<PAGE>
EXHIBIT 10.16
================================================================================
TRIPLE - S MANAGEMENT CORPORATION
US$60,000,000
6.60% Senior Unsecured Notes due December 2020
---------------------
NOTE PURCHASE AGREEMENT
---------------------
Dated December 15, 2005
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
Page
-----
<S>
<C>
1.
AUTHORIZATION OF
NOTES..................................................................................
1
2. SALE
AND PURCHASE OF
NOTES..............................................................................
1
3.
CLOSING.................................................................................................
1
4.
CONDITIONS TO
CLOSING...................................................................................
2
4.1.
Representations and
Warranties.................................................................
2
4.2.
Performance; No
Default........................................................................
2
4.3.
Compliance Certificates and Organizational
Documents...........................................
2
4.4.
Opinions of
Counsel............................................................................
3
4.5.
Purchase Permitted by Applicable Law,
etc......................................................
3
4.6.
Private Placement
Number.......................................................................
3
4.7.
Changes in Corporate
Structure.................................................................
3
4.8.
Proceedings and
Documents......................................................................
3
5.
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY...........................................................
3
5.1.
Organization; Power and
Authority..............................................................
3
5.2.
Authorization,
etc.............................................................................
4
5.3.
Financial
Statements...........................................................................
4
5.4.
Compliance with Laws, Other Instruments,
etc...................................................
5
5.5.
Governmental Authorizations,
etc...............................................................
5
5.6.
Litigation; Observance of Statutes and
Orders..................................................
5
5.7.
Taxes..........................................................................................
6
5.8. Title to Property;
Leases......................................................................
6
5.9.
Licenses, Permits,
etc.........................................................................
6
5.10.
Compliance with
ERISA..........................................................................
6
5.11.
Private Offering by the
Company................................................................
7
5.12. Use
of
Proceeds................................................................................
7
5.13.
Existing Indebtedness for Borrowed
Money.......................................................
7
5.14.
Investment Company
Act.........................................................................
8
5.15.
Disclosure.....................................................................................
8
5.16.
Labor
Disputes.................................................................................
8
5.17.
Source of
Income...............................................................................
8
6.
REPRESENTATIONS OF THE
PURCHASER........................................................................
8
6.1.
Purchase for Investment; Accredited
Investor...................................................
8
6.2.
Source of
Funds................................................................................
9
6.3.
Anti-Money
Laundering..........................................................................
10
6.4.
Transferee.....................................................................................
11
</TABLE>
i
<PAGE>
<TABLE>
<S>
<C>
7.
INFORMATION AS TO THE
COMPANY...........................................................................
11
7.1.
Financial and Business
Information.............................................................
11
7.2.
Inspection.....................................................................................
12
8.
PAYMENT OF
INTEREST.....................................................................................
13
9.
REDEMPTION OF THE NOTES PRIOR TO
MATURITY...............................................................
13
9.1.
Optional
Redemption............................................................................
13
9.2.
Allocation of Partial
Redemptions..............................................................
13
9.3.
Maturity; Surrender,
etc.......................................................................
14
9.4.
Purchase of
Notes..............................................................................
14
10. BUSINESS
COVENANTS......................................................................................
14
10.1.
Compliance with
Laws...........................................................................
14
10.2.
Insurance......................................................................................
14
10.3.
Payment of
Taxes...............................................................................
15
10.4. Use
of
Proceeds................................................................................
15
10.5.
Corporate Existence,
etc.......................................................................
15
10.6.
Source of
Income...............................................................................
15
10.7.
Lines of
Business..............................................................................
15
11. NEGATIVE
COVENANTS......................................................................................
16
11.1.
Transactions with
Affiliates...................................................................
16
11.2.
Consolidation, Merger and Sale of
Assets.......................................................
16
11.3.
Limitation Upon Creation of Liens on Voting Stock of Significant
Subsidiaries..................
16
11.4.
Limitation Upon Disposition of Voting Stock of, and Merger and Sale
of Assets of,
Principal Insurance
Subsidiary.................................................................
17
11.5.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries..................
18
11.6.
Limitation on Additional
Indebtedness..........................................................
19
11.7.
Waiver of Certain
Covenants....................................................................
19
12. EVENTS OF
DEFAULT.......................................................................................
19
13.
REMEDIES ON DEFAULT,
ETC................................................................................
21
13.1.
Acceleration...................................................................................
21
13.2. Other
Remedies.................................................................................
21
13.3.
Rescission.....................................................................................
21
13.4. No
Waivers or Election of Remedies, Expenses,
etc..............................................
22
14.
REGISTRATION; EXCHANGE; SUBSTITUTION OF
NOTES...........................................................
22
14.1.
Registration of
Notes..........................................................................
22
14.2.
Transfer and Exchange of
Notes.................................................................
22
14.3.
Replacement of
Notes...........................................................................
23
15. PAYMENTS
ON
NOTES.......................................................................................
23
15.1.
Place of
Payment...............................................................................
23
</TABLE>
ii
<PAGE>
<TABLE>
<S>
<C>
15.2. Home
Office
Payment............................................................................
23
16. SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT............................................ 24
17. AMENDMENT
AND
WAIVER....................................................................................
24
17.1.
Requirements...................................................................................
24
17.2.
Solicitation of Holders of
Notes...............................................................
25
17.3.
Binding Effect,
etc............................................................................
