Purchased Mortgage Loans subject to
such Transactions then in Seller's possession.
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(d) In all Transactions in which the defaulting party is Buyer, upon
tender by Seller of payment of the aggregate Repurchase Prices for all such
Transactions, Buyer's right, title and interest in all Purchased Mortgage Loans
subject to such Transactions shall be deemed transferred to Seller, and Buyer
shall deliver or cause the Custodian to deliver all documents relating to such
Purchased Mortgage Loans to Seller.
(e) After one (1) Business Day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subparagraph (b) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of subparagraph (a) of this
Paragraph), the nondefaulting party may:
(i) as to Transactions in which the defaulting party is
Seller, (A) immediately sell on a servicing released or servicing
retained basis as Buyer deems desirable, in a recognized market at
such price or prices as Buyer may in its sole discretion deem
satisfactory, any or all Purchased Mortgage Loans subject to such
Transactions and apply the proceeds thereof to the aggregate unpaid
Repurchase Prices and any other amounts owing by Seller hereunder or
(B) in its sole discretion elect, in lieu of selling all or a portion
of such Purchased Mortgage Loans, to give Seller credit for such
Purchased Mortgage Loans in an amount equal to the Market Value
therefor on such date against the aggregate unpaid Repurchase Prices
and any other amounts owing by Seller hereunder; and
(ii) as to Transactions in which the defaulting party is
Buyer, (A) purchase mortgage loans ("Replacement Mortgage Loans")
having substantially the same outstanding principal amount, maturity
and interest rate as any Purchased Mortgage Loans that are not
transferred by Buyer to Seller as required hereunder or (B) in its
sole discretion elect, in lieu of purchasing Replacement Mortgage
Loans, to be deemed to have purchased Replacement Mortgage Loans at
the price therefor on such date, calculated as the average of the
prices obtained from three (3) nationally recognized registered
broker/dealers that buy and sell comparable mortgage loans in the
secondary market.
(f) As to Transactions in which the defaulting party is Buyer, Buyer
shall be liable to Seller (i) with respect to Purchased Mortgage Loans (other
than Additional Purchased Mortgage Loans), for any excess of the price paid (or
deemed paid) by Seller for Replacement Mortgage Loans therefor over the
Repurchase Price for such Purchased Mortgage Loans and (ii) with respect to
Additional Purchased Mortgage Loans, for the price paid (or deemed paid) by
Seller for the Replacement Mortgage Loans therefor. In addition, Buyer shall be
liable to Seller for interest on such remaining liability with respect to each
such purchase (or deemed purchase) of Replacement Mortgage Loans from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such
interest shall be at a rate equal to the greater of the Pricing Rate for such
Transaction or the Prime Rate.
(g) For purposes of this Paragraph 12, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is Buyer shall
not increase above the amount of such Repurchase Price for such Transaction
determined as of the date of the exercise or deemed exercise by Seller of its
option under subparagraph (b) of this Paragraph.
15
<PAGE> 16
(h) The defaulting party shall be liable to the nondefaulting party
for the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the
Pricing Rate for the relevant Transaction or the Prime Rate. Expenses incurred
in connection with an Event of Default shall include without limitation those
costs and expenses incurred by the nondefaulting party as a result of the early
termination of any repurchase agreement or reverse repurchase agreement entered
into by the nondefaulting party in connection with the Transaction then in
default.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
(j) At the option of Buyer, exercised by written notice to Seller, the
Repurchase Date for any or all Transactions shall be deemed to immediately
occur in the event that the senior debt obligations or short-term debt
obligations of Bear Stearns & Co. Inc. shall be rated below the four highest
generic grades (without regard to any pluses or minuses reflecting gradations
within such generic grades) by any nationally recognized statistical rating
organization.
(k) The exercise by any party of remedies after the occurrence of an
Event of Default shall be conducted in a commercially reasonable manner.
13. Financial Statements
(a) The Seller shall deliver to Buyer a quarterly certificate (the
"Covenant Compliance Certificate") signed by an authorized officer of the
Seller to the effect that as of such date, the Seller is in compliance with all
covenants set forth in this agreement and all covenants set forth in the
Warehouse Facilities.
