exv10w2






Exhibit 10.2




EXECUTION COPY



 




INVESTMENT AGREEMENT




DATED AS OF




JUNE 27, 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
	 	 	1	 
	2.1 Closing
	 	 	1	 
	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
	 	 	20	 
	 
	ARTICLE 4 ACTIONS PRIOR TO THE TRANSACTION
	 	 	22	 
	4.1 Stockholder Approval
	 	 	22	 
	4.2 HSR Act Filings
	 	 	22	 
	4.3 Listing of Shares
	 	 	23	 
	4.4 Change of Bank Control Act and Bank Holding Company Act
	 	 	23	 
	4.5 Most Favored Terms
	 	 	24	 
	4.6 Notice of Adverse Occurrences
	 	 	24	 
	4.7 Reasonable Best Efforts
	 	 	24	 
	4.8 Access; Confidentiality
	 	 	26	 
	4.9 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
	 	 	28	 
	5.3 Waiver of Conditions to Investor’s Obligations
	 	 	31	 
	5.4 Limited Effect of Failure of Condition
	 	 	31	 
	 
	ARTICLE 6 ADDITIONAL AGREEMENTS
	 	 	31	 
	6.1 Company Obligation Regarding Adequate Public Information
	 	 	31	 
	6.2 Efforts to Maintain Listing
	 	 	32	 
	6.3 Additional Regulatory Matters
	 	 	32	 
	6.4 Percentage Maintenance Rights
	 	 	33	 
	 
	ARTICLE 7 SALE RESTRICTIONS
	 	 	35	 
	7.1 Restrictions on Sales of Acquired Common Stock
	 	 	35	 
	 
	ARTICLE 8 SECURITIES ACT REGISTRATION
	 	 	36	 






i









 






	 	 	 	 	 
	 	 	PAGE
	8.1 Obligation to Register Acquired Common Stock
	 	 	36	 
	8.2 Obligations of the Investors Regarding Registration
	 	 	41	 
	8.3 Indemnification Regarding Disclosures
	 	 	41	 
	8.4 Assignment of Registration Rights
	 	 	42	 
	8.5 Lock Up Agreements
	 	 	42	 
	8.6 Holdback
	 	 	42	 
	 
	ARTICLE 9 TERMINATION
	 	 	43	 
	9.1 Right to Terminate
	 	 	43	 
	9.2 Manner of Terminating Agreement
	 	 	44	 
	9.3 Effect of Termination
	 	 	44	 
	 
	ARTICLE 10 INDEMNIFICATION
	 	 	44	 
	10.1 Indemnification Against Loss Due to Inaccuracies in Company’s
Representations and Warranties or Company Failure to Fulfill Obligations
	 	 	44	 
	10.2 Indemnification Against Loss Due to Inaccuracies in Investor’s
Representations and Warranties or Investor Failure to Fulfill Obligations
	 	 	44	 
	10.3 Limit on Liability for Breach of Warranty
	 	 	45	 
	10.4 Indemnification Sole Remedy
	 	 	46	 
	 
	ARTICLE 11 ABSENCE OF BROKERS
	 	 	46	 
	11.1 Representations and Warranties Regarding Brokers and Others
	 	 	46	 
	 
	ARTICLE 12 GENERAL
	 	 	46	 
	12.1 Announcement of Transaction
	 	 	46	 
	12.2 Expenses
	 	 	47	 
	12.3 Entire Agreement
	 	 	47	 
	12.4 Benefit of Agreement
	 	 	47	 
	12.5 Captions
	 	 	47	 
	12.6 Assignments
	 	 	48	 
	12.7 Notices and Other Communications
	 	 	48	 
	12.8 Governing Law
	 	 	49	 
	12.9 Consent to Jurisdiction
	 	 	49	 
	12.10 Remedies; Specific Performance
	 	 	49	 
	12.11 Non-Recourse
	 	 	50	 
	12.12 Waiver of Jury Trial
	 	 	50	 
	12.13 Amendments
	 	 	50	 
	12.14 Interpretation
	 	 	50	 






ii









 