25
17.4.
Notes held by Company,
etc.....................................................................
25
17.5.
Consent of Majority
Holders....................................................................
25
18.
NOTICES.................................................................................................
26
19.
REPRODUCTION OF
DOCUMENTS...............................................................................
26
20.
CONFIDENTIAL
INFORMATION................................................................................
26
21.
MISCELLANEOUS...........................................................................................
27
21.1.
Successors and
Assigns.........................................................................
27
21.2.
Payments Due on Non-Business
Days..............................................................
28
21.3.
Severability...................................................................................
28
21.4.
Construction...................................................................................
28
21.5.
Counterparts...................................................................................
28
21.6.
Governing
Law..................................................................................
28
</TABLE>
SCHEDULE A
--
INFORMATION RELATING TO PURCHASER
SCHEDULE B
--
DEFINED TERMS
SCHEDULE 5.3 --
Financial Statements of the Company
SCHEDULE 5.6 --
Litigation
SCHEDULE 5.13 -- Existing
Indebtedness for Borrowed Money
EXHIBIT 1
--
Form of 6.60% Senior Unsecured Notes due December 2020
EXHIBIT 2-A --
Form
of Opinion of Pietrantoni Mendez & Alvarez LLP
EXHIBIT 2-B --
Form
of Opinion of Enrique R. Ubarri Baragano
iii
<PAGE>
TRIPLE - S MANAGEMENT CORPORATION
6.60% Senior Unsecured Notes due December 2020
December 15, 2005
THE PURCHASERS NAMED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
Triple-S
Management Corporation (the "COMPANY"), a corporation organized
under the laws of the Commonwealth of Puerto Rico, agrees with you
as follows:
1.
AUTHORIZATION OF NOTES.
The
Company has authorized the issuance and sale of an aggregate
principal
amount of Sixty Million United States Dollars (US$60,000,000) of
its 6.60%
Senior Unsecured Notes due December 2020 (the "NOTES," such term to
include each
Note delivered pursuant to this Agreement and each Note delivered
in
substitution or exchange for any such Note pursuant to Section 14
of this
Agreement). The Notes shall be substantially in the form of Exhibit
1 hereto and
shall have the terms as herein and therein provided. Certain
capitalized terms
used in this Agreement are defined in Schedule B hereto; references
to a
"SCHEDULE" or an "EXHIBIT" are, unless otherwise specified, to a
Schedule or an
Exhibit attached to this Agreement and all Schedules and Exhibits
are deemed to
be a part of this Agreement. References herein to this "AGREEMENT"
mean this
Agreement as from time to time amended or supplemented or as the
terms hereof
may be waived, in accordance with Section 17 hereof.
2. SALE
AND PURCHASE OF NOTES.
Subject to
the terms and conditions of this Agreement, the Company agrees
to issue and sell to you and you agree to purchase from the
Company, at the
Closing provided for in Section 3, Notes in the aggregate principal
amount
specified opposite your name in Schedule A at the purchase price of
one hundred
percent (100%) of the principal amount thereof.
3.
CLOSING.
The
closing (the "CLOSING") of the sale and purchase of the Notes to
be
purchased by you shall occur at the offices of Pietrantoni Mendez
& Alvarez LLP,
Popular Center Building, 209 Munoz Rivera Avenue, 19th Floor, San
Juan, Puerto
Rico 00918, at 10:00 a.m., local time, on December 21, 2005. At the
Closing, the
Company will deliver to you the Notes to be purchased by you in the
form of a
single Note for each Purchaser (or such greater number of Notes in
denominations
of at least Five Hundred Thousand United States Dollars
(US$500,000) as you may
request) dated the date of the Closing (the "CLOSING DATE") and
registered in
your name (or in the name of your nominee), against delivery by you
to the
Company of immediately available
<PAGE>
funds in the amount of the purchase price therefor by wire transfer
to account
number 10991506, maintained by the Company at Citibank, N.A.,
Puerto Rico
Branch, ABA Number 02100089.
4.
CONDITIONS TO CLOSING.
Your
obligation to purchase and pay for the Notes to be delivered to
you
at the Closing is subject to the fulfillment, prior to or at the
Closing, of the
following conditions:
4.1. REPRESENTATIONS
AND WARRANTIES.
The representations and warranties of the Company contained in
Section 5 of this Agreement shall have been true and correct in all
material
respects as of the date of this Agreement and shall be true and
correct at the
time of the Closing.
4.2. PERFORMANCE; NO
DEFAULT.
The Company shall have performed and complied in all material
respects with all agreements and conditions contained in this
Agreement required
to be performed or complied with by it prior to or at the Closing
and, after
giving effect to the issuance and sale of the Notes (and the
application of the
proceeds thereof as contemplated by Section 5.12), no Default or
Event of
Default shall have occurred and be continuing. The Company shall
not have
entered into any transaction since September 30, 2005, that would
have been
prohibited by Section 10 hereof had such Section applied since such
date.
4.3. COMPLIANCE
CERTIFICATES AND ORGANIZATIONAL DOCUMENTS.
(a) Officer's
Certificate. The Company shall have delivered to you
an Officer's Certificate, dated as of the Closing Date,
certifying on behalf of the Company that the conditions
specified in Sections 4.1, 4.2 and 4.7 have been fulfilled.
