exv10w2






Exhibit 10.2




EXECUTION COPY




 




AMENDED AND RESTATED INVESTMENT AGREEMENT




DATED AS OF



JULY 14, 2011



AMONG

FIRST BANCORP

AND



THE INVESTORS NAMED ON THE SIGNATURE PAGES HERETO



 




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	PAGE	 
	ARTICLE 1 PURCHASE OF SHARES
	 	 	1	 
	1.1 Purchase of Shares
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2 THE CLOSING TRANSACTIONS
	 	 	2	 
	2.1 Closing
	 	 	2	 
	2.2 Actions on the Closing Date
	 	 	2	 
	 
	 	 	 	 
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES
	 	 	2	 
	3.1 Representations and Warranties of the Company
	 	 	2	 
	3.2 Representations and Warranties of the Investors
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 4 ACTIONS PRIOR TO THE TRANSACTION
	 	 	21	 
	4.1 Stockholder Approval
	 	 	21	 
	4.2 HSR Act Filings
	 	 	21	 
	4.3 Listing of Shares
	 	 	22	 
	4.4 Change of Bank Control Act and Bank Holding Company Act
	 	 	22	 
	4.5 Most Favored Terms
	 	 	23	 
	4.6 Notice of Adverse Occurrences
	 	 	23	 
	4.7 Reasonable Best Efforts
	 	 	23	 
	4.8 Election of Independent Chairman and Independent Directors; Board
Representative
	 	 	23	 
	4.9 Access; Confidentiality
	 	 	26	 
	4.10 Conduct of the Business
	 	 	26	 
	 
	 	 	 	 
	ARTICLE 5 CONDITIONS PRECEDENT TO TRANSACTION
	 	 	27	 
	5.1 Conditions to the Company’s Obligations
	 	 	27	 
	5.2 Conditions to the Investor’s Obligations
	 	 	29	 
	5.3 Waiver of Conditions to Investor’s Obligations
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 6 ADDITIONAL AGREEMENTS
	 	 	32	 
	6.1 Company Obligation Regarding Adequate Public Information
	 	 	32	 
	6.2 Efforts to Maintain Listing
	 	 	32	 
	6.3 Additional Regulatory Matters
	 	 	32	 
	6.4 Percentage Maintenance Rights
	 	 	33	 
	6.5 Participation in Other Offerings
	 	 	36	 
	 
	 	 	 	 
	ARTICLE 7 SALE RESTRICTIONS
	 	 	38	 
	7.1 Restrictions on Sales of Acquired Common Stock
	 	 	38	 






ii









 






	 	 	 	 	 
	 	 	PAGE	 
	ARTICLE 8 SECURITIES ACT REGISTRATION
	 	 	38	 
	8.1 Obligation to Register Acquired Common Stock
	 	 	38	 
	8.2 Obligations of the Investors Regarding Registration
	 	 	43	 
	8.3 Indemnification Regarding Disclosures
	 	 	43	 
	8.4 Assignment of Registration Rights
	 	 	44	 
	8.5 Lock Up Agreements
	 	 	44	 
	8.6 Holdback
	 	 	44	 
	 
	 	 	 	 
	ARTICLE 9 TERMINATION
	 	 	45	 
	9.1 Right to Terminate
	 	 	45	 
	9.2 Manner of Terminating Agreement
	 	 	46	 
	9.3 Effect of Termination
	 	 	46	 
	 
	 	 	 	 
	ARTICLE 10 INDEMNIFICATION
	 	 	46	 
	10.1 Indemnification Against Loss Due to Inaccuracies in Company’s
Representations and Warranties or Company Failure to Fulfill Obligations
	 	 	46	 
	10.2 Indemnification Against Loss Due to Inaccuracies in Investor’s
Representations and Warranties or Investor Failure to Fulfill Obligations
	 	 	46	 
	10.3 Limit on Liability for Breach of Warranty
	 	 	47	 
	10.4 Indemnification Sole Remedy
	 	 	48	 
	 
	 	 	 	 
	ARTICLE 11 ABSENCE OF BROKERS
	 	 	48	 
	11.1 Representations and Warranties Regarding Brokers and Others
	 	 	48	 
	 
	 	 	 	 
	ARTICLE 12 GENERAL
	 	 	48	 
	12.1 Announcement of Transaction
	 	 	48	 
	12.2 Expenses
	 	 	49	 
	12.3 Entire Agreement
	 	 	49	 
	12.4 Benefit of Agreement
	 	 	49	 
	12.5 Captions
	 	 	49	 
	12.6 Assignments
	 	 	49	 
	12.7 Notices and Other Communications
	 	 	50	 
	12.8 Governing Law
	 	 	51	 
	12.9 Consent to Jurisdiction
	 	 	51	 
	12.10 Remedies; Specific Performance
	 	 	51	 
	12.11 Non-Recourse
	 	 	51	 
	12.12 Waiver of Jury Trial
	 	 	52	 
	12.13 Amendments
	 	 	52	 
	12.14 Interpretation
	 	 	52	 






iii









 






	 	 	 	 	 
	 	 	PAGE	 
	12.15 Mutual Drafting
	 	 	52	 
	12.16 Severability
	 	 	52	 
	12.17 Counterparts
	 	 	53	 
	12.18 Independent Nature of Investors’ Obligations and Rights
	 	 	53	 






iv









 







LIST OF EXHIBITS




	 	 	 

	Exhibit A

	 	Illustrative Pro Forma Capitalization of the Company
	 
	Exhibit B

	 	Form of Opinion of K&L Gates LLP
	 
	Exhibit C

	 	Form of Opinion of Martinez Odell & Calabria






	 	 	 	 	 

	Acquired Common Stock
	 	 	1	 
	Agency
	 	 	15	 
	Aggregate Purchase Price
	 	 	2	 
	Agreement
	 	 	1	 
	Bank Holding Company Act
	 	 	3	 
	Bank Regulatory Agency
	 	 	14	 
	Board Representative
	 	 	26	 
	Business Day
	 	 	2	 
	CBCA
	 	 	22	 
	Closing Date
	 	 	2	 
	Code
	 	 	11	 
	Common Stock
	 	 	1	 
	Company
	 	 	1	 
	Company 10-K
	 	 	7	 
	Company Benefit Plans
	 	 	13	 
	Company Financial Statements
	 	 	9	 
	Company Material Adverse Effect
	 	 	3	 
	Company Reports
	 	 	7	 
	Company Significant Agreement
	 	 	17	 
	Company Subsidiaries
	 	 	7	 
	Company Subsidiary
	 	 	7	 
	Environmental Law
	 	 	12	 
	ERISA
	 	 	13	 
	Exchange Act
	 	 	7	 
	FDIC
	 	 	6	 
	FDIC Consent Order
	 	 	10	 
	Federal Reserve Agreement
	 	 	10	 
	Federal Reserve Board
	 	 	6	 
	FirstBank
	 	 	3	 
	GAAP
	 	 	3	 
	Governmental Entity
	 	 	5	 
	HSR Act
	 	 	6	 
	Indemnitee
	 	 	44	 
	Information
	 	 	26	 
	Insurer
	 	 	15	 
	Intellectual Property
	 	 	19	 
	Intellectual Property Rights
	 	 	18	 
	Interim Financials
	 	 	8	 
	Investor
	 	 	1	 
	Investor Agreements
	 	 	4	 
	Investors
	 	 	1	 
	IT Assets
	 	 	18	 






v









 






	 	 	 	 	 

	Loan
	 	 	17	 
	Loan Investor
	 	 	15	 
	March 10-Q
	 	 	7	 
	Material Adverse Change
	 	 	9	 
	Materially Burdensome Regulatory Condition
	 	 	23	 
	New Security
	 	 	34	 
	Nominating Committee
	 	 	24	 
	NYSE
	 	 	4	 
	Observer
	 	 	25	 
	OCFI
	 	 	6	 
	OCFI Order
	 	 	10	 
	OFAC
	 	 	16	 
	Original Agreement
	 	 	1	 
	Other Investors
	 	 	4	 
	Per Share Price
	 	 	1	 
	Piggyback Registration
	 	 	40	 
	Previously Disclosed
	 	 	3	 
	PRTD
	 	 	33	 
	Qualifying Ownership Interest
	 	 	24	 
	Registrable Securities
	 	 	39	 
	Rights Offering
	 	 	1	 
	Ruling
	 	 	31	 
	Securities Act
	 	 	2	 
	Series G Preferred Stock
	 	 	1	 
	Shelf Registration Statement
	 	 	39	 
	Special Registration
	 	 	45	 
	Tax Return
	 	 	12	 
	Taxes
	 	 	12	 
	Termination Date
	 	 	46	 
	Unlawful Gains
	 	 	16	 






vi









 







AMENDED AND RESTATED INVESTMENT AGREEMENT




          This agreement is dated as of July 14, 2011 among First BanCorp (the “Company”), a Puerto
Rico chartered financial holding company, and each of the investors that have signed this Agreement
(each an “Investor” and together, the “Investors”), relating to the sale by the Company to each of
the Investors of a number of shares of common stock of the Company (“Common Stock”), par value
$0.10 per share, as set forth in Section 1.1, and amends and restates an Investment
Agreement, dated as of June 24, 2011, among the Company and the Investors (the “Original Agreement”
and, as amended and restated by this agreement, the “Agreement”). Now, therefore, in consideration
of the premises, and of the representations, warranties, covenants and agreements set forth herein,
and intending to be legally bound, the parties hereby agree as follows:



ARTICLE 1

PURCHASE OF SHARES




     1.1
Purchase of Shares. Subject to the conditions contained in this Agreement, on
the Closing Date described in Section 2.1, the Investors will purchase from the Company,
and the Company will sell to the Investors, in total (to be allocated among the investors as they
specify to the Company prior to the Closing Date) the lesser of (x) 49,746,992 shares of Common
Stock, (y) 24.9% of all the shares of Common Stock that will be outstanding after the issuances of
Common Stock to all Other Investors on the Closing Date, and the conversion of the Company’s fixed
rate cumulative mandatorily convertible preferred stock, Series G (“Series G Preferred Stock”) into
Common Stock as set forth in Section 5.1(g), or (z) the maximum amount that will not result in such
Investor or any of its affiliates being in control of the Company or of FirstBank for purposes of
the Bank Holding Company Act or the Federal Reserve Board’s Regulation Y, or otherwise being
subject to regulation as a bank holding company under that Act (the shares being purchased by all
the Investors being the “Acquired Common Stock”) for the purchase price of the lesser of (a) $3.50
per share of Common Stock or (b) such price as may be agreed with any Other Investor (the “Per
Share Price”). At least two (2) Business Days before the Closing Date, the Company shall deliver
to each Investor a reasonably detailed calculation of the number of shares of Acquired Common Stock
to be purchased by such Investor, as provided in this Section 1.1. Exhibit A contains
hypothetical examples illustrating how the number of shares of Acquired Common Stock would be
calculated if the Investors and Other Investors purchase Common Stock for (i) $500 million and (ii)
$525 million (equal to $562.3 million minus the $37.3 million purchase price of the shares that
would be issuable on exercise of rights expected to be issued to holders of Common Stock that is
outstanding prior to the Closing Date (the “Rights Offering”), respectively, and in either event,
all the Series G Preferred Stock is converted into Common Stock. The Per Share Price and the
number of shares of Acquired Common Stock shall be adjusted to reflect appropriately the effect of
any stock split, reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Common Stock), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or other like change with
respect to Common Stock (other than the conversion of the Series G Preferred Stock into Common
Stock) occurring on or after the date hereof and prior to the Closing.



1









 





ARTICLE 2

THE CLOSING TRANSACTIONS




     2.1
Closing. Subject to the satisfaction or waiver of the conditions set forth in
this Agreement, the closing of the sale of Common Stock described in Article 1 will take
place at the offices of K&L Gates, LLP, 599 Lexington Avenue, New York, NY 10019, or by electronic
exchange of documents and signature pages, on the day (the “Closing Date”) that is the second
Business Day after the day on which all the conditions in Article 5 (other than conditions
that by their terms cannot be fulfilled until the Closing Date, but subject to the satisfaction or
waiver of such conditions) are satisfied, or at such other place and time as is agreed upon by the
parties. As used in this Agreement, the term “Business Day” means a day that is not a Saturday, a
Sunday or a day on which banks in New York City or in San Juan, Puerto Rico generally are required
or permitted not to be open for banking business.



     2.2
Actions on the Closing Date. Not later than 11:00 a.m., New York City time, on
the Closing Date, each Investor will transmit to an account of the Company with a bank in New York
City that is specified by the Company at least two Business Days before the Closing Date
immediately available funds equal to the full amount of the purchase price for the Acquired Common
Stock to be purchased by such Investor in accordance with Section 1.1 (the “Aggregate
Purchase Price””). Upon receipt by the Company of confirmation that such funds have been received,
the Company will instruct The Bank of New York Mellon Shareholder Services (or its successor), as
transfer agent, to issue the Acquired Common Stock to the Investor in book entry form. The
depositary that holds the Acquired Common Stock may be instructed to note on its records that the
Acquired Common Stock (a) has been issued without registration under the Securities Act of 1933, as
amended (the “Securities Act”), and may not be sold or transferred other than in a transaction that
is registered under the Securities Act or is exempt from the registration requirements of the
Securities Act (which notation will be withdrawn when resale of the Acquired Common Stock has been
registered under the Securities Act as contemplated by Article 8), and (b) is subject to
the sale restrictions contained in Article 7. On the Closing Date, the Company shall also
deliver or cause to be delivered to each Investor (x) a receipt for the Aggregate Purchase Price
paid by that Investor; and (y) a certificate of the Secretary or an Assistant Secretary of the
Company, dated as of the Closing Date, certifying (i) the resolutions duly and validly adopted by
the Board of Directors of the Company evidencing its authorization of the execution and delivery of
this Agreement and the other Investor Agreements (as defined below) and the consummation of the
transactions contemplated hereby and thereby, (ii) the current versions of the Certificate of
Incorporation and bylaws of the Company, each as amended to date, and (iii) as to the signatures
and authority of persons signing this Agreement and related documents on behalf of the Company.



ARTICLE 3

REPRESENTATIONS AND WARRANTIES




     3.1
Representations and Warranties of the Company. The Company represents and
warrants to the Investors as follows:



          (a) Organization and Power. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Puerto Rico. The Company is
duly registered as a financial holding company under the U.S. Bank Holding Company Act of 1956, as
amended (the “Bank Holding Company Act”). Each of the Company and each Company Subsidiary,
including each Company Subsidiary that is a “significant subsidiary” (as that term is defined in
Rule 1-02(w) of Regulation S-X under the



2









 







Securities Act), including FirstBank Puerto Rico
(“FirstBank”), has all the corporate power and authority that is required to enable it to conduct
its business as it is being conducted at the date of the Original Agreement. The Company and each
Company Subsidiary is duly qualified to do business and is in good standing in every jurisdiction
in which qualification is required, except jurisdictions in which failure to qualify would not have
a Company Material Adverse Effect. The Company has furnished to the Investors or has filed with
the Securities and Exchange Commission (the “SEC”) pursuant to its Electronic Data Gathering,
Analysis and Retrieval system (“EDGAR”), true, correct and complete copies of the Company’s
Articles of Incorporation and By-Laws, as amended through the date of the Original Agreement. For
purposes of this Agreement, “Previously Disclosed” means (i) information publicly disclosed by the
Company in the Company 10-K or the March 10-Q (excluding any risk factor disclosures contained in
such documents and any disclosure of risks included in any forward-looking statements disclaimer or
other statements that are similarly non-specific or are predictive or forward-looking in nature),
or (ii) documents made available to the Investors prior to the date of the Original Agreement
either physically or in an electronic data room to which the Investors or their representatives had
access and the information contained in those documents, in each of (i) and (ii), prior to 11:59
p.m. on May 23, 2011, and at least until 11:59 p.m. on June 6, 2011, or (iii) information about tax
audits and the extension of the period of limitations with respect to a U.S. Internal Revenue
Service tax audit made available to the Investors prior to 11:59 p.m. on May 25, 2011 and at least
until 11:59 p.m. on June 6, 2011).



          (b) “Company Material Adverse Effect.” As used in this Agreement, the term
“Company Material Adverse Effect” means any circumstance, change, effect, event or fact the effect
of which, individually or in the aggregate, (i) is, or would reasonably be expected to be,
materially adverse to the business, assets, liabilities, results of operations or financial
condition of the Company and its consolidated Company Subsidiaries taken as a whole or (ii)
prevents or materially delays or materially impairs the ability of the Company to perform its
obligations under this Agreement and to consummate the transactions contemplated hereby;
provided, however, that the term Company Material Adverse Effect will not include
any circumstance, change, effect, event or fact arising from (A) changes after the date of the
Original Agreement in general business, economic or market conditions in the United States or the
Commonwealth of Puerto Rico (including changes generally in prevailing interest rates, credit
availability and liquidity, currency exchange rates and price levels or trading volumes in the
United States or foreign securities or credit markets), or any outbreak or escalation of
hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the
industries in which the Company and the Company Subsidiaries operate, (B) changes or proposed
changes after the date of the Original Agreement in United States generally accepted accounting
principles (“GAAP”) or regulatory accounting requirements applicable to the Company and the Company
Subsidiaries, (C) changes or proposed changes after the date of the Original Agreement in
securities or other laws or regulations of general applicability (excluding banking laws and
banking regulations), (D) changes in the market price or trading volume of the Common Stock or any
other equity, equity-related or debt securities of the Company or the Company Subsidiaries (but not
the underlying reason or reasons for any such change), (E) the effects of actions or failures to
act by the Company or the Company Subsidiaries that are required by this Agreement, or (F) failure
by the Company or any of the Company Subsidiaries to meet internal projections or forecasts with
regard to results of operations or financial condition (but not the underlying reason or reasons
that the projections or forecasts are not met); provided, however, that in the case
of clauses (A), (B) and (C), any circumstance, change, effect, event or
fact shall nevertheless be considered in determining whether a Company Material Adverse Effect has
occurred to the extent that such circumstance, change, effect, event or fact, individually or in
the aggregate, has, or would reasonably be



3









 







expected to have, a disproportionate, adverse impact on
the business, assets, liabilities, results of operations or financial condition of the Company and
its consolidated Company Subsidiaries taken as a whole relative to other participants in the United
States or in the Commonwealth of Puerto Rico in the industries in which the Company and the Company
Subsidiaries operate.



          (c) Authorization. The Company has all corporate power and authority that is
necessary to enable it to enter into this Agreement and the other Investor Agreements and carry out
the transactions contemplated by this Agreement and the other Investor Agreements. All corporate
actions necessary to authorize the Company to enter into this Agreement and the other Investor
Agreements and carry out the transactions contemplated by them have been taken, except that, if the
rules of the New York Stock Exchange (“NYSE”) require stockholder approval of the issuance of
Common Stock to the Investors and the Other Investors, that approval has not yet been given. When
this Agreement is executed by the Company, assuming due execution by the Investors, it will be a
valid and binding agreement of the Company, enforceable against the Company in accordance with its
terms. The purchases of the Acquired Common Stock contemplated by this Agreement will not, either
alone or together with the purchases of Common Stock contemplated by the other Investor Agreements,
constitute a Business Combination subject to Section B of Article Tenth of the Company’s Articles
of Incorporation and will not be subject to any statutory or other provisions regarding business
combinations with interested stockholders or other anti-takeover provisions. The Company has not
adopted a shareholder rights plan or other plan intended to have adverse effects on persons who
acquire beneficial ownership of more than specified portions of the outstanding stock of the
Company or who obtain control of the Company.



          (d) NYSE Required Stockholder Approval. If the rules of the NYSE require
stockholder approval of the issuance of Common Stock to the Investors and the Other Investors as
contemplated by this Agreement and the other Investor Agreements, such stockholder approval will
require the affirmative vote of a majority of the votes cast, provided that the total votes cast
represents over 50% of all the outstanding Common Stock.



          (e) Other Investors and Aggregate Sale Price. Subject to Section 4.5, the
Company has entered into, or intends to enter into, agreements (together with this Agreement,
“Investor Agreements”) with investors other than the Investors (“Other Investors”) relating to
purchases of Common Stock at the Per Share Price. The Company is seeking to enter into Investor
Agreements (including this Agreement) relating to sales of Common Stock with a total aggregate sale
price of at least $500 million and not more than (i) $562.3 million, minus (ii) the aggregate
purchase price of the shares that would be issuable on exercise of rights expected to be issued in
the Rights Offering, which Rights Offering will not exceed $37.3 million in the aggregate. Copies
of Investor Agreements with Other Investors or group of commonly advised Other Investors that, in each
case, will be acquiring a number of shares of Common Stock that is equal to or greater than the
total shares of Acquired Common Stock being purchased by all Investors hereunder have been provided
to the Investors prior to the date of the Original Agreement. The Company has no other agreements
or understandings (including, without limitation, side letters) with Other Investors, except that
the Company may have side letters, that have been provided to the Investors prior to the date
hereof, with one or more Other Investors each of which will be purchasing what will be after the
Closing and the issuance of Common Stock on conversion of the Series G Preferred Stock at least
3.5% of the Company’s outstanding Common Stock.



          (f) No Conflict. Neither the execution, delivery and performance by the Company
of this Agreement or of any or all of the Investor Agreements with the Other Investors,



4









 







nor the consummation of the transactions contemplated by this Agreement or by any or all of the Investor
Agreements with the Other Investors, will violate, conflict with, result in a breach of, or
constitute a default (or an event which, with notice or lapse of time or both, would constitute a
default) under, (i) the Articles of Incorporation or the By-Laws of the Company, (ii) any agreement
or instrument or obligation to which the Company or any of the Company Subsidiaries is a party or
by which any of them is bound or to which the Company or any of the Company Subsidiaries or any of
their assets or properties may be subject, or (iii) any law, order, judgment, rule or regulation of
any governmental or regulatory authorities, agencies, courts, commissions or other entities,
whether federal, state, local or foreign and including such authorities of the Commonwealth of
Puerto Rico, the United States, the United States Virgin Islands, the British Virgin Islands or any
other nation, province, municipality or other political subdivision thereof, or any applicable
self-regulatory organizations (each, a “Governmental Entity”) having jurisdiction over the Company
or any of the Company Subsidiaries, except violations, breaches or defaults that would not
reasonably be expected to have a Company Material Adverse Effect.



          (g) Issuance of Acquired Common Stock. The shares of Acquired Common Stock have
been duly authorized and, when issued and delivered in accordance with this Agreement, will be
validly issued, fully paid and non-assessable outstanding shares of Common Stock and will not
subject the Investors to personal liability. The sale of Common Stock as contemplated by this
Agreement and the Investor Agreements with the Other Investors will not give any other person
preemptive rights or other rights to acquire shares of the Company of any class or series. When
shares of Acquired Common Stock are sold to the Investors on the Closing Date as contemplated by
this Agreement, the respective Investors will own such shares free and clear of any liens,
encumbrances or claims of any other persons, other than liens imposed because of acts of the
Investors and restrictions on transfer imposed by applicable securities or banking laws.