	 	 	 	 	 
	 	 	PAGE
	12.15 Mutual Drafting
	 	 	51	 
	12.16 Severability
	 	 	51	 
	12.17 Counterparts
	 	 	51	 
	12.18 Independent Nature of Investors’ Obligations and Rights
	 	 	51	 






iii









 





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











iv









 








	 	 	 	 	 

	Acquired Common Stock
	 	 	1	 
	Affiliate
	 	 	18	 
	Agency
	 	 	15	 
	Aggregate Purchase Price
	 	 	2	 
	Agreement
	 	 	1	 
	Bank Holding Company Act
	 	 	3	 
	Bank Regulatory Agency
	 	 	14	 
	Business Day
	 	 	2	 
	CBCA
	 	 	23	 
	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
	 	 	18	 
	Company Subsidiaries
	 	 	7	 
	Company Subsidiary
	 	 	7	 
	EDGAR
	 	 	3	 
	Environmental Law
	 	 	13	 
	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
	 	 	41	 
	Information
	 	 	25	 
	Insurer
	 	 	16	 
	Intellectual Property
	 	 	19	 
	Intellectual Property Rights
	 	 	18	 
	Interim Financials
	 	 	9	 
	Investor
	 	 	1	 
	Investor Agreements
	 	 	4	 
	Investor Presentation
	 	 	20	 
	Investors
	 	 	1	 
	IT Assets
	 	 	19	 
	Loan
	 	 	17	 
	Loan Investor
	 	 	15	 
	March 10-Q
	 	 	7	 
	Material Adverse Change
	 	 	9	 






v









 






	 	 	 	 	 

	Materially Burdensome Regulatory Condition
	 	 	23	 
	New Security
	 	 	33	 
	NYSE
	 	 	4	 
	OCFI
	 	 	6	 
	OCFI Order
	 	 	10	 
	OFAC
	 	 	16	 
	Other Investors
	 	 	4	 
	Per Share Price
	 	 	1	 
	Piggyback Registration
	 	 	37	 
	Previously Disclosed
	 	 	3	 
	PRTD
	 	 	32	 
	Registrable Securities
	 	 	36	 
	Rights Offering
	 	 	1	 
	Ruling
	 	 	30	 
	SEC
	 	 	3	 
	Securities Act
	 	 	2	 
	Shelf Registration Statement
	 	 	36	 
	Special Registration
	 	 	43	 
	Submission
	 	 	24	 
	Tax Return
	 	 	12	 
	Taxes
	 	 	12	 
	Termination Date
	 	 	43	 
	Transfer Agent
	 	 	2	 
	Unlawful Gains
	 	 	16	 






vi









 





INVESTMENT AGREEMENT




          This agreement (the “Agreement”) is dated as of June 27, 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 below such Investor’s name on its signature page
to this 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, each Investor will, severally and not jointly,
purchase from the Company, and the Company will sell to each Investor, the number of shares of
Common Stock set forth below such Investor’s name on its signature page to this Agreement (which
aggregate number of shares for all Investors together shall be 19,936,451 shares of Common Stock);
provided, however, that if the aggregate number of shares shown on all of the Investors’ signature
pages to this Agreement would constitute more than 9.9% of the shares of Common Stock that will be
outstanding after the Closing and after conversion of the Company’s fixed rate cumulative
mandatorily convertible preferred stock, Series G (“Series G Preferred Stock”) into Common Stock,
the aggregate number of shares of Common Stock the Investors will purchase will be the number that
will constitute 9.9% of the shares of Common Stock that will be outstanding after the Closing and
after conversion of the Series G Preferred Stock into Common Stock (with each Investor’s shares
being reduced pro rata based on the number of shares set forth on its signature page) (the shares
being purchased hereunder by all the Investors being the “Acquired Common Stock”). The purchase
price for the Acquired Common Stock shall be the lesser of (a) $3.50 per share of Common Stock or
(b) such price per share as may be agreed with any Other Investor (the “Per Share Price”). 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) $515 million (equal to $550 million minus the $35 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.



