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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): August 3, 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
On August 3, 1999, Doral Mortgage Corporation ("DMC"), a wholly-owned
subsidiary of Doral Financial Corporation (the "Company") signed an agreement
(the "Agreement") with Nancy Hernandez and Salomon Levis to acquire 100% of the
outstanding stock of Sana Investment Mortgage Brokers, Inc. d/b/a Sana Mortgage
Bankers for $6.0 million in cash. Salomon Levis is the Chairman of the Board and
Chief Executive Officer of the Company and Nancy Hernandez is his former spouse.
While 100% of the stock of Sana is registered in the name of Ms. Hernandez, Mr.
Levis has a 50% beneficial interest in the stock as a result of the community
property laws of Puerto Rico.
Sana, which is licensed as a mortgage banking institution in Puerto
Rico, specializes in small to mid sized residential conventional mortgage loans.
It currently operates out of seven branches in Puerto Rico and plans to open two
additional branches within the next 60 days and one additional branch by year
end. Sana closed approximately $106 million and $65.6 million of mortgage loans
for the year ended December 31, 1998 and the six-month period ended June 30,
1999, respectively. Sana's income before taxes was $1.2 million for the year
ended December 31, 1998 and was approximately $700,000 for the six months ended
June 30, 1999. While the Agreement requires that the net worth of Sana be not
less than $800,000 as of the closing date, the Company expects that Sana's net
worth will be approximately $1.0 million by such date, most of which will be
represented by cash. Management expects to achieve considerable cost savings as
part of the acquisition especially in the areas of executive compensation,
advertising and promotional expenses, taxes and other expenses. The Company's
management believes that the acquisition of Sana's profitable mortgage
production capacity represents a very attractive opportunity to solidify its
mortgage business in Puerto Rico. It also allows the Company the opportunity to
secure a continuous source of mortgage servicing rights and the related income.
Nancy Hernandez will continue as President of Sana until the closing of the
transaction at which time she will leave Sana and devote herself to her personal
business interests. The Company expects to continue to operate Sana under its
current name.
The terms of the transaction were approved by the Company's Board of
Directors following a favorable recommendation by a special committee of
independent directors. Popular Securities, Inc. rendered a fairness opinion to
the Company's Board of Director's in connection with the transaction.
The closing of the transaction which has been tentatively scheduled for
September 15, 1999, is subject to the approval of the Commissioner of Financial
Institutions of Puerto Rico as well as various other standard closing
conditions.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA, FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
10.87 Purchase Contract, dated as of August 3, 1999, among
Doral Mortgage Corporation, Nancy Hernandez and Salomon Levis.
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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\ Richard F. Bonini
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Richard F. Bonini
Senior Executive Vice President and
Chief Financial Officer
Date: August 9, 1999
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EXHIBIT 10.87
PURCHASE CONTRACT
AMONG
DORAL MORTGAGE CORPORATION
NANCY HERNANDEZ
AND
SALOMON LEVIS
DATED AS OF AUGUST 3, 1999
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TABLE OF CONTENTS
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Page
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1. Purchase and Sale of Shares.....................................................................1
2. Representation and Warranties of Sellers........................................................2
3. Covenant to Retain Business Intact.............................................................13
4. Ordinary Conduct...............................................................................13
5. Mutual Covenants of Buyer and Sellers..........................................................14
6. Conditions to Buyer's Obligations..............................................................16
7. Condition to Seller's Obligation...............................................................21
8. Covenant not to Compete........................................................................21
9. Termination....................................................................................23
10. Other Agreements...............................................................................25
11. Closing........................................................................................27
12. Notices........................................................................................28
13. Interpretation.................................................................................28
14. Counterparts...................................................................................28
15. Entire Agreement...............................................................................29
16. Severability...................................................................................29
17. Arbitration....................................................................................29
18. Governing Law..................................................................................29
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EXHIBITS
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Exhibit A - List of Excluded Assets
Exhibit A-1 - Value of Excluded Assets as of May 31,
1999
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SCHEDULES
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Schedule 2(b) - List of Required Consents and
Approvals
Schedule 2(h)(i) - List of Real Property Owned by Sana
Schedule 2(h)(ii) - List of Real Property Leased by Sana
Schedule 2(k) - Schedule of liens
Schedule 2(l) - List of Material Contracts and
Agreements
Schedule 2(m) - List of pending actions, suits or
investigations
Schedule 2(n) - List of Required licenses and permits
Schedule 2(o) - List of Recourse Obligations
Schedule 2(p) - List of Insurance
Schedule 2(q) - List of Bank Accounts
Schedule 2(r)(i) - Schedule of Owned Loans
Schedule 2(r)(ii) - Schedule of Purchase Commitments
Schedule 2(r)(iii) - Schedule of Delinquent Mortgage
Loans
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Schedule 2(r)(iv) - Schedules of Mortgage loans in
foreclosure
Schedule 2(r)(v) - Schedule of Escrow Accounts
Schedule 2(r)(vi) - Schedule of Damaged Properties
Schedule 2(r)(vii) - Schedule of Advances
Schedule 2(r)(viii) - Schedule of Mortgage Loan
Originations
Schedule 4(c) - Schedule of Indebtedness
Schedule 4(g) - Certain Agreements Affecting Leases
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PURCHASE AGREEMENT
THIS AGREEMENT, dated as of August 3, 1999, among Doral Mortgage
Corporation ("Buyer") a Puerto Rico corporation, Nancy Hernandez ("Ms.
Hernandez) and Salomon Levis ("Mr. Levis" and together with Ms. Hernandez the
"Sellers");
W I T N E S S E T H:
WHEREAS, The Sellers own 100% of the outstanding capital stock
of Sana Investment Mortgage Brokers, Inc. which operates under the
name Sana Mortgage Bankers, Inc. ("Sana").
WHEREAS, Buyer desires to acquire and Sellers desire to sell and
transfer to Buyer, all of the issued and outstanding shares of capital stock of
Sana upon the terms and conditions set forth herein; and
NOW, THEREFORE, it is agreed by the parties hereto as follows:
1. PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions hereof,
(a) Sellers agree to sell, transfer and deliver to Buyer at
the Closing (as hereinafter defined) all of the issued and outstanding shares of
capital stock of Sana (the "Shares"), all of which capital stock is owned by
Sellers together with stock transfer powers transferring all of such Shares to
Buyer.
(b) Buyer agrees to pay to Seller for the Shares an amount
(the "Purchase Price") equal to $6,000,000 payable on the Closing Date by
certified or bank check (the "Cash Payment").
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2. REPRESENTATION AND WARRANTIES OF SELLERS. Sellers hereby
represent, warrant and agree as follows:
(a) Sana is a corporation duly organized, validly existing,
and in good standing under the laws of the Commonwealth of Puerto Rico and has
the corporate power to own its property and to carry on its business as now
conducted. Neither the nature of the business conducted by Sana the character of
the property owned by it or any other state of facts requires Sana to be
qualified to do business as a foreign corporation in any jurisdiction in which
it is not so qualified. Within the past five years, no claim has been made by
any governmental authority that the nature of the business conducted by Sana or
the character of the property owned by it or any other state of facts makes
qualification of Sana to do business as a foreign corporation necessary in any
jurisdiction.