          (h) Capitalization. The only authorized stock of the Company is 2,000,000,000
shares of Common Stock and 50,000,000 shares of preferred stock. At the date of the Original
Agreement, the only outstanding stock is not more than 21,350,000 shares of Common Stock, 2,522,000
shares of Series A through E preferred stock (with a liquidation preference of $25 per share) and
424,174 shares of Series G Preferred Stock (with a liquidation preference of $1,000 per share). In
the event the Company enters into Investor Agreements (including this Agreement) with total
aggregate sale proceeds of between $500 million and $525 million ($562.3 million minus the expected
$37.3 million purchase price of the shares that would be issuable on exercise of rights expected to
be issued in the Rights Offering), such Investor Agreements will require the Company to issue no
less than 142,857,142 shares of Common Stock and no more than 150,000,000 shares of Common Stock.
The only options, warrants,
exchangeable securities or other agreements which require, or which, upon the passage of time,
the payment of money or the occurrence of any other event, may require the Company to issue any
stock of any class or series are (i) options, warrants and employee equity grants that may entitle
the holders to purchase a total of up to 132,000 shares of Common Stock (subject to adjustment as a
result of various occurrences, including the transactions contemplated by this Agreement and the
other Investor Agreements), (ii) the conversion provisions of the Series G Preferred Stock, which,
among other things, give the holders the right to convert the Series G Preferred Stock into a total
of approximately 29,246,000 shares of Common Stock (which, as a result of the sales of Common Stock
contemplated by this Agreement and the other Investor Agreements, will become between 32,916,087
and 32,941,797 shares of Common Stock), (iii) a warrant entitling the United States Department of
the Treasury to purchase 389,483 shares of Common Stock (subject to adjustment as a result of
various occurrences, including the



5









 







transactions contemplated by this Agreement and the other
Investor Agreements, which will increase the number of shares issuable on exercise of that warrant
to 1,210,513 shares) and (iv) the rights of the Investors and the Other Investors under the
Investor Agreements. In addition, the Company has 251,185 shares of Common Stock reserved for
issuance under Company Benefit Plans or for other purposes and the Company expects to issue to the
holders of its common stock as of a day prior to the Closing Date rights that will entitle them to
purchase Common Stock for a per share price equal to the Per Share Price for a total of up to $35
million. The Company has filed with the SEC pursuant to EDGAR or otherwise Previously Disclosed
true, correct and complete copies of all instruments and agreements that govern the terms and
conditions of those securities, including all certificates of designation, warrant agreements and
other agreements, as amended through the date of the Original Agreement.



          (i) Consents and Approvals. Neither the execution and delivery of the Investor
Agreements by the Company, nor the completion by the Company of the transactions that are the
subject of this Agreement or the other Investor Agreements, requires the consent of, approval by,
or a filing or notification by the Company with, any Governmental Entity, other than (i) filings
with the SEC reporting the signing of Investor Agreements or the consummation of the transactions
contemplated thereby; (ii) non-objection of the Board of Governors of the Federal Reserve System
(the “Federal Reserve Board”) to any notice filed by an Investor pursuant to the Change in Bank
Control Act of 1978, as amended; (iii) consent to service of the Board Representative described in
Section 4.8(g) and Board representatives that Other Investors have the right to designate under
Investor Agreements, including non-objection under section 32 of the Federal Deposit Insurance Act
and waiver of the Depository Institution Management Interlocks Act, as may be applicable; (iv) any
filings or notifications that may be required to be made with or given to the Federal Deposit
Insurance Company (the “FDIC”), the Office of the Commissioner of Financial Institutions of the
Commonwealth of Puerto Rico (the “OCFI”) and other banking or insurance regulatory agencies; (v)
filing with NYSE a supplemental listing application in order to list the shares of Acquired Common
Stock in accordance with Section 5.2(f); and (vi) securities or blue sky laws of the
various states. Assuming the Investors’ representations and warranties in Section 3.2(h)
are correct, the transactions that are contemplated by this Agreement qualify for an exemption from
the reporting or waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the “HSR Act”) under Section 7A(c) of the HSR Act.



          (j) FirstBank. The Company owns all the outstanding shares of capital stock of
FirstBank. FirstBank is a commercial bank duly organized and validly existing under the laws of
the Commonwealth of Puerto Rico and is duly licensed by the OCFI. The deposits of FirstBank are
insured by the FDIC to the fullest extent permitted in the Federal Deposit Insurance Act and
the rules and regulations of the FDIC thereunder, and all premiums and assessments required to
be paid in connection therewith have been paid when due.



          (k) Subsidiaries. The Company has furnished to the Investors or has filed with
the SEC under Exhibit 21 to the Company 10-K a true, correct and complete list of all of its
subsidiaries (as the term “subsidiary” is defined for purposes of the Bank Holding Company Act) as
of the date of the Original Agreement (individually, a “Company Subsidiary” and, collectively, the
“Company Subsidiaries”). Each Company Subsidiary (including FirstBank) has been duly organized and
is validly existing and, to the extent the concept is applicable, in good standing under the laws
of the jurisdiction in which it was formed. All the shares of stock or other equity interests in
each of the Company Subsidiaries, whether directly or indirectly owned, have been duly authorized
and validly issued and, with regard to stock of corporations or other equity interests in limited
liability entities, are fully paid and non-assessable and are not



6









 







subject to any preemptive rights
and are free and clear of any lien, adverse right or claim, charge, option, pledge, covenant, title
defect, security interest or other encumbrance of any kind, with no personal liability attaching to
the ownership thereof, except liens, adverse rights or claims, charges, options, pledges,
covenants, title defects, security interests or encumbrances on the Company’s equity interests in
Company Subsidiaries other than FirstBank that do not affect the Company’s control over those
Company Subsidiaries and, in the aggregate, would not reasonably be expected to be materially
adverse to the Company and the Company Subsidiaries taken as a whole. Neither the Company nor any
of the Company Subsidiaries has issued any options, warrants, scrips, pre-emptive rights, rights to
subscribe, gross-up rights, calls, commitments or convertible or exchangeable securities, or is a
party to any other agreements, which require, or, upon the passage of time, the giving of notice,
the payment of money or the occurrence of any other event may require, the Company or any Company
Subsidiary to issue or transfer any shares of or other equity interests in a Company Subsidiary,
and there are no registration rights or covenants or transfer or voting restrictions with respect
to any shares of or other equity interests in any of the Company Subsidiaries.



          (l) Company Reports. Since January 1, 2008, the Company and the Company
Subsidiaries have filed all reports, proxy statements, registration statements and other documents
required to have been filed with the SEC (the “Company Reports”), including under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and have paid all material fees and
assessments due and payable in connection therewith. When they were filed, the Company Reports
complied in all material respects with the applicable statutes, rules, regulations and forms. In
the case of each such Company Report filed with or furnished to the SEC, none of the Company
Reports, when filed or furnished, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements made in it, in light of the
circumstances under which they were made, not misleading. Without limiting the generality of what
is said in the preceding sentence, the Company’s Annual Report on Form 10-K for the year ended
December 31, 2010 (the “Company 10-K”) and its Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2011 (the “March 10-Q”) which were filed with the SEC, including any
documents incorporated by reference in them, each complied in all material respects with the
requirements of the form on which it was filed and, when it was filed, did not contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements made in it, in light of the circumstances under which they were made, not misleading.
As of the date of the Original Agreement, there are no outstanding comments from the SEC with
respect to any Company Report other than oral inquiries regarding the accounting for and
presentation in the consolidated financial
statements and disclosures made in those consolidated financial statements regarding the
February 2011 sale of loans from FirstBank to a joint venture majority owned by PRLP Ventures LLC.
No executive officer of the Company has failed in any respect to make the certifications required
of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.



          (m) Controls and Procedures. The records, systems, controls, data and information
of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under
means (including any electronic, mechanical or photographic process, whether computerized or not)
that are under the exclusive ownership and direct control of the Company, the Company Subsidiaries
or their accountants (including all means of access thereto and therefrom), except for any
nonexclusive ownership and nondirect control that would not reasonably be expected to have a
material adverse effect on the system of internal accounting controls described below. The Company
(i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Exchange Act) to ensure that material information relating to the Company, including its
consolidated Company



7









 







Subsidiaries, is made known to the chief executive officer and the chief
financial officer of the Company by others within those entities, and (ii) has disclosed, based on
its most recent evaluation prior to the date of the Original Agreement, to the Company’s outside
auditors and the audit committee of the Board of Directors (A) any significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely to adversely affect
the Company’s ability to record, process, summarize and report financial information, and (B) any
fraud, whether or not material, that involves management or other employees who have a significant
role in the Company’s internal controls over financial reporting. As of the date of the Original
Agreement, no officer of the Company has knowledge of any reason that its outside auditors and its
chief executive officer and chief financial officer shall not be able to give the certifications
and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of
the Sarbanes-Oxley Act of 2002, without qualification, when next due. Since December 31, 2008, (A)
neither the Company nor any of the Company Subsidiaries nor, to the knowledge of the Company, any
director, officer, employee, auditor, accountant or representative of the Company or any of the
Company Subsidiaries, has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of the Company or any of the Company
Subsidiaries or their respective internal accounting controls, including any material complaint,
allegation, assertion or claim that the Company or any of the Company Subsidiaries has engaged in
questionable accounting or auditing practices, and (B) no attorney representing the Company or any
of the Company Subsidiaries, whether or not employed by the Company or any of the Company
Subsidiaries, has reported under Part 205 of the SEC Rules (17 CFR §205.1, et.seq.) evidence of a
material violation of securities laws, breach of fiduciary duty or similar violation by the Company
or any of its officers, directors, employees or agents to the Board of Directors or any committee
thereof or to any director or officer of the Company. The management of the Company has, since
January 1, 2006, performed the evaluation of the effectiveness, as of the end of each fiscal year,
of the Company’s internal control over financial reporting required by SEC Rule 13a-15(c). The
evaluation as of December 31, 2010 did not disclose any material weaknesses.



          (n) Financial Statements. Each of (x) the consolidated balance sheets of the
Company and the Company Subsidiaries and the related consolidated statements of income,
stockholders’ equity and cash flows, together with the notes thereto, included in the Company 10-K,
and (y) the unaudited consolidated balance sheets of the Company and the Company Subsidiaries as of
March 31, 2011 and the related consolidated statements of income,
stockholders’ equity and cash flows for the period ending March 31, 2011, together with the
notes thereto, included in the March 10-Q, (the “Interim Financials” and, collectively, the
“Company Financial Statements”), (i) have been prepared from, and are in accordance with, the books
and records of the Company and the Company Subsidiaries, (ii) complied, as of their respective
filing dates, in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, (iii) have been prepared in
accordance with GAAP applied on a consistent basis and (iv) present fairly in conformity with GAAP
in all material respects the consolidated financial position of the Company and the Company
Subsidiaries at the dates and the consolidated results of operations, changes in stockholders’
equity and cash flows of the Company and the Company Subsidiaries for the periods stated therein
(subject to the absence of notes and normal year-end audit adjustments in the case of the Interim
Financials which are not expected to be material).



          (o) Absence of Undisclosed Liabilities. Neither the Company nor any of the
Company Subsidiaries has any liabilities, contingent or otherwise, that would be required to be



8









 







reflected on, or disclosed in notes to, consolidated financial statements of the Company and the
Company Subsidiaries prepared in accordance with GAAP, other than (i) liabilities reflected on the
consolidated balance sheet of the Company and the Company Subsidiaries at March 31, 2011 included
in the March 10-Q, (ii) liabilities disclosed in the notes to the financial statements in the
Company 10-K or the March 10-Q, (iii) liabilities that, because they were not material, were not
required by GAAP to have been reflected on the consolidated balance sheet of the Company and the
Company Subsidiaries at March 31, 2011 or disclosed in the notes to the financial statements
included in the Company 10-K or the March 10-Q, (iv) contingent obligations and contingent
liabilities disclosed in the management’s discussion and analysis of financial condition and
results of operations included in the Company 10-K or the March 10-Q, (v) contingent liabilities
not required by GAAP to be reflected in, or described in notes to, the Company’s financial
statements and not required by applicable SEC rules to be described in the management’s discussion
and analysis of financial condition and results of operations included in the Company 10-K or the
March 10-Q or (vi) liabilities arising in the ordinary course of the conduct by the Company and the
Company Subsidiaries of their respective businesses since March 31, 2011.



          (p) Absence of Certain Changes. Since December 31, 2010, (i) the Company and the
Company Subsidiaries, including FirstBank, have conducted their businesses in the ordinary course
and in the same manner in which they were being conducted during the period immediately prior to
December 31, 2010, (ii) there has not been a Material Adverse Change in the financial condition,
results of operations, business or prospects of the Company and the Company Subsidiaries taken as a
whole and (iii) nothing has occurred that has had or would reasonably be expected to have a Company
Material Adverse Effect. A “Material Adverse Change” (x) in the financial condition of the Company
and the Company Subsidiaries will occur between two dates if between those dates there is a
material reduction of the Company’s and the Company Subsidiaries’ consolidated working capital, net
worth or tangible net worth, a material increase in their consolidated current liabilities (other
than due to the conduct of business in the ordinary course) or a material increase in their
consolidated total liabilities (other than due to the conduct of business in the ordinary course),
and (y) in the results of operations, business or prospects of the Company and the Company
Subsidiaries during a period will occur if that period consists of one or more full fiscal quarters
and during that period there is a material reduction in its and its subsidiaries’ consolidated
total revenues, net income before income taxes, net income, or earnings before interest, taxes,
depreciation and amortization compared both with the same period of the preceding fiscal year
and with the immediately preceding period of the same number of fiscal quarters. However, a
change due wholly or primarily to any of the conditions or occurrences referred to in clauses
(A) through (F) of Section 3.1(b) is not a Material Adverse Change (which
clauses shall be read to incorporate the proviso applicable to clauses A through C
in Section 3.1(b)).



          (q) Compliance with FDIC Order, OCFI Order and Federal Reserve Agreement. The
capital of the Company and of FirstBank, supplemented by proceeds totaling at least $500 million of
the sales of Common Stock under this and other Investor Agreements and the conversion of the Series
G Preferred Stock into Common Stock, will be sufficient to meet any applicable minimum capital
requirement imposed by statute, regulation or Governmental Entity, including any requirements as to
the capitalization of FirstBank contained in or arising out of the consent order dated June 3, 2010
issued by the FDIC (the “FDIC Consent Order”) and the simultaneous order issued by the OCFI
requiring compliance with the FDIC Consent Order (the “OCFI Order”) or as to the capitalization of
the Company contained in or arising out of the agreement dated June 4, 2010 between the Company and
the Federal



9









 







Reserve Bank of New York (the “Federal Reserve Agreement”) and any capital plan
approved in connection therewith and in effect.



          (r) Compliance with Laws. Each of the Company, FirstBank, and each of the other
Company Subsidiaries has at all times complied, and currently is complying, with, and the condition
and use of its assets and properties has not violated or infringed and does not currently violate
or infringe in any material respects, any applicable United States domestic, federal, state or
local, any applicable Commonwealth of Puerto Rico, or any applicable foreign, laws, regulations,
rules, judgments, orders, injunctions or decrees, including, to the extent they are applicable to
the Company or Company Subsidiaries, the Troubled Asset Relief Program, the Emergency Economic
Stabilization Act of 2008, the Sarbanes-Oxley Act of 2002, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
(USA PATRIOT) Act of 2001, all other applicable fair lending laws or other laws relating to
discrimination and the Bank Secrecy Act, except to the extent of failures to comply, violations or
infringements that would not reasonably be expected to result in actions against the Company or
Company Subsidiaries that would, in the aggregate, interfere in a material respect with the
businesses of the Company and the Company Subsidiaries or result in monetary penalties against the
Company or Company Subsidiaries that would be material to the Company and the Company Subsidiaries
taken as a whole. Insofar as any officer of the Company is aware, none of the Company or any of
the Company Subsidiaries is under investigation with respect to, or has been threatened to be
charged with or given notice of any material violation of, any such laws, regulations, rules,
judgments, injunctions or decrees. FirstBank is the only Company Subsidiary that is subject to the
Community Reinvestment Act. FirstBank has a Community Reinvestment Act rating of “satisfactory” or
better.



          (s) Licenses and Permits. The Company and the Company Subsidiaries have all
material licenses, permits, orders and approvals of, and have made all filings, applications and
registrations with, Governmental Entities that are required at the date of the Original Agreement
to enable them to conduct their businesses as they currently are being conducted and to own or
lease their properties or assets. No suspension or cancellation of any such licenses or permits is
pending or, to the knowledge of the Company, threatened.



          (t) Litigation. Neither the Company nor any of the Company Subsidiaries is a
party to (i) any legal proceeding that the Company would be required to disclose under Item 103 of
SEC Regulation S-K in a filing at the date of the Original Agreement or the Closing Date to which
that Item applies, other than legal proceedings disclosed in the Company 10-K, or in a report on
Form 8-K filed with the SEC since December 31, 2010, or (ii) any suit or governmental proceeding
that seeks to prevent the Company from completing the transactions that are the subject of this
Agreement or any of the other Investor Agreements, nor, to the best of the knowledge of any officer
of the Company, has any suit or governmental proceeding which seeks to prevent the Company from
completing the transactions that are the subject of this Agreement been threatened.



          (u) Tax Matters. Each of the Company and the Company Subsidiaries has timely
filed when due (taking account of timely filed extensions) all Tax Returns which it has been
required to file and has timely paid or has timely withheld and remitted all Taxes shown on any Tax
Return. All such Tax Returns are true, correct and complete in all material respects and
accurately reflect in all material respects all Taxes required to have been paid, except to the
extent of items that may be disputed by applicable taxing authorities but for which there is



10









 







substantial authority to support the position taken by the Company or the Company Subsidiary and
which have been adequately reserved against in accordance with GAAP on the consolidated balance
sheet at December 31, 2010 included in the Company 10-K. No Tax lien has been filed by any taxing
authority against the Company or any of the Company Subsidiaries or any of their assets, other than
properties acquired through foreclosure or similar processes and held for sale. Except as
Previously Disclosed, no Federal, Commonwealth, United States Virgin Islands, foreign, state or
local audits or other administrative proceedings or court proceedings in any jurisdiction with
regard to Taxes are currently pending or threatened with regard to the Company or any of its the
Company Subsidiaries. Neither the Company nor any of the Company Subsidiaries (i) is a party to
any agreement providing for the allocation or sharing of Taxes, (ii) has participated in or
cooperated with an international boycott as that term is used in Section 999 of the Internal
Revenue Code of 1986, as amended (the“Code”), or (iii) is liable as a transferee, a successor or
otherwise for any Tax incurred by any other person. There is no material intercompany income or
gain which may in the future become taxable to the Company, whether on disposition of particular
assets or Company Subsidiaries or otherwise. Except as Previously Disclosed, no Tax Return of the
Company or any of the Company Subsidiaries is the subject of an audit by any taxing authority
(including any state or local taxing authority) in the Commonwealth of Puerto Rico, the United
States, the U.S. Virgin Islands or any other nation. All deficiencies asserted or assessments made
as a result of any Tax audits that are not being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established have been paid in full. At least since
January 1, 2006, no claim has been made by an authority in a jurisdiction where the Company or any
of the Company Subsidiaries does not file a Tax Return that the Company or any of the Company
Subsidiaries is or may be subject to taxation by that jurisdiction. Except as Previously
Disclosed, neither the Company nor any Company Subsidiary (i) has waived any statute of limitations
with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, in each case, that is still in effect, or has pending a request for any such extension
or waiver or (ii) has or has ever had a permanent establishment in any country other than the
country of its organization, or is or has ever been subject to Tax in a jurisdiction outside the
country of its organization. The Company is not a “controlled foreign corporation” within the
meaning of Section 957 of the Code, nor will it become a “controlled foreign corporation” as a
result of the transactions contemplated by this Agreement. Neither the Company nor any of the
Company Subsidiaries is (i) a passive foreign investment company within the meaning of Section 1297
of the Code or (ii) a shareholder, directly or indirectly, in
such a passive foreign investment company. There are no current limitations on the
utilization by the Company or any of the Company Subsidiaries of its respective net operating loss
carryforwards under any applicable Tax law, including Section 382 of the Code (or any similar
provision of state, local or non-U.S. law). The transactions described herein occurring on the
Closing Date and any other transactions contemplated by this Agreement and the other Investor
Agreements will not result in a limitation on the utilization of the Company’s or FirstBank’s net
operating loss carryforwards under any applicable provision of Puerto Rico income Tax law. The net
operating loss carryforward of FirstBank as of December 31, 2010 as a result of losses that have
been or will be reflected on FirstBank’s Puerto Rico income tax returns (at least some of which are
or will be subject to audit) is at least $550,000,000. For the purposes of this Agreement, the
term “Taxes” means (1) all Commonwealth of Puerto Rico, U.S. Virgin Islands, British Virgin
Islands, U.S. federal, state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed
by any Governmental Entity, including taxes on or with respect to income, franchise, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll, employment,
unemployment, social security, workers’ compensation or net worth, and taxes in the nature of
excise, withholding, ad valorem or value added, (2) liability for the payment of any



11









 







amounts of the type described in clause (1) as a result of being or having been a member of an affiliated,
consolidated, combined or unitary group, and (3) liability for the payment of any amounts as a
result of being party to any tax sharing agreement or as a result of any express or implied
obligation to indemnify any other person with respect to the payment of amounts of the type
described in clause (1) or (2). For the purposes of this Agreement, the term “Tax Return” means
any and all returns and reports (including elections, declarations, disclosures, schedules,
estimates and information returns and any amendments thereto) supplied or required to be supplied
to any Governmental Entity in connection with Taxes.



          (v) Environmental Matters. Except as would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect, (i) the Company and
the Company Subsidiaries have all environmental permits which are necessary to enable them to
conduct their businesses as they are being conducted on the date of the Original Agreement without
violating any Environmental Laws, (ii) neither the Company nor any of the Company Subsidiaries has
received any notice of material noncompliance or material liability under any Environmental Law,
(iii) neither the Company nor any of the Company Subsidiaries has performed any acts, including,
but not limited to, releasing, storing or disposing of hazardous materials, there is no condition
on any property owned or leased by the Company or a Company Subsidiary, and there was no condition
on any property formerly owned or leased by the Company or a Company Subsidiary while the Company
or a Company Subsidiary owned or leased that property, that could result in liability by the
Company or a Company Subsidiary under any Environmental Law and (iv) neither the Company nor any of
the Company Subsidiaries is subject to any order of any Governmental Entity requiring the Company
or any of the Company Subsidiaries to take, or refrain from taking, any actions in order to comply
with any Environmental Law and no action or proceeding seeking such an order is pending or, insofar
as any officer of the Company or any of the Company Subsidiaries is aware, threatened against the
Company or any of the Company Subsidiaries. As used in this Agreement, the term“Environmental Law”
means any United States, Puerto Rico or other national, state or local law, rule, regulation,
guideline or other legally enforceable requirement of a Governmental Entity relating to protection
of the environment or to environmental conditions which affect human health or safety.



          (w) Labor Matters. No employees of the Company or Company Subsidiaries are
represented by any labor union nor are there any collective bargaining agreements otherwise in
effect. There is no pending demand by any union or employee group to be recognized or certified as
the bargaining representative for any of the Company’s or the Company Subsidiaries’ employees, and
there are no proceedings seeking recognition or certification of that type pending before the
National Labor Relations Board or any other Governmental Entity in the United States, Puerto Rico
or elsewhere.



          (x) Company Benefit Plans.