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



1









 







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. At the earliest time the Company instructs The Bank
of New York Mellon Shareholder Services (or its successor) (the “Transfer Agent”), as transfer
agent, to issue Common Stock to any Other Investor (as defined below), the Company will instruct
the Transfer Agent to issue the Acquired Common Stock in book entry form to accounts at The
Depositary Trust Company designated by the respective Investors. As soon as an Investor receives
confirmation that the Acquired Common Stock it will be purchasing has been transferred into the
account it designated, the 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 purchase price
to be paid by each Investor being such Investor’s “Aggregate Purchase Price”) The Company may
notify the depositary that holds Acquired Common Stock 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 at the request of the Investor at any time after
(i) a registration statement registering resales of the Acquired Common Stock under the Securities
Act has become effective, (ii) with regard to particular shares, when those shares are sold or
transferred in a transaction that under SEC Rule 144 causes the shares no longer to be restricted
shares, or (iii) under Rule 144, the shares can be sold without limitation as to 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)). 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 each of the Investors as follows:



2









 





          (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 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 this 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 this 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 this 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 the third
Business Day before the date of this Agreement, 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 the third Business Day before the date of
this Agreement.




          (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 this 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 this 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 this 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




3









 




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 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 the Investor Agreements and 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) $550 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 $35 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




4









 




Investors hereunder have been provided to the
Investors prior to the date hereof. 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 4.9% 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, 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 in case of clauses (ii) and (iii) 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 this 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 $515 million ($550
million minus the expected $35 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
147,142,858 shares of Common Stock. The only options, warrants, exchangeable securities or other
agreements which require, or which, upon the passage of




5









 




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 32,931,770 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 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 this 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 Board representatives that Other
Investors have the right to designate under other 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 the NYSE of 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




6









 




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 this 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 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 this 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




7









 




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 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 this 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 this 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




8









 




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 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




9









 




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 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 this Agreement to enable
them to conduct their businesses as they currently are being conducted




10









 




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. At the date of this Agreement, 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 this 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 between December 31, 2010 and the Business Day
before the date of this Agreement, 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. Neither the Company nor any
Company Subsidiary, nor any director or officer thereof, is the subject of any action involving a
claim of violation of or liability under federal or state securities laws. To the Company’s
knowledge there is not pending or contemplated any investigation by the SEC involving the Company
or any current director or officer of the Company.




          (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 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




11









 




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 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 this 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




12









 




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 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



13









 







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 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


14









 







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 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



15









 






     (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 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




16









 




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 hereof, 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-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




17









 




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 this 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. As used in this Agreement, the term
“Affiliate” means, with respect to any person, any person directly or indirectly controlling,
controlled by or under common control with, such other person. For purposes of this definition,
“control” (including, with correlative meanings, the terms “controlled by” and “under common
control with”) when used with respect to any person, means the possession, directly or indirectly,
of the power to cause the direction of management or policies of such person, whether through the
ownership of voting securities by contract or otherwise.




          (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 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 this



18









 







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 this
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 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.



19









 





          (ll) Shell Company Status. The Company is not, and never has been, an issuer of the
type identified in SEC Rule 144(i)(1).




          (mm) Disclosure. If an Investor did not, in the course of its investigation regarding
whether to purchase Acquired Common Stock, receive from the Company or its representatives any
information about the Company other than the Investor Presentation dated May 2011 (the “Investor
Presentation”) and did not access information posted in the electronic data room that was made
available to prospective purchasers of Common Stock who requested access to that information, when
the Investor Presentation and the terms of the transactions contemplated by the Investor
Agreements are publicly disclosed as required by Section 12.1, no information such Investor has
received from the Company or its representatives in connection with the offer that resulted in the
execution of this Agreement will constitute material non-public information about the Company.
The Company understands that each Investor and its subsidiaries may rely on the representation in
the preceding sentence in effecting transactions in securities of the Company.