(b)
Secretary's
Certificates. The Company shall have delivered to
you copies of the by-laws of the Company and each of its
Subsidiaries (collectively, the "GROUP MEMBERS") and of the
resolutions of the Board of Directors of the Company relating
to the authorization, execution and delivery of the Notes,
certified by the Secretary or Assistant Secretary of the
Company, and an incumbency certificate executed by such
Secretary or Assistant Secretary.
(c)
Organizational Documents. The Company shall have delivered to
you copies of the articles of incorporation of each of the
Group Members, certified as of a recent date by the Secretary
of State of the Commonwealth of Puerto Rico or, if a copy
certified by the Secretary of State is unavailable on the
Closing Date, certified by the Secretary or Assistant
Secretary of each Group Member, and good standing certificates
for each Group Member from such Secretary of State or, in the
case of each Subsidiary that is an insurance company, from the
Commissioner of Insurance of Puerto Rico.
2
<PAGE>
4.4. OPINIONS OF
COUNSEL.
You shall have received opinions from (a) Pietrantoni Mendez
&
Alvarez LLP, special counsel to the Company, and (b) Enrique R.
Ubarri Baragano,
Senior Vice President, Legal Affairs, of the Company, each dated as
of the
Closing Date, substantially in the respective forms set forth as
Exhibits 2-A
and 2-B. This Section 4.4 shall constitute direction by the Company
to such
counsel named in the foregoing clauses (a) and (b) to deliver the
opinions
specified to you at the Closing.
4.5. PURCHASE
PERMITTED BY APPLICABLE LAW, ETC.
On the Closing Date, your purchase of Notes shall (i) be
permitted
by the laws and regulations of each jurisdiction to which you are
subject,
without recourse to provisions of law permitting limited
investments by
financial institutions without restriction as to the character of
the particular
investment, (ii) not violate any applicable law or regulation and
(iii) not
subject you to any tax, penalty or liability under or pursuant to
any applicable
law or regulation, which law or regulation was not in effect on the
date hereof.
4.6. PRIVATE PLACEMENT
NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP
Service
Bureau shall have been obtained for the Notes.
4.7. CHANGES IN
CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of
incorporation
or been a party to any merger or consolidation. The Company shall
not have
succeeded to all or any substantial part of the liabilities of any
other entity
following the date of the most recent financial statements referred
to in
Schedule 5.3.
4.8. PROCEEDINGS AND
DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and
instruments
incident to such transactions shall be reasonably satisfactory to
you and your
counsel, and you and your counsel shall have received all such
counterpart
originals or certified or other copies of such documents as you or
they may
reasonably request.
5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to you as follows:
5.1. ORGANIZATION;
POWER AND AUTHORITY.
Each Group Member is a corporation duly organized, validly
existing
and in good standing under the laws of the Commonwealth of Puerto
Rico, and is
duly qualified as a foreign corporation and is in good standing in
each
jurisdiction in which such qualification is required by law, other
than those
jurisdictions as to which the failure to be so qualified or in good
standing
3
<PAGE>
would not, individually or in the aggregate, reasonably be expected
to have a
Material Adverse Effect. The Company and each Subsidiary has the
corporate power
and authority to conduct its business as presently conducted and as
proposed to
be conducted after the Acquisition. The Company has the corporate
power and
authority to execute and deliver this Agreement and the Notes and
to perform the
provisions hereof and thereof.
5.2. AUTHORIZATION,
ETC.
This Agreement has been, and on the Closing Date the Notes will
be,
duly authorized by all necessary corporate action on the part of
the Company,
and this Agreement constitutes, and upon execution and delivery
thereof by the
Company each Note issued to you will constitute, a legal, valid and
binding
obligation of the Company (assuming with respect to this Agreement
and any Notes
issued to you, the due authorization, execution and delivery of
this Agreement
by you), enforceable against the Company in accordance with its
terms, except as
such enforceability may be limited by (i) applicable bankruptcy,
insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of
creditors' rights generally from time to time in effect and (ii)
the application
of equitable principles and the availability of equitable
remedies.
5.3. FINANCIAL
STATEMENTS.
(a) The Company
has delivered to you copies of the financial
statements of the Company listed on Schedule 5.3 (such
financial statements collectively the "FINANCIAL STATEMENTS").
(b) The
Financial Statements (including in each case the related
schedules and notes) fairly present in all material respects
the consolidated financial position of the Company and its
Subsidiaries as of the respective dates specified in such
Financial Statements and the consolidated results of its
operations and cash flows for the respective periods so
specified in accordance with GAAP consistently applied
throughout such periods except as set forth in the notes
thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
(c) Since the
date of the most recent Financial Statement, there
has been no material adverse change in the business,
operations or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, and no event
that could reasonably be expected to have a Material Adverse
Effect, and the Company has not incurred any material
Indebtedness for Borrowed Money or entered into any material
transaction other than as disclosed to the Purchasers.
(d) The Company
maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to
4
<PAGE>
maintain accountability for assets, (iii) access to assets is
permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability
for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
5.4. COMPLIANCE WITH
LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) in any material respect
contravene, result
in any breach of, or constitute a default under, or result in the
creation of
any Lien in respect of any property of the Company or any of its
Significant
Subsidiaries under, any indenture, mortgage, deed of trust, loan,
purchase or
credit agreement, lease, corporate charter or by-laws, or any other
material
agreement or instrument to which the Company or any such
Significant Subsidiary
is bound or by which the Company or any such Significant Subsidiary
or their
respective properties may be bound or affected, (ii) conflict with
or result in
a material breach of any of the terms, conditions or provisions of
any order,
judgment, decree or ruling of any court, arbitrator or Governmental
Authority
applicable to the Company or any of its Significant Subsidiaries,
or (iii)
violate any provision of any statute or other rule or regulation of
any
Governmental Authority applicable to the Company or any of its
Significant
Subsidiaries.
