EX-10.2 ADVISORY SERVICES AGREEMENT



 





Exhibit 10.2




EXECUTION
COPY




ADVISORY SERVICES AGREEMENT




     This Advisory Services Agreement (this “Agreement”) is made as of July 19, 2007, by
and among Bear Stearns Merchant Manager III, L.P., a Cayman Islands exempted limited partnership
(the “Advisor”) and Doral Financial Corporation, a corporation organized under the laws of
the Commonwealth of Puerto Rico (the “Company”).



RECITALS:




     Doral Holdings, L.P., a Cayman Islands exempted limited partnership (the
“Partnership”), and the Company are parties to a Stock Purchase Agreement, dated as of May
16, 2007 (the “Purchase Agreement”).



     The Company desires to retain the Advisor with respect to the services described herein.



     NOW, THEREFORE, the parties agree as follows:



     1. Term. This Agreement shall commence on the date hereof and shall terminate (except
as provided in the immediately following sentence) on the earliest to occur of (a) the occurrence
of a Termination Event and (b) the fifth anniversary of the date hereof (the “Term”). The
provisions of Sections 3(c), 4(b), 5, 6, 7, 8,
9, 10, 12, and 13 and obligations to pay any outstanding unpaid
fees hereunder shall survive the termination of this Agreement. As used herein, “Termination
Event” means 60 days following delivery by the Company to the Advisor of written notice of
termination of this Agreement.



     2. Services.



          (a) The Advisor shall perform or cause to be performed the following services for the Company
and its subsidiaries: (i) identification, support, negotiation and analysis of acquisitions and
dispositions by the Company or its subsidiaries; (ii) support, negotiation and analysis of
financing alternatives, including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness, assistance in the preparation of financial
projections, and monitoring of compliance with financing agreements; and (iii) advice with respect
to procurement, information technology, accounting and tax matters.




          (b) The Advisor and the Company’s board of directors shall agree upon the time and manner in
which requested services are to be performed by the Advisor. The Advisor shall provide and devote
to the performance of this Agreement such partners, employees and agents of the Advisor as the
Advisor shall deem appropriate to the furnishing of the services required. The Advisor is an
independent contractor and nothing in this Agreement shall be construed to imply that the Advisor
is a partner or joint venturer with, or an agent or fiduciary of, the Company.





 









 







     3. Advisory Fee.



          (a) Subject to Section 3(d), in consideration of the Advisor’s undertaking to provide
advisory services hereunder, during the Term of this Agreement, the Company shall pay the Advisor
an annual advisory fee (the “Advisory Fee”) equal to (i) for the period beginning July 1,
2007 (or if later, the date hereof) and ending June 30, 2008, $1,500,000, (ii) for the twelve-month
period beginning July 1, 2008 and ending June 30, 2009, $2,000,000, (iii) for the twelve-month
period beginning July 1, 2009 and ending June 30, 2010, $2,500,000, (iv) for the twelve-month
period beginning July 1, 2010 and ending June 30, 2011, $3,000,000, and (v) for the twelve-month
period beginning July 1, 2011 and ending June 30, 2012, $3,500,000, in each case, payable in
advance beginning on the date hereof and thereafter in annual installments on August 31 of each
year (or if such date is not a business day, on the latest business day preceding such date, each
an “Advance Payment Date”). The Advisory Fees shall be payable by the Company whether or
not the Company actually requests that the Advisor provide the services described in Section
2 above. All Advisory Fees shall be fully earned when paid, and shall not be refundable, in
whole or in part.




          (b) The first installment of the Advisory Fee, for the period beginning on the date hereof and
ending June 30, 2008, shall be payable on the date hereof in an amount equal to $1,500,000 and will
not be pro rated.




          (c) Upon a Termination Event, the Company shall be obligated to pay to the Advisor, the
remaining Advisory Fees that would otherwise be payable to the Advisor pursuant to this Section
3 through the earlier of (i) the fifth anniversary of the date of this Agreement or (ii) the
second anniversary of the date of the Termination Event.