     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 Wellington Management Company,
LLP.




          (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) 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. Assuming the accuracy of the representations and
warranties of the Company and the performance of the covenants and agreements of the Company
contained herein, 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




20









 




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 this Agreement, if the Investor is required to obtain the
consent or approval of a Governmental Entity with respect to such Investor’s purchase of its
Acquired Common Stock hereunder, the Investor does not know of any reason that such Governmental
Entity would not give any required consent to, or approval of, the Investor’s acquiring the
Acquired Common Stock as contemplated by this 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 Investor of its Acquired Common Stock would
cause First Bank 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 under the limited circumstances set forth in Article 7.




          (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




21









 




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
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 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 this 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. The Company will, to the extent it is not unreasonable for it to
do so, resolve and comply with all comments of the staff of the SEC promptly, and 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. If, in order to satisfy the
requirements of such exemption, the Investors and the Company



22









 







are required to make filings with
one or both of the Federal Trade Commission and the Department of Justice, each of them will make
those filings as promptly as practicable, and each of them will take all reasonable 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. If applicable,
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 (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 this 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. If the Investors are (or
any of them 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 Investors’ proposed
purchase of Acquired Common Stock, each of those Investors will file that notice within 20
Business Days after the date of this 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, 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



23









 







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 such requirement,
condition, restriction or limitation, a “Materially Burdensome Regulatory Condition”). At least 20
Business Days before the Closing Date, the Company will include in a schedule of contemplated steps
with regard to the transactions that are the subject of this and the other Investor Agreements that
is submitted to the Federal Reserve Board, or in another document that is submitted to the Federal
Reserve Board regarding the transactions that are the subject of this Agreement and the other
Investor Agreements, disclosure of the fact that between the time when Common Stock is issued to
the Investors at the Closing and the time when the conversion of the Series G Preferred Stock into
Common Stock becomes effective (which is expected to be immediately after Common Stock is issued
to, and paid for, by the Investors and the Other Investors at the Closing), the Acquired Common
Stock will constitute more than 9.9% of the outstanding shares of Common Stock (the “Submission”.
A copy of the Submission will be provided to the Investors at least two Business days prior to its
being submitted to the Federal Reserve Board.



     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 or group of commonly
advised Other Investors, other than an Other Investor or group of commonly advised Other Investors
that will be acquiring a number of shares of Common Stock that is greater than the Acquired Common
Stock being purchased by the Investors in the aggregate hereunder, so that such other Investor
Agreement is in any respect more favorable to the Other Investor or group of commonly advised Other
Investors that is a party, or are parties, to such Investor Agreement than this Agreement is to the
Investors (other than as to the number of shares of Common Stock being purchased), 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). Under no
circumstances will the Company agree that an Other Investor may pay a price per share that is
lower than the Price Per Share unless the Company reduces the Price Per Share being paid by the
Investors to the lowest price per share of Common Stock being paid by any investor.



     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 hereof 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.



          (a) 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




24









 




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 as promptly as practicable after the Closing, and
if the conversion will not occur until 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.




          (b) Notwithstanding anything in Section 4.7(a) or elsewhere in this Agreement, if any
Governmental Entity requires disclosure of the identities of limited partners, shareholders or
members (other than the managing member) of an Investor or any of its Affiliates or investment
advisors, or other confidential proprietary information of an Investor or any of its Affiliates or
investment advisers, and such Investor is not able with reasonable effort to persuade the
Governmental Entity to accept only the information that such Investor typically provides to
Governmental Entities under policies of such Investor and its Affiliates (including policies
regarding confidential treatment of the information that is provided) that such Investor and its
Affiliates consistently apply, such Investor may refuse to provide that information, but if it
does so and the Company reasonably determines that there is a significant possibility that such
Investor’s failure to provide that information will prevent, or materially delay, the Governmental
Entity’s giving a required consent or approval, the Company will have the option, after reasonable
consultation with such Investor to determine a mutually acceptable resolution to the issue and the
failure by the Company and such Investor to reach such a resolution, to terminate the Investor’s
participation in the transactions contemplated by this Agreement.