(b) This Agreement has been duly executed and delivered by the
Sellers and constitutes a valid and binding obligation of Sellers, enforceable
against Sellers in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give right to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any lien, claim, encumbrance, security interest, option, charge or
restriction of any kind upon any of the properties or assets of Sana under any
provision of (i) the General Business Corporation Law of the Commonwealth of
Puerto Rico (ii) the Certificate of Incorporation or By-laws of Sana, (iii)
except as disclosed on the Schedules hereto, any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which the Sellers or Sana is a party or by which any of their
respective properties or assets are bound, or (iv) any judgment, order or
decree, or statute, law, ordinance, rule or regulation applicable to Sellers,
Sana or the property or assets of Sellers or Sana. Except as disclosed on
Schedule 2(b) hereof, no consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required to be obtained or made by or
with
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respect to Sellers, Sana or its subsidiaries and affiliates in connection
with (i) the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or (ii) the conduct by Sana of its business
following the Closing Date as conducted on the date hereof, other than those
that may be required solely by reason of Buyer's (as opposed to any other third
party's) participation in the transactions contemplated hereby.
(c) The Sellers have good and valid title to the Shares, free
and clear of any liens, claims, encumbrances, security interests, options,
charges and restrictions of any kind. Assuming Buyer has the requisite power and
authority to be the lawful owner of the Shares, upon delivery to Buyer at the
closing of certificates representing the Shares, duly endorsed by Sellers for
transfer to Buyer, and upon Sellers receipt of the Purchase Price good, legal
and valid title to the Shares will pass to Buyer, free and clear of any liens,
claims, encumbrances, security interests, options, charges and restrictions of
any kind other than those arising from acts of Buyer or its affiliates. Other
than this Agreement, the Shares are not subject to any voting trust agreement or
other contract, agreement, arrangement, commitment or under standing, including
any such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of the Shares.
(d) The authorized capital stock of Sana consists of 10,000
shares of Common Stock, par value $100.00 per share, of which 6,500 shares
constituting the Shares, are duly authorized and validly issued and outstanding,
fully paid and nonassessable. Ms. Hernandez is the sole registered holder of the
Shares. Mr. Levis as the former spouse of Ms. Hernandez has a 50% beneficial
ownership interest in the Shares, pursuant to the Community property laws of
Puerto Rico. Other than Ms. Hernandez, Mr. Levis is the only other person
holding or owning a "beneficial" interest in the Shares. Neither the Shares nor
any shares of capital stock of any subsidiary of Sana have been issued in
violation of, and none of the Shares or such shares of capital stock is subject
to, any preemptive or subscription rights. Except as set forth above, there are
no shares of capital stock or other equity securities of Sana outstanding. There
are no outstanding warrants, options, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) pursuant to which
the Seller's or Sana is or may become obligated to issue, sell, purchase, return
or
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redeem any shares of capital stock or other securities of Sana, and there are no
equity securities of Sana reserved for issuance for any purpose. All permits or
authorizations required to be obtained from any governmental agency or authority
in connection with any and all issues of Shares have been or will be obtained
prior to the Closing Date. None of the Shares were issued in violation of the
Securities Act of 1933, as amended, or of any applicable state securities law.
(e) Sellers have furnished to Buyer the balance sheet of Sana
as at December 31, 1998 and the related statements of income and retained
earnings and changes in financial position for the year then ended reported upon
by Horwath Velez Semprit & Co. PSC, and the balance sheet of Sana as of May 31,
1999 and the related statements of income and retained earnings for the three
month period then ended, (hereinafter referred to or the "May 31 Financial
Statements"). The above financial statements are true and correct in all
material respects (subject in the case of interim financial statements to normal
year end adjustments which are not expected to be material) and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated. Such financial statements
present fairly the financial position of Sana as at the dates thereof and
reflect all known claims against and the debts and liabilities of Sana fixed or
contingent, as at the dates thereof and present fairly the results of its
operations and changes in its financial position of the periods indicated. Since
December 31, 1998, there has not been any change in the nature of the business,
results of operations, the financial condition or the manner of conducting the
business of Sana other than changes in the ordinary course of business and no
change which has had a material adverse effect on the business, results of
operations, assets, financial condition or manner of conducting the business of
Sana. To the best of Sellers' knowledge, no fact or condition exists or is
contemplated or threatened which might result in such a material adverse change,
except for the distribution to Sellers prior to the Closing Date of those assets
(the "Excluded Assets") identified on Exhibit A hereto. Neither the financial
statements referred to therein, nor any certificate, Schedule or Exhibit
furnished to Buyer by Sellers contain, or will contain, any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading.
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(f) The account receivables, investments and other assets
(other than any Excluded Assets) shown on the May 31 Financial Statements and
acquired by Sana thereafter and prior to the Closing Date have been collected or
are collectible in the amounts thereof shown on the books of Sana.
(g) Sana is engaged only in the business of originating, and
selling mortgage loans secured by residential and commercial properties. Sana is
not engaged in the business of servicing such mortgage loans.
(h) Sana owns no real property except as set forth in Schedule
2(h)(i). All of such real property will be distributed by Sana to the Sellers
prior to the Closing Date and prior to the Closing Date Sellers shall assume and
release Sana and the Buyer from any indebtedness or other liability related to
such real property, including, but not limited to, any mortgages encumbering
such property. Schedule 2(h)(ii) sets forth the list of all real properties
leased by Sana together with the location and nature of each of the leased
properties, the date of termination of each such lease, the name of the lessor
an all rental payments or other payments made or required to be made under such
leases. Each such lease is in full force and effect and there are no defaults
thereunder. Except as specified in such Schedule 2(h)(i), no such lease will
require the consent of the Lessor as a result of the consummation of the
transaction contemplated by this Agreement. There are no defaults under any of
the financial arrangements to which the fee (or any prior lease) of the leased
premised is subject.
(i) Sana has filed all Puerto Rico and other tax returns
required to be filed to date by it or on its behalf. All Puerto Rico income
taxes, personal and real property taxes, municipal license taxes and all other
taxes payable by Sana for any and all periods prior to December 31, 1998, have
been paid or adequate reserves for the payment thereof have been provided and
all such taxes due which were accrued for any period subsequent to
December 31, 1998 either have been paid in full or, if not yet due, have been,
and until the Closing Date will be, either fully accrued on the books of Sana or
paid. The May 31 Financial Statements reflect the accrual of all taxes which may
be payable for any reason up to the date thereof.
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(j) Sana has no material liabilities, fixed or contingent,
which are not disclosed in the May 31 Financial Statements, except current
obligations incurred in the ordinary course of business.
(k) Sana owns outright all the assets reflected in the May 31
Financial Statements (other than properties or assets disposed of since May 31,
1999 in the ordinary course of business), and except as set forth in Schedule
2(k) are not subject to any liens, mortgages, pledges, encumbrances, conditional
sales agreements or charges of any kind other than liens or mortgage loans in
favor of warehousing lenders incurred in the ordinary course of business.