(b) Each delivery of Purchased Securities by the Seller to Buyer
hereunder will constitute a representation by the Seller that there has been no
material adverse change in the Seller's financial condition not disclosed to
Buyer since the date of the Seller's most recent unaudited balance sheet or
income statement delivered to Buyer. The Seller shall provide Buyer, from time
to time at the Seller's expense, with such information of a financial or
operational nature as Buyer may reasonably request promptly upon receipt of
such request.
14. Servicing of the Purchased Mortgage Loans
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the Purchased Mortgage Loans contemplated hereby, Seller
shall service the Purchased Mortgage Loans for the benefit of Buyer and, if
Buyer shall exercise its rights to sell the Purchased Mortgage Loans pursuant
to this Agreement prior to the related Repurchase Date, Buyer's assigns;
provided, however, that the obligation of Seller to service Purchased Mortgage
Loans for the benefit of Buyer as aforesaid shall cease upon the securitization
of Mortgage Loans into Agency Securities.
(b) The Seller shall service and administer the Mortgage Loans in
accordance with prudent mortgage loan servicing standards and procedures
generally accepted in the mortgage banking industry and in accordance with the
standards incorporated (with respect to the GNMA
16
<PAGE> 17
securitization program) the GNMA Guide or (with respect to the FNMA
securitization program) the FNMA Guide or (with respect to the FHLMC
securitization program) the FHLMC Guide; provided, however, that the Seller
shall at all times comply with applicable law and FHA regulations and VA
regulations so that the FHA insurance, VA guarantee or any other applicable
insurance or guarantee, if any, in respect of any Mortgage Loan is not voided
or reduced. The Seller shall at all times maintain accurate and complete
records of its servicing of the Mortgage Loans.
(c) Seller will provide Buyer with monthly reports, substantially
identical in form to FNMA's standard form of remittance report with respect to
all Purchased Mortgage Loans then involved in any Transaction hereunder.
(d) Buyer may, in its sole discretion if an Event of Default shall
have occurred and be continuing, without payment of any termination fee or any
other amount to Seller, sell the Mortgage Loans on a servicing released basis
without the payment of any termination fee to the Seller or terminate Seller as
the servicer of the Purchased Mortgage Loans with or without cause.
15. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers made by
either of them in respect of any Transaction shall be deemed to have been made
in consideration of payments, deliveries and other transfers in respect of any
other Transactions hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other and netted.
16. Notices and Other Communications
Except as otherwise expressly provided herein, all such notices or
communications shall be in writing (including, without limitation, telegraphic,
facsimile or telex communication) or confirmed in writing and such notices and
other communications shall, when mailed, telegraphed, communicated by facsimile
transmission or telexed, be effective when received at the address for notices
for the party to whom such notice or communications is to be given as follows:
if to Seller:
Doral Financial Corporation
1159 F.D. Roosevelt Avenue
Puerto Nuevo, PR 00920
Attention: Mario S. Levis
Telephone: (787) 749-7108_________
17
<PAGE> 18
Telecopy: (787) 749-8267
if to Buyer:
Bear Stearns Mortgage Capital Corporation
245 Park Avenue
17th Floor
New York, New York 10167
Attention: John Garzone
Telephone: (212) 272-3853
Telecopy: (212) 272-5736
Notwithstanding the foregoing, however, that a facsimile transmission shall be
deemed to be received when transmitted so long as the transmitting machine has
provided an electronic confirmation of such transmission, and provided further,
however, that all financial statements delivered shall be hand-delivered or
sent by first-class mail. Either party may revise any information relating to
it by notice in writing to the other party, which notice shall be effective on
the third business day following receipt thereof.
17. Payment of Expenses
Seller shall pay on demand all reasonable fees and expenses
(including, without limitation, the reasonable fees and expenses for legal
services of any kind whatsoever) incurred by Buyer or the Custodian in
connection with this Agreement and the Custody Agreement and the transactions
contemplated hereby and thereby, whether or not any Transactions are entered
into hereunder, including, by way of illustration and not by way of limitation,
the fees and expenses incurred in connection with (i) the preparation,
reproduction and distribution of this Agreement and the Custody Agreement and
any opinions of counsel, certificates of officers or other documents
contemplated by the aforementioned agreements and (ii) any Transaction under
this Agreement; provided, however, that Seller shall not be required to pay the
fees and expenses of Buyer incurred as a result of Buyer's default under this
Agreement. The obligation of Seller to pay such fees and expenses incurred
prior to or in connection with the termination of this Agreement shall survive
the termination of this Agreement.