     4.8 Access; Confidentiality.



          (a) 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 (in which case, the party disclosing such
information shall provide the other party with prior written notice of its intention to disclose
the information), 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.




25









 








          (b) If, through the exercise of its rights under this Agreement, 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. The Company will not provide any Investor with information that the Company believes to
constitute material non-public information about the Company, other than at the written request,
or with the written consent, of such Investor.




     4.9 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 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 Section
4.9 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. Without limiting the
foregoing, during the period from the date hereof 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 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



26









 







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);
(xiii) merge or consolidate with, or sell all or substantially all its assets to, any person
(except that the Company may cause wholly owned Company Subsidiaries to merge or consolidate or to
transfer all or substantially all the assets of one of them to another of them) 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
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.




27









 








          (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 this 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.




     5.2 Conditions to the Investor’s Obligations. The obligations of each Investor 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 such Investor, as to itself only):



          (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 required to have been fulfilled on or before the Closing Date.




28









 








          (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 this 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).




          (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) $550 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
this 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 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 Acquired Common Stock to be purchased by all Investors hereunder will not constitute
more than 9.9% of the shares of Common Stock that will be outstanding after the Closing and after
conversion of the Series G Preferred Stock into Common Stock.




29









 








          (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.




          (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 Company shall have submitted the Submission to the Federal Reserve Board in accordance
with Section 4.4 and the Federal Reserve Board shall not have raised any concerns with respect to
the matters disclosed in the Submission insofar as they relate to the Investors that have not been
resolved to the Investors’ reasonable satisfaction.




          (n) 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.




          (o) 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.




          (p) 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.




          (q) 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%.




30









 








          (r) 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.




          (s) 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.




          (t) The Investor or its adviser shall have received the legal opinion(s), dated as of the
Closing Date, 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.




          (u) The Investor or its adviser 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 a condition in paragraph (b), (c) (other than the condition in paragraph (c)
relating to actions or proceedings against the Company or any of the Company Subsidiaries that, if
decided against the Company or any of the Company Subsidiaries, would impose a Materially
Burdensome Regulatory Condition or could reasonably be expected to have a Company Material Adverse
Effect), (e), (f), (g), (h), (i) or (m) in Section 5.2, each Investor will be deemed to
have waived that condition even if the Investor does not itself waive it. A condition in Section
5.2(b), (c) (other than the condition in paragraph (c) relating to actions or
proceedings against the Company or any of the Company Subsidiaries that, if decided against
the Company or any of the Company Subsidiaries, would impose a Materially Burdensome Regulatory
Condition or could reasonably be expected to have a Company Material Adverse Effect), (e), (f),
(g), (h), (i) or (m) may be waived as to an Investor only by that Investor.



     5.4 Limited Effect of Failure of Condition. The failure of the condition in
Section 5.2(b) or (i) with regard to an Investor or an Other Investor will affect
only the obligations of that Investor or Other Investor, and will not affect the obligations of any
other 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.




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          (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 Investors 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, without the consent of the Investors, take any action (including,
but not limited to, 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, in
each case where the Investors are not given the right to participate in such redemption,
repurchase or recapitalization to the extent of their pro rata proportion) that would cause the
Acquired Common Stock to constitute in total more than 9.9% of the Common Stock outstanding at
that time or otherwise 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, or that will require a filing that would not otherwise be
required under the CBCA, including the rules and regulations promulgated thereunder (or any
successor provisions).




          (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 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:




32









 









     (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 in the aggregate at least 60% of the number of shares of
Acquired Common Stock acquired by the Investors on the Closing Date (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 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 hereof), 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



33









 







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 each Investor shall be entitled to
purchase 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 such Investor 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) 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), 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). 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.




          (c) 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.




          (d) 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(b) or, if so exercised, the Investors are unable to consummate such purchase within the
time period specified in Section 6.4(c) above because of their 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




34









 




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 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.