(l) Except as set forth in Schedule 2(1), Sana is not a party
to: (i) any contract or other arrangement not made in the ordinary course of
business, or any contract or other arrangement for leasehold improvements or of
a material or unusual nature, (ii) any lease of personal property, (iii) any
labor union contract, (iv) any pension plan, profit-sharing or bonus plan for
its employees, (v) any written or oral employment contract which is not
terminable on thirty days' notice or (vi) any contract for the purchase of
fixtures or capital items. Schedule 2(1) also sets forth all contracts or
arrangements of any sort which will require the consent of any party as a result
of the transaction contemplated hereby.
(m) Except as set forth in Schedule 2(m), there are no known
actions, suits, investigations or proceedings pending, or, to their knowledge,
threatened, against or affecting or which may affect Sana in any court or by or
before any governmental body or agency, and Sana is not subject to any order,
judgment or decree, stipulation or consent or any agreement with any
governmental body or agency which affects or may affect the business or
operations of Sana. Sellers shall be deemed to have knowledge of any pending
action, suit, investigation or proceeding against Sana and shall be deemed to
have knowledge of any threatened action, suit, investigation or proceeding
against Sana as to which either oral or written communication has been given to
any officer, director, branch manager or agent of Sana or to any one of the
Sellers.
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(n) The business of Sana has been and is being operated in
substantial compliance with all applicable governing laws, rules regulations and
ordinances, including without limitation, the Puerto Rico Mortgage Institutions
Act (7 L.P.R.A. Sec. 1051, et. seq.), the Puerto Rico Act Regulating the
Business of Financial Intermediation (7 L.P.R.A. Sec 1071 et. seq.), the Federal
Fair Employment Practices Act, the Truth in Lending Act, the Real Estate
Settlement Practices Act, the Home Mortgage Disclosure Act, the Equal
Opportunity in Housing Act, the Fair Housing law, all applicable regulations of
the Commissioner of Financial Institutions of Puerto Rico, the Federal Housing
Administration, the Veterans Administration, and the U.S. Department of Housing
and Urban Development, all federal, state and local laws, rules, regulations and
ordinances relating to equal opportunity in lending, and all necessary licenses,
permits and orders, if any, with respect thereto have been obtained and are in
effect. Schedule 2(n) sets forth all such licenses, permits and orders. No
written claim has been made by any governmental or regulatory authority and
delivered to Sana (and no such claim is anticipated by Sana or the Sellers) to
the effect that the business conducted by Sana fails to comply, in any material
respect, with any law, rule, regulation or ordinance applicable to Sana, or that
Sana has not obtained any license, permit or order necessary to conduct its
business as currently conducted.
(o) Sana has not received notice that any of the mortgage
loans originated by it and sold to others did not comply with the terms of their
sale or any letter or other communication complaining as to the quality or legal
adequacy of the mortgages originated. Except as set forth on Schedule 2(o), Sana
has no legal or other obligation express or implied to repurchase from any
person, firm, corporation or other entity any mortgage which shall go into
default or otherwise become a "work-out" mortgage or any other recourse or
guaranty arrangement with respect to the mortgage loans sold by it.
(p) Schedule 2(p) contains a list of all insurance of Sana in
force as of May 31, 1999 and as of the date hereof together with the premiums
paid thereon.
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(q) Schedule 2(q) is a list of each bank or safe deposit
company in which Sana has an account or safe deposit box and the names of all
persons authorized to draw thereon or who have access thereto.
(r) The Sellers have delivered to the Buyer the following
schedules which were true and complete as of April 30, 1999 as follows:
(i) Owned Mortgages and Mortgage-Backed Securities/
Schedule 2(r)(i). A Schedule of all mortgage notes (and related mortgages)
and/or mortgage-backed securities owned by Sana classified according to the
following categories: (i) held for investment; (ii) subject to purchase
commitments but not yet delivered by Sana Company; and (iii) held for sale. The
mortgage notes listed on such Schedule 2(r)(i) are further classified according
to whether such mortgage notes are secured by first and second liens, insured or
are subject to commitments to insure by FHA under the National Housing Act of
1934, as amended ("FHA Loans"), or a named private mortgage insurer ("Private
Insured Loans") or guaranteed or subject to commitments to guarantee by the VA
under the Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or
conventional mortgage notes not so insured or guaranteed but eligible for sale
to FNMA or FHLMC ("Conforming Conventional Loans") or conventional uninsured
mortgage notes not eligible for sale to FNMA and FHLMC ("Non-Conforming
Conventional Loans"). In addition, such Schedule sets forth the outstanding
principal balance of each mortgage note, the term of the mortgage note, the
interest rate, whether the mortgage note is standing or self-amortizing, and the
jurisdiction in which the property encumbered by the related mortgage is
located, and the average weighted interest rate and weighted average maturity
for the entire portfolio of mortgage loans. Such Schedule will also identify
those mortgage loans secured by real property located in project or development
in which the aggregate amount of mortgage notes held by the Sana is in excess of
$500,000;
(ii) Purchase Commitments Schedule 2(r) (ii). A
Schedule of all purchase commitments broken down by purchaser or investor for
mortgage loans originated by Sana;
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(iii) Delinquent Mortgage Notes/Schedule 2(r)(iii).
A Schedule of all mortgage notes which are thirty (30), sixty (60) and ninety
(90) days or more delinquent in payment;
(iv) Foreclosures/Schedule 2(r)(iv). A Schedule of
all properties acquired by Sana through foreclosure action or which are in the
process of foreclosure. As used herein, the term "foreclosure action" means any
action taken by the Sana to liquidate a delinquent loan, whether by judicial or
non-judicial foreclosure, the exercise of a power of sale, the taking of a deed
in lieu of foreclosure or any other assignment or transfer to an insurer or
guarantor of a loan or any other method of liquidation customary in the locality
where the property encumbered by the mortgage is located;
(v) Escrow Accounts/Schedule 2(r)(v). A Schedule
of the escrow accounts if any, which Sana maintains for mortgage notes (and
related mortgages) indicating where each such account is maintained and the
balance thereof;
(vi) Damaged Properties/Schedule 2(r)(vi). A
Schedule of the properties encumbered by mortgages which have been materially
damaged or destroyed, in whole or in part, by any casualty, whether or not
covered by hazard insurance, and a statement whether the loss resulting from
such casualty is covered by hazard insurance and whether the loss proceeds
payable under the policy will be payable, in whole or in part, to the respective
holders of the Mortgages;
(vii) Advances/Schedule 2(r)(vii). A Schedule of
any advances which Sana, itself or through others for its account, has made or
committed to make under any mortgages to protect its security or for any other
purpose; and
(viii) Originations/Schedule 2(r)(viii). A Schedule
of mortgage loans closed (including brokered loans) for the calendar years
(ended December 31, 1998 and 1997 and for the four months ended April 30, 1999,
broken down by type of loan (e.g., first and second mortgage loan, Private
Insured, FHA or Va Loans, Conforming Conventional Loans or Non-Conforming
Conventional Loans).
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(s) No persons hold powers of attorney for Sana.
(t) Sana has no contract with the United States Government
which is subject to renegotiation.