18. Opinions of Counsel
Seller shall, on the Purchase Date of the first Transaction hereunder
and, upon the request of Buyer, on the Purchase Date of any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon permitted as
to any person or entity that purchases the Mortgage Loans from Buyer in a
repurchase transaction, a favorable opinion of counsel with respect to the
matters set forth in Exhibit C hereto, in form and substance acceptable to
Buyer and its counsel.
19. Further Assurances; Additional Information
(a) Seller shall promptly provide such further assurances or
agreements as Buyer may request in order to effect the purposes of this
Agreement and any Takeout Assignment.
18
<PAGE> 19
(b) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in its possession
pertaining to each Purchased Mortgage Loan that is the subject of such
Transaction. Such inspection shall occur upon the request of Buyer at a
mutually agreeable location during regular business hours and on a date not
more than two (2) Business Days after the date of such request.
(c) Seller agrees to provide Buyer or its agents, from time to time,
with such information concerning Seller of a financial or operational nature as
Buyer may reasonably request.
(d) Seller shall provide Buyer or its agents, with copies of all
filings made by or on behalf of Seller or any entity that controls Seller, with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended, promptly upon making such filings.
20. Buyer as Attorney-in-Fact
Buyer is hereby appointed the attorney-in-fact of Seller for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instruments that Buyer may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, Buyer shall have the right and power during the occurrence and
continuation of any Event of Default to receive, endorse and collect all checks
made payable to the order of Seller representing any payment on account of the
principal of or interest on any of the Purchased Mortgage Loans and to give
full discharge for the same.
21. Appointment of Agent
Buyer hereby appoints Bear Stearns Mortgage Capital Corporation as its
agent for purposes of issuing Requests/Confirmations, determining Market Value,
exercising Buyer's rights under any margin maintenance provision of this
Agreement and such other purposes as Buyer may direct. The appointment of such
agent shall not relieve Buyer of its obligations hereunder.
Buyer hereby appoints Bear, Stearns & Co. Inc.as its agent for
purposes of the receipt, registration and sale of Agency Securities.
22. Wire Instructions
(a) Any amounts to be transferred by Buyer to Seller hereunder shall
be sent by wire transfer in immediately available funds to the account of
Seller at:
FEDERAL RESERVE OF N.Y.
ABA # 221572838
Doral Bank
For further credit to:
HF Mortgage Bankers
Acct. #2-4000011-2
19
<PAGE> 20
(b) Any amounts to be transferred by Seller to Buyer hereunder shall
be sent by wire transfer in immediately available funds to the account of Buyer
at:
FNB CHICAGO/BEAR STEARNS MBS
ABA #: 071-000-013
Acct. No.: 5801230
Attention: John Garzone
(c) Amounts received after 3:00 p.m., New York City time, on any
Business Day shall be deemed to have been paid and received on the next
succeeding Business Day.
23. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement herein shall be treated as separate and
independent from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such other provision or
agreement.
24. Non-assignability; Termination
(a) The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by either party without the prior
written consent of the other party. Subject to the foregoing, this Agreement
and any Transactions shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
(b) This Agreement and all Transactions outstanding hereunder shall
terminate automatically without any requirement for notice on the date
occurring three hundred and sixty-four (364) days after the date as of which
this Agreement is entered into; provided, however, that this Agreement and any
Transaction outstanding hereunder may be extended by mutual agreement of Buyer
and Seller; and provided further, however, that no such party shall be
obligated to agree to such an extension.
25. Agency Documentation
All references in this Agreement to items of Agency Documentation
shall, if such items are amended or superseded from time to time by the related
Agency, be deemed references to such Agency Documentation as so amended or
superseded.
26. Counterparts
This Agreement may be executed in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
20
<PAGE> 21
27. Governing Law
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
28. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any provision
of this Agreement and no consent by any party to a departure herefrom shall be
effective unless and until such shall be in writing and duly executed by both
of the parties hereto. Without limitation on any of the foregoing, the failure
to give a notice pursuant to subparagraph 4(a) hereof will not constitute a
waiver of any right to do so at a later date.
29. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of
the Employee Retirement Income Security Act of 1974 ("ERISA") are intended to
be used by either party hereto (the "Plan Party") in a Transaction, the Plan
Party shall so notify the other party prior to the Transaction. The Plan Party
shall represent in writing to the other party that the Transaction does not
constitute a prohibited transaction under ERISA or is otherwise exempt
therefrom, and the other party may proceed in reliance thereon but shall not be
required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this
Paragraph, any such Transaction shall proceed only if Seller furnishes or has
furnished to Buyer its most recent available audited statement of its financial
condition and its most recent subsequent unaudited statement of its financial
condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller
shall be deemed (i) to represent to Buyer that since the date of Seller's
latest such financial statements, there has been no material adverse change in
Seller's financial condition which Seller has not disclosed to Buyer, and (ii)
to agree to provide Buyer with future audited and unaudited statements of its
financial condition as they are issued, so long as it is a Seller in any
outstanding Transaction involving a Plan Party.
30. Intent
(a) Each Transaction involving Mortgage Loans is entered into in
contemplation of the issuance of one or more Agency Securities backed by the
related Mortgage Loans. The parties intend that the Seller will act as issuer
or seller and/or servicer with respect to such Agency Securities, as
applicable, and that each Agency Security will be issued in the name of, and
delivered to or upon the order of, Bear, Stearns & Co. Inc.
(b) The parties intend and acknowledge that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of Title 11 of
the United States Code, as amended (except insofar as the type of Mortgage
Loans subject to such Transaction or the term
21
<PAGE> 22
of such Transaction would render such definition inapplicable), and a
"securities contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended.
(c) It is understood that either party's right to liquidate Mortgage
Loans delivered to it in connection with Transactions hereunder or to exercise
any other remedies pursuant to Paragraph 12 hereof, is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of Title 11 of
the United States Code, as amended.
31. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties
is a broker or dealer registered with the Securities and Exchange
Commission ("SEC") under Section 15 of the Securities Exchange Act of
1934 ("1934 Act"), the Securities Investor Protection Corporation has
taken the position that the provisions of the Securities Investor
Protection Act of 1970 ("SAPPY") do not protect the other party with
respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties
is a government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act, SAPPY will
not provide protection to the other party with respect to any
Transaction hereunder; and
(c) in the case of Transactions in which one of the parties
is a financial institution, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and therefore
are not insured by the Federal Deposit Insurance Corporation, the
Federal Savings and Loan Insurance Corporation or the National Credit
Union Share Insurance Fund, as applicable.
BEAR STEARNS MORTGAGE CAPITAL DORAL FINANCIAL CORPORATION
CORPORATION
By /s/ JOHN M. GARZONE By /s/ MARIO S. LEVIS
----------------------- -------------------
Title SR. VICE PRESIDENT Title EVP & TREASURER
Date 6-11-99 Date June 10, 1999
22
<PAGE> 23
EXHIBIT A
REQUEST/CONFIRMATION
TO: Doral Financial Corporation ("Seller")
1159 F.D. Roosevelt Avenue
Puerto Nuevo, PR 00920
Attention: John Garzone
FROM: Bear Stearns Mortgage Capital Corporation ("Buyer")
RE: TRANSACTIONS INVOLVING MORTGAGE LOANS TO BE SECURITIZED INTO AGENCY
SECURITIES
AGENCY (check one): FNMA (TM) FHLMC (TM) GNMA (TM)
Bear Stearns Mortgage Capital Corporation ("Buyer") is pleased to confirm your
sale and its purchase of the Mortgage Loans described below and listed on the
attached Loan Schedule pursuant to the Master Repurchase Agreement between the
Seller and Buyer under the following terms and conditions:
POOL/COMMITMENT NO.
ORIG. PRINCIPAL AMOUNT OF MORTGAGE LOANS:
CURRENT PRINCIPAL AMOUNT OF MORTGAGE LOANS:
PURCHASE DATE:
REPURCHASE DATE:
PURCHASE PRICE:
PRICING RATE:
MINIMUM REQUIRED MARGIN PERCENTAGE:
PRICE DIFFERENTIAL DUE DATE:
A-1
<PAGE> 24
The Master Repurchase Agreement is incorporated by reference into this
Request/Confirmation and made a part hereof as if it were fully set forth
herein. All capitalized terms used herein but not otherwise defined shall have
the meanings specified in the Master Repurchase Agreement.