          (e) 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.




          (f) 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.




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 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.




35









 








          (d) If Rule 144A under the Securities Act makes it possible for sales of Acquired Common Stock
to be exempt under that Rule from the registration requirements of the Securities Act, the Investor
may sell Acquired Common Stock to one or more purchasers, each of which is a qualified
institutional buyer, as that term is defined in Rule 144A, in transactions that satisfy all the
conditions in Rule 144A(d), but only if prior to each sale, the purchaser delivers to the Company
an agreement to be bound by this Section 7.1 to the same extent as the Investor.




          (e) 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.




          (f) 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.




          (g) The Investor may sell Acquired Common Stock in a transaction that is exempt from the
registration requirements of the Securities Act for a reason other than one described in a previous
paragraph of this Section, 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 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).




36









 








          (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 securities that are not Registrable
Securities; or (ii) if after receiving a request for registration of an underwritten distribution
of Registrable Securities from one or more of the Investors, the Company notifies those Investors
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 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




37









 




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.




     (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.



38









 






     (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 (which notice will not include information about
the event if that information would constitute material non-public information about the
Company).




     (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;




     (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, but



39









 







will not include information about the event if that
information would constitute material non-public information about the Company) 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 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




40









 




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 (unless the underwriter refused to include an indemnification in
its underwriting agreement with the selling stockholders, but included an indemnification in its
underwriting agreement with the Company), expressly 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.




41









 








          (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 (or such lesser amount of
Registrable Securities as is all the Registrable Securities that the Investor owns), (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 at a time when the Investors and their Affiliates own in
total 10% or more of the outstanding Common Stock, 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



42









 







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 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) 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.




43









 








          (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.




          (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. 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
27, 2011 between the Company and the Investors.



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,



44









 







each Investor, severally and not jointly, indemnifies 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 expenses of investigation) incurred by the Company
directly or indirectly because (i) any matter that is the subject of a representation and warranty
by such Investor 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) such 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) (Tax
Matters) (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 this 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




45









 




income and applicable state and local Tax purposes, unless a different treatment is required by
applicable law.




     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) (Tax Matters), 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) (Tax Matters) 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, indemnifies 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



46









 







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 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 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 27, 2011 between the Company and the Investors 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 April 12,
2011 between the Company and Wellington Management Company, LLP. and the letter agreement dated
June 27, 2011 between the Company and the Investors 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 April 12, 2011 between the Company and
Wellington Management Company, LLP. and the letter agreement dated June 27, 2011 between the
Company and the Investors 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.



47









 





     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 or an entity that shares a common discretionary investment adviser
(in which case, the term “Investor” will include the transferee), provided,
however, that, in such event, such Investor and such Affiliate or entity, as applicable,
will be jointly and severally liable for any failure of the Affiliate or entity, as applicable, to
fulfill any of the Investor’s obligations under 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 only to the individuals or departments
designated below at the addresses, e-mail addresses or facsimile numbers
designated below (or to such other persons or addresses as may be specified in writing after
the date of this Agreement by the party to which the notice or communication is sent); it being
understood and agreed that the Company shall not send notices or communications to any other person
acting on behalf of any of the Investors without the prior written consent of a member of the Legal
and Compliance Department at Wellington Management Company, LLP:



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





c/o Wellington Management Company, LLP

280 Congress Street

Boston, MA 02210

Attn: Legal and Compliance Department

Facsimile: 617-289-5699

Email Address: seclaw@wellington.com




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




Greenberg Traurig LLP

One International Place

Boston, MA 02110

Attn: Bradley Jacobson

Facsimile: 617-279-8402

Email Address: jacobsonb@GTLAW.com



          (b) If to the Company





First BanCorp



48









 






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):




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



49









 







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 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



50









 







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.