5.5. GOVERNMENTAL
AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing
or
declaration with, any Governmental Authority is required for the
due execution,
delivery or performance by the Company of this Agreement or the
Notes.
5.6. LITIGATION;
OBSERVANCE OF STATUTES AND ORDERS.
(a) Except as
disclosed in Schedule 5.6, there are no actions,
suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of
its Significant Subsidiaries or any property of the Company or
of its Significant Subsidiaries in any court or before any
arbitrator or administrative agency of any kind or before or
by any Governmental Authority that, if determined adversely to
the Company or any of its Significant Subsidiaries,
individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
(b) Neither the
Company nor any of its Significant Subsidiaries is
in default under any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority or in violation of
any applicable law, ordinance, rule or regulation of any
Governmental Authority, which default or violation,
individually or in the aggregate, would reasonably be expected
to have a Material
Adverse Effect.
5
<PAGE>
5.7. TAXES.
Each of the Company and its Significant Subsidiaries has filed
all
income tax returns that are required to have been filed, except for
any filings
which failure to make would not be reasonably expected to have a
Material
Adverse Effect, and has paid all taxes shown to be due and payable
on such
returns and all other taxes payable by it, to the extent such taxes
have become
due and payable, except for any taxes (i) the amount of which would
not
individually or in the aggregate reasonably be expected to have a
Material
Adverse Effect or (ii) the amount, applicability or validity of
which is
currently being contested in good faith by appropriate proceedings
and with
respect to which the Company and each such Significant Subsidiary
has
established adequate reserves in accordance with GAAP. The Company
is not aware
of any tax deficiency that, if determined adversely to the Company
or any
Significant Subsidiary, could reasonably be expected to result in a
Material
Adverse Effect.
5.8. TITLE TO
PROPERTY; LEASES.
Each of the Company and its Significant Subsidiaries has good
and
sufficient title to its respective material properties, free and
clear of Liens,
except for (i) Liens described in Schedule 5.8, and (ii) defects in
title that,
individually or in the aggregate, would not have a Material Adverse
Effect. All
material leases entered into by the Company and its Significant
Subsidiaries are
valid and subsisting and are in full force and effect in all
material respects.
5.9. LICENSES,
PERMITS, ETC.
The Company and each of its Significant Subsidiaries owns or
possesses all licenses, permits, franchises, authorizations,
patents,
copyrights, service marks, trademarks and trade names, or rights
thereto, that
are material to its business, without known conflict with the
rights of others,
except for those conflicts that, individually or in the aggregate,
would not
have a Material Adverse Effect.
5.10. COMPLIANCE WITH ERISA.
(a) Each of the
Company, its Significant Subsidiaries and each of
their respective ERISA Affiliates has operated and
administered each Plan
in compliance in all material respects
with all applicable laws except for such instances of
noncompliance as have not resulted in and would not reasonably
be expected to result in a Material Adverse Effect. None of
the Company, its Significant Subsidiaries nor their respective
ERISA Affiliates has incurred any liability pursuant to Title
I or IV of ERISA or applicable penalty or excise tax
provisions of the PRIRC relating to employee benefit plans (as
defined in section 3 of ERISA), and no event, transaction or
condition has occurred or exists that would reasonably be
expected to result in the incurrence of any such liability by
the Company, its Significant Subsidiaries or any of such ERISA
Affiliates, or in the imposition of any Lien on any of the
rights, properties or assets of the Company, its Significant
Subsidiaries or any of such ERISA Affiliates, in either case
pursuant to Title I or IV of ERISA or to such penalty or
excise
6
<PAGE>
tax provisions of the PRIRC, other than in any of such
cases, such liabilities or Liens as would not reasonably be
expected to result, individually or in the aggregate, in a
Material Adverse Effect.
(b) None of the
Company, its Significant Subsidiaries nor their
respective ERISA Affiliates has incurred withdrawal
liabilities (or is subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate
would reasonably be expected to result in a Material Adverse
Effect.
(c) The
execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406
of ERISA or in connection with which a tax could be imposed
pursuant to the PRIRC. The representation by the Company in
the first sentence of this Section 5.10(c) is made in reliance
upon and subject to (i) the accuracy of your representation in
Section 6.2 as to the sources of the funds to be used to pay
the purchase price of the Notes to be purchased by you and
(ii) the assumption, made solely for the purpose of making
such representation, that Department of Labor Interpretive
Bulletin 75-2 with respect to prohibited transactions remains
valid in the circumstances of the transactions contemplated
herein.
5.11. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor UBS Financial Services Incorporated of
Puerto Rico, as placement agent (the only Person authorized or
employed by the
Company as agent, broker, dealer or finder in connection with the
offering or
sale of the Notes) has offered any of the Notes or any similar
securities for
sale to, or solicited any offer to buy any of the same from, or
otherwise
approached or negotiated in respect thereof with, any Person other
than you. As
used in the preceding sentence, "SIMILAR SECURITY" means a security
which would
be integrated with the offering of the Notes under applicable
securities laws.