BEAR STEARNS MORTGAGE CAPITAL
CORPORATION
BY: ______________________________
NAME: ____________________________
TITLE: ___________________________
A-2
<PAGE> 25
TO EXHIBIT A
CONFIRMATION/FUNDING REQUEST FOR MORTGAGE LOANS
Request No. ___
Date: _________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount
Funded
to
Product Wire Loan Borrower Loan Purchase Qualified Market Takeout Note Commitment Takeout Maturity
Investor Type Date Number Last Amount Price Originator Value Date Rate Number Price Date
- -------- ---- ---- ------ ---- ------ ----- ---------- ----- ---- ---- ------ ----- ----
</TABLE>
TOTALS:
[SELLER]
By: ______________________________
Title: ______________________________
Date: ______________________________
Amount to be
funded by MLMCI: $____________
<PAGE> 26
EXHIBIT B
List of Warehousing Facilities for
Whole loans only
As of 6/4/99
<TABLE>
<CAPTION>
LENDER* SIZE OF CREDIT LINE
- ------- ------------------------
(IN MILLIONS OF DOLLARS)
<S> <C>
Banco Popular 70
Banco Santander 60
Government Development Bank 100
Economic Development Bank 20
Scotiabank 20
First Bank 40
Bankers Trust 313
Citibank 50
PaineWebber 200
Merrill Lynch 600
Bear Stearns 450
TOTAL $1,923
======
</TABLE>
Note: The above lines are in addition to over $1.0 Billion in Repo lines
available for securities.
- ---------------------
* In addition, Morgan Stanley has committed to a facility of
$450,000,000 but final documentation is still pending.
B-1
<PAGE> 27
EXHIBIT C
OPINION OF COUNSEL TO SELLER
1. Seller is duly organized and validly existing as a corporation in
good standing under the laws of the Commonwealth of Puerto Rico and has power
and authority to enter into and perform its obligations under this Agreement
and the Custody Agreement. Seller is duly qualified to do business and is in
good standing in each jurisdiction in which the character of the business
transacted by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business, properties,
assets or condition (financial or other) of Seller and its subsidiaries,
considered as a whole.
2. This Agreement and the Custody Agreement have each been duly
authorized, executed and delivered by Seller, and each constitutes a valid and
legally binding obligation of Seller enforceable against Seller in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights generally and to general equity principles.
3. No consent, approval, authorization or order of any state or
federal court or government agency or body is required to be obtained by Seller
for the consummation of the transactions contemplated by this Agreement or the
Custody Agreement.
4. The consummation of any of the transactions contemplated by this
Agreement and the Custody Agreement will not conflict with, result in a breach
of, or constitute a default under the articles of incorporation or bylaws of
Seller or the terms of any indenture or other agreement or instrument known to
us to which Seller is party or bound, or any order known to such counsel to be
applicable to Seller or any regulations applicable to Seller, of any state or
federal court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over Seller.
5. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator involving
Seller or relating to the transaction contemplated by this Agreement or the
Custody Agreement which, if adversely determined, would have a material adverse
effect on Buyer.
6. Seller is duly registered as a finance company in each state in
which Mortgage Loans were originated, to the extent such registration is
required by applicable law.
7. Each Mortgage Loan will have been endorsed in a manner which
satisfies any requirement of endorsement in order to transfer all right, title
and interest in and to that Mortgage Loan from Seller to Buyer. This Agreement
together with (a) the delivery of such related Mortgage Loans to Custodian and
(b) the endorsement of such Mortgage Loans to Buyer, creates a valid, perfected
security interest in such Mortgage Loans in favor of Buyer. As holder of the
Mortgage Loans by endorsement, Buyer shall, subject to the terms of the
Agreement, be entitled to the same security interest and liens with respect to
the Mortgage Loans as Seller, without the necessity of recording any
assignments of mortgage in the Registry of Property of Puerto Rico.