(u) Sana has no investment in or outstanding loan to any
person, firm or corporation other than (i) residential mortgage loans made
acquired by it in the ordinary course of its mortgage banking operation, all of
which, are in the process of being resold by Sana in the ordinary cause of its
mortgage banking business (ii) and advances to employees, which will be
transferred to the Sellers as part of the Excluded Assets prior to the Closing
Date.
(v) As of the Closing Date, the Net Assets of Sana will have a
book value of at least $800,000. "Net Assets" shall mean the assets of Sana
(after the distribution to Sellers of the Excluded Assets) less all liabilities
of Sana determined in accordance with generally accepted accounting principles.
(w) This Agreement is made and the negotiations leading to it
were initiated and have been carried out without the intervention, on behalf of
Sellers, of any broker, finder or other similar person.
3. COVENANT TO RETAIN BUSINESS INTACT. Sellers covenant and
agree that, until the Closing Date, they will cause Sana to conduct its business
and operations in the ordinary course and efficiently, retain intact its
business organization and keep available the services of its present officers
and employees to the extent deemed advisable by Sana for the conduct of its
business. Sana, however, shall be entitled to distribute the Excluded Assets to
Sellers prior to the Closing Date.
4. ORDINARY CONDUCT. Since December 31, 1998, Sana has not, and
from the date hereof and prior to the Closing Date, without the prior written
consent of Buyer will not, and Sellers will not permit Sana to:
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(a) declare or pay any dividend or make any distribution
to its stockholders (except for any dividend or distribution of the
Excluded Assets to the Sellers);
(b) issue or sell, or agree to issue or sell, any shares
of its capital stock;
(c) except as set forth on Schedule 4(c) incur any obligation
for money borrowed, or mortgage, pledge or otherwise subject to any lien or
encumber any of its assets or acquire any real property;
(d) have any subsidiary or make any investment in any firm,
person or corporation;
(e) make any employment contracts with any of its management
personnel or make, adopt, alter, revise or amend any pension, bonus,
profit-sharing or other employee benefit plan, or grant any salary increase or
bonus to any person;
(f) make any long-term commitments;
(g) except as set forth on Schedule 4(g) enter into, renew,
extend, modify, terminate or waive any right under any lease, licence or
concession;
(h) make any expenditure for, or incur any obligation in
respect of, fixed assets, fixtures and other capital items (except that which
occurs in the ordinary course of business not exceeding $25,000 on an aggregate
basis;
(i) enter into or engage in any transactions with any
stockholder of Sana or any corporation, person or other entity controlling,
controlled by or under common control with Sana;
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(j) other than in the ordinary course of business and except
for the distribution to Sellers of the Excluded Assets, enter into any
transaction, make any payments, dispose of or acquire any property or incur any
obligation; or
(k) make any payments in respect of any liabilities or
obligations except in the ordinary course of business.
5. MUTUAL COVENANTS OF BUYER AND SELLERS. Each of the Sellers
and Buyer covenants and agrees as follows:
(a) Buyer and the Sellers shall cooperate with each other and
shall cause their officers, employees, agents, auditors and representatives to
cooperate with each other to ensure the orderly transition of Sana from Sellers
to Buyer and to minimize any disruption to the respective businesses of Buyer or
Sana that might result from the transactions contemplated hereby. Each party
shall reimburse the other for reasonable out-of-pocket costs and expenses
incurred in assisting the other pursuant to this Section 5. Neither party shall
be required by this Section 5 to take any action that would unreasonably
interfere with the conduct of its business.
(b) The Sellers and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
transactions contemplated hereby shall be issued by either party without the
prior consent of the other party, except any such release or announcement as may
be required or deemed convenient by Buyer in order to comply with federal or
local securities laws.
(c) Subject to the terms and conditions of this Agreement,
each party will use its best efforts to cause the Closing to occur.
(d) On or prior to the Closing Date, the Sellers shall deliver
or cause to be delivered to Buyer all original agreements, documents, books,
records and files (collectively, the "Records"), in the possession of the
Sellers relating to the business and operations of Sana to the
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13
extent not then in the possession of the Sana; provided, however, that the
Sellers may retain all records prepared in connection with the sale of the
Shares, including bids received from other parties and analyses relating to
Sana; and
(e) After the Closing Date, upon reasonable written notice,
Buyer and the Sellers agree to furnish or cause to be furnished to each other
and their representatives, employees, counsel and accountants access, during
normal business hours, to such information (including records pertinent to the
Sana) and assistance relating to Sana as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any Tax returns,
reports or forms or the defense of any Tax claim or assessment; provided,
however, that such access does not unreasonably disrupt the normal operations of
Buyer or Sana.
(f) From time to time, as and when requested by either party
hereto, the other party shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
Agreement.
6. CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the fulfillment of
each of the following conditions on or before the Closing Date, except to the
extent that the Buyer may, in its absolute discretion, waive any one or more
thereof in whole or in part:
(a) The representations and warranties of Sellers shall be
true and correct in all material respects as of the Closing Date with the same
force and effect as though such representations and warranties had been made on
the Closing Date, and all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Sellers on or before the Closing
Date shall have been duly complied with and performed.
<PAGE> 17
14
(b) The business and properties of Sana shall not have been
adversely affected in any material way as a result of any fire, accident or
other casualty (whether or not covered by insurance), any labor disturbance or
act of God, public authority or the public enemy, which would interfere in any
way with the operations of Sana. There shall have been no change in the nature
of the business, the results of operations, the financial condition or the
manner of conducting business of Sana since December 31, 1998 except for (i) the
distribution to Sellers of the Excluded Assets and (ii) changes in the ordinary
course of business; and no change which would have a material adverse effect on
the business, results of operations, assets, financial condition (other than the
distribution of the Excluded Assets) or manner of conducting business of Sana.
(c) Buyer shall have received the approval of the Commissioner
of Financial Institutions of Puerto Rico and of the Board of Governors of the
Federal Reserve System, and all other licenses, approvals and consents of any
governmental instrumentality, agency or subdivision to the continued conduct of
the business of Sana following the acquisition of control of Sana by Buyer, and
all other consents, if any, required by the leases or contracts to which Sana is
a party or for the future conduct of the business of Sana following the
acquisition of control of Sana by Buyer.
(d) The consummation of the transaction contemplated hereby
will not violate any provision of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment, or decree to which any of the Sellers or Sana is a
party or by which any of them is bound, and will not violate or conflict with
any other restriction of any kind or character to which any of the Sellers or
Sana is subject.
(e) Buyer shall have received all consents of the lenders to
Buyer and such amendments to the terms of all applicable lending arrangements of
Buyer, as Buyer shall deem necessary, appropriate or desirable in connection
with the transactions contemplated hereby and the future conduct of the business
of Sana.
(f) Except with respect to the application for approval for
transfer of control of Sana required by Puerto Rico Mortgage Institutions Act
(Act 97 of June 5, 1973, as amended,) no
<PAGE> 18
15
inquiry shall have been received nor shall any investigation, action or
proceeding have been instituted or threatened by any governmental agency
regarding the transaction contemplated hereby.