Neither the Company nor such agent has taken, or will take, any
action that
would subject the issuance or sale of the Notes to the registration
requirements
of Section 5 of the Securities Act.
5.12. USE OF PROCEEDS.
The Company will apply the proceeds from the sale of the Notes
for
working capital and general corporate purposes, which may include
the purchase
of evidences of indebtedness issued by Puerto Rico corporations
(including
indebtedness evidenced under surplus notes issued by its
Subsidiaries).
5.13. EXISTING INDEBTEDNESS FOR BORROWED MONEY.
Schedule 5.13 sets forth a complete and correct list of all
outstanding Indebtedness for Borrowed Money in the principal amount
of at least
Five Million United States Dollars (US$5,000,000) of the Company
and its
Significant Subsidiaries as of September 30, 2005, since which date
there has
been no material change in the amounts, interest rates, sinking
funds,
installment payments or maturities of such Indebtedness for
Borrowed Money.
Neither
7
<PAGE>
the Company nor any of its Significant Subsidiaries is in default
(and no waiver
of any such default is currently in effect) in the payment of any
principal or
interest on, and no Event of Default exists with respect to, any
such
Indebtedness for Borrowed Money.
5.14. INVESTMENT COMPANY ACT.
The Company is not subject to regulation under the Investment
Company Act of 1940, as amended.
5.15. DISCLOSURE.
No statement or information contained in this Agreement or any
other
document, certificate or statement furnished to the Purchasers or
any of them,
by or on behalf of the Company in connection with the transactions
contemplated
by this Agreement contained as of the date such statement,
information, document
or certificate was so furnished any untrue statement of a material
fact or
omitted to state a material fact necessary in order to make the
statements
contained herein or therein in the light of the circumstances in
which they were
made not misleading. The projections and pro forma financial
information
contained in the materials referenced above are based upon good
faith estimates
and assumptions believed by management of the Company to be
reasonable at the
time made, it being recognized by the Purchasers that such
financial information
as it relates to future events is not to be viewed as fact and that
actual
results during the period or periods covered by such financial
information may
differ from the projected results set forth therein by a material
amount.
5.16. LABOR DISPUTES.
None of the Company nor its Significant Subsidiaries is engaged
in
any labor dispute that could reasonably be expected to have a
Material Adverse
Effect.
5.17. SOURCE OF INCOME.
The Company has derived more than 20 percent of its gross
income
from Commonwealth of Puerto Rico sources on an annual basis since
its
incorporation in accordance with the applicable sourcing rules
under the Code.
6.
REPRESENTATIONS OF THE PURCHASER.
You hereby
represent and warrant to the Company as follows:
6.1. PURCHASE FOR
INVESTMENT; ACCREDITED INVESTOR.
(a) You are
purchasing the Notes for your own account and not with
a view to, or for sale in connection with, the distribution
thereof within the meaning of the Securities Act, provided
that you have the right to dispose of the Notes, or any part
thereof, if you deem it advisable to do so, either pursuant to
a registration of the Notes under the Securities Act or
pursuant to an applicable exemption from the registration
requirements of the
8
<PAGE>
Securities Act. You understand that the Notes have not been
registered under the Securities Act or the Puerto Rico Uniform
Securities Act, as amended ("PRUSA"), and you understand and
agree that the Notes may be resold only if registered pursuant
to the provisions of the Securities Act or if an exemption
from registration is available thereunder.
(b) You are an
"ACCREDITED INVESTOR" as defined in Rule 501(a)
under the Securities Act.
(c) It is
understood that, in making the representations set out
in Sections 5.4, 5.5 and 5.10 hereof, the Company is relying,
to the extent applicable, upon your representations set forth
in this Section 6.1.
(d) (i) You have
consulted with your own legal and tax advisers in
connection herewith to the extent you have deemed necessary,
(ii) you have had a reasonable opportunity to ask questions of
and receive answers from officers and representatives of the
Company and its Subsidiaries concerning their respective
financial condition and results of operations and any other
matter relevant to the purchase of the Notes, and any such
questions have been answered to your satisfaction, (iii) you
have had the opportunity to review all publicly available
records and filings concerning the Company and its
Subsidiaries, and (d) you have made your own investment
decisions based upon your own judgment, due diligence and
advice from such advisers as you have deemed necessary and
upon the representations made by the Company herein.
6.2. SOURCE OF
FUNDS.