C-1
<PAGE> 28
EXHIBIT D
[TAKEOUT ASSIGNMENT]
_____________________ ("Takeout Investor")
(Address)
Attention: ____________________
Gentlemen:
Attached hereto is a correct and complete copy of your confirmation of
commitment (the "Commitment"), trade-dated ___________, 19__, to purchase
$____________ of _____% ____ year:
(Check Box)
: (a) Government National Mortgage Association;
: (b) Federal National Mortgage Association; or
: (c) Federal Home Loan Mortgage Corporation;
mortgage-backed pass-through securities ("Securities") at a purchase
price of ____________ from _________________. This is to confirm that (i) the
Commitment is in full force and effect, (ii) the Commitment has been assigned
to _____________________ ("Assignee") whose acceptance of such assignment is
indicated below, (iii) you will accept delivery of such Securities directly
from Assignee and (iv) you will pay Assignee for such Securities. Payment will
be made "delivery versus payment (DVP)" to Assignee in immediately available
funds. Assignee shall have the right to require you to fulfill your obligation
to purchase the Securities.
Notwithstanding the foregoing, the obligation to deliver the
Securities to you shall be that of [Seller] and your sole recourse for the
failure of such delivery shall be against [Seller].
D-1
<PAGE> 29
If you have any questions, please call ____________________ of the
Assignee at __________________ immediately.
Very truly yours,
[SELLER]
By: _________________________
Title: ______________________
Date: _______________________
Agreed to:
[ASSIGNEE]
By: ____________________
Title: _________________
Date: __________________
D-2
<PAGE> 30
EXHIBIT E
PAYMENT INSTRUCTIONS FOR AGENCY SECURITIES
FED FNMA AND FHLMC SECURITY INSTRUCTIONS: ________________
ABA _________
PTC GNMA SECURITY INSTRUCTIONS: ________
E-1
<PAGE> 31
EXHIBIT F
INVESTOR COMMITMENT REPORT
MORTGAGE LOANS
(SECURITIZATION)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Confirmation/
Funding Request Trade Delivery MBS Note/Coupon Delivery Trade Commitment
(Listed by Number) Date Takeout Investor Month Type Rate Price Amount Number Number Reason
- ------------------ ---- ---------------- ----- ---- ---- ----- ------ ------ ------ ------
</TABLE>
F-1
<PAGE> 32
EXHIBIT G
TAKEOUT INVESTORS
<PAGE> 1
[LOGO]
- -------------------------------------------------------------------------------
October 7, 1999
<TABLE>
<S> <C> <C>
Contact:
Richard F. Bonini Mario S. Levis David J. Rochester
Executive Vice President Executive Vice President Senior Vice President
Tel: (212) 508 0340 Tel: (787) 749 7108 Investor Relations
Tel: (212) 508 0349
</TABLE>
DORAL FINANCIAL CORPORATION REPORTS RECORD EARNINGS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1999
San Juan, Puerto Rico, October 7, 1999 - Doral Financial Corporation
(NASDAQ: DORL), a diversified financial services company, bank holding company,
and Puerto Rico's largest mortgage banker, today reported record results for
the third quarter and first nine months of 1999.
Net income for the quarter and nine months ended September 30, 1999,
amounted to a record $17.3 million and $50.2 million, compared to $13.9 million
and $38.0 million for the 1998 periods, representing increases of 25% and 32%
for such comparative periods. Consolidated earnings per diluted share were
$0.38 and $1.11, respectively, for the third quarter and nine months ended
September 30, 1999, as compared to $0.33 and $0.91, respectively, per diluted
share for the comparable 1998 periods. No sales of mortgage servicing rights
were made during the first nine months of 1999, while net income for the
corresponding 1998 period included a pre-tax gain of $1.8 million on the sale
of approximately $100 million of mortgage servicing rights.
Net interest income for the third quarter of 1999 rose to $12.4
million from $7.6 million for the respective 1998 quarter, an increase of 63%.
For the nine months ended September 30, 1999, net interest income was $34.3
million, compared to $24.2 million for the same period a year ago, an increase
of 42%. The increase in net interest income is mainly due to the planned
continuing growth of the Company's portfolio of interest earning assets,
composed primarily of mortgage loans, mortgage-backed securities and US
Government securities and obligations.
For the quarter ended September 30, 1999, net gain on mortgage loan
sales increased to $21.1 million from $12.6 million, an increase of 68%
compared to the 1998 third quarter. For the first nine months of 1999, net gain
on mortgage loan sales amounted to $61.2 million, compared to $29.4 million for
the corresponding period a year ago, an increase of 108%. The increase for the
third quarter was principally due to an increase in origination fees. The
Company has recently been emphasizing loan products with higher origination
fees. The increase for the nine month period was due to a higher volume of
mortgage loan originations and related fees.