     (i) The Company has Previously Disclosed all benefit plans, agreements,
commitments, practices or arrangements of any type maintained or sponsored by the Company or
any Company Subsidiary for its current and former employees, directors and consultants and
the compensation paid to all its directors, to its Chief Executive Officer, its Chief
Financial Officer, and its three most highly compensated officers other than its Chief
Executive Officer and its Chief Financial Officer who were serving as officers at December
31, 2010. “Company Benefit Plans” means all benefit and compensation plans, agreements,
commitments, practices or arrangements of any type



12









 







maintained or sponsored by the Company or
any Company Subsidiary for its current and former employees, directors and individual
consultants.




     (ii) Except as would not reasonably be expected to result in a liability that would be
material to the Company and the Company Subsidiaries taken as a whole, (i) each Company
Benefit Plan that is required to be registered with, or approved by, a Governmental Entity
in the Commonwealth of Puerto Rico, the United States or any other jurisdiction has been so
registered with or approved by that Governmental Entity, and (ii) each Company Benefit Plan
has been maintained in all material respects in accordance with its terms and any applicable
provisions of law (including, if applicable, the U.S. Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), the Code, the Internal Revenue Code of New Puerto Rico,
the Troubled Asset Relief Program, and the Emergency Economic Stabilization Act of 2008).




     (iii) No Company Benefit Plan is (x) a pension plan (of the type described in
Section 3(2) of ERISA) subject to statutory minimum funding requirements under Title IV of
ERISA, Section 412 of the Code, or similar law; (y) a “multiemployer plan” (of the type
described in Section 3(37) of ERISA), or (z) an “employee welfare plan” (of the type
described in Section 3(1) of ERISA) providing benefits, including death or medical benefits,
beyond termination of service or retirement other than coverage mandated by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, or similar law, and at the sole
expense of the participant or the participant’s beneficiary. Neither the Company nor any
Company Subsidiary would reasonably be expected to have any liability with respect to any
plan described in (x), (y), or (z) of this subsection or otherwise as a result of any trade
or business that is or during the past six years has been treated as a single employer with
the Company or any Company Subsidiary under Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b) of ERISA.




     (iv) Neither the execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement will give rise to a change in control under, or
result in the breach or the violation of, or the acceleration of any right under, or result
in any additional rights, or the triggering of any anti-dilution adjustment under an equity
plan sponsored by the Company or any of the Company Subsidiaries or an employment
agreement or other contract or agreement to which the Company or any of the Company
Subsidiaries is a party.




     (v) Neither the Company nor any of the Company Subsidiaries has a contract, plan or
commitment, whether legally binding or not, to create any additional Company Benefit Plan or
to modify any existing Company Benefit Plan in a manner that would increase materially the
expense of maintaining such Company Benefit Plan above the level of the expense incurred
therefore for the most recent fiscal year.



          (y) Investment Company or Investment Adviser. Neither the Company nor any of the
Company Subsidiaries is required to be registered as an investment company under the Investment
Company Act of 1940, as amended, or to be registered under the Investment Advisers Act of 1940, as
amended.



          (z) Compliance with Banking Laws and Regulations. Neither the Company nor any of
the Company Subsidiaries (including FirstBank) (i) is subject to (or has been advised that a
Governmental Entity that regulates banking activities in any location in which the Company or any
Company Subsidiary conducts banking activities (including the FDIC, the OCFI



13









 







and the
Federal Reserve) (each a “Bank Regulatory Agency”) is considering issuing, initiating or ordering) any
cease-and-desist or similar order, or any enforcement action commenced, by any Bank Regulatory
Agency or (ii) is a party to any written agreement, consent agreement or memorandum of
understanding with, or any commitment letter or written undertaking to, any Bank Regulatory Agency,
and no resolution of the Board of Directors of the Company or any of the Company Subsidiaries
(including FirstBank) is in effect that was adopted at the request of a Bank Regulatory Agency that
restricts in any material respect the conduct of its business or that relates in a material manner
to its capital adequacy, its liquidity and funding policies and practices, its ability to pay
dividends, its credit, risk management or compliance policies, its internal controls, its
management or its operations or business, other than the FDIC Consent Order, the OCFI Order, the
Federal Reserve Agreement and a confidential agreement dated September 28, 2010 with a Bank
Regulatory Agency. The Company and each of the Company Subsidiaries is in compliance in all
material respects with all agreements, commitments and undertakings it has made to a Governmental
Entity that are currently in effect (including the FDIC Consent Order, the OCFI Order and the
Federal Reserve Agreement) and neither the Company nor any of the Company Subsidiaries has received
any notice from any Bank Regulatory Agency indicating that either the Company or any of the Company
Subsidiaries is not in compliance in all material respects with any such agreement, commitment or
undertaking. Since January 1, 2008, the Company and each Company Subsidiary have filed all
material reports, registrations and statements, together with any required amendments thereto, that
it was required to file with the Bank Regulatory Agencies, including, without limitation, all
financial statements and financial information required to be filed by it under the Federal Deposit
Insurance Act and the Bank Holding Company Act. As of their respective dates, such reports
complied in all material respects with all the rules and regulations promulgated by the applicable
Bank Regulatory Agencies.



          (aa) Compliance with Mortgage Laws and Sale of Mortgage Loans. The Company and
the Company Subsidiaries have complied in all material respects with (i) all requirements of
applicable laws and governmental regulations with respect to the origination, purchase, sale,
insuring or servicing of or filing of claims in connection with mortgage loans, including all laws
and governmental regulations with respect to documentation in connection with the origination,
processing, underwriting (including credit approval), purchase and servicing
of mortgage loans, real estate settlement procedures, consumer protection, truth in lending,
fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable
rate mortgages, (ii) with regard to mortgage loans any of them has sold to any Agency, any
agreements with, or applicable rules, regulations, guidelines or other requirements of, any Agency
to which the mortgage loans were sold, in each case, except failures to comply that would not
reasonably be expected, in aggregate, to have a Company Material Adverse Effect, (iii) the
responsibilities and obligations relating to mortgage loans set forth in any agreement between the
Company or any of the Company Subsidiaries and any such Agency, Loan Investor or Insurer, and (iv)
the terms and provisions of any mortgage or other collateral documents and other loan documents
with respect to each mortgage loan, in the case of this clause (iv) only, except as would
not cause a Company Material Adverse Effect.  Neither the Company nor any of the
Company Subsidiaries has received a written claim from any Agency, Loan Investor or Insurer to the
effect that the Company or any of the Company Subsidiaries has failed to comply in any material
respect with applicable underwriting standards or guidelines with respect to mortgage loans sold by
the Company or any of the Company Subsidiaries to an Agency or Loan Investor or with respect to any
sale of mortgage servicing rights, or a written notice from any Agency, Loan Investor or Insurer
restricting the activities (including commitment authority) of the Company or any of the Company
Subsidiaries or terminating or giving notice of intent to terminate its relationship with the
Company or any of the Company Subsidiaries



14









 







because of poor performance, poor loan quality or
concern with respect to the Company’s or any of the Company Subsidiaries’ compliance with laws.
For purposes of this Section 3.1(aa):




     (i) “Agency ” shall mean the Federal Housing Administration, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the Government National
Mortgage Association, or any other federal or state agency with authority to (i) determine
any investment, origination, lending or servicing requirements with regard to mortgage loans
originated, purchased or serviced by the Company or any of the Company Subsidiaries or (ii)
originate, purchase, or service mortgage loans, or otherwise promote mortgage lending,
including, without limitation, state and local housing finance authorities;




     (ii) “Loan Investor ” shall mean any person (including an Agency) having a
beneficial interest in any mortgage loan originated, purchased or serviced by the Company or
any of the Company Subsidiaries or a security backed by or representing an interest in any
such mortgage loan; and




     (iii) “Insurer ” shall mean a person who insures or guarantees for the benefit of
the mortgagee all or any portion of the risk of loss upon borrower default on any of the
mortgage loans originated, purchased or serviced by the Company or any of the Company
Subsidiaries, including the Federal Housing Administration, the United States Department of
Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture and any
private mortgage insurer, and providers of hazard, title or other insurance with respect to
such mortgage loans or the related collateral.



          (bb) Risk Management. The Company and the Company Subsidiaries have in place risk
management policies and procedures sufficient in scope and operation to provide reasonable
protection against risks of the type and in amounts reasonably expected to be incurred by entities
that are similar to the Company and the Company Subsidiaries in size and in the lines of business
in which they are engaged. All material derivative instruments entered into by the Company or the
Company Subsidiaries for their own accounts were entered into (i) in the ordinary course of
business only for the purposes of mitigating identified risks, (ii) in
accordance with prudent practices and in all material respects with all applicable laws,
rules, regulations and regulatory policies, and (iii) with counterparties that, at the time, the
Company or the applicable Company Subsidiary believed to be financially responsible. Each such
material derivative instrument constitutes a valid and legally binding obligation of the Company or
one or more of the Company Subsidiaries, enforceable in accordance with its terms and, to the
knowledge of the Company, neither the Company nor any of the Company Subsidiaries, nor any other
party thereto, is in material breach of or has materially defaulted under any such agreement or
arrangement.



          (cc) Patriot Act, Office of Foreign Asset Controls; Anti-Money Laundering. The
operations of the Company and the Company Subsidiaries are being conducted in compliance in all
material respects with applicable financial recordkeeping, reporting and other requirements of the
Currency and Foreign Transactions Reporting Act of 1970, as amended, the United and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
any applicable order or regulation issued by the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”), or any other applicable anti-money laundering or
anti-terrorist-financing statutes, rules or regulations of any jurisdictions, and no action or
proceeding by or before any Governmental Entity alleging violations of anti-money laundering
statutes or anti-terrorist financing statutes by the Company



15









 







or any of the Company Subsidiaries is
pending or, to the knowledge of the Company, threatened, except, in each case, as would not
reasonably be expected, individually or in the aggregate, to have a Company Material Adverse
Effect. None of the Company or any of the Company Subsidiaries has, since December 31, 2008, nor
to the knowledge of the Company has any other person on behalf of the Company or any of the Company
Subsidiaries that qualifies as a “financial institution” under U.S. anti-money laundering laws,
knowingly acted, by itself or in conjunction with another, in any act in connection with the
concealment of any currency, securities or other proprietary interest that is the result of a
felony as defined in U.S. anti-money laundering laws (“Unlawful Gains”), nor knowingly accepted,
transported, stored, dealt in or brokered any sale, purchase or any transaction of any other nature
for Unlawful Gains. Each of the Company and, to the extent it qualifies as a “financial
institution” under U.S. anti-money laundering laws, any of the Company Subsidiaries has implemented
in all material respects such anti-money laundering mechanisms and kept and filed all material
reports and other necessary material documents as required by, and otherwise complied in all
material respects with, U.S. anti-money laundering laws and rules and regulations thereunder. None
of the Company or any of the Company Subsidiaries, nor any of their respective directors, officers,
agents, employees or any other persons acting on their behalf, will knowingly directly or
indirectly lend, contribute or otherwise make available any funds to any subsidiary, joint venture
partner or other person or entity for the purpose of financing the activities of any person
currently subject to U.S. sanctions administered by OFAC.



          (dd) Foreign Corrupt Practices Act. None of the Company or any of the Company
Subsidiaries, nor any of their respective directors, officers, agents, employees or any other
persons acting on their behalf (i) has violated the Foreign Corrupt Practices Act, 15 U.S.C. §
78dd-1 et seq., as amended, or any other similar applicable foreign, federal, or state legal
requirement, including making or providing, or causing to be made or provided, directly or
indirectly, any payment or thing of value to a foreign official, foreign political party, candidate
for office or any other person knowing that the person shall pay or offer to pay the foreign
official, party or candidate, for the purpose of influencing a decision, inducing an official to
violate their lawful duty, securing any improper advantage, or inducing a foreign official to use
his or her influence to affect a governmental decision, (ii) has paid, accepted or received any
unlawful contributions, payments, expenditures or gifts, or (iii) has violated or operated in
noncompliance with any export restrictions, anti-terrorism law or regulation, anti-boycott regulations or
embargo regulations.



          (ee) Insurance. The Company and each of the Company Subsidiaries is presently
insured, and during each of the past three calendar years (or during such lesser period of time as
the Company has owned such subsidiary) has been insured, for reasonable amounts with financially
sound and reputable insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be insured.



          (ff) Core Deposits and Certificates of Deposits. As of the date of the Original
Agreement, FirstBank has at least $3,475,000,000 in core deposits (including money market, demand,
checking, savings and transactional accounts and excluding secured governmental deposits and
certificates of deposits) and at least $1,825,000,000 in certificates of deposits, excluding
governmental and brokered deposits.



          (gg) Loans to Affiliates; Loans to Directors and Officers. Neither the Company
nor any of the Company Subsidiaries is a party to any loan, loan agreement, note or borrowing
arrangement (including leases, credit enhancements, commitments, guarantees and interest-



16









 







bearing liabilities) (each, a “Loan”) with any director or executive officer of the Company or any of the
Company Subsidiaries or shareholder of the Company that beneficially owns five percent or more of
the Common Stock of the Company. All Loans with any executive officer of the Company or any of the
Company Subsidiaries or shareholder of the Company are made in compliance with the applicable
requirements of the Federal Reserve Board’s Regulation O.



          (hh) Compliance with Securities Laws. Neither the Company nor any person acting
on its behalf has taken any action (including, offering any securities of the Company under
circumstances which would require the integration of such offering with the offering of any of the
securities to be issued pursuant to this Agreement or any other Investor Agreement with any Other
Investors for purposes of the Securities Act and the rules and regulations of the SEC promulgated
thereunder) which might subject the offering, issuance or sale of any of the securities to be
issued pursuant to this Agreement or any other Investor Agreement with any Other Investors to the
registration requirements of the Securities Act or that would cause the sale of Common Stock under
this and the other Investor Agreements not to be eligible for the exemption from the registration
requirements of the Securities Act contained in Section 4(2) of that Act.



          (ii) Commitments and Contracts. Each agreement to which the Company or any
Company Subsidiary is a party which is a “material contract” within the meaning of Item 601(b)(10)
of Regulation S-K (each, a “Company Significant Agreement”) is valid and binding on the Company and
the Company Subsidiaries, as applicable, and, and insofar as any officer of the Company is aware,
is valid and binding on the other party or parties to it, and is in full force and effect. The
Company and each of the Company Subsidiaries, as applicable, are in all material respects in
compliance with and have in all material respects performed all obligations required to be
performed by them to date under each Company Significant Agreement. Neither the Company nor any of
the Company Subsidiaries knows of, or has received notice of, any material violation or default (or
any condition which with the passage of time or the giving of notice would cause such a violation
of or a default) by the Company or any Company Subsidiary under any Company Significant Agreement.
As of the date of the Original Agreement, there are no material
transactions or series of related transactions, agreements, arrangements or understandings,
nor are there any currently proposed material transactions, or series of related transactions
between the Company or any Company Subsidiaries, on the one hand, and the Company, any current or
former director or executive officer of the Company or any Company Subsidiaries or any person who
beneficially owns 5% or more of the Common Stock (or any of such person’s immediate family members
or affiliates) (other than Company Subsidiaries), on the other hand. Since January 1, 2008, the
Company and each Company Subsidiary have filed all material reports, registrations and statements,
together with any required amendments thereto, that it was required to file with the Bank
Regulatory Agencies, including, without limitation, all financial statements and financial
information required to be filed by it under the Federal Deposit Insurance Act and the Bank Holding
Company Act. As of their respective dates, such reports complied in all material respects with all
the rules and regulations promulgated by the applicable Bank Regulatory Agencies.



          (jj) Properties and Leases. The Company and the Company Subsidiaries have good
and marketable title to all real properties and good title to all other properties and assets owned
by them (other than any assets the Company or any of the Company Subsidiaries has repossessed), in
each case, free from Liens that would affect the value thereof or interfere with the use made or to
be made thereof by them in any material respect. The Company and the Company Subsidiaries own or
lease all properties that are necessary to their operations as now conducted. All leases of real
property and all other leases material to the Company or any



17









 







of the Company Subsidiaries pursuant
to which the Company or any such Company Subsidiary, as lessee, leases real or personal property
are valid and effective in accordance with their respective terms, and there is not, under any such
lease, any existing default by the Company or such Company Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a default except for such as would not
reasonably be expected to have a Company Material Adverse Effect.



          (kk) Intellectual Property Rights.




     (i) The Company and the Company Subsidiaries own or possess adequate rights or
licenses to use all material Intellectual Property rights (“Intellectual Property Rights”)
necessary to conduct their business as conducted on the date of the Original Agreement and
as presently contemplated to be conducted in the future. To the knowledge of the Company,
no product or service of the Company or the Company Subsidiaries infringes the Intellectual
Property Rights of others. The Company and the Company Subsidiaries have not received
notice of any claim being made or brought, or, to the knowledge of the Company, being
threatened, against the Company or any of the Company Subsidiaries (i) regarding their
Intellectual Property Rights that are necessary to conduct their business as conducted on
the date of the Original Agreement and as presently contemplated to be conducted in the
future, or (ii) that the products or services of the Company or the Company Subsidiaries
infringe the Intellectual Property Rights of others. The computers, computer software,
firmware, middleware, servers, workstations, routers, hubs, switches, data communications
lines, and all other information technology equipment, and all associated documentation used
in the business of the Company and the Company Subsidiaries (the “IT Assets”) operate and
perform in all material respects in accordance with their documentation and functional
specifications and otherwise as required in connection with the business. To the Company’s
knowledge, no person has gained unauthorized access to the IT Assets. The Company and the
Company Subsidiaries have implemented reasonable backup and disaster recovery technology
consistent with industry practices. The Company and the Company Subsidiaries take reasonable measures,
directly or indirectly, to ensure the confidentiality, privacy and security of customer,
employee and other confidential information. The Company and the Company Subsidiaries have
complied with all internet domain name registration and other requirements of internet
domain registrars concerning internet domain names that are used in the business. Without
limiting the foregoing, the Company and the Company Subsidiaries (A) own or have the valid
right to use all the names that are material to the conduct of their businesses or the
maintenance of their customer goodwill, including the name “FirstBank”, in all applicable
jurisdictions, free and clear of all Liens and (B) have not granted to any third party, by
license or otherwise, any right or interest in or to use any such name other than in
connection with relationships between those third parties and the Company or Company
Subsidiaries. No third party has asserted any rights in any geographic area in which it
competes with the Company or a Company Subsidiary to any name that is material to the
business of the Company or a Company Subsidiary with which the third party competes.




     (ii) For the purposes of this Agreement, “Intellectual Property” shall mean
trademarks, service marks, brand names, certification marks, trade dress, domain names and
other indications of origin, the goodwill associated with the foregoing and registrations in
any jurisdiction of, and applications in any jurisdiction to register, the foregoing,
including any extension, modification or renewal of any such registration or



18









 







application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction; patents,
applications for patents (including divisions, continuations, continuations in part and
renewal applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; nonpublic information, know-how, trade secrets and confidential information
and rights in any jurisdiction to limit the use or disclosure thereof by any person;
writings and other works, whether copyrightable or not, in any jurisdiction; and
registrations or applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; and any similar intellectual property or proprietary rights.



     3.2
Representations and Warranties of the Investors. Each Investor represents and
warrants, severally and not jointly and only with respect to itself, to the Company as follows:



          (a) Organization and Power. The Investor is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it was formed and the Investor is duly
qualified to do business in all jurisdictions where failure to be qualified could reasonably be
expected to affect adversely the Investor’s ability to carry out the transactions that are the
subject of this Agreement. The Investor is an entity advised by an affiliate of Oaktree Capital
Management, L.P.



          (b) Authorization. The Investor has all power and authority that is necessary to
enable it to enter into this Agreement and carry out the transactions contemplated by this
Agreement. All actions necessary to authorize the Investor to enter into this Agreement and carry
out the transactions contemplated by it have been taken. This Agreement has been duly executed by
the Investor and, assuming due execution by the Company, it is a valid and binding agreement of the
Investor, enforceable against the Investor in accordance with its terms.



          (c) No Conflict. Neither the execution and delivery of this Agreement by the
Investor nor the consummation of the transactions contemplated by this Agreement will violate,
result in a breach of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, (i) the certificate of incorporation and bylaws or other
organizational documents of the Investor, (ii) any agreement or instrument to which the Investor or
any of its subsidiaries is a party or by which any of them is bound, or (iii) except as set forth
on Schedule 3.2, any law, or any order, rule or regulation of any Governmental Entity
having jurisdiction over the Investor or any of its subsidiaries, except violations, breaches or
defaults that would not reasonably be expected to affect adversely the Investor’s ability to carry
out the transactions that are the subject of this Agreement when and as contemplated by this
Agreement.



          (d) Consents and Approvals. Except as set forth on Schedule 3.2, neither
the execution and delivery of this Agreement by the Investor, nor the completion by the Investor of
the transactions that are the subject of this Agreement, requires the consent of, approval by, or a
filing or notification by the Investor with, any Governmental Entity, other than, if applicable,
filings under the Exchange Act reporting the purchase of Common Stock by the Investor and filings,
notifications, clearances or approvals that may be required to be made or given with or to, or
obtained from, the Federal Reserve Board, the FDIC, the OCFI or any other Governmental Entity,
including any banking or insurance regulatory agency, as a result of its jurisdiction over the
Company or any of the Company Subsidiaries (including FirstBank) or persons who control the
Company. At the date of the Original Agreement, the Investor did not know of any reason that any
Governmental Entity would not give any required consent to, or approval of, the Investors’
acquiring the Acquired Common Stock as contemplated by this



19









 







Agreement. The transactions that are
contemplated by this Agreement qualify for an exemption from the reporting or waiting period
requirements of the HSR Act under Section 7A(c) of the HSR Act.



          (e) Ownership. The Investor and its affiliates do not own an interest in any
depository institution such that the acquisition by the Investors of the Acquired Common Stock
would cause FirstBank and that depository institution to become “commonly controlled insured
depository institutions” (as that term is defined for purposes of Section 5(e) of the Federal
Deposit Insurance Act). Except as shown on the signature page of this Agreement, neither the
Investor nor any affiliate of the Investor (other than an affiliate as to which the Investor does
not control decisions regarding the purchase, sale or voting of securities) owns any Common Stock
of the Company.



          (f) Financial Capacity. The Investor has, or has legally binding commitments from
equity investors, lenders or both to provide, and the Investor will have on the Closing Date, all
the funds the Investor will require to enable the Investor to pay the purchase price for the
Acquired Common Stock it will be purchasing as described in Section 1.1 when and as
contemplated by this Agreement.



          (g) Accredited Investor. The Investor either (i) is an accredited investor, as
that term is defined in SEC Rule 501 under the Securities Act, of the type described in clause (1),
(2), (3), (4) or (7) of that Rule, and has such knowledge and experience in financial and business
matters and in investments similar to the purchase of the Acquired Common Stock that it is capable
of evaluating the merits and risks of its investment in the Acquired Common Stock and of making an
informed investment decision regarding the purchase of the Acquired Common Stock, or (ii) is not a
U.S. person, as that term is defined in SEC Regulation S under the Securities Act and is acquiring
the Acquired Common Stock outside the United States. The
Investor is aware that the Acquired Common Stock is being offered in a transaction not
involving a public offering in the United States, that the offer and sale of the Acquired Common
Stock has not been registered under the Securities Act, and that the Investor may only sell or
transfer Acquired Common Stock under the limited circumstances set forth in Article 7. The
Investor will be acquiring the Acquired Common Stock for investment, and not with a view to
distributing the Acquired Common Stock in violation of securities laws, except that the Investor
may sell Acquired Common Stock, to the extent permitted by Article 7, in transactions
registered under the Securities Act.