(g) There shall have been delivered to Buyer the opinion of
legal counsel for Sana and Ms. Hernandez, satisfactory in form and substance to
counsel for Buyer, to the effect that (i) Sana is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Puerto Rico which is the only jurisdiction in which the business conducted by
Sana or the character of the property owned by it or any other state of facts
requires such qualification, and has corporate power to own all of its
properties and assets and to carry on its business as presently conducted; (ii)
this Agreement is a valid and binding agreement of Ms. Hernandez enforceable
against Ms. Hernandez in accordance with its terms, (iii) the execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the Certificate of
Incorporation or By-Laws of Sana, or any provision of , or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which, Ms. Hernandez
or Sana is a party or by which any of them is bound, and will not violate or
conflict with any other material restriction of any kind or character to which
Ms. Hernandez or Sana is subject known to such counsel; (iv) Ms. Hernandez has
full legal title to the Shares of and has full legal right, power and all
authorization and approval required by law to sell, transfer and deliver said
shares pursuant to this Agreement, and such delivery will pass good and
marketable title to such Shares free and clear of any claims, liens, equities or
encumbrances, and (v) the business of Sana as currently conducted is conducted
in compliance with all applicable laws and regulations Sana has all approvals,
licenses, permits and orders necessary to permit operation of the business of
Sana as currently conducted and such approvals licenses, permits and orders will
remain in full force and effect after the transactions contemplated hereby; (iv)
no consent of any other party to any of the leases to which Sana is a party is
required in order that such leases shall remain in full force and effect after
the transactions contemplated by the Agreement (viii) such other matters
incident to the transaction contemplated hereby as counsel for Buyer may
reasonably request including the continued authority of Sana to continue the
business currently conducted by Sana.
<PAGE> 19
16
(h) There shall have been determined to Buyer the opinion of
legal counsel to Mr. Levis, satisfactory in form and substance to counsel for
Buyer, to the effect that (i) this Agreement is a valid and binding agreement of
Mr. Levis enforceable against Mr. Levis in accordance with its terms, (ii) the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, violate any provision of, or result
in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree to which,
Mr. Levis is a party or by which he is bound, and will not violate or conflict
with any other material restriction of any kind or character to which Mr. Levis
is subject known to such counsel; (iii) Mr. Levis has full legal title to the
Shares of and have full legal right, power and all authorization and approval
required by law to sell, transfer and deliver said shares pursuant to this
Agreement, and such delivery will pass good and marketable title to such Shares
free and clear of any claims, liens, equities or encumbrances.
(i) All indebtedness owing to Sana from the Sellers shall have
been paid at or prior to the Closing Date, all indebtedness of Sana to Sellers
whether represented by note, book entry, account payable or otherwise shall have
been contributed to the capital of Sana and all indebtedness of Sana to Sana
S.E. or Three Star Rental shall have been assumed by Sellers and Sana shall have
been relieved of any liability on such indebtedness.
(j) There shall have been delivered to Buyer certificates of
the Sellers dated the Closing Date to the effect that the conditions specified
in Subsections (a), (b), (c), (d), (e), (f) and (i) of this Section 6 have been
complied with.
(k) There shall have been delivered to Buyer the resignation
of all of Sana's directors and the Sellers and the Board of Directors of Sana
shall have taken all action required under Sana's Certificate of Incorporation,
By-laws and the laws of the Commonwealth of Puerto Rico to elect Salomon Levis,
Richard F. Bonini and Edison Velez, or such other persons as may be designated
by Buyer, as directors of Sana.
<PAGE> 20
17
(l) Sellers shall cause Sana to distribute to Sellers the
Excluded Assets and Seller shall assume and release Sana and Buyer from any
indebtedness or other liability related to the Excluded Assets, all in a manner
satisfactory to Buyer and its counsel.
(m) There shall have been delivered to Buyer such other
instruments or documents as it or its counsel may reasonably request.
7. CONDITION TO SELLER'S OBLIGATION. The obligations of the
Sellers hereunder are subject to the fulfillment of each of the following
conditions on or before the Closing Date, except to the extent that the Sellers
may in their absolute discretion waive any one or more thereof in whole or in
part:
(a) The representations and warranties made by Buyer herein
shall be correct as of the Closing Date and the Sellers shall have received a
certificate of an executive officer of Buyer to such effect.
(b) There shall have been delivered to the Sellers a certified
copy of resolutions duly adopted by the Board of Directors of Buyer approving
this Agreement.
(c) The Buyer shall have delivered the Purchase Price.
8. COVENANT NOT TO COMPETE. Sellers for the period of three years
following the Closing Date (the "Restricted Period") will not without the prior
written consent of Doral:
(a) accept employment or render service to any person, firm or
corporation, directly or indirectly in competition with Sana, Doral or any
affiliate thereof, for any purpose which would be competitive with the mortgage
banking business (the "Restricted Business") of Sana within the Commonwealth of
Puerto Rico, or directly or indirectly enter into or in any manner take part in
or lend their name, counsel or assistance to any venture, enterprise, business
or endeavor, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, adviser, agent,
<PAGE> 21
18
independent contractor, or in any other capacity whatsoever for any purpose
which would be competitive with the Restricted Business within the Commonwealth
of Puerto Rico, provided, however, that this restriction shall not be deemed to
apply to mortgages placed on land developed and sold by Sellers and that an
investment of not in excess of 1% of the outstanding stock of any corporation
regularly traded on a national securities exchange or in the over-the-counter
market shall not violate this restriction provided that neither Seller shall
render services for any such corporation;
(b) The Sellers will not, directly or indirectly, either for
themselves or any other person (other than Buyer or any subsidiary or affiliate
of Buyer), (i) induce or attempt to induce any employee of Sana to leave the
employ of Sana, (ii) in any way interfere with the relationship between the Sana
and any employee of Sana, (iii) employ, or otherwise engage as an employee,
independent contractor, or otherwise, any employee of Sana, or (iv) induce or
attempt to induce any customer, supplier, licensee, or business relation of Sana
to cease doing business with Sana, or in any way interfere with the relationship
between any customer, supplier, licensee, or business relation of Sana.