At least one of the following statements is an accurate
representation as to each source of funds (a "SOURCE") to be used
by you to pay
the purchase price of the Notes to be purchased by you
hereunder:
(a) all or part
of the Source constitutes assets of a bank
collective investment fund, as contemplated by PTE 91-38,
maintained by you, and you have disclosed to the Company the
names of such employee benefit plans whose assets in such bank
collective investment fund exceed ten percent of the total
assets or are expected to exceed ten percent of the total
assets of such fund as of the date of such purchase (for the
purpose of this clause (a), all employee benefit plans
maintained by the same employer or employee organization are
deemed to be a single plan);
(b) all or part
of the Source constitutes assets of one or more
employee benefit plans, each of which has been identified to
the Company in writing;
(c) you are
acquiring the Notes for the account of one or more
pension funds, trust funds or agency accounts, each of which
is a "GOVERNMENTAL PLAN" (as defined in section 3(32) of
ERISA) and the investment does not give rise to any violation
of any federal, state or local law which is substantially
9
<PAGE>
similar to Title I of ERISA, section 4975 of the Code or
comparable provisions of the PRIRC;
(d) the Source
is an "INVESTMENT FUND" managed by a "QUALIFIED
PROFESSIONAL ASSET MANAGER" or "QPAM" (as defined in Part V of
PTE 84-14, issued March 13, 1984), provided that (i) no other
party to the transaction described in this Agreement and no
"AFFILIATE" of such party (as defined in Part V(c) of PTE
84-14) has at this time, and during the immediately preceding
one year none has exercised, the authority to appoint or
terminate said QPAM as manager of the assets of any plan
identified in writing pursuant to this clause (d) or to
negotiate the terms of said QPAM's management agreement on
behalf of any such identified plans, (ii) the conditions set
forth in paragraphs (c), (d), (e), (f) and (g) of Part I of
PTE 84-14 are satisfied; and (iii) you have disclosed to the
Company the name of the QPAM and of all employee benefit plans
whose assets are included in such investment fund;
(e) the Source
is a "PLAN" managed by an "IN-HOUSE ASSET MANAGER"
or "INHAM" (as defined in Part IV of PTE 96-23, issued April
10, 1996), provided that the conditions set forth in
paragraphs (a), (c), (d), (e), (f), (g) and (h) of Part I of
PTE 96-23 are satisfied; or
(f) none of such
funds consists of assets of any "EMPLOYEE BENEFIT
PLAN" as defined in ERISA or any "PLAN" as defined in section
4975 of the Code or comparable provisions of the PRIRC, other
than an employee benefit plan or plan exempt from the coverage
of ERISA and section 4975 of the Code.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN,"
"GOVERNMENTAL
PLAN," "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the
respective
meanings assigned to such terms in section 3 of ERISA. If you
breach any
representation made by you under this Section 6.2, your purchase of
the Notes
shall be void ab initio.
6.3. ANTI-MONEY
LAUNDERING.
(a) The funds
that you are using to purchase the Notes were not
directly or indirectly derived from activities that may
contravene federal, state and international laws and
regulations, including Anti-Money Laundering Laws; and
(b) to the best
of your knowledge, neither:
(i) you, nor
(ii) any person
controlling, controlled by, or under common
control with you,
(1) is a country, territory, individual or entity named on an
Office
of Foreign Assets Control ("OFAC") list, or is an individual or
entity
that resides or has a
10
<PAGE>
place of business in a country or territory named on such lists,
(2)
is a "senior foreign political figure," or any "immediate
family
member" or "close associate" (as such terms are defined in the
Patriot Act) of a senior foreign political figure or (3) is a
"foreign shell bank" (as defined in the Patriot Act) or
transacts
business with a foreign shell bank.
You understand that the Company may not accept any payments for
the
Notes from you if you cannot make the representations set forth
above.
6.4. TRANSFEREE.
Any transferee of a Note shall, by its acceptance of such Note,
be
deemed to have made the same representations regarding the purchase
of the Notes
as the original holder thereof made pursuant to Sections 6.1, 6.2
and 6.3 above.
7. INFORMATION AS TO THE COMPANY.
7.1. FINANCIAL AND
BUSINESS INFORMATION.
The Company shall deliver to you and to any subsequent holder
of
Notes that is an Institutional Investor, subject to the proviso
contained at the
end of Section 7.2 hereof:
(a) SEC and
Other Reports -- for so long as the Company is subject
to reporting obligations under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") with respect to any of
its securities, within ten (10) days after it files them with
the U.S. Securities and Exchange Commission (the "SEC"), one
copy 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;
provided that no such delivery shall be required as to any of
such reports and documents which have been filed and are
available in
electronic format at the SEC's EDGAR database. In
the event that the Company is at any time no longer subject to
the reporting requirements of Section 13 or 15(d) the Exchange
Act, the Company shall provide to you and each subsequent note
holder that is an Institutional Investor, (1)(i) within sixty
(60) days after the end of each of the first three quarterly
fiscal periods in each fiscal year of the Company: an
unaudited consolidated balance sheet of the Company as at the
end of such quarter, and the related unaudited consolidated
statements of income and cash flows of the Company for such
quarter; and (ii) within one hundred twenty (120) days after
the end of each fiscal year of the Company, the consolidated
audited balance sheet of the Company and the related
consolidated statements of income and cash flows of the
Company for such year; and (2) at your request, (i) a
quarterly presentation which shall include a discussion by the
Company's management of the most recent financial and
operational results of the Company and its Significant
Subsidiaries on a consolidated basis and a discussion of the
Company's
11
<PAGE>
most recent business plans and projections, and (ii) on a
yearly basis, a written report reflecting a discussion by the
Company's management of the financial and operational results
of the Company and its Significant Subsidiaries on a
consolidated basis as of the year ended. In addition, on a
quarterly basis, the Company's designated legal counsel, at
your request, will provide you and your designated legal
counsel, access to material and recent information so as to
provide an update to the status of all material legal actions,
suits or proceedings;
(b) Notice of
Default or Event of Default -- within ten (10) days
after a Responsible Officer becomes aware of the existence of
any condition or event which constitutes a Default or Event of
Default, a written notice specifying the nature thereof and
what action the Company is taking or proposes to take with
respect thereto;
(c) Compliance
Certificate -- concurrently with the delivery of
any financial statements pursuant to Section 7.1(a), a
certificate of a Responsible Officer stating that, to the best
of such Responsible Officer's knowledge, the Company and each
Subsidiary during such period has observed or performed all of
its covenants and other agreements, and satisfied every
condition, contained in this Agreement, and that such
Responsible Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate;
and
(d) Notice of
Reduction in Risk-based Capital Ratio -- within
fifteen (15) days after the end of any month in which the
Company's Risk-based Capital Ratio shall be lower than 375%, a
written notice specifying the Company's Risk-based Capital
Ratio as of the end of such month and what action the Company
is taking or proposes to take with respect thereto.