          (h) Investment Purpose. The Investor will be acquiring the Acquired Common Stock
for investment (as that term is defined in the rules under the HSR Act) and, assuming the Company’s
representations and warranties in Section 3.1(h) are correct, the acquisition of the
Acquired Common Stock by the Investor as contemplated by this Agreement will not result in the
Investor’s owning 25% or more of the outstanding Common Stock. The Investor is not acting in
concert with any other party to an Investor Agreement with regard to the purchase of Common Stock
and the Investor has no agreements or understandings with any other persons (other than the other
Investor signatory to this Agreement and the Investor’s agreements with the Company in this
Agreement) regarding actions as a stockholder of the Company after the Closing Date.



          (i) Investor’s Decision. The Investor’s decision to enter into this Agreement and
to purchase the Acquired Common Stock it has agreed to purchase was based on the Investor’s or its
adviser’s independent analysis of the merits and risks of an investment in Acquired Common Stock,
taking into account the Investor’s own financial circumstances. The



20









 







Investor did not rely in
making that decision upon any analysis prepared by, or investment advice received from, the Company
or any financial advisor, placement agent or other person acting on behalf of the Company. The
Investor is, however, relying on the representations and warranties of the Company in this
Agreement in making its decision to purchase Acquired Common Stock.



ARTICLE 4

ACTIONS PRIOR TO THE TRANSACTION




     4.1
Stockholder Approval. Unless the NYSE informs the Company that the NYSE rules
(including Rule 312.03 of the NYSE Listed Company Manual) do not require (whether because the NYSE
requirement has been satisfied by prior stockholder approvals, or because of an exception, a waiver
or otherwise) approval by the Company’s stockholders of the transactions that are the subject of
the Investor Agreements, within 20 days after the date of the Original Agreement, the Company will
file with the SEC a preliminary proxy statement relating to a special stockholders meeting at which
the Company’s stockholders will be asked to approve the transactions that are the subject of the
Investor Agreements in accordance with Rule 312.03 of the NYSE Listed Company Manual. The Company
will include in the proxy statement the unanimous recommendation of its Board of Directors that the
Company’s stockholders vote to approve the transactions that are the subject of the Investor
Agreements, unless, and solely to the extent, the Board determines, after consultation with
counsel, that in the exercise of its fiduciary duties it must withdraw or modify that
recommendation. A withdrawal or modification of the recommendation of the Board shall not affect
the obligations of the Company to hold the meeting of the Company’s stockholders contemplated by
this Agreement. If the preliminary proxy statement has not been filed with the SEC prior to the
date of the Original Agreement, the Investors and their counsel
shall have the opportunity to review such preliminary proxy statement in advance of the
Company filing such preliminary proxy statement with the SEC, and to provide comments thereon,
which comments the Company shall give due and reasonable consideration. The Company will provide
any comments received from the SEC to the Investors and their counsel as promptly as practicable
upon receipt thereof and shall use its reasonable best efforts to consult with the Investors and
their counsel and, to the extent it is not unreasonable for it to do so, to resolve and comply with
all comments of the staff of the SEC promptly, and to cause the proxy statement to be filed in
definitive form and distributed to the Company’s stockholders as promptly as practicable, either by
mail or by notice of internet access, and in any event within five Business Days after the Company
is informed by the staff of the SEC that they have no further comments with regard to the proxy
statement. The Company will cause the stockholders meeting to which the proxy statement relates
and at which the Company’s stockholders will be asked to approve the transactions that are the
subject of the Investor Agreements to be held as promptly as practicable and no more than 40 days
after the Company distributes the proxy statement to its stockholders.



     4.2 HSR Act Filings.




	        (a) The purchase of the Acquired Common Stock by the Investors as contemplated by this
Agreement (either alone or together with the purchases of Common Stock by Other Investors under
the other Investor Agreements) qualifies for an exemption from the reporting or waiting period
requirements of the HSR Act under Section 7A(c) of the HSR Act. In order to satisfy the
requirements of such exemption, the Investors and the Company will each make as promptly as
practicable any filings they are required to make in connection with such exemption under the HSR
Act and such other antitrust laws with regard to the transactions that are the subject of this
Agreement and each of them will take all reasonable




21









 






	steps within its control (including providing
information to the Federal Trade Commission and the Department of Justice) to ensure the
transaction qualifies for the exemption under the HSR Act. Each of the Investors and the Company
will each provide information and cooperate in all other respects to assist the other of them in
ensuring that the transaction qualifies for the exemption under the HSR Act.






	        (b) If it is determined by any Governmental Entity that a filing with regard to the
transactions that are the subject of this Agreement is required under the HSR Act (the HSR Act
(notwithstanding the belief of the Company and the Investors that those transactions are exempt
from the reporting and waiting period requirements of the HSR Act) or any other antitrust or
competition laws of any jurisdiction, each of the Investors and the Company will each provide
information and cooperate in all other respects to assist the other of them in making the filing
required under the HSR Act or other antitrust or competition law. The Company will pay the filing
fee that is required with regard to any filing required under the HSR Act or any other antitrust
or competition law.





     4.3 Listing of Shares. Promptly after the date of the Original Agreement, the
Company will file an application with the NYSE to list the shares of Common Stock that it will be
issuing under this Agreement and the other Investor Agreements and the Company will use its best
commercially reasonable efforts to cause those shares to be authorized for listing upon notice of
issuance.



     4.4 Change of Bank Control Act and Bank Holding Company Act.
Each Investor that is required to file a written notice with the Federal Reserve Board under
the Change in Bank Control Act of 1978, as amended (the “CBCA”) with respect to such Investor’s
proposed purchase of Acquired Common Stock will file that notice within 20 Business Days after the
date of the Original Agreement and will use its best commercially reasonable efforts, including
providing all information reasonably requested by the Federal Reserve Board and entering into
customary passivity commitments, to obtain as promptly as practicable a written confirmation from
the Federal Reserve Board to the effect that such Investor’s purchase of the Acquired Common Stock
and the consummation of the transactions that are the subject of this Agreement will not result in
such Investor or any of its affiliates being in control of the Company or of FirstBank for purposes
of the Bank Holding Company Act or the Federal Reserve Board’s Regulation Y, or otherwise being
subject to regulation as a bank holding company under that Act. The Company will cooperate with
each Investor in all reasonable respects with regard to such Investor’s efforts to obtain such
confirmation from the Federal Reserve Board. If the Federal Reserve Board requires revisions to
the structure of the transactions that are the subject of this Agreement before it will give such
confirmation, the Company and the Investors will cooperate to make the necessary revisions,
provided that neither the Company nor the Investors will be required to revise the structure of
those transactions in a way that would impose a Materially Burdensome Regulatory Condition.
Notwithstanding anything to the contrary, neither the Investors nor any of their affiliates shall
be required to comply with, agree to, or suffer to exist, any requirement, condition, restriction
or limitation (other than customary passivity commitments or other requirements, conditions,
restrictions or limitations that are customary for similarly situated investments) arising pursuant
to any notice to, registration, declaration or filing with, exemption or review by, or
authorization, order, consent or approval of, any Governmental Entity, that when used in reference
to an Investor’s or the Company’s obligations hereunder or a condition to an Investor’s or the
Company’s obligations hereunder, is, in the good faith reasonable judgment of such Investor or the
Company, as the case may be, materially burdensome on, or would materially reduce the economic
benefits of the transactions contemplated by this Agreement to, such Investor or the Company or any
of their affiliates (any



22









 







such requirement, condition, restriction or limitation, a “Materially
Burdensome Regulatory Condition”).



     4.5 Most Favored Terms. The Company has not entered into and will not enter into
any Investor Agreement, or amend any Investor Agreement, with any Other Investor so that such other
Investor Agreement is in any respect more favorable to the Other Investor that is a party to such
Investor Agreement than this Agreement is to the Investors, including with respect to the Per Share
Price, or that gives any Other Investor or group of affiliated Other Investors the right to
purchase more shares of Common Stock than the total number of shares to be purchased by all the
Investors, unless the Company modifies this Agreement so that it provides the Investors with the
same rights and benefits that are provided to the Other Investor under the Investor Agreement to
which it is a party (or the Company offers to modify this Agreement in that manner but the
Investors refuse to agree to such modification). To the extent funds are raised via private
placements, the Company shall provide the Investors with copies of any and all written documents
the Company or its representatives prepare for the purposes of such private placements, including
the offering memorandum, and shall cooperate with the Investors to incorporate the Investors’
reasonable comments provided on a timely basis regarding any such documents that are finalized
after the date of the Original Agreement prior to furnishing such documents to the participants in
such private placements.



     4.6 Notice of Adverse Occurrences. The Company shall promptly provide the
Investors with written notice of the occurrence of any circumstance, change, effect, event, fact or
development occurring between the date of the Original Agreement and the Closing Date and relating
to the Company or any of the Company’s Subsidiaries of which the Company has knowledge and which
(a) causes any representation and warranty in Section 3.1 to cease to be correct, (b) could
give rise to a Material Adverse Change in the financial condition, results of operations, business
or prospects of the Company and the Company’s Subsidiaries taken as a whole, or (c) has, or in the
Company’s reasonable judgment could give rise to, a Company Material Adverse Effect.



     4.7
Reasonable Best Efforts. Subject to the terms and conditions of this Agreement,
the Company and the Investors will use their respective reasonable best efforts to take, or cause
to be taken, all appropriate actions, to do, or cause to be done, and assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate, in the most
expeditious manner practicable, the transactions contemplated by this Agreement, including causing
the satisfaction and fulfillment of all the conditions set forth in Article 5. Without
limiting the foregoing, the Company shall use its reasonable best efforts, in order to cause the
condition set forth in Section 5.2(h) to be fulfilled at the Closing, to cause the
conversion of the Series G Preferred Stock to take place at the Closing or immediately after the
Closing, and if the conversion will not occur until immediately after the Closing, to obtain from
all the holders of the Series G Preferred Stock written assurances at or before the Closing that on
the Closing Date, effective immediately after (but subject to) the completion of the sales of
Common Stock contemplated by this Agreement and the other Investor Agreements, the Company will
have the right to cause all the shares of Series G Preferred Stock to be converted into Common
Stock.



     4.8 Election of Independent Chairman and Independent Directors; Board
Representative.



          (a) At or before the Closing, the Company’s Board of Directors will elect as Chairman of
the Board a person of national reputation within the banking community who (i) is


23









 







independent of the Company, the Investors and the Other Investors; (ii) has “banking or related financial
management expertise” within the meaning of 12 U.S.C. Section 1831m(g)(1)(C)(i) and 12 C.F.R. Part
363, Appendix A, Section 32; (iii) has served, within the last three years, as the Chief Executive
Officer, President, Chief Financial Officer, Chief Risk Officer, Chief Credit Officer or
non-executive director of an insured depository institution or insured depository institution
holding company of comparable or greater size as FirstBank, and (iv) has significant experience
working with United States bank regulatory agencies. Subject to the requirements set forth in
Section 5.2(b), if the Company, despite exercising good faith best efforts, is not able to
find by the Closing Date a person with the qualifications described in the preceding sentence who
is willing to serve as Chairman of the Board, the Company will use its good faith best efforts to
identify such a person and cause that person to become Chairman of the Board as promptly as
practicable after the Closing.




          (b) The Company shall cause the Board Representative to be elected or appointed, subject
to satisfaction of all legal and governance requirements regarding service as a director of the
Company and to the approval of the Company’s Corporate Governance
and Nominating Committee (the “Nominating Committee”) (such approval not to be unreasonably
withheld or delayed), to the Board of Directors on the Closing Date, and thereafter, as long as
the Investors own in the aggregate at least 25% of the number of shares of Acquired Common Stock
acquired by the Investors on the Closing Date (the “Qualifying Ownership Interest ”), the Company
will include the Board Representative among the Company’s and its directors’ nominees for election
to the Board of Directors at all of the Company’s applicable annual meetings, subject to
satisfaction of all legal and governance requirements regarding service as a director of the
Company and to the approval of the Nominating Committee (such approval not to be unreasonably
withheld or delayed). If the Nominating Committee determines that the Board Representative is not
qualified to serve on the Board of Directors of the Company, the Investors will have the right to
designate a different Board Representative. If the Investors no longer have a Qualifying
Ownership Interest, the Investors shall have no further rights under this Section 4.8 and,
at the written request of the Board of Directors, shall use all reasonable best efforts to cause
their Board Representative to resign from the Board of Directors as promptly as possible
thereafter. The Board of Directors shall cause the Board Representative to be appointed to two
committees of the Board as requested by the Board Representative, so long as the Board
Representative qualifies to serve on such committees under the applicable rules of the NYSE (or
such other market as is the principal market for the Common Stock), the SEC and the Company’s
corporate governance guidelines and the charters of such committees.




          (c) The Company shall use its reasonable best efforts to cause the Board Representative
to be elected as a director of the Company by the stockholders of the Company and the Company
shall solicit proxies for the Board Representative to the same extent as it does for any of its
other nominees to the Board of Directors.




          (d) Subject to Section 4.8(b), upon the death, resignation, retirement,
disqualification or removal from office of the Board Representative, the Investors shall, in
accordance with Section 4.8(g), have the right to designate the replacement for the Board
Representative, which replacement shall satisfy all legal and governance requirements regarding
service as a director of the Company. The Board of Directors of the Company shall take all action
required to fill the vacancy resulting from the death, resignation, retirement, disqualification
or removal of the Board Representative with the designated replacement, subject to satisfaction of
all legal and governance requirements regarding service as a director of the Company and to the
approval of the Nominating Committee (such approval not to be


24









 







unreasonably withheld or delayed).
If the Nominating Committee determines that the designated replacement Board Representative is not
qualified to serve on the Board of Directors of the Company, the Investors will have the right to
designate a different replacement Board Representative. After a person becomes a replacement Board
Representative, the provisions of this Section 4.8 will apply to that replacement Board
Representative to the same extent they apply to predecessor Board Representatives.




          (e) The Company hereby agrees that, from and after the Closing Date, for so long as the
Investors own the Qualifying Ownership Interest, the Company shall, subject to applicable law,
invite a person designated by the Investors and reasonably acceptable to the Board of Directors
(the “Observer”) to attend meetings of the Board of Directors (including any meetings of
committees thereof which the Board Representative is a member) in a nonvoting observer capacity.
If the Investors no longer own the Qualifying Interest, the Investors shall have no further rights
under this Section 4.8(e).




          (f) The Board Representative shall be entitled to the same compensation and same
indemnification in connection with his or her role as a director as the other members of the Board
of Directors, and the Board Representative shall be entitled to reimbursement for documented,
reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors or any
committee thereof, to the same extent as the other members of the Board of Directors. The Company
shall notify the Board Representative and the Observer of all regular meetings and special
meetings of the Board of Directors and of all regular and special meetings of any committee of the
Board of Directors of which the Board Representative is a member. The Company shall provide the
Board Representative and Observer with copies of all notices, minutes, consents and other material
that it provides to all other members of the Board of Directors concurrently as such materials are
provided to the other members.




          (g) For purposes of this Agreement, “Board Representative” means Michael Harmon or such
successor as the holders of a majority of the shares of Common Stock held by the Investors shall
designate.




          (h) The Company agrees that a majority of the members of the Board of Directors shall be
independent of the Company, the Investors and the Other Investors.




          (i) Following the Closing, the Company shall use its reasonable best efforts to identify
two (2) persons who will then be nominated by the Company for election to the Board of Directors
(subject to satisfaction of all legal and governance requirements regarding service as a director
of the Company and to the approval of the Nominating Committee) at the Company’s Annual Meeting of
Stockholders to be held in April 2012, and each of whom (i) is not a member of the Board of
Directors prior to the Closing, (ii) is determined by the Board of Directors to be independent of
the Company, the Investors and the Other Investors, (iii) has “banking or related financial
management expertise” within the meaning of 12 U.S.C. Section 1831m(g)(1)(C)(i) and 12 C.F.R. Part
363, Appendix A, Section 32, and (iv) has served as a director of an insured depository
institution or insured depository institution holding company of comparable or greater size as
FirstBank. The Company shall use its reasonable best efforts so that at all times after the
Company’s annual meeting of stockholders to be held in April 2012 as long as the Investors hold a
Qualifying Ownership Interest, a majority of the directors on the Board (other than directors
elected by the holders of the Company’s Series A through E Preferred Stock, if they have the right
to elect directors) will be comprised solely of (i) persons designated by the Investors or by
Other Investors as board representatives through exercise of rights under Investor Agreements,
(ii) a Chairman of the Board who satisfies the qualifications


25









 







set forth in Section 4.8(a), and
(iii) persons each of whom satisfies all the qualifications set forth in this Section 4.8(i).




     4.9 Access; Confidentiality.



          (a) From the date of the Original Agreement, until the date when the shares of Common
Stock owned by the Investors represent less than the Qualifying Ownership Interest, the Company
shall ensure that upon reasonable notice, but no more than once per quarter, the Company and its
subsidiaries shall use reasonable efforts to afford to the Investors and their representatives
(including officers and employees of the Investors, and counsel, accountants and other
professionals retained by the Investors) such access during normal business hours to its books,
records (including Tax returns and appropriate work papers of independent auditors under normal
professional courtesy), properties and personnel and to such other information as the Investors
may reasonably request.




          (b) Except as otherwise provided in Section 12.2, each party to this Agreement
shall hold, and shall cause its respective subsidiaries and their directors, officers, employees,
agents, consultants and advisors to hold, in strict confidence, unless disclosure to a
Governmental Entity is necessary or appropriate in connection with any necessary regulatory
approval or unless compelled to disclose by judicial or administrative process or, upon the advice
of its counsel, by other requirement of law or the applicable requirements of any Governmental
Entity, all nonpublic records, books, contracts, instruments, computer data and other data and
information (collectively “Information”) concerning the other party hereto furnished to it by such
other party or its representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (1) previously known by such party on a nonconfidential
basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from
other sources by the party to which it was furnished), and neither party hereto shall release or
disclose such Information to any other person, except its auditors, attorneys, financial advisors,
other consultants and advisors and, to the extent permitted above, to bank regulatory authorities.




          (c) If, through the exercise of its rights under this Section 4.9 or otherwise, an
Investor obtains material non-public information about the Company, that Investor will comply with
all applicable provisions of law relating to trading on the basis of material non-public
information, including SEC Rule 10b5-1.




     4.10 Conduct of the Business. Prior to the earlier of the Closing Date and the
termination of this Agreement pursuant to Article 9, the Company shall, and, shall cause each of
the Company Subsidiaries to: (a) use commercially reasonable efforts to carry on its business in
the ordinary course of business and use reasonable best efforts to maintain and preserve its and
its subsidiaries’ business (including its organization, assets, properties, goodwill and insurance
coverage) and preserve business relationships with customers, strategic partners, suppliers,
distributors and others having business dealings with it; provided, that nothing in this clause (a)
shall limit or require any actions that the Board of Directors may, in good faith, determine to be
inconsistent with, or reasonably likely to be necessary to enable the Company and the Company
Subsidiaries to be able to comply with, the duties of the Board of Directors or the Company’s
obligations under applicable law or imposed by any Governmental Entity and (b) consult with the
Investors prior to taking any material actions outside of the ordinary course of business. Without
limiting the foregoing, during the period from the date of the Original Agreement until the Closing
Date, the Company shall and shall cause the Company Subsidiaries to, not take any of the following
actions: (i) grant or provide any severance or




26











 





termination payments or benefits to any director,
officer or employee of the Company or any of its subsidiaries, other than as required by any
Company Benefit Plans; (ii) increase the compensation, bonus or pension, welfare, severance or
other benefits of, pay any bonus to, or make any new equity awards to any director, officer or
employee of the Company or any of its subsidiaries, other than (x) as required by any Company
Benefit Plans or (y) increases in employee salaries, or bonus awards, made in the ordinary course
consistent with past practice, that do not in aggregate exceed 5% of current aggregate employee
salaries; (iii) establish, adopt, amend or terminate any Company Benefit Plan or amend the terms of
any outstanding equity-based awards, except that the Company expects to inform employees that it
intends to adopt new equity incentive plans, or amend existing equity incentive plans, in each
case, after the Closing Date, so that the Company will be able to make equity based awards to
employees with regard to up to 4% of the shares of Common Stock that will be outstanding after the
Closing and the conversion of the Series G Preferred Stock into Common Stock; (iv) take any action
to accelerate the vesting or payment, or fund or in any other way secure the payment, of
compensation or benefits under any Company Benefit Plan, to the extent not already provided in any
such Company Benefit Plan; (v) change any actuarial or other assumptions used to calculate funding
obligations with respect to any Company Benefit Plan or to change the manner in which contributions
to such plans are made or the basis on which such contributions are determined, except as may be
required by GAAP; (vi) forgive any loans to directors, officers or employees of the Company or any
of the Company Subsidiaries; (vii) amend its articles of incorporation, bylaws or other comparable
charter or organizational documents of the Company or any of the Company Subsidiaries; (viii)
except as contemplated or permitted by this Agreement and the other Investor Agreements or required
by Company Benefit Plans, issue, deliver, sell, pledge or otherwise encumber or subject to any
lien, security interest or other encumbrance any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or options, to acquire any
such shares, voting securities or convertible securities, of the Company or any of the Company
Subsidiaries; (ix) amend, modify or waive any material term of any outstanding security of the
Company or any of the Company Subsidiaries; (x) make or change any Tax election or adopt or change
any material Tax practice or policy (unless required by applicable law) or change its fiscal year
or accounting methods, policies or practices (except as required by changes in GAAP; (xi) except as
expressly contemplated in the applicable organizational documents, adjust, split, combine or
reclassify any of the Company’s capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its capital stock; (xii)
purchase, redeem or otherwise acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such shares or securities
(other than pursuant to
any Company Benefit Plan); or (xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.



ARTICLE 5

CONDITIONS PRECEDENT TO TRANSACTION



     5.1 Conditions to the Company’s Obligations. The obligations of the Company to
complete the transactions that are the subject of this Agreement are subject to satisfaction of the
following conditions (any or all of which may be waived by the Company):



          (a) (i) The representations and warranties of the Investors contained in Section
3.2(a) and Section 3.2(b) will be true and correct in all material respects as of the
Closing Date with the same effect as though made on such date (except that any representation and
warranty that relates to a specified date or a specified time period need only to have been true
and correct with regard to the specified date or time period) and (ii) all other representations



27









 




and warranties of the Investors contained in this Agreement will be true and correct as of the
Closing Date (without giving effect to any “material” or “materiality” qualifications contained in
such representations and warranties) with the same effect as though made on such date (except that
any representation and warranty that relates to a specified date or a specified time period need
only to have been true and correct with regard to the specified date or time period), except, in
the case of this clause (ii) only, to the extent the failure of any such representations or
warranties to be true and correct would not, individually or in the aggregate, prevent or
materially delay the ability of the Investors to perform their obligations under this Agreement and
to consummate the transactions contemplated hereby.