(c) The Sellers will not, directly or indirectly, either for
themselves or any other person (other than Buyer or any subsidiary or affiliate
of Buyer), solicit the business of any person known to the Sellers to be a
customer of Sana, whether or not the Sellers had personal contact with such
person, with respect to products or activities which compete in whole or in part
with the products or activities of Sana;
(d) In the event of a breach by the Sellers of any covenant
set forth in this Section 8, the term of such covenant will be extended by the
period of the duration of such breach; and
(e) Sellers will not, at any time during or after the
Restricted Period, disparage Buyer or Sana, or any of their shareholders,
directors, officers, employees, or agents; and
<PAGE> 22
19
9. TERMINATION.
(a) Anything contained herein to the contrary notwithstanding,
this Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date:
(i) by mutual written consent of the Sellers and
Buyer;
(ii) by the Sellers if any of the conditions set
forth in Section 7 hereof shall have become incapable of fulfillment, and shall
not have been waived by Sellers;
(iii) by Buyer if any of the conditions set forth
in Section 6 hereof shall have become incapable of fulfillment, and shall not
have been waived by Buyer; or
(iv) by either party hereto, if the Closing does not
occur on or prior to November 3, 1999;
provided, however, that the party seeking termination pursuant to clause (ii),
(iii), or (iv) is not in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
(b) In the event of termination by Sellers or Buyer pursuant
to this Section 9, written notice thereof shall promptly be given to the other
party and the transactions contemplated by this Agreement shall be terminated,
without further action by either party. If the transactions contemplated by this
Agreement are terminated as provided herein, Buyer shall return all documents
and other material received from Sellers or Sana relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to Sellers.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 9, this Agreement
shall become void and of no further force and effect, except for (i) the
provisions of Section 10(a) relating to the obligation of Buyer to return
<PAGE> 23
20
certain information and data obtained by it from Sellers, (ii) Section 10(d)
hereof relating to payment of certain costs and expenses, (iii) Section 5(b)
hereof relating to publicity, (iv) Section 10(b) relating to indemnification of
Buyer by Sellers and (v) this Section 9. Nothing in this Section 9 shall be
deemed to release either party from any liability for any breach by such party
of the terms and provisions of this Agreement or to impair the right of either
party to compel specific performance by the other party of its obligations under
this Agreement.
10. OTHER AGREEMENTS.
(a) Prior to the Closing Date, Sellers and Sana shall afford
to the officers, attorneys, accountants, and other authorized representatives of
Buyer free and full access to the offices, properties, books and records of Sana
on reasonable notice during normal business hours, in order that Buyer may make
such investigations as it may deem desirable of the affairs of Sana. Buyer may
also have access to, and obtain information from, all customers or others with
whom Sana has had direct or indirect dealings and Sana will assist Buyer in
obtaining such information from all governmental or other agencies, dealing
with, or regulating Sana, as Buyer may deem appropriate. Buyer acknowledges that
the financial information of Sana furnished to Buyer as part of this Agreement
is confidential in nature. Buyer agrees to keep such information confidential
until the Closing of the transaction contemplated by this Agreement.
(b) All covenants, agreements, representations and warranties
made herein and in any certificate, exhibit, or document delivered at the
Closing or pursuant thereto shall be deemed to be material and to have been
relied upon notwithstanding any investigation heretofore or hereafter made or
omitted by Buyer, and shall survive the Closing. Sellers, jointly and severally,
hereby agree to indemnify and hold Buyer and its affiliates (including
Doral Financial Corporation) and each of their respective officers, directors,
employees and agents harmless against any and all liability, loss, cost or
expense (including reasonable counsel fees) resulting from (i) any error,
misstatement or omission in any of the representations and warranties of the
Sellers contained in this Agreement, or in any certificate or other instrument
furnished to or to be furnished to Buyer pursuant to this Agreement including
but not limited to any understatement of liabilities in any financial statement
<PAGE> 24
21
furnished to Buyer; (ii) any overstatement of mortgage loan originations or loan
closings, net income or net worth of Sana in such statements; (iii) any
indebtedness of Sellers owing to Sana on the Closing Date which shall continue
unpaid after the Closing Date; (iv) an indebtedness or liability related to the
Excluded Assets which shall continue unpaid after the Closing Date; (v) the
litigation described in Schedule 2(m); and reasonable costs and expenses
including counsel fees incident to any and all actions, suits, demands,
assessments and judgments related to any claim made hereunder.
The liability of the Sellers for all matters, except for
the representations, warranties and covenants contained in Section 2(i) hereof
and for intentional misrepresentations as to matters represented or warranted
herein or in any certificate, exhibit or document delivered pursuant hereto,
shall expire and terminate on the fifth anniversary of the Closing Date,
provided that such liability shall continue with respect to any claim, notice of
which has been given to Sellers by Buyer on or prior to such date and shall
continue in effect without date of termination with respect to the
representations and warranties contained in Section 2(i) and with respect to
intentional misrepresentations.
The Buyer agrees not to make any claim for indemnification against the
Sellers for liability, losses or other damages that in the aggregate do not
exceed $50,000.
(c) This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by Buyer or Sellers (including by
operation of law in connection with a merger, or sale of substantially all the
assets, of Buyer or Seller) without the prior written consent of the other party
hereto; provided, however, that Buyer may assign its right to purchase the
Shares hereunder to Doral Financial Corporation or any subsidiary of Doral
Financial Corporation without the prior written consent of Sellers; provided,
further, however, that no assignment shall limit or affect the assignor's
obligations hereunder.
(d) Whether or not the transaction contemplated by this
Agreement is consummated, Buyer will pay all its expenses in connection
herewith, including without limitation, the fees and expenses of its counsel and
accountants, the Sellers will pay all expenses incurred by
<PAGE> 25
22
them in connection herewith, including without limitation, the fees and expenses
of their counsel and accountants and all transfer taxes on the transfer of the
Shares to Buyer.
(e) This Agreement contains the entire Agreement between the
parties with respect to the transaction contemplated hereby.
(f) Except as provided in Section 10(b) and 10(c), this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any person or entity, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
11. CLOSING. The closing (the "Closing") of the purchase and sale
of the Shares shall take place at 10:00 A.M., local time on September 15, 1999,
or if the conditions to Closing set forth in Sections 6 and 7 of this Agreement
shall not have been satisfied by such date, as early as possible thereafter,
said date being herein generally referred to as the "Closing Date," and the
place of such Closing shall be the offices of Pietrantoni Mendez & Alvarez LLP,
Suite 1901, Banco Popular Center, San Juan, Puerto Rico.
12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed first-class
postage prepaid:
(i) if to Buyer, to Buyer, attention Richard F.
Bonini, 650 Munoz Rivera Avenue, San Juan, Puerto Rico 00918, with copies to
Ignacio Alvarez, Pietrantoni Mendez & Alvarez, Suite 1901 Banco Popular Center,
209 Munoz Rivera Avenue, San Juan, Puerto Rico 00918.
<PAGE> 26
23
(ii) if to the Sellers, as follows.
Nancy Hernandez:
Apartment 1001
Plaza Atlantic Condominium
Isla Verde, Puerto Rico
Salomon Levis
6th Floor, Doral Building
650 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
with copies to:
Sandra Perez
PO Box 191818
San Juan, Puerto Rico 00918-1818
13. INTERPRETATION. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement, are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
15. ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
16. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof.
<PAGE> 27
24
17. ARBITRATION. Any dispute arising under this Agreement shall be
submitted to, and finally determined by, arbitration in San Juan, Puerto Rico
under the rules of the American Arbitration Association.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Puerto Rico applicable to
agreements made and to be performed entirely within the Commonwealth.
IN WITNESS WHEREOF, Buyer and the Sellers have caused this Agreement to
be executed all as of the day and year first above written.
DORAL MORTGAGE CORPORATION
By: /s/Edison Velez
--------------------------------
Name: Edison Velez
Title: President
NANCY HERNANDEZ
/s/ Nancy Hernandez
--------------------------------
SALOMON LEVIS
/s/ Salomon Levis
--------------------------------
<PAGE> 28
SCHEDULE 2(B)
LIST OF REQUIRED CONSENTS AND APPROVALS
1. Consent of Commissioner of Financial Institutions pursuant to
the Puerto Rico Mortgage Institutions Act 7 L.P.R.A. 1071, et seq.