The volume of mortgage loan production for the third quarter and first
nine months of 1999 was $601 million and $2.054 billion respectively, compared
to $567 million and $1.498 billion for the comparative 1998 periods. These
figures represent increases of 6% and 37%, respectively, for such comparative
periods. Significantly, 82% of Doral's mortgage loan production consisted of
internal loan originations, which continues to be one of the highest in the
nation for any publicly traded mortgage banking company. The sustained high
level of originations, even during a period of rising interest rates, reflects
the Company's efforts to continue to better serve the consumer, Doral's ongoing
branch expansion, the Company's strength in new housing production, and the
availability of a wide range of attractive financial products and services.
<TABLE>
<S> <C> <C> <C> <C>
HF Mortgage Bankers - Doral Mortgage Corporation - Doral Bank - Doral Securities - Centro Hipotecario
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1159 F. D. Roosevelt Ave, Puerto Nuevo, PR 00920-2998 - Phone (787) 791-3300 - Fax (787) 792-4028
</TABLE>
<PAGE> 2
For the third quarter of 1999, servicing income increased to $7.2
million, compared to $5.5 million for the corresponding 1998 period, an
increase of 31%. During the first nine months of 1999, servicing income
increased to $21.6 million, from $15.7 million for the corresponding 1998
period, an increase of 38%. The increase in servicing income for the quarter
and nine month periods reflects the continuing growth of the Company's mortgage
servicing portfolio which increased to $7.3 billion at September 30, 1999, from
$5.5 billion a year ago.
Non-interest expenses for the second quarter and first nine months of
1999 were $26.5 million and $71.0 million respectively, compared to $15.3
million and $40.1 million a year ago. These increases reflect the expansion of
the Company's loan origination capacity and banking operations, investment in
technology, and the increased costs associated with the continuing growth of
the servicing portfolio. The Company is currently implementing a cost reduction
program throughout the organization.
Salomon Levis, Chairman and Chief Executive Officer of Doral
Financial, said: "We are delighted that the results for the third quarter ended
September 30, 1999, were very strong in spite of higher interest rates". Mr.
Levis added "We are very pleased to report that Doral Financial's internal
originations for the third quarter of 1999 were higher than those for the third
quarter of 1998 in spite of the closing of our Chicago mortgage wholesale
operation in July 1999 and also despite mortgage originations purchased from
third party lenders in Puerto Rico being lower than projected . This growth
reflects Doral Financial's leadership in our market, including its increased
production in the growing new housing sector".
Currently in its 27th year of operations, Doral Financial Corporation
is a bank holding company and a diversified consumer finance company. Through
Doral Mortgage Corporation, H.F. Mortgage Bankers Division, Centro Hipotecario,
Inc. and its newly acquired mortgage operation, SANA Investment Mortgage
Bankers, Doral Financial Corporation is the largest mortgage banker in Puerto
Rico.
The Company has 57 retail offices (38 mortgage offices in Puerto Rico,
one mortgage office in Florida, one mortgage office in New York, 15 bank
branches and 2 broker-dealer offices in Puerto Rico), and engages in the
origination, sale, and servicing of mortgage loans, as well as commercial
banking through Doral Bank, a Puerto Rico commercial bank, and broker-dealer
services through Doral Securities, Inc. Additionally, on October 4, 1999, the
Company received a charter for Doral Bank FSB, which will commence business on
October 14, 1999, and will allow the Company to expand its presence in the New
York City marketplace.
A telephone conference call will be held on Friday, October 8 at
8:30am EST to discuss these results. In order to participate in the telephone
conference, please call 1-800-451-7724 at least 10 minutes prior to the start
of the call. Ask for the Doral Financial conference call and give conference ID
number V108.
A recorded version of the conference call will be available two hours
after completion of the conference until midnight on Saturday, October 9, 1999
by calling 1-800-695-1564.