          (b) The Investors will have fulfilled in all material respects all their obligations under
this Agreement required to have been fulfilled on or before the Closing Date.



          (c) No provision of any applicable law or regulation shall exist and no order, decree,
injunction or judgment will have been entered by any Governmental Entity and be in force that
invalidates this Agreement or restrains the Company from completing the transactions that are the
subject of this Agreement and no actions or proceedings will be pending against the Company or any
of the Company Subsidiaries that, if decided against the Company or any of the Company
Subsidiaries, would (i) materially affect the operations of the Company and the Company
Subsidiaries taken as a whole or (ii) reasonably be expected to require the Company or any of the
Company Subsidiaries to pay damages, in each case of clause (i) or (ii), in order to complete the
transactions that are the subject of the Investor Agreements (including this Agreement) in an
amount that would have a Company Material Adverse Effect.



          (d) The Company’s stockholders will have given the approval of the issuances of Common Stock
contemplated by the Investor Agreements that are required by Rule 312.03 of the NYSE Listed Company
Manual, or the NYSE will have informed the Company in writing that it is not required to obtain
that stockholder approval (whether because the NYSE requirement has been satisfied by prior
stockholder approvals, or because of an exception, a waiver or otherwise).



          (e) All approvals of the Federal Reserve Board, the FDIC, the OCFI and all other Governmental
Entities, including those with authority to regulate banking or insurance, that are required to be
obtained before the sales of Common Stock contemplated by the Investor Agreements can be completed
will have been obtained.



          (f) The shares of Common Stock that will be issued under the Investor Agreements will have
been authorized for listing on the NYSE.



          (g) All the outstanding shares of Series G Preferred Stock will have been converted into the
number of shares of Common Stock determined in accordance with the Certificate of Designations
relating to the Series G Preferred Stock as in effect on the date of the Original Agreement, or all
the holders of Series G Preferred Stock will have given written assurances that on the Closing
Date, effective immediately after (but subject to) the completion of the sales of Common Stock
contemplated by this Agreement and the other Investor Agreements, the Company will have the right
to cause all the shares of Series G Preferred Stock to be converted into Common Stock.



          (h) The Company shall have received one or more certificates from the Investors, dated as of
the Closing Date, signed, as applicable, by an officer of each Investor, certifying that the
conditions set forth in Section 5.1(a) and 5.1(b) have been fulfilled.



28









 





     5.2 Conditions to the Investor’s Obligations. The obligations of the Investors to
complete the transactions that are the subject of this Agreement are subject to satisfaction of the
following conditions (any or all of which may be waived by the Investors, and any or all of which
will be deemed waived by the Investors under the circumstances described in Section 5.3):



          (a) (i) The representations and warranties of the Company contained in Section 3.1(h) will be
true and correct in all respects as of the Closing Date with the same effect as though made on such
date (except for such inaccuracies as are de minimis relative to Section 3.1(h) taken as a whole);
(ii) the representations and warranties of the Company contained in Section 3.1(a) (with
respect to the Company and its Significant Subsidiaries) and Section 3.1(c) will be true and
correct in all material respects as of the Closing Date with the same effect as though made on such
date (except that any representation and warranty that relates to a specified date or a specified
time period need only to have been true and correct with regard to the specified date or time
period); and (iii) all other representations and warranties of the Company contained in this
Agreement will be true and correct as of the Closing Date (without giving effect to any “Company
Material Adverse Effect”, “material” or “materiality” qualifications contained in such
representations and warranties) with the same effect as though made on such date (except that any
representation and warranty that relates to a specified date or a specified time period need only
to have been true and correct with regard to the specified date or time period), except, in the
case of this clause (iii) only, to the extent the failure of any such representations or
warranties to be true and correct would not, individually or in the aggregate, have, or reasonably
be expected to have, a Company Material Adverse Effect.



          (b) The Company will have fulfilled in all material respects all its obligations under this
Agreement (including, for the avoidance of doubt, the obligations required under the first sentence
of Section 4.8(a)) required to have been fulfilled on or before the Closing Date.



          (c) No provision of any applicable law or regulation shall exist and no order, decree,
injunction or judgment will have been entered by any Governmental Entity and be in force that
invalidates this Agreement or restrains any of the Investors from completing the transactions that
are the subject of this Agreement and no actions or proceedings will be pending against any of the
Investors or the Company or any of the Company Subsidiaries that, if decided against any of the
Investors or the Company or any of the Company Subsidiaries, could require an Investor to pay
damages that would be material to such Investor, would impose
a Materially Burdensome Regulatory Condition or could reasonably be expected to have a Company
Material Adverse Effect.



          (d) Between the date of the Original Agreement and the Closing Date, there will not have been
a Material Adverse Change in the financial condition, results of operations, business or prospects
of the Company and the Company Subsidiaries taken as a whole and nothing will have occurred that
has had or would reasonably be expected to have a Company Material Adverse Effect.



          (e) The Company’s stockholders will have given the approval of the issuance of Common Stock
contemplated by the Investor Agreements that are required by NYSE listed company Rule 312.03, or
the NYSE will have informed the Company in writing that it is not required to obtain that
stockholder approval (whether because the NYSE requirement has been satisfied by prior stockholder
approvals, or because of an exception, a waiver or otherwise).



29









 





          (f) The shares of Common Stock that will be issued under Investor Agreements will have been
authorized for listing on the NYSE.



          (g) The Company will receive gross proceeds on or before the Closing Date from sales of Common
Stock under Investor Agreements (including this Agreement) totaling at least $500 million and not
more than (i) $562.3 million, minus (ii) the purchase price of the shares expected to be issuable
on exercise of the rights expected to be issued in the Rights Offering.



          (h) (i) All the outstanding shares of Series G Preferred Stock will have been converted into
an aggregate of not more than the number of shares of Common Stock calculated as provided in the
Certificate of Designations relating to the Series G Preferred Stock as in effect on the date of
the Original Agreement and all dividends and other amounts accrued or owing but unpaid in respect
of the Series G Preferred Stock shall have been paid in cash in full, or (ii) all the holders of
Series G Stock will have given written assurances that on the Closing Date, effective immediately
after (but subject to) the completion of the sales of Common Stock contemplated by this Agreement
and the other Investor Agreements, the Company will have the right to cause all the shares of
Series G Preferred Stock to be converted into Common Stock on the Closing Date and the Company
shall have delivered notice to the holders of the Series G Preferred Stock of such conversion and
done all things necessary to cause such conversion to occur and to pay all dividends and other
amounts accrued or owing but unpaid in respect of the Series G Preferred Stock, in each case,
immediately after (but subject to) the completion of the sales of Common Stock contemplated by this
Agreement and the other Investor Agreements.



          (i) The Investors will have received confirmation from the Federal Reserve Board, satisfactory
to the Investors in their reasonable judgment, to the effect that none of the Investors or any of
their affiliates (which for purposes of this paragraph shall include all “affiliates” as defined in
the Bank Holding Company Act or Regulation Y of the Federal Reserve) shall be deemed to “control”
the Company or any Company Subsidiary after the Closing Date for purposes of the Bank Holding
Company Act or Regulation Y of the Federal Reserve.



          (j) All approvals of the Federal Reserve Board, the FDIC, the OCFI and all other Governmental
Entities, including those with authority to regulate banking or insurance, that are required to be
obtained before the sales of Common Stock contemplated by the
Investor Agreements can be completed will have been obtained and no such approval shall impose
or contain any Materially Burdensome Regulatory Condition.



          (k) The Company shall not have received any notification from any of the FDIC, the Federal
Reserve Board and the OCFI to the effect that the capital of the Company or of FirstBank is
insufficient to meet any applicable minimum capital requirement imposed by statute, regulation or
Governmental Entity, including any requirements as to the capitalization of FirstBank contained in
or arising out of the FDIC Consent Order and the OCFI Order or as to the capitalization of the
Company contained in or arising out of the Federal Reserve Agreement, and any capital plan approved
in connection therewith and in effect with regard to the Company or FirstBank, as the case may be,
or to the effect that the Company will not be permitted to make acquisitions and to engage in all
aspects of its business and its currently proposed businesses without material restrictions,
including the imposition of a Materially Burdensome Regulatory Condition.



30









 





          (l) No proceeding by any Governmental Entity shall be pending or threatened in writing in
which the Governmental Entity asserts that the Company, FirstBank or any subsidiary of FirstBank
has engaged in improper lending practices.



          (m) The private letter ruling dated May 6, 2011, received by FirstBank from the Puerto Rico
Department of the Treasury, a true and correct copy of which has been provided to the Investors
(the “Ruling”), to the effect that the issuance of Common Stock to the Investors and the Other
Investors as contemplated by the Investor Agreements will not reduce or limit the extent to which
FirstBank can apply losses incurred in 2010 or prior years to reduce income taxes FirstBank would
be required to pay to the Commonwealth of Puerto Rico in 2011 or any subsequent year or years,
shall continue to be in full force and effect and not amended or modified in any respect.



          (n) In the event FirstBank’s Puerto Rico income tax returns have been filed prior to the
Closing Date, the net operating loss carryforward of FirstBank as of December 31, 2010 as a result
of losses that are reflected on such income tax returns (at least some of which are or will be
subject to audit) will be at least $550,000,000.



          (o) As of the Closing Date, FirstBank shall have at least $3,475,000,000 in core deposits
(including, money market, demand, checking, savings and transactional accounts and excluding
secured governmental deposits and certificates of deposits) and at least $1,825,000,000 
in certificates of deposits, excluding governmental and brokered deposits.



          (p) On the Closing Date, taking into account the transactions contemplated by the Investor
Agreements and assuming the full conversion of the Series G Preferred Stock, the Company’s Tier 1
leverage ratio shall be no lower than 10.75%.



          (q) The consummation of the transactions contemplated by the Investor Agreements and the
conversion of the Series G Preferred Stock will not cause the Company or any Company Subsidiary to
be required by GAAP to establish a new cost basis for its assets through the application of push
down accounting or otherwise.



          (r) The Company shall not be in default, and there shall not be any condition which with the
passage of time or the giving of notice, or both, would result in a default, under repurchase
agreements (so-called repos) or agreements for borrowed money under which the Company has payment
obligations totaling more than $25 million.



          (s) The Investors shall have received the legal opinion(s), substantially in the forms
attached hereto as Exhibit B and Exhibit C, respectively, of K&L Gates LLP and
Martinez Odell & Calabria, P.S., counsel to the Company.



          (t) The Investors shall have received (A) a certificate from the Company, dated as of the
Closing Date, signed by an officer of the Company, certifying that the conditions set forth in
Section 5.1(a) and 5.1(b) have been fulfilled and (B) the items required to be
delivered pursuant to the last sentence of Section 2.2.



     5.3 Waiver of Conditions to Investor’s Obligations. If investors that have signed
Investor Agreements obligating them to purchase in total 75% of all the shares of Common Stock that
investors have agreed to purchase under all the Investor Agreements that are in effect on the
Closing Date (including this Agreement) waive any of the conditions in Section 5.2 of this
Agreement other than Section 5.2(n) and comparable provisions of their Investor



31









 




Agreements, the
Investors will be deemed to have waived that condition, or those conditions, even if the Investor
does not itself waive that condition or those conditions. The condition in Section 5.2(n)
may only be waived by an Investor as to itself, and failure of the condition in that subsection
with regard to an Investor will only affect the obligations of that Investor.




ARTICLE 6

ADDITIONAL AGREEMENTS



     6.1 Company Obligation Regarding Adequate Public Information. Until such time as the
Investors no longer own any Registrable Securities, the Company will:



          (a) File in a timely manner all reports it is required to file under Section 13 of the
Exchange Act, except that failure to file a report on Form 8-K will not be a breach of this
Agreement.



          (b) Do all things, in addition to filing required reports under Section 13 of the Exchange
Act, that are necessary so that adequate public information, as defined in Rule 144(c) under the
Securities Act, is available at all times.



          (c) Upon request, furnish to the Investor a written statement as to the Company’s
compliance with the reporting conditions of Rule 144 under the Securities Act, and a copy of the
most recent annual or quarterly report of the Company (which may be a Report on Form 10-K or
10-Q); and such other reports and documents as the Investor may reasonably request in order to
meet the requirements of any rule that would allow the Investors to sell Registrable Securities
without registration under the Securities Act.



     6.2 Efforts to Maintain Listing. From the Closing Date until such time as no
Investor any longer owns any Registrable Securities, the Company will use its reasonable best
efforts to cause the Common Stock to be listed on either the New York Stock Exchange or the Nasdaq
Global Market (or a successor to one of those exchanges).



     6.3 Additional Regulatory Matters



          (a) The Company shall not take any action (including, any redemption, repurchase or
recapitalization of Common Stock, of securities or rights, options, or warrants to purchase Common
Stock, or securities of any type whatsoever that are, or may become, convertible into or
exchangeable into or exercisable for Common Stock) that, based on the
advice of counsel, could cause any Investor or any of its affiliates to be deemed to become,
or “control”, a “bank holding company” with respect to the Company and its affiliates within the
meaning of the Bank Holding Company Act, including the rules and regulations promulgated
thereunder (or any successor provision).



          (b) Neither the Company nor the Investors shall take or permit to be taken any action that
would cause any subsidiary of the Company to become a “commonly controlled insured depository
institution” (as that term is defined for purposes of 12 U.S.C. §1815(e), as may be amended or
supplemented from time to time, or any successor provision) with respect to any institution that
is not a direct or indirect subsidiary of the Company.



          (c) The Company shall not take, or permit to be taken, any action that would reasonably be
expected to cause any Investor to be subject to or bound by the FDIC’s



32









 




Statement of Policy on
Qualifications for Failed Bank Acquisitions, as it may be amended or supplemented from time to
time, except with the prior written consent of such Investor.




          (d) In the event that any party to this Agreement breaches its obligations under this
Section 6.3 or believes that it is reasonably likely to breach such obligations, it shall
immediately notify the other parties and shall cooperate in good faith with such other parties to
modify ownership or other arrangements or take any other action, in each case, as is necessary to
cure or avoid such breach.



          (e) The Company shall, and shall cause FirstBank to, take all necessary and appropriate
actions within their commercially reasonable control to:




     (i) ensure the continuing application of the Ruling;




     (ii) (A) supplement the ruling request submitted to the Puerto Rico Treasury Department
(the “PRTD”) on January 14, 2011 to include a request that the PRTD rule that (x) the
requirements of Puerto Rico Treasury Article 1124(b)(2)-2 were met to allow FirstBank to use
its net operating losses to offset First Leasing & Rental Corporation’s income and (y) the
transactions contemplated by this Agreement do not cause a “change of identity” or a change
in the trade or business of FirstBank (within the meaning of Puerto Rico Treasury Article
1124(b)(2)-2(a)(3)) and (B) confirm with the Puerto Rico Treasury Department by filing for a
ruling request (as may be necessary) that, with respect to the net operating losses of
FirstBank, the Company will continue to meet the requirements of Puerto Rico Treasury
Article 1124(b)(2)-2(a)(3) during the net operating losses carryover period; and




     (iii) with respect to the mortgage tax credits granted by the Puerto Rico Treasury
Department that are set to expire June 30, 2011, either (x) timely transfer such credits to
one or more subsidiaries for timely application of such credits against such subsidiaries’
2010 Commonwealth of Puerto Rico Tax liability, (y) timely apply for a refund for such
credits from the Puerto Rico Treasury Department, or (z) timely sell such credits to a third
party in an arm’s-length transaction.



     6.4 Percentage Maintenance Rights



          (a) Sale of New Securities. After the Closing, for so long as the Investors own the
Qualifying Ownership Interest (before giving effect to any issuances triggering provisions of this
Section 6.4), at any time that the Company makes any public or nonpublic
offering (including the Rights Offering) or sale of any equity (including Common Stock,
preferred stock or restricted stock), or any securities, options or debt that is convertible into
or exercisable or exchangeable for equity or that includes an equity component (such as, an
“equity” kicker) (including any hybrid security) (any such security, a “New Security”) (other
than (1) pursuant to the granting or exercise of employee stock options or other stock incentives
pursuant to the Company’s stock incentive plans approved by the Board of Directors (so long as the
authorized awards under the Company’s stock incentive plans represent less than 10% of the
outstanding shares of Common Stock) or the issuance of stock pursuant to the Company’s employee
stock purchase plan approved by the Board of Directors or similar plan where stock is being issued
or offered to a trust, other entity or otherwise, for the benefit of any employees, officers or
directors of the Company, in each case, in the ordinary course of providing incentive
compensation, (2) issuances of capital stock as full or partial consideration for a merger,
acquisition, joint venture, strategic alliance, license agreement or other similar



33









 




non-financing
transaction, (3) issuances of up to a total of 8,000,000 shares of Common Stock in exchange for
shares of the Company’s Series A through E Non-Cumulative Preferred Stock outstanding as of the
Closing Date, or (4) issuances of shares of Common Stock upon the conversion of the Series G
Preferred Stock in accordance with the terms applicable thereto as of the date of the Original
Agreement), the Investors shall be afforded the opportunity to acquire from the Company for the
same price (net of any underwriting discounts or sales commissions) and on the same terms (except
that, to the extent permitted by law and the Articles of Incorporation and By-Laws of the Company,
the Investors may elect to receive such securities in nonvoting form, convertible into voting
securities in a widely dispersed offering) as such securities are proposed to be offered to
others, up to the amount of New Securities in the aggregate required to enable it to maintain its
percentage Common Stock-equivalent interest in the Company as it was immediately prior to any such
issuance of New Securities. The amount of New Securities that the Investors shall be entitled to
purchase in the aggregate shall be determined by multiplying (x) the total number or principal
amount of such offered New Securities by (y) a fraction, the numerator of which is the number of
shares of Common Stock held by the Investors as of such date, and the denominator of which is the
number of shares of Common Stock then outstanding plus the number of shares of Common Stock
represented by any then-existing warrant or any other convertible securities then outstanding (if
any) on an as-exercised or as-converted basis on such date (after giving effect to any applicable
adjustment thereunder).




          (b) Most Favored Purchase Opportunity. Without limiting anything that is said in
Section 6.4(a), (i) if at any time after the Closing while the Investors own the Qualifying
Ownership Interest, the Company offers any Other Investor and its affiliates, other than an Other
Investor which, together with its affiliates, owns more shares of Common Stock than the Investors,
the opportunity to purchase New Securities, the Company will offer the Investors the opportunity
to purchase, for the same price (net of any underwriting discounts or sales commissions) and on
the same terms (except that, to the extent permitted by law and the Articles of Incorporation and
By-Laws of the Company, the Investors may elect to receive such securities in nonvoting form,
convertible into voting securities in a widely dispersed offering) as such New Securities are
proposed to be offered to the Other Investor and its affiliates, an amount of New Securities that
is at least as great in aggregate as the aggregate amount of New Securities the Company offers the
Other Investor and its affiliates the opportunity to purchase, and (ii) if at any time when the
Investors in aggregate own at least as many shares of Common Stock as any other entity or group of
affiliated entities, the Company offers to sell to any entity or group of affiliated entities a
number of New Securities that, after giving effect to the acquisition of all the Common Stock that
can be acquired upon conversion or exercise of New Securities or other securities that are
convertible into, or exercisable to acquire, Common
Stock, would cause the other entity or group of affiliated entity to own more shares of
Common Stock than the Investors, the Company will offer the Investors the opportunity to purchase,
for the same price (net of any underwriting discounts or sales commissions) and on the same terms
(except that, to the extent permitted by law and the Articles of Incorporation and By-Laws of the
Company, the Investors may elect to receive such securities in nonvoting form, convertible into
voting securities in a widely dispersed offering) as such New Securities are offered to the other
entity or group of affiliated entities, the amount of New Securities that will cause the aggregate
number of shares of Common Stock owned by the Investors, after giving effect to the acquisition of
all the Common Stock that can be acquired upon conversion or exercise of New Securities or other
securities that are convertible into, or exercisable to acquire, Common Stock, to be equal to the
number of shares of Common Stock owned by the other entity or group of affiliated entities, after
giving effect to the acquisition of all the Common



34









 




Stock that can be acquired upon conversion or
exercise of New Securities or other securities that are convertible into, or exercisable to
acquire, Common Stock.




          (c) Notice. In the event the Company proposes to offer or sell New Securities that
are subject to the Investors’ rights under Section 6.4(a) or (b), it shall give the
Investors written notice of its intention, describing the price (or range of prices), anticipated
amount of securities, timing and other terms upon which the Company proposes to offer the same
(including, in the case of a registered public offering and to the extent possible, a copy of the
prospectus included in the registration statement filed with respect to such offering), no later
than five (5) Business Days, as the case may be, after the initial filing of a registration
statement with the SEC with respect to an underwritten public offering, after the signing of an
agreement with the initial purchasers with respect to a Rule 144A offering or after the Company
makes a firm commitment to pursue any other offering. The Investors shall have ten (10) Business
Days from the date of receipt of such a notice to notify the Company in writing that they intend
to exercise their rights provided in this Section 6.4 and as to the amount of New
Securities the Investors desire to purchase, up to the maximum amount calculated pursuant to
Section 6.4(a) or (b). Such notice shall constitute a binding agreement by the Investors
to purchase the amount of New Securities so specified at the price and on the other terms set
forth in the Company’s notice to it. The failure of the Investors to respond within such ten (10)
Business Day period shall be deemed to be a waiver of the Investors’ rights under this Section
6.4 only with respect to the offering described in the applicable notice.



          (d) Purchase Mechanism. If the Investors exercise their rights provided in this
Section 6.4, the closing of the purchase of the New Securities with respect to which such
rights have been exercised shall take place on a date specified by the Company that will be not
less than ten nor more than thirty calendar days after the giving of notice of such exercise,
which period of time shall be extended for a maximum of twenty days in order to comply with
applicable laws and regulations (including receipt of any applicable regulatory or stockholder
approvals). Each of the Company and the Investors agree to use their commercially reasonable
efforts to secure any regulatory or stockholder approvals or other consents, and to comply with
any law or regulation necessary in connection with the offer, sale and purchase of, such New
Securities.



          (e) Failure of Purchase. In the event the Investors fail to exercise their rights
provided in this Section 6.4 within the ten Business Day period described in Section
6.4(c) or, if so exercised, the Investors are unable to consummate such purchase within the
time period specified in Section 6.4(d) above because of the failure to obtain any
required regulatory or stockholder consent or approval, the Company shall thereafter be entitled
during the period of ninety days following the conclusion of the applicable period to sell or
enter into
an agreement (pursuant to which the sale of the New Securities covered thereby shall be
consummated, if at all, within thirty days from the date of such agreement) to sell the New
Securities not elected to be purchased pursuant to this Section 6.4 or which the Investors
are unable to purchase because of such failure to obtain any such consent or approval, at a price
and upon other terms that, taken in the aggregate, are not more favorable to the purchasers of
such securities than were specified in the Company’s notice to the Investors. Notwithstanding the
foregoing, if such sale is subject to the receipt of any regulatory or stockholder approval or
consent or the expiration of any waiting period, the time period during which such sale may be
consummated shall be extended until the expiration of five (5) Business Days after all such
approvals or consents have been obtained or waiting periods expired, but in no event shall such
extension period exceed ninety days from the date of the applicable agreement with respect to such
sale. In the event the Company has not sold the New Securities or entered



35









 




into an agreement to
sell the New Securities within such ninety-day period (or sold and issued New Securities in
accordance with the foregoing within thirty days from the date of said agreement (as such period
may be extended in the manner described above for a period not to exceed ninety days from the date
of such agreement)), the Company shall not thereafter offer, issue or sell such New Securities
without first offering such securities to the Investors in the manner provided above.