<PAGE> 29
SCHEDULE 2(H)(I)
LIST OF OWNED PROPERTIES*
<TABLE>
<CAPTION>
OUTSTANDING
DESCRIPTION COST MORTGAGE
----------- ---- ------------
<S> <C> <C>
1. Apt 1608 $184,806 - 0 -
the Terrace Condominium
Bayamon, P.R.
2. 6-K Versallez Street $145,783 $46,643
Bayamon, P.R.
3. Apt 1608, South Tower $106,797 $63,191
Torres del Parque
Bayamon, P.R.
4. Villa Palmeras $61,408 - 0 -
San Juan, P.R.
</TABLE>
- --------------------
* All the above properties will be transferred to Sellers as part of the
Excluded Assets prior to Closing and the Sellers will take appropriate
action to relieve Sana and Buyer from any indebtedness or other
liability related to the above properties, including but not limited
to, mortgage loans encumbering such properties.
<PAGE> 30
SCHEDULE 2(H)(II)
LIST OF REAL PROPERTY LEASED
<TABLE>
<CAPTION>
REQUIRED
NAME OF DATE OF MONTHLY CONSENT OF
LOCATION LESSOR TERMINATION RENTAL PAYMENTS LANDLORD
-------- ------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
RIO PIEDRAS
- -----------
(1) St. 54 SE 1101 William Pagan Ortiz May 3, 2002 $ 900.00
Reparto
Metropolitano
Rio Piedras, PR
(2) Reparto Real Investment, July 31, 2001 $ 800.00
Metropolitano(1) S.E.
Shopping Center
Rio Piedras, PR
(3) 65th Infantry Real Investment, June 30, 2003 $1,202.28
Shopping Center S.E.
No. 165 Infantry
Avenue
Rio Piedras, PR
PONCE
- -----------
(4) Site 11, Centro(2) Real Investment, March 31, 2003 $1,700.00
del Sur Mall S.E.
Ponce, PR
(5) A-11 Fagot Lugo Bougal Estate February 14, $2,000.00
Avenue 2002
Ponce, PR
CAGUAS
- -----------
(6) Pino Street 2D Pedro Luis Correa March 1, 2002 $1,600.00
Number 33 Amil
Villa del Rey
Caguas, PR
(7) F-22 Pino Luis M. Diaz Lopez May 15, 1998 $1,100.00
Street(3)
Urb. Turabo
Caguas, PR
BAYAMON
- -----------
(8) St. Rd.2, Km 11, Jose M. & May 1, 2001 $3,000.00
Hm 4 Jorge Perez Lopez
Bayamon, PR
(9) I C-18 Lomas Israel Hernandez April 1, 2001 $1,000.00
Verdes Avenue Rivera
Bayamon, PR
CAROLINA
- -----------
(10) C-2 Roberto Luis Alberto Medina August 1, 2004 $2,800.00
Clemente St. Nieves
Carolina, PR
HATO REY
- -----------
(11) Suite 901 H.R. Real Estate June 1, 2000 $4,342.33
654 Munoz Rivera Management ("HR Real
Avenue Estate")
Hato Rey, PR
(12) Suite 917 H.R. Real Estate Nov. 1, 2000 $1,713.17
654 Munoz Rivera
Avenue
Hato Rey, PR
(13) Suite 919 H.R. Real Estate April 1, 2001 $1,147.12
654 Munoz Rivera
Avenue
Hato Rey, PR
(14) Suite 940 H.R Real Estate Nov. 1, 2000 $1,731.17
654 Munoz Rivera
Avenue
Hato Rey, PR
(15) Suite 2004 H.R. Real Estate June 1, 2000 $2,500.32
654 Munoz Rivera
Avenue
Hato Rey, PR
</TABLE>
- -------------------
(1) This branch will be closed when the remodeling of the site described in
(1) is completed.
(2) This branch will be closed when the remodeling of the site described in
(5) is completed.
(3) This site will be closed when the remodeling of the site described in
(6) is completed.
<PAGE> 31
SCHEDULE 2(K)
SCHEDULE OF LIENS
None, other than mortgage loans encumbering the real property
constituting part of the Excluded Assets. Sellers will take prior to the Closing
Date, any and all action required to relieve Sana and Buyer from any
indebtedness or other liability related to such liens, all in a manner
satisfactory to Buyer and its counsel.
<PAGE> 32
SCHEDULE 2(L)
LIST OF MATERIAL CONTRACTS AND AGREEMENTS
None
<PAGE> 33
SCHEDULE 2(M)
LIST OF PENDING ACTIONS, SUITS OR INVESTIGATIONS
A claim by the sellers of one of the real properties constituting the
Excluded Assets. The plaintiffs are suing Sana and requesting the Court to void
the deed of sale as well as damages in the amount of $75,000.
<PAGE> 34
SCHEDULE 2(N)
LIST OF REQUIRED LICENSES AND PERMITS
The following licenses for each of Sana's branches
<TABLE>
<CAPTION>
BRANCH LICENSE NUMBER DATE OF LICENSE
------ -------------- ---------------
<S> <C> <C>
(1) Suite 901 IH-045 1/2 /98
654 Munoz Rivera
Avenue
Hato Rey, PR
(2) C-2 Roberto IH-045-01 1/2 /98
Clemente Avenue
Urb. Villa
Carolina
Carolina, PR
(3) IC-18 Lomas Verdes IH-045-04 2/25/98
Avenue
Royal Palm
Bayamon, PR
(4) Centro del Sur IH-045-05 2/25/98
Shopping Center
Ponce, PR
(5) 65 Infantry IH-045-06 5/4/98
Shopping Center
Rio Piedras, PR
(6) Reparto IH-045-07 6/22/98
Metropolitano
Shopping Center
Rio Piedras, PR
</TABLE>
<PAGE> 35
SCHEDULE 2(O)
LIST OF RECOURSE OBLIGATIONS
None
<PAGE> 36
SCHEDULE 2(P)
LIST OF INSURANCE
INSURANCE COVERAGE
All properties rented by SANA have insurance under the terms disclosed
below with a total cost of $ 11,465.00:
<TABLE>
<CAPTION>
PROPERTY: SPECIAL & E.Q CONTENT
<S> <C> <C>
OFFICE LOCATION
Hato Rey $ 120,000.00
Bayamon 80,000.00
Carolina 20,000.00
Caguas 10,000.00
65 de Infanteria 10,000.00
Las Lomas 10,000.00
Ponce 10,000.00
Reparto Metropolitano 10,000.00
LIABILITY CONTENT
OFFICE LOCATION
Hato Rey $ 10,000.00
Bayamon 5,000.00
Carolina 5,000.00
Caguas 5,000.00
65 de Infanteria 5,000.00
Las Lomas 5,000.00
Ponce 5,000.00
Reparto Metropolitano 5,000.00
EMPLOYEE DISHONESTY: of $2,000.00 10,000.00
of $1,000.00
OFFICE LOCATION
Hato Rey $ 5,000.00
Bayamon 5,000.00
Carolina 5,000.00
Caguas 5,000.00
65 de Infanteria 5,000.00
Las Lomas 5,000.00
Ponce 5,000.00
Reparto Metropolitano 5,000.00
</TABLE>
<PAGE> 37
<TABLE>
<S> <C>
INLAND MARINE $ 10,000.00
VALUABLE PAPERS $ 100,000.00
ELECTRONIC DATA: EQUIPMENT: $ 75,000.00
DATA: $ 60,000.00
Car insurance has a $500.00 deductible with a total cost of $9,005.00 with the
following terms:
PROPERTY DAMAGE: $ 500,000.00
HIRED AUTO LIABILITY COVERAGE $ 500,000.00
NON-OWNERSHIP LIABILITY $ 500,000.00
</TABLE>
The ERRORS AND OMISSIONS policy does not have a deductible and covers up to
$500,000.00 with an annual cost of $6,570.00.