          (d) Notwithstanding anything to the contrary in Section 3(a)(ii), (iii), (iv)
or (v), if on any Advance Payment Date beginning August 31, 2009, the amount of the annual
installment of the Advisory Fee advanced on the previous Advance Payment Date for the immediately
previous twelve-month period ended June 30 as described in Section 3(a) above (such period,
the “Prior Fee Period”) exceeds three percent (3.0%) of the Company’s actual consolidated
pre-tax income, before dividends on its preferred and common stock, for such Prior Fee Period, then
the amount of the annual installment of the Advisory Fee then payable shall be reduced by such
excess amount. In the event that an advance payment is made on August 31, 2011, then on or prior
to August 31, 2012 the Company shall determine whether the Advance paid on August 31, 2011 (without
giving effect to any reduction in the previous sentence) exceeds 3% of the Company’s actual
consolidated pre-tax income, before dividends on its preferred and common stock for the
twelve-month period ended June 30, 2012, and if it so exceeds then the Advisor shall promptly
reimburse the Company for such excess. For the avoidance of doubt, each reference in this
Section 3(d) to an Advance Payment Date occurring on August 31 shall be deemed, if such
August 31 is not a business day, to be a reference to the Advance Payment Date on the latest
business day preceding such date.




     4. Expenses.



          (a) In addition to Advisory Fees, the Company shall reimburse the Advisor, promptly upon
request, for all reasonable out-of-pocket expenses incurred by the Advisor in





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connection with the Advisor’s performance of services hereunder, including fees and expenses
paid to consultants, subcontractors and other third parties in connection with such obligations;
provided that reimbursement by the Company for any such fees and expenses paid to
consultants, subcontractors and other third parties in connection with such obligations shall
require the prior approval of either the Company’s board of directors or the board of directors of
Doral GP Ltd., a Cayman Islands exempted company.




          (b) The Company shall promptly reimburse the Partnership for all documented “Partnership
Expenses” other than the “Doral Transaction Fee” (as each such term is defined in the Partnership’s
limited partnership agreement, as in effect on the date hereof) incurred prior to or during the
Term of this Agreement. The Partnership shall be entitled to enforce the provisions of this
Section 4(b) against the Company as if it were a party hereto.




     5. No Implied Duties. The Advisor does not make any representations or warranties,
express or implied, in respect of the services to be provided by any member of its Advisor Group.
Except as the Advisor may otherwise agree in writing on or after the date hereof: (a) each member
of the Advisor’s Advisor Group shall have the right to, and shall have no duty (contractual or
otherwise) not to, directly or indirectly: (i) engage in the same or similar business activities
or lines of business as the Company or its subsidiaries and (ii) do business with any client,
customer, supplier, lender or investor of, to or in the Company or its subsidiaries; (b) no member
of the Advisor’s Advisor Group shall be liable to the Company or its subsidiaries or affiliates for
breach of any duty (contractual or otherwise) by reason of any such activities or of such person’s
participation therein; and (c) in the event that any member of the Advisor’s Advisor Group acquires
knowledge of a potential transaction or matter that may be a corporate opportunity for both (i) the
Company or any of its subsidiaries, on the one hand, and (ii) the Advisor or a member of its
Advisor Group, on the other hand, or any other person, no member of the Advisor’s Advisor Group
shall have any duty (contractual or otherwise) to communicate or present such corporate opportunity
to the Company or its subsidiaries and, notwithstanding any provision of this Agreement to the
contrary, shall not be liable to the Company, its subsidiaries or any of their affiliates for
breach of any duty (contractual or otherwise) by reason of the fact that any member of the
Advisor’s Advisor Group directly or indirectly pursues or acquires such opportunity for itself,
directs such opportunity to another person, or does not present such opportunity to the Company,
its subsidiaries or any of their affiliates.



     6. Indemnity. The Company and its subsidiaries shall, to the fullest extent permitted
by applicable law, defend, indemnify and hold harmless the Advisor, its affiliates, and their
respective partners, members, directors, officers, employees, agents and affiliates (the
“Advisor Group”) from and against any and all losses, claims, liabilities, damages or
expenses, including reasonable attorney’s fees and amounts paid in settlement (collectively,
“Losses”) arising out of or related to the services provided or to be provided pursuant to
this Agreement, including with respect to any actual or threatened action, suit, proceeding or
claim relating thereto (collectively, “Claims”), except to the extent that they are
determined by a court of competent jurisdiction in a final judgment not subject to appeal to have
resulted from the gross negligence or willful misconduct of the Advisor and excluding any Losses
suffered by the Advisor Group on its direct or indirect investment in the Company. The Company and
its subsidiaries shall defend at its own cost and expense any and all suits or actions which may be
brought against the Company and its subsidiaries or any member of the Advisor’s Advisor Group, or
in which any member of the