          (f) Non-Cash Consideration. In the case of the offering of securities for a
consideration in whole or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the per share purchase price to
be paid by the investors shall be cash equal to the per share fair value of the non-cash
consideration as determined by the Board of Directors (treating warrants as being exercised and
convertible securities as being converted and including any payment required on exercise of the
warrants or conversion of the convertible securities); provided, however, that
such fair value as determined by the Board of Directors shall not exceed the aggregate per share
market price of the securities being offered (treating warrants as being exercised and convertible
securities as being converted and including any payment required on exercise of the warrants or
conversion of the convertible securities) as of the date the Board of Directors authorizes the
offering of such securities.



          (g) Cooperation. The Company and the Investors shall cooperate in good faith to
facilitate the exercise of the Investors’ rights under this Section 6.4, including securing any
required approvals or consents.




	     6.5	 	Participation in Other Offerings.





          (a) Except as provided in Section 6.5(b) or 6.5(c), in the event this
Agreement is terminated pursuant to Section 9.1, other than a termination by the Company
under Section 9.1(c) if the Closing Date shall not have occurred by December 31, 2011
because one or more Investors has breached its representations, warranties or obligations under
this Agreement and such breach has resulted in the failure of a condition set forth in Section
5.1 to be fulfilled, each of the Investors shall have the right, for a period of one year
after the date of such termination, to participate and purchase securities in any offering of
securities by the Company on terms no less favorable to such Investor(s) than to any other
participants in such offering, including with respect to price and the type and rights of such
securities purchased and offered, in an amount to be determined by such Investors in their sole
discretion up to the lesser of (x) 24.9% of all the Common Stock that will be outstanding after
the offering and after any substantially simultaneous conversion of the Series G Preferred Stock
into Common Stock or (y) the maximum amount that will not result in such Investor or
any of its affiliates being in control of the Company or of FirstBank for purposes of the
Bank Holding Company Act or the Federal Reserve Board’s Regulation Y, or otherwise being subject
to regulation as a bank holding company under that Act.



          (b) The provisions of Section 6.5(a) will not apply to (i) any transaction or series
of transactions that will result in a person or group of persons acquiring 100% of the common
stock of the Company or to any merger of the Company, or (ii) any offering of securities of the
Company as part of a merger, share exchange or other transaction in which either the Company
becomes part of, or majority owned by, another entity that results in such entity or any of its
affiliates being in control of the Company or of FirstBank for purposes of the Bank Holding
Company Act or the Federal Reserve Board’s Regulation Y, or otherwise being



36









 




subject to regulation
as a bank holding company under that Act or the Company acquires at least a majority of the
outstanding equity of another entity.




          (c) The provisions of Section 6.5(a) will not apply to any offering of securities to
investors if (i) the offering is fully subscribed by investors other than the Investors, (ii) the
investors who have proposed to purchase a majority of the securities the Company is offering
inform the Company in writing that if the Company issues securities to the Investors in accordance
with Section 6.5(a) the other investors will withdraw their willingness to purchase the
securities the Company is offering and (iii) the Company pays the Investors a total of $12.5
million, minus any sum paid pursuant to Section 9.3 allocated among them in proportion to
the respective numbers of shares of Acquired Common Stock each of them has agreed in this
Agreement to purchase.



          (d) If the Investors are entitled under Section 6.5(a) to participate in an offering
of securities by the Company, not later than the earliest time that any of the securities are
issued to purchasers in the offering, the Company will notify the Investors of the offering,
including the title and principal terms of the securities being offered, the price for which the
securities are being offered, and the maximum amount of the securities that the Investors are
entitled under Section 6.5(a) to purchase. The respective Investors will have 30 days from
the date they are sent that notice to notify the Company that they wish to purchase at least some
of the securities they are entitled to purchase and, if an Investor wishes to purchase less than
all the securities it is entitled to purchase, the amount of securities the Investor wishes to
purchase. An Investor will not have the right to purchase securities under Section 6.5(a)
unless it notifies the Company within the 30 day period that it wishes to purchase the securities.
A notice to the Company that an Investor wishes to purchase securities will be a binding
agreement by the Investor to purchase the securities specified in the notice.



          (e) If an Investor exercises its purchase right provided in this Section 6.5, the
closing of the purchase of the New Securities with respect to which such right has been exercised
shall take place on the later of (i) a date specified by the Company that will be not less than
ten nor more than thirty calendar days after the giving of notice of such exercise, or (ii) the
earliest date on which securities are issued to any purchasers in the offering, which period of
time shall be extended for a maximum of twenty days in order to comply with applicable laws and
regulations (including receipt of any applicable regulatory or stockholder approvals). Each of
the Company and the Investors agree to use their commercially reasonable efforts to secure any
regulatory or stockholder approvals or other consents, and to comply with any law or regulation
necessary in connection with the offer, sale and purchase of, the securities.



          (f) If the Investors fail to purchase the full amount of securities that they are entitled to
purchase under Section 6.5(a), the Company may, within 90 days after the end of the 30 day
period described in Section 6.5(d), sell to other persons the securities the Investors did
not purchase for a sale price not less than the price at which the securities were offered to the
Investors.



          (g) The Company may issue securities that are the subject of an offering to purchasers other
than the Investors before the time when Investors must decide whether to participate in the
offering and before the Investors who elect to participate in the offering purchase securities
that are the subject of the offering.



37









 





ARTICLE 7

SALE RESTRICTIONS




     7.1 Restrictions on Sales of Acquired Common Stock. No Investor will sell or
otherwise transfer any of the Acquired Common Stock, except as follows:



          (a) An Investor may at any time transfer Acquired Common Stock to an entity that is an
affiliate of the Investor, as the term “affiliate” is defined in the Securities Act, or to a
general or limited partner of the Investor, but only if prior to the transfer, the affiliate or the
general or limited partner delivers to the Company a written agreement to be bound by this
Section 7.1 to the same extent as the Investor.



          (b) An Investor may sell Acquired Common Stock in transactions that are registered under the
Securities Act.



          (c) An Investor may sell Acquired Common Stock in transactions that are not subject to the
registration requirements of the Securities Act by reason of Rule 144 under the Securities Act.



          (d) An Investor may sell Acquired Common Stock in transactions that constitute “offshore
transactions,” as that term is defined in Rule 902 under the Securities Act.



          (e) An Investor may sell or transfer Acquired Common Stock as part of a merger of the Investor
with another entity or in connection with a sale of all or substantially all of the Investor’s
assets to the person to whom the Investor transfers the Acquired Common Stock, but only if prior to
the merger or sale, the entity that will survive the merger or the purchaser of all or
substantially all of the Investor’s assets delivers to the Company an agreement to be bound by this
Section 7.1 to the same extent as the Investor.



          (f) An Investor may sell or transfer Acquired Common Stock in a transaction that is exempt
from the registration requirements of the Securities Act (other than transactions covered by
Section 7.1(e)), but only if prior to each such sale, the purchaser delivers to the Company a
written agreement to be bound by this Section 7.1 to the same extent as the Investor.



ARTICLE 8

SECURITIES ACT REGISTRATION



     8.1 Obligation to Register Acquired Common Stock..



          (a) As promptly as practicable, and in any event not later than 90 days after the Closing
Date, the Company will file with the SEC a shelf registration statement (the “Shelf Registration
Statement”) under SEC Rule 415 relating to sales of Registrable Securities by the Investors and
other holders of Registrable Securities. If the Shelf Registration Statement can be filed as an
automatic shelf registration statement, the Company will file it as an automatic shelf registration
statement. If the Shelf Registration Statement cannot be filed as an automatic shelf registration
statement, the Company will file it on Form S-3, or if the Shelf Registration Statement cannot be
filed on Form S-3, the Company will file it on Form S-1 or such other form as is applicable. The
Company may, instead of filing a separate registration statement relating to the Registrable
Securities, register the Registrable Securities by filing a prospectus supplement to an existing
automatic shelf registration statement or by otherwise designating an





38









 







existing shelf registration
statement to cover the Registrable Securities. The Company will use its reasonable best efforts to
cause the Shelf Registration Statement to become effective as promptly as practicable (or, if it is
an automatic shelf registration statement, to cause it to be effective when it is filed) and to
keep the Shelf Registration Statement continuously effective and available for resales of
Registrable Securities until such time as there are no remaining Registrable Securities (including
by refiling the Shelf Registration Statement, or filing a new Shelf Registration Statement, if the
initial Shelf Registration Statement ceases to be effective or is not otherwise available for
resales of Registrable Securities).




          (b) The term “Registrable Securities” means shares of Common Stock that are issued under
Investor Agreements (including this Agreement), and any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event with respect to such
shares, except that shares of Common Stock will cease to be Registrable Securities when (i) they
are sold pursuant to an effective registration statement under the Securities Act, (ii) they may be
sold pursuant to Rule 144 without limitation on volume or manner of sale and without a requirement
that the Company be in compliance with the current public information requirement of Rule 144(c)(1)
(or Rule 144(i)(2), if applicable, (iii) they cease to be outstanding or (iv) they have been sold
in a private transaction in which the transferor’s rights under this Section 8.1 are not
assigned to the transferee.



          (c) If any Investors notify the Company that they intend to distribute Registrable Securities
by means of an underwritten offering, and that the aggregate public offering price of the shares
that will be the subject of the underwritten offering is estimated to be at least $25,000,000, the
Company will take all reasonable steps to facilitate that distribution, including the actions
described in Section 8.1(f). However, the Company will not be required to file or
supplement a registration statement (i) with respect to any Registrable Securities that cannot be
sold under a registration statement as a result of the transfer restrictions set forth in
Article 8; (ii) with respect to securities that are not Registrable Securities; or (iii) if
after receiving a request for registration of an underwritten distribution of Registrable
Securities from the Investor, the Company notifies the Investor and any other holders of
Registrable Securities who joined in the request that in the good faith judgment of the Company’s
Board of Directors, it would be materially detrimental to the Company or its stockholders for a
registration to be effected at the particular time, in which event the Company may defer filing a
registration statement, a post-effective amendment or a prospectus supplement relating to the
underwritten distribution of Registrable Securities for up to 90 days after receipt of the request
for registration; provided, that the Company may not exercise the right to defer filing a
registration statement, a post-effective amendment or a prospectus supplement relating to an
underwritten
distribution more than twice in any 12-month period or for an aggregate of more than 180 days
in any 12-month period.



          (d) If during any period when the Shelf Registration Statement is not effective or available,
the Company proposes to register any of its securities, other than a registration pursuant to
Section 8.1(a) or a Special Registration, and the registration form to be filed may be used
for the registration or qualification for distribution of Registrable Securities, the Company shall
give prompt written notice to the Investors of its intention to effect such a registration (but in
no event less than ten days prior to the anticipated filing date) and shall include in such
registration all Registrable Securities with respect to which the Company has received written
requests for inclusion therein within ten Business Days after the date of the Company’s notice (a
“Piggyback Registration”). Any such person that has made such a written request may withdraw its
Registrable Securities from such Piggyback Registration by giving written notice to the Company and
the managing underwriter, if any, on or before the fifth



39









 




Business Day prior to the planned
effective date of such Piggyback Registration. The Company may terminate or withdraw any
registration under this Section 8.1(d) prior to the effectiveness of such registration,
whether or not the Investors or any other Holders have elected to include Registrable Securities in
such registration. If (x) the Company grants “piggyback” registration rights to one or more third
parties to include their securities in an underwritten offering under a Shelf Registration
Statement under Section 8.1(a) or (y) a Piggyback Registration under this Section
8.1(d) that relates to an underwritten primary offering on behalf of the Company, and in either
case the managing underwriters advise the Company that in their reasonable opinion the number of
securities requested to be included in such offering exceeds the number which can be sold without
adversely affecting the marketability of such offering (including an adverse effect on the per
share offering price), the Company shall include in such registration or prospectus only such
number of securities that in the reasonable opinion of such underwriters can be sold without
adversely affecting the marketability of the offering (including an adverse effect on the per share
offering price), which securities shall be so included in the following order of priority: (i)
first, in the case of a Piggyback Registration under Section 8.1(d), the securities the
Company proposes to sell, (ii) second, Registrable Securities of the Investors who have requested
registration of Registrable Securities pursuant to Sections 8.1(a) or 8.1(d) of
this Agreement, pro rata on the basis of the aggregate number of such securities or shares subject
to such request and (ii) third, any other securities of the Company that have been requested to be
so included, subject to the terms of this Agreement.




          (e) The Company will bear all expenses of preparing and filing the Shelf Registration
Statement and all other expenses of fulfilling its obligations under this Article 8.
However, the Company will not pay any commissions or underwriting discounts and other expenses
incurred by an Investor for its own benefit (including fees and disbursements of counsel for an
Investor related to the Investor’s sale of Common Stock), and the Investor will be responsible for
paying all those expenses.



          (f) Whenever the Company is required to effect the registration of any Registrable Securities,
or facilitate the distribution of Registrable Securities in an underwritten offering, the Company
will, as expeditiously as reasonably practicable:




     (i) Prepare and file with the SEC a registration statement, or a post-effective
amendment or prospectus supplement with regard to an already effective registration
statement, relating to the offering and sale of the Registrable Securities and keep that
registration statement effective or that prospectus supplement current until the
Registrable Securities to which it relates no longer are Registrable Securities or the
underwritten distribution has been completed or abandoned.




     (ii) Prepare and file with the SEC such amendments and supplements to the applicable
registration statement and the prospectus or prospectus supplement relating to the
underwritten distribution of Registrable Securities as may be necessary to comply with the
Securities Act with respect to the distribution of the Registrable Securities to which the
registration statement or the prospectus supplement relates.




     (iii) Provide to each holder of Registrable Securities a copy of any disclosure
regarding the plan of distribution or the selling holders, in each case, with respect to
such holder, at least three Business Days in advance of any filing with the SEC of any
registration statement or any amendment or supplement thereto that amends such information.



40









 






     (iv) Furnish to each holder of the Registrable Securities to which the registration
statement or prospectus supplement relates and to the underwriters of any underwritten
offering of those Registrable Securities at least one copy of the registration statement
(including exhibits) and each amendment to it, and as many copies of the prospectus included
in that registration statement and any amendments or supplements to it, as each holder or
underwriter may reasonably request, and any other documents that they may reasonably request
in order to facilitate the disposition of Registrable Securities they own or are
distributing.




     (v) File a copy of the final prospectus or prospectus supplement with the SEC under
Rule 424, even if the Company is not required by that Rule to do so.




     (vi) Use its reasonable best efforts to register and qualify the Registrable Securities
that are the subject of the registration statement or prospectus supplement under the
securities or Blue Sky laws of such, if any, jurisdictions as may reasonably be requested by
any holder or managing underwriter, and to keep that registration or qualification in effect
for as long as required by applicable law, and take any other reasonable action that may be
necessary or appropriate to enable the holders to dispose of the Registrable Securities that
are the subject of the registration or qualification, provided that the Company will not be
required to qualify to do business or to file a general consent to service of process in any
jurisdiction.




     (vii) At any time when holders of Registrable Securities are required to deliver
prospectuses in connection with sales of Registrable Securities, notify each holder of
Registrable Securities of the happening of any event as a result of which the applicable
prospectus includes an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.




     (g) The Company will give written notice to the Investors:




     (i) When any registration statement filed pursuant to this Section 8.1 or any
amendment to such a registration statement is filed with the SEC and when any such
registration statement or any post-effective amendment to such a registration statement
becomes effective;




     (ii) Of any request by the SEC for an amendment or supplement to any registration
statement filed pursuant to this Section 8.1 that relates to Registrable Securities
owned by one or more Investors or the prospectus included in any such registration
statement;




     (iii) Of the issuance by the SEC of a stop order suspending the effectiveness of any
registration statement filed pursuant to this Section 8.1 that relates to
Registrable Securities owned by one or more Investors or the initiation by the SEC of a
proceeding for that purpose;




     (iv) Of the receipt by the Company or its legal counsel of any notification with
respect to the suspension of the qualification of the Common Stock for sale in any
jurisdiction in which Registrable Securities owned by Investors are registered or qualified
or the initiation of any proceeding for that purpose;



41









 






     (v) Of the happening of any event that requires the Company to make changes in any
effective registration statement that relates to Registrable Securities owned by one or more
Investors or the prospectus included in any such registration statement or a supplement to
it in order to make the statements therein not misleading (which notice will be accompanied
by an instruction to suspend the use of the prospectus or prospectus supplement until the
requisite changes have been made and which suspensions hereunder, when aggregated with any
suspensions under Section 8.1(i), will not exceed 90 days in any 12-month period); and




     (vi) If at any time the representations and warranties of the Company contained in any
underwriting agreement relating to an underwritten distribution that includes Registrable
Securities owned by one or more Investors cease to be true and correct in all material
respects.



          (h) The Company will use its reasonable best efforts to prevent the issuance, or obtain the
withdrawal, as promptly as practicable, of any order suspending the effectiveness of any
registration statement relating to Registrable Securities owned by Investors.



          (i) If anything occurs that causes a registration statement, a prospectus or a prospectus
supplement relating to a sale of Registrable Securities to contain an untrue statement of a
material fact or omit to state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, the Company will promptly prepare
a post-effective amendment to the registration statement or a supplement to the prospectus or
prospectus supplement so that the registration statement, prospectus or prospectus supplement no
longer will contain an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies Investors to suspend the use of a prospectus or
prospectus supplement until required changes have been made, each Investor will (and will cause any
underwriter of a distribution of Registrable Securities owned by the Investor to) suspend use of
that prospectus or prospectus supplement and use its reasonable best efforts to obtain the return
of any copies of the prospectus or prospectus supplement that the Investor (or the underwriters)
have given to prospective purchasers of Registrable Securities; provided, however, that suspensions
hereunder, when aggregated with any suspensions under Section 8.1(g)(v), will not exceed 90 days in
any 12-month period.



          (j) The Company will use reasonable best efforts to procure the cooperation of the Company’s
transfer agent in settling any transfer of Registrable Securities in a transaction that is
registered under the Securities Act as contemplated by this Section 8.1.



          (k) If Investors and other holders of Registrable Securities notify the Company that they
intend to distribute Registrable Securities by means of an underwritten offering, and that the
aggregate public offering price of the underwritten offering is estimated to be at least
$25,000,000, the Company will enter into an underwriting agreement in customary form, and take all
other actions that are reasonably requested by the managing underwriter, if any, to facilitate the
underwritten disposition of the Registrable Securities, including (i) making members of management
and executives of the Company available to participate in a “road show” and similar events, (ii)
making representations and warranties to the selling stockholders and the underwriters that are
customarily made by issuers in connection with underwritten public offerings by selling
stockholders, (iii) using its reasonable best efforts to obtain and furnish to the underwriters
opinions of counsel to the Company regarding the matters



42









 




customarily covered in opinions given in
connection with underwritten public offerings by selling stockholders, (iv) using its reasonable
best efforts to obtain and furnish to the underwriters “comfort letters” from the firm of
independent registered public accountants that audits the Company’s financial statements (and, if
necessary, any other independent registered public accountants that audited any financial
statements included in the registration statement) and (v) delivering to the underwriters any other
documents or certificates that the managing underwriter reasonably requests.




     8.2 Obligations of the Investors Regarding Registration. 



          (a) No Investor will use any free writing prospectus (as defined in Rule 405 under the
Securities Act) in connection with a sale of Registrable Securities without the prior written
consent of the Company.




          (b) Each Investor will, and will cause any underwriters of an underwritten offering of
Registrable Securities owned by the Investor to, furnish to the Company all information regarding
themselves, the Registrable Securities that the Investor and any other selling stockholders hold,
and the intended method of disposition of those Registrable Securities as the Company may
reasonably request for inclusion in a registration statement, prospectus or prospectus supplement
required by this Article 8. The Company will not describe the Investor as an “underwriter”
in any registration statement, prospectus or prospectus supplement without the prior written
consent of the Investor, provided that if the staff of the SEC requests that the Investor be
described as an “underwriter,” and the Company and the Investor are not able to convince the SEC
(by using good faith reasonable efforts through the comment process or otherwise) that the Investor
does not need to be described as an “underwriter” and the Investor does not consent to being
described as an underwriter, the Investor will not be eligible to include Registrable Securities it
or its affiliates own in the applicable registration statement.




     8.3 Indemnification Regarding Disclosures.



          (a) The Company agrees to indemnify each Investor and each Investor’s officers, directors,
employees, agents, representatives and affiliates, and each person, if any, that controls the
Investor within the meaning of the Securities Act (each, an “Indemnitee”), against any and all
losses, liabilities and expenses (including reasonable fees and expenses of attorneys and other
professionals) arising out of or based upon any untrue statement or alleged untrue statement of
material fact contained in any registration statement,
prospectus or prospectus supplement that includes Registrable Securities owned by the
Investor, or any amendments or supplements to any of them or any documents incorporated by
reference in any of them or contained in any free writing prospectus prepared by the Company or
authorized by it in writing for use by the Investor; or any omission or alleged omission to state
in any such document a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading;
provided, that the Company will not be liable to any Indemnitee to the extent that any loss,
liability or expense results from (i) a claim relating to information provided in writing by the
Investor or an underwriter of an offering that includes Registrable Securities owned by the
Investor for use in connection with the applicable registration statement, prospectus or prospectus
supplement, or (ii) an offer or sale effected by or on behalf of such Investor “by means of” (as
defined in Rule 159A under the Securities Act) a “free writing prospectus” that was not prepared
or authorized in writing by the Company.





43









 







          (b) If the indemnification provided for in Section 8.3(a) is not available to an
Indemnitee with respect to any loss, liability or expenses referred to in that Section or is not
sufficient to hold the Indemnitee harmless as contemplated in that Section, then the Company, in
lieu of indemnifying that Indemnitee, will contribute to the amount paid or payable by that
Indemnitee in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on
the one hand, and the Company, on the other hand, in connection with the statements or omissions
which resulted in the loss, liability or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the
other hand, will be determined by reference to, among other factors, whether the untrue statement
of a material fact or omission to state a material fact relates to information supplied by the
Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent the statement or omission. The Company and the Investors agree
that it would not be just and equitable if contribution under this Section 8.3 were
determined by pro rata allocation or by any other method of allocation that does not take account
of those equitable considerations. No Indemnitee that is guilty of fraudulent misrepresentation
(as that term is used with regard to Section 11(f) of the Securities Act) will be entitled to
contribution from the Company if the Company was not guilty of fraudulent misrepresentation.




     8.4 Assignment of Registration Rights. The rights of an Investor to registration of
Registrable Securities under this Article 8 may be assigned by the Investor to any
transferee of Registrable Securities if (i) the Investor transfers to that transferee Registrable
Securities with a market value at the time of transfer of at least $5,000,000, (ii) the transfer is
permitted under the terms of this Agreement and (iii) the Investor or the transferee has furnished
to the Company written notice of the name and address of the transferee and the number of
Registrable Securities that were, or are being, transferred to the transferee, and the transferee
agrees in writing to be bound by this Article 8, including Section 8.3.