     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)




51









 





          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	 	 






 









 





	 	 	 	 	 	 	 

	 	 	INVESTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	Ithan Creek Master Investment Partnership (Cayman)
II, L.P.	 	 
	 	 	By: Wellington Management Company, LLP	 	 
	 	 	As investment adviser	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven M. Hoffman
 

Name: Steven M. Hoffman
	 	 
	 

	 	 	 	Title: Vice President & Counsel	 	 






Name  Ithan Creek Master Investment Partnership (Cayman) II, L.P.

Form of entity Limited Partnership

Jurisdiction of formation See Attached Spreadsheet

Taxpayer Identification No. See Attached Spreadsheet

Name in which securities should be registered See Attached Spreadsheet

Number of Shares 482,000

Total Purchase Price $1,687,000.00

Shares already owned by Investor or Affiliates 0




	 	 	 	 	 	 	 

	 	 	Bay Pond Partners, L.P.	 	 
	 	 	By: Wellington Management Company, LLP	 	 
	 	 	As investment adviser	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven M. Hoffman
 

Name: Steven M. Hoffman
	 	 
	 

	 	 	 	Title: Vice President & Counsel	 	 






Name Bay Pond Partners, L.P.

Form of entity Limited Partnership

Jurisdiction of formation See Attached Spreadsheet

Taxpayer Identification No. See Attached Spreadsheet

Name in which securities should be registered See Attached Spreadsheet

Number of Shares 8,885,900

Total Purchase Price $31,100,650.00

Shares already owned by Investor or Affiliates 0




	 	 	 	 	 	 	 

	 	 	Bay Pond Investors (Bermuda), L.P.	 	 
	 	 	By: Wellington Management Company, LLP	 	 
	 	 	As investment adviser	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven M. Hoffman
 

Name: Steven M. Hoffman
	 	 
	 

	 	 	 	Title: Vice President & Counsel	 	 






Name Bay Pond Investors (Bermuda), L.P.

Form of entity Limited Partnership

Jurisdiction of formation See Attached Spreadsheet

Taxpayer Identification No.  See Attached Spreadsheet

Number of Shares 4,655,200




 









 





Name in which securities should be registered See Attached Spreadsheet

Total Purchase Price $16,293,200.00

Shares already owned by Investor or Affiliates 0




	 	 	 	 	 	 	 

	 	 	Ithan Creek Master Investors (Cayman) L.P.	 	 
	 	 	By: Wellington Management Company, LLP	 	 
	 	 	As investment adviser	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven M. Hoffman
 

Name: Steven M. Hoffman
	 	 
	 

	 	 	 	Title: Vice President & Counsel	 	 






Name Ithan Creek Master Investors (Cayman) L.P.

Form of entity Limited Partnership

Jurisdiction of formation See Attached Spreadsheet

Taxpayer Identification No. See Attached Spreadsheet

Number of Shares 3,252,900

Name in which securities should be registered See Attached Spreadsheet

Total Purchase Price $11,385,150.00

Shares already owned by Investor or Affiliates 0




	 	 	 	 	 	 	 

	 	 	Wolf Creek Partners, L.P.	 	 
	 	 	By: Wellington Management Company, LLP	 	 
	 	 	As investment adviser	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven M. Hoffman
 

Name: Steven M. Hoffman
	 	 
	 

	 	 	 	Title: Vice President & Counsel	 	 






Name Wolf Creek Partners, L.P.

Form of entity Limited Partnership

Jurisdiction of formation See Attached Spreadsheet

Taxpayer Identification No. See Attached Spreadsheet

Number of Shares 1,393,400

Name in which securities should be registered See Attached Spreadsheet

Total Purchase Price $4,876,900.00

Shares already owned by Investor or Affiliates 0




	 	 	 	 	 	 	 

	 	 	Wolf Creek Investors (Bermuda) L.P.	 	 
	 	 	By: Wellington Management Company, LLP	 	 
	 	 	As investment adviser	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven M. Hoffman
 

Name: Steven M. Hoffman
	 	 
	 

	 	 	 	Title: Vice President & Counsel	 	 






Name Wolf Creek Investors (Bermuda) L.P.