A replay of the conference call will also be available for 7 days
through the internet and can be accessed through www.streetfusion.com and
StreetEvents via our web site at www.doralfinancial.com
<PAGE> 3
DORAL FINANCIAL CORPORATION
Consolidated Statement Of Operations
(Dollars in Thousands Except Per Share Data)
(Nasdaq:DORL)
(Unaudited)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income $ 54,828 $ 38,557 $ 142,459 $ 104,563
Interest expense 42,421 30,925 108,209 80,368
----------- ----------- ----------- -----------
Net interest income 12,407 7,632 34,250 24,195
Provision for loan losses 878 163 1,631 474
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 11,529 7,469 32,619 23,721
----------- ----------- ----------- -----------
Non-interest income:
Net gain on mortgage loan sales 21,094 12,581 61,215 29,438
Trading account profit 2,109 2,113 6,632 6,717
Gain on sale of investment securities 1,581 1,960 1,807 3,554
Servicing income 7,170 5,469 21,581 15,673
Gain on sale of servicing assets -- -- -- 1,829
Commissions, fees and other income 2,064 847 4,069 1,998
----------- ----------- ----------- -----------
Total non-interest income 34,018 22,970 95,304 59,209
----------- ----------- ----------- -----------
Non-interest expense:
Compensation and benefits, net 12,721 5,962 33,807 13,378
Taxes, other than payroll and income taxes 776 465 1,759 1,266
Professional services 1,081 1,088 3,839 2,964
Telephone 886 709 2,612 1,974
Rent 1,113 865 3,270 2,374
Amortization of servicing assets 2,554 1,795 8,274 4,748
Depreciation and amortization 1,196 930 3,169 2,656
Maintenance 420 438 1,118 1,038
Advertising 1,415 1,420 4,014 4,234
Other, net 4,384 1,653 9,130 5,497
----------- ----------- ----------- -----------
Total non-interest expense 26,546 15,325 70,992 40,129
----------- ----------- ----------- -----------
Income before income taxes 19,001 15,114 56,931 42,801
Income taxes 1,723 1,237 6,714 4,823
----------- ----------- ----------- -----------
Net income $ 17,278 $ 13,877 $ 50,217 $ 37,978
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.39 $ 0.34 $ 1.15 $ 0.94
=========== =========== =========== ===========
Diluted $ 0.38 $ 0.33 $ 1.11 $ 0.91
=========== =========== =========== ===========
Weighted common shares outstanding:
Basic 40,428,920 40,428,920 40,428,920 39,776,664
Diluted 42,366,149 42,416,813 42,413,421 41,743,051
</TABLE>
<PAGE> 4
DORAL FINANCIAL CORPORATION
(Nasdaq:DORL)
SELECTED BALANCE SHEET AND OPERATING DATA
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, JUNE 30, DECEMBER 31,
---------------------------- ------------
1999 1999 1998
------------ ----------- ------------
(UNAUDITED) (UNAUDITED) (AUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA
Money market investments $ 195,309 $ 162,873 $ 312,751
Mortgage loans held for sale, at lower of cost or market 991,449 909,983 883,048
Trading securities, at fair value 770,931 684,673 606,918
Securities held to maturity, at amortized cost 1,255,142 937,186 190,778
Securities available for sale, at fair value 67,906 28,862 408,888
Loans receivable, net 190,922 192,756 166,987
Total Assets 3,823,375 3,279,870 2,918,113
Stockholders' Equity 372,918 360,562 269,559
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
OPERATING DATA
Mortgage loan production $2,054,000 $1,498,000
Loan servicing portfolio 7,337,000 5,462,000
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
FINANCIAL RATIOS
Return on average assets 2.06% 2.21%
Return on average common equity 21.96% 22.69%
Common stock dividend payout ratio 19.83% 18.34%
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH DIVIDENDS PER SHARE
Common $ 0.08 $ 0.06 $ 0.22 $ 0.17
Cumulative preferred (1) 20.00 20.00 60.00 60.00
Non-cumulative preferred (2) 0.88 -- 2.11 --
</TABLE>
(1) Represents dividends on 8,460 outstanding shares of the Company's 8%
Convertible Cumulative Preferred Stock (Liquidation Preference $1,000 per
share) which have been privately placed with a local financial institution.
(2) Represents dividends on 1,495,000 outstanding shares of the Company's 7%
Non-Cumulative Monthly Income Preferred Stock (Liquidation Preference $50 per
share).