The BUSINESS INCOME policy does not have deductible and covers up to $500,000.00
with an annual cost of $9,026.00.
2
<PAGE> 38
SCHEDULE 2(Q)
LIST OF BANK ACCOUNTS
<TABLE>
<CAPTION>
NAME OF ACCOUNT ACCOUNT AUTHORIZED
BANK TYPE NUMBER SIGNATURE
---- ---- ------ ---------
<S> <C> <C> <C>
Doral Bank Operational 240000872 Nancy Hernandez
("Hernandez"), Ingrid
Schmidt ("Schmidt") and
Jose Herrero ("Herrero")
Doral Bank Escrow 240000987 Hernandez and Schmidt
Hernandez, Schmidt and
Banco Popular de Puerto Rico Payroll 106-042610 Herrero
Hernandez, Schmidt and
Banco Popular de Puerto Rico Transmittal 116-220643 Herrero
</TABLE>
<PAGE> 39
SCHEDULE 2(R)(I)
SCHEDULE OF OWNED LOANS AND MORTGAGE-BACKED SECURITIES
<TABLE>
<CAPTION>
LOANS REAL ESTATE PROJECTS
SUBJECT TO PURCHASE REPRESENTING MORE
LOANS HELD FOR COMMITMENTS BUT NOT MORTGAGE-BACKED THAN $500,000
INVESTMENT YET DELIVERED SECURITIES IN LOANS
-------------- ------------------- --------------- ---------------------
<S> <C> <C> <C>
None None None None
<CAPTION>
LOANS HELD FOR SALE
-------------------
LOAN NO. DATE OF CLOSING OBLIGOR $ AMOUNT
-------- --------------- ------- ---------
<S> <C> <C> <C>
2214 03/31/99 Joaquin Fonollosa Rodriguez $ 45,000
2215 03/31/99 Lillian Sanchez Pagan 14,500
2216 03/31/99 Ileana Sabater Rodriguez 51,000
2219 03/31/99 Jose J. Velez Rodriguez 48,750
2220 03/31/99 Heriberto Herrera Cortes 21,800
2243 04/01/99 Jose S. Medina Rodriguez 50,000
2244 04/01/99 Maria C. Osorio Torres 56,000
2247 04/01/99 Emmanuel Cruz Lampon 90,000
2249 04/01/99 Rene Carazo Gilot 71,500
2250 04/01/99 Jose A. Gonzalez Ortiz 45,000
</TABLE>
<PAGE> 40
SCHEDULE 2(R)(II)
SCHEDULE OF PURCHASE COMMITMENTS
None
<PAGE> 41
SCHEDULE 2(R)(III)
SCHEDULE OF DELINQUENT MORTGAGE LOANS
None
<PAGE> 42
SCHEDULE 2(R)(IV)
MORTGAGE LOANS IN FORECLOSURE
None
<PAGE> 43
SCHEDULE 2(R)(VIII)
MORTGAGE LOAN ORIGINATIONS
Buyer acknowledges having separately received a list of mortgage loans
closed through April 30, 1999.
<PAGE> 44
SCHEDULE 2(R)(V)
ESCROW ACCOUNTS
Not Applicable
<PAGE> 45
SCHEDULE 2(R)(VI)
SCHEDULE OF DAMAGED PROPERTIES
None
<PAGE> 46
SCHEDULE 2(R)(VII)
SCHEDULE OF ADVANCES
Not Applicable
<PAGE> 47
SCHEDULE 4(C)
SCHEDULE OF EXISTING INDEBTEDNESS
See Schedule 2(h)(i) for mortgage loans securing certain Excluded
Assets. Sellers shall be responsible for assuming and relieving Sana and Buyer
from such indebtedness prior to the Closing Date.
<PAGE> 48
SCHEDULE 4(G)
CERTAIN AGREEMENTS REGARDING LEASES
1. Termination of Lease relating to existing branch in Reparto
Metropolitano Shopping Center upon completion of new branch in same
Shopping Center. There is no fee or penalty payable upon termination of
this lease.
2. Termination of lease relating to existing branch in Centro del Sur
Shopping Center in Ponce upon completion of branch on Fagot Avenue.
There is no fee or penalty payable upon termination of this lease.
3. Termination of lease relating to branch located at F-22 Calle Pino in
Caguas upon completion of new Caguas branch. There is no fee or penalty
payable upon termination of this lease.
<PAGE> 49
EXHIBIT A
EXCLUDED ASSETS
1. Accounts receivables representing amounts owed to Sana from
Sana New York or advances made to Sana employees.
2. Investment in Sana New York.
3. Amounts on deposit in Sana's securities account and investment
property.
4. Mercedes Benz automobile
5. Art work identified by Sellers prior to the Closing Date.
See Exhibit A-1 for a description of the value of the Excluded
Assets as of May 31, 1999. Notwithstanding the above description of
Excluded Assets, Seller have agreed in Section 2(v) of the Agreement
that the net worth of Sana as of the Closing Date shall be not less
than $800,000.
A-1
<PAGE> 50
EXHIBIT A-1
VALUE OF EXCLUDED ASSETS AS OF
MAY 31, 1999
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- ------
<S> <C> <C>
EXCLUDED ASSETS
(1) Accounts Receivable - amounts due
from Sana New York and employees
- Sana New York 41,759
- Employees 19,261 61,020
-------
(2) Investment in Sana New York 366,345
(3) Securities Account 199,611
(4) Investment Property 498,795
(5) Automobile (Mercedes Benz)
(less accumulated depreciation) 26,229
(6) Art work (less accumulated 124,369
depreciation ----------
GROSS VALUE OF EXCLUDED ASSETS $1,276,369
LESS LIABILITIES TO BE ASSUMED BY SELLER
- ----------------------------------------
Mortgage on investment property to be
assumed by Seller (107,895)
Accounts Payable in favor of Sana SE (183,657)
Accounts Payable in favor of three Star
Rentals (59,683)
NET VALUE OF EXCLUDED ASSETS $ 925,134
==========
NET WORTH OF SANA AS OF MAY 31, 1999 AFTER
DEDUCTION OF EXCLUDED ASSETS $ 888,570
==========
</TABLE>
A-1-1