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Advisor’s Advisor Group may be impleaded with others upon any Claims, or upon any matter,
directly or indirectly, related to or arising out of this Agreement or the performance of the
obligations hereunder by the Advisor’s Advisor Group, and shall promptly reimburse each member of
the Advisor’s Advisor Group for all costs and expenses (including reasonable attorney’s fees) as
incurred, in connection with the investigation of, preparation for or defense or settlement of any
pending or threatened Claim subject to indemnification hereunder, whether or not the Advisor’s
Advisor Group member is a party and whether or not such Claim is initiated by or on behalf of the
Company and whether or not resulting in any liability. In no event will any member of an Advisor’s
Advisor Group be liable to the Company or any of its subsidiaries for any punitive, exemplary,
indirect, special, incidental or consequential damages, including lost profits or savings, whether
or not such damages are foreseeable, or in respect of any liabilities relating to any third party
claims (whether based in contract, tort or otherwise).



     7. Notices. All notices hereunder shall be in writing and shall be delivered
personally or mailed by United States mail, postage prepaid, addressed to the parties as follows:



     to the Company:



	 	 	 	 	 
	 	 	Doral Financial Corporation
	 	 	1451 Franklin D. Roosevelt Avenue
	 	 	San Juan, Puerto Rico 00920
	 	 	Telephone: (787) 474-6381
	 	 	Fax: (787) 474-6817
	 

	 	Attn:
	 	Glenn Wakeman
	 

	 	 	 	Enrique Ubarri






     to BSMB:



	 	 	 	 	 	 	 
	 	 	Bear Stearns Merchant Manager III, L.P.
	 	 	c/o Bear, Stearns & Co. Inc.
	 	 	383 Madison Avenue, 40th Floor
	 	 	New York, New York 10179-5706
	 	 	Attention:	 	David E. King
	 

	 	 	 	 	 	Robert Juneja
	 	 	Tel.:	 	212-272-2000
	 	 	Fax:	 	212-881-9516






     with a copy, which shall not constitute notice, to:



	 	 	 	 	 	 	 
	 	 	Kirkland & Ellis LLP
	 	 	153 East 53rd Street
	 	 	New York, NY 10022
	 	 	Attention:	 	Michael T. Edsall
	 	 	Tel.:	 	212-446-4800
	 	 	Fax:	 	212-446-6460






     8. Assignment. No party hereto may assign any obligations hereunder to any other
party without the prior written consent of the other parties (which consent shall not be



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unreasonably withheld); provided that the Advisor may, without the consent of the
Company, assign its rights under this Agreement to any of its affiliates.



     9. No Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.



     10. Successors. This Agreement and all the obligations and benefits hereunder shall
inure to the successors and permitted assigns of the parties.



     11. Counterparts. This Agreement may be executed and delivered by each party hereto
in separate counterparts, each of which when so executed and delivered shall be deemed an original
and all of which taken together shall constitute but one and the same agreement.



     12. Entire Agreement; Modification; Governing Law. The terms and conditions hereof
constitute the entire agreement between the parties hereto with respect to the subject matter of
this Agreement and supersede all previous communications, either oral or written, representations
or warranties of any kind whatsoever, except as expressly set forth herein. No modifications of
this Agreement nor waiver of the terms or conditions thereof shall be binding upon either party
unless approved in writing by an authorized representative of such party. All issues concerning
this agreement shall be governed by and construed in accordance with the laws of the State of New
York without giving effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of New York.



     13. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY, OR OTHERWISE. EACH PARTY TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.



[END OF PAGE]

[SIGNATURE PAGE FOLLOWS]




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     IN WITNESS WHEREOF, the parties have executed this Advisory Services Agreement as of the date
first written above.



	 	 	 	 	 
	 	 	DORAL FINANCIAL CORPORATION
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	/s/ Glen R. Wakeman
	 

	 	 	 	 
	 

	 	 	 	Name:  Glen R. Wakeman
	 

	 	 	 	Title:  Chief Executive
Officer
	 
	 	 	 	 
	 	 	BEAR STEARNS MERCHANT MANAGER III, L.P.
	 
	 	 	 	 
	 

	 	By:
	 	JDH Management LLC, a general partner
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	/s/ David E. King
	 

	 	 	 	 
	 

	 	 	 	Name:  David E. King
	 

	 	 	 	Title:  Senior Managing Director






Signature Page to

Advisory Services Agreement