Form of entity Limited Partnership

Jurisdiction of formation See Attached Spreadsheet

Taxpayer Identification No. See Attached Spreadsheet

Number of Shares 1,266,600

Name in which securities should be registered See Attached Spreadsheet

Total Purchase Price $4,433,100.00

Shares already owned by Investor or Affiliates 0




 









 





Exhibit A




Illustrative Pro Forma Capitalization of the Company



(see attached)



 









 





Share Reconciliation



“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 CPP 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	 	 	Assumed FBP “Market Price” One Day Prior to Pricing

	 	 	 	 	78	%	 	78	%	 	Implied Equity Raise (% of Market)

	 	 	 	 	$3.5000	 	$	3.5000	 	 	Actual Equity Raise Price

	 	 	 	 	$515,000	 	$	500,000	 	 	Gross Proceeds from Common Equity Raise ($000s)

	 	 	 	 	 	 	 	 	 	 	 

	 	(1	)	 	21,303,669	 	 	21,303,669	 	 	# of shares of common stock in effect immediately prior to equity raise issuance

	 	+	 	 	 
	 	 	 	 	 	 
	 	(2	)	 	128,286,565	 	 	124,550,063	 	 	# of additional shares from common stock offering at 90% of the market price prior to the offering

	 
	 	(A	)	 	149,590,234	 	 	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	)	 	147,142,857	 	 	142,857,143	 	 	# of additional shares of common stock for the equity raise issuance

	 
	 	(B	)	 	168,446,526	 	 	164,160,812	 	 	Denominator

	 
	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	$10.8780	 	$	10.8780	 	 	CPP Conversion Price ($0.7252 ADJUSTED FOR REVERSE STOCK SPLIT)

	 	x	 	 	0.8881	 	 	0.8885	 	 	Treasury Factor (“A” divided by “B” as defined above)

	 
	 	 	 	 	$9.6603	 	$	9.6649	 	 	Revised CPP Conversion Price

	 
	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	$424,174	 	$	424,174	 	 	CPP 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 CPP Exchange

	 
	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	$424,174	 	$	424,174	 	 	CPP Balance

	 	x	 	 	75.0	%	 	75.0	%	 	TARP Pricing/% of Par

	 	/	 	 	$9.6603	 	$	9.6649	 	 	Conversion Price Per Agreement

	 
	 	 	 	 	32,931,770	 	 	32,916,087	 	 	Shares Issued from CPP Exchange with Mechanism

	 
	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	3,686,458	 	 	3,670,775	 	 	Incremental Shares Issued to Treasury

	 	 	 	 	(1.86	%)	 	(1.90	%)	 	Incremental Dilution vs. Baseline Share Exchange

	 	 	 	 	201,378,296	 	 	197,076,899	 	 	Total Pro Forma Shares Outstanding

	 	 	 	 	$704,824,036	 	$	689,769,145	 	 	Pro Forma Market Capitalization

	 
	 	 	 	 	21,303,669	 	 	21,303,669	 	 	Current Shareholder Ownership

	 	 	 	 	32,931,770	 	 	32,916,087	 	 	Treasury Ownership

	 	 	 	 	147,142,857	 	 	142,857,143	 	 	New Shareholder Ownership

	 	 	 	 	10.58	%	 	10.81	%	 	Current Shareholder Ownership

	 	 	 	 	16.35	%	 	16.70	%	 	Treasury Ownership

	 	 	 	 	73.07	%	 	72.49	%	 	New Shareholder Ownership

	 
	 	 	 	 	19,936,451	 	 	19,510,613	 	 	9.9% Shareholder (shares)

	 	 	 	 	69,777,580	 	 	68,287,145	 	 	9.9% Shareholder ($)








 









 





Exhibit B




Form of Opinion of K&L Gates LLP



(No Exhibit at Execution)



 









 





Exhibit C




Form of Opinion of Martinez Odell & Calabria



(No Exhibit at Execution)



 









 





Schedule 3.2




No Conflict; Consents and Approvals



(see attached)




 











 






Schedule 3.2




(NONE)