     8.5 Lock Up Agreements. If the Company proposes to sell securities in an underwritten
public offering or an offering under SEC Rule 144A with an expected public offering price of at
least $25,000,000, and a managing underwriter or lead initial purchaser of that offering tells the
Company that failure to suspend sales of Registrable Securities could adversely affect the amount
of securities the Company can sell or the price for which the Company can sell the securities, at
the request of the Company, each Investor will enter into an agreement with the underwriters or
initial purchasers to suspend sales of Registrable Securities for a period not exceeding 90 days.
In the event an Investor enters into such an agreement, the Company will use its reasonable best
efforts to cause each of the Other Investors which at the
time own, together with its Affiliates, at least as many shares of Common Stock as the
Investors and their Affiliates, and each of the Company’s senior executive officers, to execute an
agreement with substantially the same terms and conditions and for the same time period to which
such Investor is bound. An Investor will not be required to enter into an agreement of that type
more than twice in any twelve month period.



     8.6 Holdback. With respect to any underwritten offering of Registrable Securities by
the Investors or other Holders pursuant to this Article 8, the Company agrees not to effect
(other than pursuant to such registration or pursuant to a Special Registration) any public sale or
distribution, or to file any Shelf Registration Statement (other than such registration or a
Special Registration) covering any of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the period not to exceed ten days prior and
60 days following the effective date of such offering or such longer period up to 90 days as may be
requested by the managing underwriter. The Company also agrees to cause each of its



44









 




directors and
senior executive officers to execute and deliver customary lockup agreements in such form and for
such time period up to 90 days as may be requested by the managing underwriter. For purposes of
this Agreement, the term “Special Registration” means the registration of (a) equity securities
and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or
successor form) or (b) shares of equity securities and/or options or other rights in respect
thereof to be offered to directors, members of management, employees, consultants, customers,
lenders or vendors of the Company or Company Subsidiaries or in connection with dividend
reinvestment plans.




ARTICLE 9

TERMINATION



     9.1 Right to Terminate. This Agreement may be terminated at any time prior to the
earlier of the payment by the Investors of the purchase price for the Acquired Common Stock, or the
issuance of the Acquired Common Stock to the Investors, as described in Section 2.2:



          (a) By mutual consent of the Investors and the Company.



          (b) By either the Investors or the Company by July 31, 2011 if, by such date, the Company has
not entered into Investor Agreements (including this Agreement) relating to sales of Common Stock
for at least $500 million (but the right to terminate this Agreement pursuant to this Section
9.1(b) will end when the Company has entered into Investor Agreements (including this Agreement)
relating to sales of Common Stock for at least $500 million).



          (c) By either the Investors or the Company if the Closing Date shall not have occurred by
December 31, 2011 (the “Termination Date”); provided, however, that a party shall
not be entitled to terminate this Agreement pursuant to this Section 9.1(c) if such party
has breached any of its representations, warranties or obligations under this Agreement (including
each such party’s obligations under Section 4.7 or 4.8, as applicable) and such
breach was a material reason for the failure of a condition set forth in Section 5.1 or
5.2, as applicable, to be fulfilled.



          (d) By either the Investors or the Company if either of them is informed by a Governmental
Entity that an approval or other action by that Governmental Entity that is required to enable the
sale of Common Stock contemplated by this Agreement to take place will not be given or taken by
that Governmental Entity or that any Government Entity intends to
impose, or will condition any required approval or other action on the imposition of, a
Materially Burdensome Regulatory Condition.



          (e) By either the Investors or the Company if any applicable law or regulation shall be in
force or any final and non-appealable order, decree, injunction or judgment shall have been entered
by any Governmental Entity that invalidates this Agreement or prevents or restrains any of the
parties hereto from completing the transactions that are the subject of this Agreement.



          (f) By either the Investors or the Company if a stockholders meeting is held as contemplated
by Section 4.1, and at that meeting, the Company’s stockholders vote on, but do not
approve, the proposal to approve the transactions that are the subject of the Investor Agreements.



45









 





          (g) By the Company, at any time prior to the Closing, if (i) any Investor is in breach of its
representations, warranties or covenants made by it in this Agreement; (ii) such breach is not
cured or capable of being cured by the earlier of the day prior to the Termination Date and thirty
days following written notice of such breach from the Company and (iii) such breach, if uncured,
would render any condition set forth in Section 5.1 incapable of being satisfied.



          (h) By the Investors, at any time prior to the Closing, if (i) the Company is in breach of its
representations, warranties or covenants made by it in this Agreement; (ii) such breach is not
cured or capable of being cured by the earlier of the day prior to the Termination Date and thirty
days following written notice of such breach from the Investors and (iii) such breach, if uncured,
would render any condition set forth in Section 5.2 incapable of being satisfied.



     9.2 Manner of Terminating Agreement. If at any time the Investors or the Company have
the right under Section 9.1 to terminate this Agreement, they or it can terminate this
Agreement by a notice to the other of them that they are or it is terminating this Agreement at a
time specified in the notice (which may be the time the notice is given).



     9.3 Effect of Termination. If this Agreement is terminated pursuant to this
Article 9, after this Agreement is terminated, neither the Investors nor the Company will
have any further rights or obligations under this Agreement, except that (i) the provisions of
Section 6.5 will remain in effect until one year after the day on which this Agreement is
terminated, and (ii) if this Agreement is terminated under Section 9.1(f), within 10 days
after this Agreement is terminated, the Company will pay to the Investors $5 million, which will be
allocated among them in proportion to the respective numbers of shares of Acquired Common Stock
each of them has agreed in this Agreement to purchase. Nothing contained in this Article 9
will relieve any party of liability for any breach of this Agreement that occurs before this
Agreement is terminated or for any reimbursement obligations under the letter agreement dated June
24, 2011 between the Company and Oaktree Capital Management, L.P.



ARTICLE 10

INDEMNIFICATION



     10.1 Indemnification Against Loss Due to Inaccuracies in Company’s Representations and
Warranties or Company Failure to Fulfill Obligations. Subject to the limits in Section
10.3, the Company indemnifies the Investors against, and agrees to hold the
Investors harmless from, all losses, liabilities and expenses (including, but not limited to,
reasonable fees and expenses of counsel and expenses of investigation) incurred by the Investor
directly or indirectly because (i) any matter that is the subject of a representation and warranty
contained in Section 3.1 is not as represented and warranted (without giving effect to any
“material”, “materiality”, “material adverse change” or “material adverse effect” qualification
contained in any such representation and warranty in determining whether there has been, or the
extent of, any inaccuracy in, or breach of, any such representation and warranty), or (ii) the
Company fails to fulfill in any respect any of its obligations under this Agreement, or under any
document delivered in accordance with this Agreement, which is required to be fulfilled after the
Closing Date.



     10.2 Indemnification Against Loss Due to Inaccuracies in Investor’s Representations and
Warranties or Investor Failure to Fulfill Obligations. Subject to the limits in Section 10.3,
each Investor, severally and not jointly, indemnifies the Company against, and agrees to hold



46









 




the
Company harmless from, all losses, liabilities and expenses (including, but not limited to,
reasonable fees and expenses of counsel and expenses of investigation) incurred by the Company
directly or indirectly because (i) any matter that is the subject of a representation and warranty
contained in Section 3.2 is not as represented and warranted (without giving effect to any
“material”, “materiality”, “material adverse change” or “material adverse effect” qualification
contained in any such representation and warranty in determining whether there has been, or the
extent of, any inaccuracy in, or breach of, any such representation and warranty), or (ii) the
Investor fails to fulfill in any respect any of its obligations under this Agreement, or under any
document delivered in accordance with this Agreement, which is required to be fulfilled after the
Closing Date.




     10.3 Limit on Liability for Breach of Warranty.



          (a) Except with respect to breaches of the representations and warranties contained in
Sections 3.1(a) (Organization and Power), 3.1(c) (Authorization), 3.1(g)
(Issuance of Acquired Common Stock), Section 3.1(h) (Capitalization) or Section 3.1(u)
(Taxes) (but only with respect to the representations and warranties in that Section with respect
to the amount and ability to apply net operating loss carryforward of FirstBank as of December 31,
2010, which shall be the only portion of Section 3.1(u) that is not subject to the limitations in
this Section 10.3), and in instances of fraud, the Company will not be liable to any
Investor under Section 10.1, or any other provision of this Agreement, as a result of a
breach of the Company’s representations and warranties in Section 3.1, to the extent the
losses, liabilities and expenses for which the Investor would, except for this Section
10.3(a), be entitled to indemnification under Section 10.1 are in total less than 2% or
more than 15% of the Aggregate Purchase Price the Investor has agreed in Section 1.1 to pay
for the Acquired Common Stock it is purchasing. The Company will have no obligation to reimburse
the Investor for the amount that is less than 2% or more than 15% of the Aggregate Purchase Price
the Investor has agreed in Section 1.1 to pay for the Acquired Common Stock it is
purchasing. In determining the amount of losses, no individual claim or series of related claims
for breach of a representation and warranty that results in a loss of less than $50,000 in the
aggregate will be included.



          (b) Except in instances of fraud, no Investor will be liable under Section 10.2, or
any other provision of this Agreement, as a result of a breach of such Investor’s representations
and warranties in Section 3.2, to the extent the losses, liabilities and expenses for which
the Company would, except for this Section 10.3(b), be entitled to indemnification from the
Investor under Section 10.2 are in total less than 2% or more than 15% of the total
purchase price the Investor has agreed in Section 1.1 to pay for the Acquired Common Stock,
and the
Investor will have no obligation to reimburse the Company for the amount that is less than 2%
or more than 15% of the total purchase price the Investor has agreed in Section 1.1 to pay
for the Acquired Common Stock. In determining the amount of losses, no individual claim or series
of related claims for breach of a representation and warranty that results in a loss of less than
$50,000 in the aggregate will be included.



          (c) No investigation by any Investor of the Company or by the Company of any Investor prior to
or after the date of the Original Agreement shall limit a party’s indemnification right hereunder
or be deemed a waiver of any such right.



          (d) Any indemnification payment pursuant to Sections 10.1 and 10.2 will be
treated as an adjustment to the purchase price for the Acquired Common Stock for U.S. federal
income and applicable state and local Tax purposes, unless a different treatment is required by
applicable law.



47









 





     10.4 Indemnification Sole Remedy. Except in instances of fraud, the indemnification
in Sections 10.1 and 10.2, as the case may be, will be the sole remedy of the
Investors or the Company, as applicable, as a result of a breach of a representation and warranty
contained in Section 3.1 or 3.2, as applicable. Except as to claims with respect
to breaches of the representations and warranties in Section 3.1(u) (Taxes), any claim for
indemnification must be made in a written notification to the party from which indemnification is
sought, must describe in reasonable detail the claim and the facts on which such claim is based
and, with respect to claims for indemnification arising under Section 10.1(i) or
Section 10.2(i) must be given not later than the second anniversary of the Closing Date;
provided that if notice of a claim for indemnification is brought prior to such second
anniversary, then the indemnification obligation in respect of such claim shall survive until the
final resolution of such claim. Each of the representations and warranties set forth in this
Agreement shall survive the Closing under this Agreement but, except as to the representations and
warranties in Section 3.1(u) (Taxes) only for a period of two years following the Closing Date (or
until final resolution of any claim or action arising from the breach of any such representation
and warranty, if notice of such breach was provided prior to the second anniversary of the Closing
Date) and thereafter shall expire and have no further force and effect. Neither the Company nor
the Investors will have any liability for any breach of a representation and warranty contained in
Section 3.1 or 3.2 unless a claim is made in accordance with this Section
10.4.



ARTICLE 11

ABSENCE OF BROKERS



     11.1 Representations and Warranties Regarding Brokers and Others. The Company and the
Investors each represent and warrant to the other of them that nobody acted as a broker, a finder
or in any similar capacity in connection with the transactions that are the subject of this
Agreement, except that Sandler O’Neill & Partners, L.P. acted as financial adviser to the Company
(there may be a finder with regard to sales of Common Stock to some Other Investors, who will be
entitled to a fee from the Company equal to 1% of the purchase price paid by those Other
Investors). The Company will pay all the fees and other charges of Sandler O’Neill & Partners,
L.P. The Company indemnifies the Investors and agrees to hold each of them harmless from, and each
Investor, severally and not jointly, the Company, against and agrees to hold the Company harmless
from, all losses, liabilities and expenses (including, but not limited to, reasonable fees and
expenses of counsel and costs of investigation) incurred because of any claim by anyone for
compensation as a broker, a finder or in any similar
capacity by reason of services allegedly rendered to the indemnifying party or its
subsidiaries in connection with the transactions which are the subject of this Agreement.



ARTICLE 12

GENERAL



     12.1 Announcement of Transaction. The Company will, not later than one Business Day
after Investors and Other Investors have signed Investor Agreements (including this Agreement)
relating to purchases of Common Stock for a total of at least $500 million, (i) make a public
announcement, in a form to be provided to and approved in advance by the Investors in their
reasonable discretion, of the signing of such Investor Agreements in sufficient detail so that the
fact that Investor Agreements have been signed and knowledge of the terms of the Investor
Agreements will not constitute material non-public information and (ii) include the Investor
Presentation in a Report filed with the SEC. In addition, if Investor Agreements are terminated
and those terminations make it unlikely that the transactions that are the subject of the Investor
Agreements will take place, the Company will, not later than one Business Day after the



48









 




Investor
Agreements are terminated, make a public announcement of the termination. The Company will also
timely make all filings with the SEC that are required under the Exchange Act with respect to the
execution of Investor Agreements, the issuance of Common Stock under Investor Agreements and the
termination of the Investor Agreements. The Company will not, without the consent of the
Investors, mention the names of the Investors or of their Affiliates or advisers in any public
disclosures regarding the transactions that are the subject of the Investor Agreements, except that
nothing in this Section or elsewhere in this Agreement will prevent the Company from disclosing the
name of any Investor or its Affiliates or investment adviser to the extent it is required to do so
by law, by rules of the SEC or the NYSE, or by any form the Company is required to file with a
Governmental Entity, or to the extent it is asked for that information by any Governmental Entity
(including, but not limited to, the staff of the SEC, the FDIC, the Federal Reserve or the OCFI);
provided, however, that the Company will, to the extent reasonably practicable,
provide the Investors with a reasonable opportunity to review and comment on such disclosures and
filings in advance.




     12.2 Expenses. Except as specifically provided in this Agreement or in the letter
agreement dated June 24, 2011 between the Company and Oaktree Capital Management, L.P., each of the
Investors and the Company will pay its own expenses in connection with the transactions that are
the subject of this Agreement, including legal fees and disbursements.



     12.3 Entire Agreement. This Agreement, the non-disclosure agreement dated May 6, 2011
between the Company and Oaktree Principal Fund V L.P. and Oaktree FF Investment Fund, L.P.. and the
letter agreement dated June 24, 2011 between the Company and Oaktree Capital Management, L.P.
contain the entire agreement between the Company and the Investors relating to the transactions
that are the subject of this Agreement, and supersede all prior negotiations, understandings and
agreements between the Company and any of the Investors, and there are no representations,
warranties, understandings or agreements concerning the transactions that are the subject of this
Agreement other than those expressly set forth in this Agreement, the non-disclosure agreement
dated May 6, 2011 between the Company and Oaktree Principal Fund V L.P. and Oaktree FF Investment
Fund, L.P.. and the letter agreement dated June 24, 2011 between the Company and Oaktree Capital
Management, L.P. The Company has provided a good faith estimate of the estimated amount of
transaction expenses that will be incurred by the Company and the Company Subsidiaries and their
advisors prior to or in connection with the Closing Date.



     12.4 Benefit of Agreement. This Agreement is for the benefit of, and will bind, the
parties to it, their respective successors and any permitted assigns. This Agreement is not
intended to be for the benefit of, or to give any rights to, anybody other than the parties, their
respective successors and any permitted assigns and, with respect to Section 8.3 only, the
Indemnitees. Without limiting the generality of the foregoing, no investor other than the
Investors will have any claim against the Company or any of the Investors under or by reason of
this Agreement.



     12.5 Captions. The captions of the Articles and Sections of this Agreement are for
convenience only, and do not affect the meaning or interpretation of this Agreement.



     12.6 Assignments. Neither this Agreement nor any right of any party under it may be
assigned, except that (i) any Investor may assign its rights to acquire the Acquired Common Stock
to an affiliate of such Investor (in which case, the term “Investor” will include the affiliated
transferee), provided, however, that, in such event, such Investor and such
affiliate will be jointly and severally liable for any failure of the affiliate to fulfill any of
the Investor’s obligations under



49









 




this Agreement and (ii) if an Investor transfers Registrable
Securities to another person under circumstances and in a manner that entitles the transferee to
registration rights as provided in Section 8.4, the Company will be deemed to have entered
into an agreement with the transferee giving the transferee all the rights with regard to the
transferred Registrable Securities that the Investor had immediately before the transfer.




     12.7 Notices and Other Communications. Any notice or other communication under this
Agreement must be in writing and will be deemed given when it is delivered in person or sent by
facsimile or electronic mail (with proof of receipt at the facsimile number or email address to
which it is required to be sent), on the Business Day after the day on which it is delivered to a
major overnight delivery service marked for next business day delivery, or on the third Business
Day after the day on which it is mailed by first class registered or certified mail, return receipt
requested, from within the United States or Puerto Rico to the address below (or to such other
address as may be specified after the date of the Original Agreement by the party to which the
notice or communication is sent):



(a) If to the Investors (or any of them):





c/o Oaktree Capital Management, L.P.




333 South Grand Avenue, 28th Floor




Los Angeles, CA 90071




Attn: Michael Harmon




Facsimile: 213-830-8505




with a copy to (which copy alone shall not constitute notice):




Skadden, Arps, Slate, Meagher & Flom LLP




300 South Grand Avenue, 34th Floor




Los Angeles, CA 90071




Attn: Jeffrey H. Cohen and Jonathan Ko




Facsimile: 213-687-5600




Email: Jeffrey.Cohen@skadden.com




Email: Jonathan.Ko@skadden.com



(b) If to the Company





First BanCorp




1519 Ponce de Leon Avenue




San Juan, Puerto Rico 00908




Attention: General Counsel




Facsimile No.: 787-753-8402




Email Address: lawrence.odell@firstbankpr.com




with a copy to (which copy alone shall not constitute notice):



50









 






K&L Gates LLP




599 Lexington Avenue




New York, NY 10022




Attention: David W. Bernstein




Facsimile No.: 212-536-3901




Email Address: david.bernstein@klgates.com


Any notice or communication given hereunder shall be deemed given on (a) if received on a Business
Day on or before 5:00 p.m. local time of the recipient, the date of receipt, or (b) if received on
a day other than a Business Day or on a Business Day after 5:00 p.m. local time of the recipient,
the first Business Day following the date of receipt.




     12.8 Governing Law. This Agreement and all disputes arising out of or relating to
this Agreement and the subject matter hereof or the actions of the parties hereto in the
negotiation, execution, administration, performance or nonperformance, enforcement, interpretation,
termination and construction hereof and all matters based upon, arising out of or related to any of
the foregoing (whether based on contract, tort or otherwise), including all matters of
construction, validity and performance, shall be governed by and construed in accordance with the
internal laws, both procedural and substantive, of the State of New York, without regard to
conflicts of laws principles (whether of the State of New York or any other jurisdiction) that
would apply the laws of any jurisdiction other than the State of New York.



     12.9 Consent to Jurisdiction. The Company and each Investor each agrees that any
action or proceeding relating to this Agreement or the transactions that are the subject of this
Agreement shall be brought in any state or Federal court sitting in the Borough of Manhattan in the
State of New York, and in no other court, and each of them (i) consents to the personal
jurisdiction of each of those courts in any such action or proceeding, (ii) agrees not to seek to
transfer any such action or proceeding to any other court, whether because of inconvenience of the
forum or for any other reason (but nothing in this Section 12.9 will prevent a party from
removing any action or proceeding from a state court sitting in the Borough of Manhattan to a
Federal court sitting in that Borough) and (iii) agrees that process in any such action or
proceeding may be served by registered mail or in any other manner permitted by the rules of the
court in which the action or proceeding is brought.



     12.10 Remedies; Specific Performance. The parties acknowledge that money damages may
not be an adequate remedy if the Company or any Investor failed to perform in any material respect
any of its obligations under this Agreement, and accordingly they agree that in addition to any
other remedy to which a party may be entitled at law or in equity, each
party will be entitled to seek to obtain an order compelling specific performance of the other
party’s or parties’ obligations under this Agreement, without any requirement that the party
seeking specific performance post a bond, and the parties agree that if any proceeding is brought
in equity to compel performance of any provision of this Agreement, no party will raise the defense
that there is an adequate remedy at law. No remedy will be exclusive of any other remedy to which
a party may be entitled, and the remedies available to a party will be cumulative.



     12.11 Non-Recourse. All claims or causes of action (whether in contract or in tort,
in law or in equity) that may be based upon, arise out of or relate to this Agreement, or the
negotiation, execution or performance of this Agreement (including any representation or warranty
made in or in connection with this Agreement or as an inducement to enter into this Agreement), may
be made only against the entities that are expressly identified as parties



51









 




hereto. No person who
is not a named party to this Agreement, including without limitation any past, present or future
director, officer, employee, incorporator, member, partner, equityholder, Affiliate, agent,
attorney or representative of any named party to this Agreement, shall have any liability (whether
in contract or in tort, in law or in equity, or based upon any theory that seeks to impose
liability of an entity party against its owners or affiliates) for any obligations or liabilities
arising under, in connection with or related to this Agreement or for any claim based on, in
respect of, or by reason of this Agreement or its negotiation or execution; and each party hereto
waives and releases all such liabilities, claims and obligations against any such person who is not
a named party to this Agreement.




     12.12 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING ANY ACTION OR PROCEEDING BROUGHT BY WAY OF
COUNTERCLAIM. EACH OF THE PARTIES ACKNOWLEDGES THAT IT IS AWARE THAT THIS WAIVER OF RIGHTS TO JURY
TRIAL WAS A FACTOR IN EACH OTHER PARTY’S DECISION TO AGREE TO THE TERMS OF THIS AGREEMENT AND THAT
NOBODY PROMISED THAT THIS WAIVER OF THE RIGHT TO JURY TRIAL WOULD NOT BE ENFORCED.



     12.13 Amendments. This Agreement may be amended by, but only by, a document in
writing signed by both the Company and all the Investors.



     12.14 Interpretation. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Except to the extent otherwise provided or when the context otherwise requires,
references to Sections, Articles or Exhibits contained herein refer to Sections, Articles or
Exhibits of this Agreement. Whenever the words “include”, “includes”, or “including” are used in
this Agreement, they are deemed to be followed by the words “without limitation”. The words
“hereof”, “herein”, and “hereunder”, and words of similar import, when used in this Agreement,
refer to this Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto, unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural forms of such
terms. References to a person are also to its successors and permitted assigns. The use of “or”
is not intended to be exclusive unless expressly indicated otherwise. All Exhibits annexed hereto
or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth
in full herein. A reference that a statement is made “to the knowledge
of the Company” means that no officer of the Company has actual knowledge of facts that are
inconsistent with that statement.



     12.15 Mutual Drafting. The parties hereto are sophisticated and have been represented
by lawyers who have carefully negotiated the provisions hereof. As a consequence, the parties do
not intend that the presumptions of any laws or rules relating to the interpretation of contracts
against the drafter of any particular clause should be applied to this Agreement and therefore
waive their effects.