7.2. INSPECTION.
The Company shall permit each holder of Notes that is an
Institutional Investor, or a group of Institutional Investors that
are (i)
Puerto Rico licensed investment companies advised by the same
investment adviser
and (ii) Purchasers and holders of Notes, and holds Notes with an
aggregate
principal amount of at least Ten Million United States Dollars
(US$10,000,000),
or at least Five Million United States Dollars (US$5,000,000) in
the case of
such group, together with their respective representatives, at the
expense of
the Company if done in connection with an Event of Default, to
visit and inspect
any of the offices or properties of the Company and its Significant
Subsidiaries
to examine their books and records, and to discuss their affairs,
finances and
accounts with their officers, employees and independent public
accountants (and
by this provision, the Company authorizes said accountants to
discuss the
finances and affairs of the Company and its Significant
Subsidiaries, but any
such discussions shall be arranged by the Company and the Company
shall have the
opportunity to participate therein) all at such reasonable times
and as may be
reasonably requested in relation to the performance by the Company
of its
obligations under the Notes or under this Agreement;
12
<PAGE>
provided, however, that the Company (or any such Significant
Subsidiary) shall
not be required to disclose to any such holder of Notes (or to any
of its
representatives) information to the extent that the Company (or any
such
Significant Subsidiary) is advised by internal or external legal
counsel that it
is prohibited from disclosing such information at such time to its
creditors
generally under applicable laws, rules, regulations or orders (or
other binding
restrictions imposed by Governmental Authorities or agreements
entered into in
good faith with third parties that are not Affiliates of the
Company).
8. PAYMENT
OF INTEREST.
The Company shall pay interest (computed on the basis of a
360-day
year of twelve 30-day months) (a) on the unpaid balance of the
Notes at the rate
of 6.60% per annum from the date of the Notes, payable monthly in
arrears, on
the first (1st) day of each month, commencing on January 1, 2006,
until the
principal of the Notes shall have become due and payable and (b) to
the extent
permitted by law, on any overdue payment (including any overdue
prepayment) of
principal and any overdue payment of interest, payable monthly as
aforesaid (or,
at the option of the registered holder hereof, on demand), at a
rate per annum
from time to time equal to the Default Rate. Notwithstanding the
above, in the
event that the Company's Risk-based Capital Ratio is less than 375%
during a
period of at least one year, the interest rate payable on the Notes
on any
interest payment date after the expiration of such year shall
increase to 6.75%
per annum while such condition exists. The interest so payable on
any interest
payment date will be paid to the Holder in whose name a Note is
registered at
the close of business on the fifteenth (15th) calendar day (whether
or not a
Business Day) next preceding such interest payment date.
9.
REDEMPTION OF THE NOTES PRIOR TO MATURITY.
9.1. OPTIONAL REDEMPTION.
The Company may, at its option, upon notice as provided below,
redeem and prepay prior to maturity from time to time, all or any
part of the
Notes on or after January 1, 2011, at a price equal to 100% of the
principal
amount of the Notes to be redeemed together with accrued and unpaid
interest, if
any, to the date of redemption specified by the Company (the
"REDEMPTION DATE").
The Company will give each holder of Notes written notice of
any
redemption under this Section 9.1 not less than thirty (30) days
and not more
than sixty (60) days prior to any Redemption Date. Each such notice
shall
specify the Redemption Date, the aggregate principal amount of the
Notes to be
redeemed on such Redemption Date, the principal amount of each Note
held by such
holder to be redeemed (determined in accordance with Section 9.2),
and the
interest to be paid on such Redemption Date with respect to such
principal
amount being redeemed.
9.2. ALLOCATION OF PARTIAL REDEMPTIONS.
In the case of any partial redemption of the Notes, the
principal
amount of the Notes to be redeemed shall be allocated among all of
the Notes at
the time outstanding in
13
<PAGE>
proportion, as nearly as practicable, to the respective unpaid
principal amounts
thereof not theretofore called for redemption.
9.3. MATURITY; SURRENDER, ETC.
In the case of each redemption of Notes pursuant to this Section
9,
the principal amount of each Note to be redeemed shall mature and
become due and
payable on the respective Redemption Date, together with interest
on such
principal amount accrued to such date. From and after such date,
unless the
Company shall fail to pay such principal amount when so due and
payable,
together with the interest thereon, interest on such principal
amount shall
cease to accrue. Any Note paid or redeemed in full shall be
surrendered to the
Company and cancelled and shall not be reissued, and no Note shall
be issued in
lieu of any prepaid principal amount of any Note.