     12.16 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.



52









 





     12.17 Counterparts. This Agreement may be executed in two or more counterparts, some
of which may be signed by fewer than all the parties or may contain facsimile copies of pages
signed by some of the parties. Each of those counterparts will be deemed to be an original copy of
this Agreement, but all of them together will constitute one and the same agreement.



     12.18 Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor under this Agreement are several and not joint with the obligations of any other
Investor under this Agreement, and no Investor shall be responsible in any way for the performance
of the obligations of any other Investor under this Agreement. Nothing contained herein, and no
action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Investors are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by this Agreement. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in shares of Acquired Common Stock or enforcing its rights under this Agreement. Each
Investor shall be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose. It is expressly
understood and agreed that each provision contained in this Agreement is between the Company and an
Investor, solely, and not between the Company and the Investors collectively and not between and
among the Investors.



(Signatures on following page)



53









 





          IN WITNESS WHEREOF, the Company and the Investors have executed this Agreement, intending to
be legally bound by it, as of the day shown on the first page of this Agreement.



	 	 	 	 	 
	 	FIRST BANCORP

 	 
	 	By:  	/s/ Lawrence Odell
 	 
	 	 	Title: General Counsel, EVP 	 
	 	 	 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	INVESTOR:



OAKTREE PRINCIPAL FUND V (DELAWARE), L.P.

 
	 	By:  	Oaktree Fund GP, LLC, its general partner
 	 
	 	 	 	 	 
	 	By:  	 Oaktree Fund GP I, L.P., its managing member
 
	 	 	 
	 	By:  	                      /s/ Michael Harmon
 	 
	 	 	Name:  	Michael Harmon 	 
	 	 	Title:  	 	 
	 	 	 	 	 
	 	By:  	                      /s/ Zachary Serebrenik
 	 
	 	 	Name:  	Zachary Serebrenik 	 
	 	 	Title:  	VP 	 
	 



Name      
               
               
               


Form of entity      
               
               
               

Jurisdiction of formation     
               
               
               

Taxpayer Identification No.       
               
               

Name in which securities should be registered     
               
               
               

Total Purchase Price $     
               
               
               

Shares already owned by Investor or affiliates     
               0




 









 





	 	 	 	 	 
	 	OAKTREE FF INVESTMENT FUND AIF (DELAWARE), L.P.

 	 
	 	By:  	Oaktree Fund AIF Series, L.P. — Series I, 
its general partner
 
	 
	 	By:  	Oaktree Fund GP AIF, LLC, its general partner
 
	 
	 	By:  	                      Oaktree Fund GP III, L.P., its managing member
 
	 
	 	By:  	                      /s/ Michael Harmon
 	 
	 	 	Name:  	Michael Harmon 	 
	 	 	Title:  	 	 



	 	 	 	 	 
	 	By:  	                      /s/ Zachary Serebrenik
 	 
	 	 	Name:  	Zachary Serebrenik 	 
	 	 	Title:  	VP 	 
	 



Name      
               
               
               

Form of entity      
               
               
               

Jurisdiction of formation      
               
               
               

Taxpayer Identification No.       
               
               
               

Name in which securities should be registered      
               
               
               

Total Purchase Price $     
               
               
               

Shares already owned by Investor or affiliates     
               
                0





 









 





Exhibit A




Illustrative Pro Forma Capitalization of the Company


“If issuance price of new common shares is less than 90% of Market Price on Trading Day Immediately preceding the
pricing of the equity offering, then the following factor must be multiplied against the Series G Conversion Price as agreed
to in the exchange agreement which increases the shares to Treasury”



“Market Price means, with respect to the Common Stock, on any given date, the average VWAP for the 5 consecutive trading
day-period ending on the Trading Day immediately preceding such given date.”






	 	 	 	 	 	 	 	 	 	 	 
	 	 	Offering Assumptions:
	 
				90
	% 		 	90	%	 	Threshold Rate per Treasury Agreement
			$	4.4605
	 		$	4.4605	 	 	FBP “Market Price” One Day Prior to Pricing
				78
	%		 	78	%	 	Implied Equity Raise Price (% of Market)
			$	3.5000
	 		$	3.5000	 	 	Equity Raise Price
			$	525,000
	 		$	500,000	 	 	Gross Proceeds from Common Equity Raise ($000s)
	 
	 	 	 	 	 	 	 	 	 	 	 

	(1)
	 	 	21,303,669	 	 	 	21,303,669	 	 	# of shares of common stock outstanding immediately prior to equity raise issuance
	+
	 	 	 	 	 	 	 	 	 	 
	(2)
	 	 	130,777,566	 	 	 	124,550,063	 	 	# of additional shares from common stock offering at 90% of the market price prior to the offering
	 
	 
	 	 
	 
	(A)
	 	 	152,081,235	 	 	 	145,853,732	 	 	Numerator
	 
	 
	 	 
	(1)
	 	 	21,303,669	 	 	 	21,303,669	 	 	# of shares of common stock in effect immediately prior to equity raise  issuance
	+	 	 	 	 	 	 	 	 	 	 
	(2)
	 	 	150,000,000	 	 	 	142,857,143	 	 	# of additional shares of common stock for the equity raise issuance
	 
	 
	 	 
	 
	(B)
	 	 	171,303,669	 	 	 	164,160,812	 	 	Denominator
	 
	 
	 
	 	$	10.8780	 	 	$	10.8780	 	 	Series G Conversion Price ($0.7252 ADJUSTED FOR REVERSE STOCK SPLIT)
	x
	 	 	0.8878	 	 	 	0.8885	 	 	Treasury Factor (“A” divided by “B” as defined above)
	 
	 
	 	$	9.6574	 	 	$	9.6649	 	 	Revised Series G Conversion Price
	 
	 
	 	 
	 
	 	$	424,174	 	 	$	424,174	 	 	Series G Balance ($000s)
	x
	 	 	75.0	%	 	 	75.0	%	 	TARP Pricing/% of Par
	/
	 	$	10.8780	 	 	$	10.8780	 	 	Conversion Price Per Agreement (VWAP at date of agreement)






 









 






	 	 	 	 	 	 	 	 	 	 	 

	 
	 
	 	 	29,245,312	 	 	 	29,245,312	 	 	Shares Issued from Series G Exchange
	 
	 
	 	 
	 
	 	$	424,174	 	 	$	424,174	 	 	Series G Balance
	x
	 	 	75.0	%	 	 	75.0	%	 	TARP Pricing/% of Par
	/
	 	$	9.6574	 	 	$	9.6649	 	 	Conversion Price Per Agreement
	 
	 	 
	 
	 
	 	 	32,941,797	 	 	 	32,916,087	 	 	Shares Issued from adjusted Series G Exchange
	 
	 
	 	 
	 
	 
	 	 	21,303,669	 	 	 	21,303,669	 	 	Current Shareholder Ownership
	 
	 	 	32,941,797	 	 	 	32,916,087	 	 	Treasury Ownership
	 
	 	 	150,000,000	 	 	 	142,857,143	 	 	New Shareholder Ownership
	 
	 
	 	 
	 
	 
	 	 	204,245,466	 	 	 	197,076,899	 	 	Total Pro Forma Shares Outstanding
	 
	 	$	714,859,131	 	 	$	689,769,145	 	 	Pro Forma Market Capitalization
	 
	 
	 	 
	 
	 
	 	 	10.43	%	 	 	10.81	%	 	Current Shareholder Ownership
	 
	 	 	16.13	%	 	 	16.70	%	 	Treasury Ownership
	 
	 	 	73.44	%	 	 	72.49	%	 	New Shareholder Ownership
	 
	 
	 	 
	 
	 	 	49,746,993	 	 	 	49,072,148	 	 	Total Acquired Common Stock
	 
	 	 	24.36	%	 	 	24.9	%	 	Total Percentage Interest
	 
	 	$	174,114,474	 	 	$	171,752,517	 	 	Total Aggregate Purchase Price






 









 






Exhibit B




Form of Opinion of K&L Gates LLP



(see attached)



 









 





[K&L GATES LETTERHEAD]



[Date]




The Investors set forth on Schedule I

c/o Oaktree Capital Management, L.P.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071



Ladies and Gentlemen:




     We have acted as counsel to First BanCorp, a Puerto Rico chartered financial holding company
(the “Company”), in connection with the Amended and Restated Investment Agreement dated as
of July 14, 2011 (the “Investment Agreement”) among the investors set forth on Schedule I
to this letter (the “Investors”) and the Company. The Investment Agreement provides for
the issuance and sale by the Company to the Investors (the “Transaction”) of [___] shares
(the “Acquired Shares”) of the common stock of the Company, par value $0.10 per share
(“Common Stock”). We are delivering this opinion letter to you at the Company’s request in
order to enable it to fulfill the condition in Section 5.2(s) of the Investment Agreement.



     In connection with rendering the opinions set forth below, we have, in addition to reviewing
the Investment Agreement and the documents the Company is required by the Investment Agreement to
deliver to the Investors at or before the Closing Date (as defined in the Investment Agreement),
reviewed and relied on statements by officers of the Company, certifications by governmental
authorities and a fact certificate of an officer of the Company (the “Fact Certificate”)
and such other documents as we deemed are necessary to enable us to render those opinions. We have
also made the assumptions that are customary in opinion letters of this kind, including the
assumptions that each document submitted to us is accurate and complete, that each such document
that is an original is authentic, that each such document that is a copy conforms to an authentic
original, that all signatures on each such document are genuine, and that no changes in the facts
certified in the Fact Certificate have occurred or will occur between the date of the Fact
Certificate and the date of this letter.



     We have further assumed the legal capacity of natural persons, and have assumed that each
party to the Investment Agreement (other than the Company) has the legal capacity and has satisfied
all legal requirements that are applicable to that party to the extent necessary to make the
Investment Agreement enforceable against that party. We have further assumed that the Company (a)
is duly incorporated and in good standing under the laws of the Commonwealth of Puerto Rico, (b)
has the corporate power to execute, deliver, and perform its obligations under the Investment
Agreement, (c) has taken all corporate action necessary to authorize the execution, delivery, and
performance of the Investment Agreement and (d) has duly executed and delivered the Investment
Agreement. With respect to the assumptions described in (a), (b), (c) and (d), we have relied on
the legal opinion delivered to you by Martinez Odell & Calabria in



 









 




connection with the Investment Agreement. We have not independently verified any of the
foregoing assumptions or independently established any of the facts so relied upon.




     Except the opinions contained in numbered paragraphs 4, 5 and 6 below, which are limited to
United States federal law, and the opinion contained in numbered paragraph 1 below, which is
limited to the rules of the New York Stock Exchange (“NYSE”) contained in the NYSE Listed
Company Manual, the opinions expressed in this opinion letter are limited to the laws of the State
of New York, without regard to conflicts of laws principles (whether of the State of New York or
any other jurisdiction) that would apply the laws of any jurisdiction other than New York. We are
not opining on, and we assume no responsibility with respect to, the applicability to or effect on
any of the matters covered by our opinion of any other laws, the laws of any other jurisdiction or
the laws of any county, municipality or other political subdivision or any local governmental
agency or authority.



     Based on, and subject to, the foregoing and the additional qualifications and other matters
set forth below, it is our opinion that:



     1. The stockholder approval required by the Section 312.03 of the NYSE Listed Company Manual
is the affirmative vote of a majority of the votes cast, provided that that total votes cast
represent over 50% of all of the outstanding Common Stock.



     2. The Investment Agreement is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.



     3. When the Acquired Shares are sold to and paid for by the Investors on the Closing Date as
contemplated by the Investment Agreement, the respective Investors will receive such shares free
and clear of any liens, encumbrances or claims of any other persons, other than liens imposed
because of acts of, or conditions relating to, the Investors and restrictions on transfer imposed
by applicable securities or banking laws or Section 8-511(c) of the New York Uniform Commercial
Code.



     4. Except with regard to approvals required to be obtained by the Investors, as to which we
render no opinion, neither the execution and delivery of the Investment Agreement by the Company,
nor completion by the Company of the Transaction, requires the consent of, approval by, or a filing
or notification by the Company with any Governmental Entity (as defined in the Investment
Agreement) under United States federal law other than filings and notifications that have already
been made.



     5. Assuming the accuracy of the representations and warranties made by the Investors in
Section 3.2 of the Investment Agreement and by the Company in Section 3.1 of the Investment
Agreement and in the Fact Certificate, the issuance and sale of the Acquired Shares in accordance
with the Investment Agreement will be exempt from the registration requirements of the Securities
Act of 1933, as amended.



     6. The Company is not, and will not become solely as a result of the consummation of the
transactions that are the subject of the Investment Agreement, an “investment company” or a
“company” “controlled” by an “investment company” (as each of those terms is defined in



- 2 -









 




the Investment Company Act of 1940 (“1940 Act”)) that is required to be registered
under the 1940 Act.




     Our opinion in numbered paragraph 2 above is subject to the effect of bankruptcy, insolvency,
fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights
and remedies of creditors generally, and to general principles of equity (whether applied by a
court of law or equity).



     We are furnishing this opinion letter to you solely in connection with the Transaction. You
may not rely on this opinion letter in any other connection, and it may not be furnished to or
relied upon by any other person for any purpose, without our specific prior written consent. The
foregoing opinions are rendered as of the date of this letter. We assume no obligation to update
or supplement any of our opinions to reflect any changes of law or fact that may occur.



	 	 	 	 	 
	 	 Yours truly,

 	 


Attachment:   Schedule I — Investors









- 3 -









 








Schedule I




Oaktree Principal Fund V (Delaware), L.P.

Oaktree FF Investment Fund AIF (Delaware), L.P.




 









 





Exhibit C




Form of Opinion of Martinez Odell & Calabria



(see attached)



 









 





[MARTINEZ ODELL & CALABRIA LETTERHEAD]



[Date]




The Investors set forth on Schedule I

c/o Oaktree Capital Management, L.P.

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071



Ladies and Gentlemen:





     We have acted as counsel to First BanCorp, a Puerto Rico chartered financial holding company
(the “Company”), in connection with the Amended and Restated Investment Agreement dated as
of July 14, 2011 (the “Investment Agreement”) among the investors set forth on Schedule I
to this letter (the “Investors”) and the Company. The Investment Agreement provides for
the issuance and sale by the Company to the Investors (the “Transaction”) of [___] shares
(the “Acquired Shares”) of the common stock of the Company, par value $0.10 per share
(“Common Stock”). We are delivering this opinion letter to you at the Company’s request in
order to enable it to fulfill the condition in Section 5.2(s) of the Investment Agreement.



     In connection with rendering the opinions set forth below, we have, in addition to reviewing
the Investment Agreement and the documents the Company is required by the Investment Agreement to
deliver to the Investors at or before the Closing Date (as defined in the Investment Agreement),
reviewed and relied on statements by officers of the Company, certifications by governmental
authorities and a fact certificate of an officer of the Company (the “Fact Certificate”)
and such other documents as we deemed are necessary to enable us to render those opinions. We have
also made the assumptions that are customary in opinion letters of this kind, including the
assumptions that each document submitted to us is accurate and complete, that each such document
that is an original is authentic, that each such document that is a copy conforms to an authentic
original, that all signatures on each such document are genuine, and that no changes in the facts
certified in the Fact Certificate have occurred or will occur between the date of the Fact
Certificate and the date of this letter.



     We have further assumed the legal capacity of natural persons, and have assumed that each
party to the Investment Agreement (other than the Company) has the legal capacity and has satisfied
all legal requirements that are applicable to that party to the extent necessary to make the
Investment Agreement enforceable against that party. We have not verified any of the foregoing
assumptions, or others contained herein, or independently established any of the facts so relied
upon.



     The opinions expressed in this opinion letter are limited to the laws of the Commonwealth of
Puerto Rico the (“Commonwealth”), without regard to conflicts of laws principles (whether
of the Commonwealth or any other jurisdiction) that would apply the laws of any jurisdiction other
than the Commonwealth. We are not opining on, and we assume no responsibility with respect to, the
applicability to or effect on any of the matters covered by our opinion of any other laws or the
laws of any other jurisdiction.



 









 





     Based on the foregoing, and subject to the foregoing and the additional qualifications and
other matters set forth below, it is our opinion that:



     1. The Company is a corporation validly existing and, with the exception of any consent order
or agreement with a governmental authority, in good standing under the laws of the Commonwealth.
Each of the Company and each subsidiary of the Company or FirstBank Puerto Rico set forth on
Schedule II (each a “Subsidiary,” collectively, the “Subsidiaries”) is duly
qualified to do business in the Commonwealth.



     2. Each of the Subsidiaries has been and is validly existing and, to the extent the concept is
applicable, and with the exception of any consent order or agreement with a governmental authority,
in good standing under the laws of the Commonwealth.



     3. The Company has all corporate power and authority that is necessary to enable it to enter
into the Investment Agreement and carry out the Transaction, and all corporate actions necessary to
enable the Company to enter into the Investment Agreement and carry out the Transaction have been
taken. The Investment Agreement has been duly executed and delivered by the Company.



     4. The purchase of the Acquired Shares by the Investors will not constitute a “Business
Combination” subject to Section B of Article Tenth of the Company’s Articles of Incorporation and
will not be subject to any statutory or other provisions regarding business combinations with
interested stockholders.



     5. The Acquired Shares have been duly authorized and validly issued and, upon receipt of the
full amount of requisite consideration, will be non-assessable outstanding shares of Common Stock.
The sale of the Acquired Shares and the sale of Common Stock to Other Investors under Investor
Agreements (as defined in the Investment Agreement) will not give any other person preemptive
rights or other rights to acquire shares of Company of any class or series under Commonwealth law,
under the Certificate of Incorporation or by-laws of the Company, or under any agreement of which
we are aware to which the Company is a party.



     6. The only authorized stock of the Company is 2,000,000,000 shares of Common Stock and
50,000,000 shares of preferred stock.



     7. Except with regard to approvals required to be obtained by the Investors, as to which we
render no opinion, neither the execution and delivery of the Investment Agreement by the Company,
nor completion by the Company of the Transaction, requires the consent of, approval by, or a filing
or notification by the Company with any Governmental Entity (as defined in the Investment
Agreement) under the laws of the Commonwealth other than filings and notifications already made
and/or consents and approvals already obtained.



- 2 -









 





     Our opinions expressed above are further subject to the following limitations, exceptions,
qualifications and assumptions:



     (a) We express no opinion with respect to limitations imposed by law and court decisions upon
the availability of the remedy of specific performance, injunctive relief and other equitable
remedies, whether sought in legal or equitable proceedings.



     (b) We note that the enforcement of any obligations of the Company under the Investment
Agreement may be limited by the receivership, conservatorship and supervisory powers of depository
institution regulatory agencies generally, as well as by, and our opinions are subject to,
applicable bankruptcy, solvency, insolvency, reorganization, moratorium, marshaling, or other
similar laws and legal requirements (including, without limitation, fraudulent transfer laws) and
general equitable principles (whether considered in a proceeding in equity or at law).



     (c) We express no opinion as to, and have assumed for purposes of our opinions, the fairness
of, the transactions contemplated under the Investment Agreement, and the adequacy of consideration
for the obligations of each party thereunder.



     (d) Limitations imposed by general principles of equity upon the availability of equitable
remedies or the enforcement of provisions of the Investment Agreement and the effect of judicial
decisions which have held that certain provisions are unenforceable where their enforcement would
violate the implied covenant of good faith and fair dealing, or would be commercially unreasonable,
or where a default under the revised documents is not material.



     (e) We express no opinion as to the validity or enforceability of any provision in the
Investment Agreement waiving, expressly or by implication, stated rights, defenses or rights
granted by laws, where such waivers are or may be deemed to be against public policy or prohibited
by law.



     (f) We express no opinion as to the enforceability of any rights to indemnification provided
for in the Investment Agreement which may be limited by (i) laws rendering unenforceable
indemnification contrary to federal or state securities laws and the public policy underlying such
laws, and (ii) laws limiting the enforceability of provisions exculpating or exempting a party from
liability, or requiring indemnification of a party, for its own action or inaction, to the extent
such action or inaction involves gross negligence, recklessness or willful or unlawful conduct.



     (g) We express no opinion as to the validity or enforceability of any particular provision
that the Investment Agreement may contain relating to (i) waivers of rights to object to
jurisdiction or venue, or consents to jurisdiction or venue, (ii) waivers of rights to (or methods
of) service of process, or rights to trial by jury, or other rights or benefits bestowed by
operation of law, or (iii) exculpation or exoneration clauses, indemnity clauses, and clauses
relating to releases or waivers of unmatured claims or rights.



- 3 -









 





     (h) We have also assumed that, without independent investigation or verification, there are no
extrinsic agreements, arrangements or understandings between or among any of the parties to the
Investment Agreement that would modify or interpret the terms of the same or the respective rights
or obligations of the parties thereunder.



     (i) We express no opinion on whether the Company or each Subsidiary has conducted all required
local, municipal, state and/or federal tax filings or paid all corresponding taxes, and we express
no opinion on any tax matters addressed in the Investment Agreement.



     (j) The opinions expressed in paragraphs 1 and 2 of this opinion are based upon certain
certificates, confirmations, statements and information issued by or received from the appropriate
Governmental Entities.



     (k) The Commonwealth’s Department of State has informed us that it does not issue good
standing certificates in connection with international banking entities; therefore, we provide no
opinion as to whether First Bank Overseas Corp., or any other international banking entity, is in
good standing under the laws of the Commonwealth.



     (l) For purposes of the opinions set forth herein, we have relied on the Fact Certificate, the
Company’s Articles of Incorporation, and minute books and stock records relating to meetings and
written actions of the Board of Directors and stockholders of the Company. The Company has
represented to us that the records and documents made available to us are complete and accurate.



     (m) We have assumed the conformity of the documents filed with the U.S. Securities and
Exchange Commission via EDGAR, except for required EDGAR formatting changes to physical copies of
the documents delivered to or prepared by, the Company and submitted for our examination.



     We are furnishing this opinion letter to you solely in connection with the Transaction. You
may not rely on this opinion letter in any other connection, and it may not be furnished to or
relied upon by any other person for any purpose, without our specific prior written consent. The
foregoing opinions are rendered as of the date of this letter. We assume no obligation to update
or supplement any of our opinions to reflect any changes of law or fact that may occur.



	 	 	 	 	 
	 	 Yours truly,

 	 



Attachment:   Schedule I — Investors

Attachment:   Schedule II — Subsidiaries




- 4 -









 





Schedule I




Oaktree Principal Fund V (Delaware), L.P.

Oaktree FF Investment Fund AIF (Delaware), L.P.




 









 





Schedule II




	 	 	 

	FirstBank Puerto Rico

	 	Puerto Rico
	First Federal Finance Corporation (d/b/a Money Express)

	 	Puerto Rico
	FirstMortgage, Inc.

	 	Puerto Rico
	FirstBank Overseas Corp.

	 	Puerto Rico
	FirstBank Puerto Rico Securities Corp.

	 	Puerto Rico
	First Management of Puerto Rico, Inc.

	 	Puerto Rico
	FirstBank Insurance Agency, Inc.

	 	Puerto Rico







 











 





Schedule 3.2




No Conflict; Consents and Approvals



(see attached)




 











 






Schedule 3.2




(NONE)