9.4. PURCHASE OF NOTES.
The Company will not, and the Company will not permit any of
its
Affiliates to, purchase, redeem, prepay or otherwise acquire,
directly or
indirectly, any of the outstanding Notes except (i) pursuant to an
offer made to
all holders of the Notes or (ii) upon the payment or redemption of
the Notes in
accordance with the terms of this Agreement and the Notes. The
Company will
promptly cancel all Notes acquired by it or any of its Affiliates
pursuant to
any payment, redemption or purchase of Notes pursuant to any
provision of this
Agreement and no Notes may be issued in substitution or exchange
for any such
Notes.
10. BUSINESS
COVENANTS.
The
Company covenants that, so long as the Notes are outstanding, it
will,
and it will cause each of its Significant Subsidiaries to:
10.1. COMPLIANCE WITH LAWS.
Comply with all laws, ordinances and governmental rules and
regulations to which it is subject and obtain and maintain in
effect all
licenses, certificates, permits, franchises and other
governmental
authorizations necessary to the ownership of its properties or to
the conduct of
its businesses, in each case to the extent necessary to ensure
that
non-compliance with such laws, ordinances or governmental rules or
regulations
or failures to obtain or maintain in effect such licenses,
certificates,
permits, franchises and other governmental authorizations would not
reasonably
be expected, individually or in the aggregate, to have a Material
Adverse
Effect.
10.2. INSURANCE.
Except where the failure to comply would not reasonably be
expected
to have a Material Adverse Effect, maintain, with financially sound
and
reputable insurers, insurance with respect to its properties and
business
against such casualties and contingencies, of such types, on such
terms and in
such amounts (including deductibles, co-insurance and
self-insurance, if
adequate reserves are maintained with respect thereto) as is
customary in the
case of entities of established reputations engaged in the same or
a similar
business and similarly situated.
14
<PAGE>
10.3. PAYMENT OF TAXES.
File all tax returns required to be filed and pay and discharge
or
cause to be paid or discharged all taxes shown to be due and
payable on such
returns and all other taxes and assessments payable by it, to the
extent such
taxes and assessments have become due and payable, provided that
the Company or
such Significant Subsidiary need not (a) make any filing the
failure to make
which would not be reasonably expected to have a Material Adverse
Effect or (b)
pay any such tax or assessment if (i) the amount, applicability or
validity
thereof is contested by the Company or such Significant Subsidiary
on a timely
basis in good faith and in appropriate proceedings, and the Company
or such
Significant Subsidiary has established adequate reserves therefor
in accordance
with GAAP on their respective books, or (ii) the nonpayment of all
such taxes
and assessments in the aggregate would not reasonably be expected
to have a
Material Adverse Effect.
10.4. USE OF PROCEEDS.
Apply the proceeds from the sale of the Notes for the purposes
set
forth in Section 5.12 hereof within twenty-four (24) months from
the date of the
issuance of the Notes. The Company will notify Treasury of such use
as required
by Section 1013A of the PRIRC.
If a favorable ruling from Treasury is obtained after the
Closing
Date, by purchasing the Notes, the subsequent holders of the Notes,
other than
the Purchasers, will be deemed to have made an election under
Section 1013A of
the PRIRC and the 10 percent preferential withholding tax will be
made on the
interest on the Notes unless such holders elect out of such
withholding by
providing a written statement to that effect to the Company,
through certified
mail, in the form set forth in Exhibit 3.
10.5. CORPORATE EXISTENCE, ETC.
Subject to the provisions of Sections 11.2 and 11.4 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 corporate existence of a Significant Subsidiary if the
Company
shall determine that the preservation thereof is no longer
desirable in the
conduct of the business of the Company and that the loss thereof is
not
disadvantageous in any material respect to the holders of the
Notes.
10.6. SOURCE OF INCOME.
The
Company shall do or cause to be done all things necessary or
proper within its control to ensure that, for purposes of the Code,
interest
paid on the Notes will constitute income from sources within the
Commonwealth of
Puerto Rico.
10.7. LINES OF BUSINESS.
The Company will continue to be a Blue Cross/Blue Shield
licensee
and will be principally engaged in the business of providing
health, life and
property and casualty insurance.
15
<PAGE>
11. NEGATIVE
COVENANTS.
The
Company covenants that, so long as any of the Notes is outstanding,
it
will not:
11.1. TRANSACTIONS WITH AFFILIATES.
Enter into, or permit any of its Significant Subsidiaries to
enter
into, directly or indirectly, into any transaction or group of
related
transactions which, in the opinion of the management of the
Company, is material
to the Company and its Subsidiaries taken as a whole (including
without
limitation the purchase, lease, sale or exchange of properties of
any kind or
the rendering of any service) with any of its Affiliates, except
(i) pursuant to
its reasonable business requirements and (ii) in the case of
transactions with
Affiliates other than wholly owned Subsidiaries, on arm's length
terms.
11.2. CONSOLIDATION, MERGER AND SALE OF ASSETS.
Not consolidate with or merge into, or convey, transfer or lease
its
properties and assets substantially as a whole to,
any Person, unless:
(a) the Company
is the surviving or continuing entity, or the
entity formed by such consolidation or into which the Company
is merged or to which the Company has conveyed, transferred or
leased its properties and assets substantially as an entirety
is an entity organized and validly existing under the laws of
the United States of America, any province or state thereof or
the District of Columbia or the Commonwealth of Puerto Rico,
and such ent
