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                                                                   EXHIBIT 10.73


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                      FIRST FINANCIAL CARIBBEAN CORPORATION




                    8% CONVERTIBLE CUMULATIVE PREFERRED STOCK
                    (LIQUIDATION PREFERENCE $1,000 PER SHARE)






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                               EXCHANGE AGREEMENT


                            DATED AS OF JULY 9, 1997













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                           EXCHANGE AGREEMENT dated as of July 9, 1997, between
                  FIRST FINANCIAL CARIBBEAN CORPORATION, a Puerto Rico
                  corporation (the "Company"), and POPULAR, INC., a Puerto Rico
                  corporation
                  ("Popular").


         The Company and Popular are parties to a Debenture Purchase Agreement
dated as of September 25, 1995, amended and restated as of December 15, 1995
(the "Debenture Purchase Agreement"), pursuant to which Popular purchased
$10,000,000 aggregate principal amount of the Company's 8.25% Convertible
Subordinated Debentures Due January 1, 2006 (the "Debentures").

         Prior to the date hereof, Popular converted $1,540,000 aggregate
principal amount of Debentures into 88,000 shares of common stock of the Company
and sold such shares in a Rule 144 transaction.

         The parties have agreed to exchange the remaining $8,460,000 aggregate
principal amount of Debentures into 8,460 shares of the Company's newly issued
8% Convertible Cumulative Preferred Stock (Liquidation Preference $1,000 per
share) (the "Securities").

         Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined below) of the
Securities (except for Articles 3 and 5, which are for the exclusive benefit of
Popular):

                                    ARTICLE 1

                      DEFINITIONS AND RULES OF CONSTRUCTION

         SECTION 1.1.  DEFINITIONS.

         "Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.

         "Agreement" means this Agreement as amended or supplemented
from time to time.

         "Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.

         "Business Day" means each day which is not a Legal Holiday.

         "Capital Stock" means any and all shares, interests, rights
to purchase, warrants, options, participations or other



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                                     -2-

equivalents of or interests in (however designated) corporate stock, including
any Preferred Stock.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

         "Company" means the party named as such in this Agreement until a
successor replaces it and, thereafter, includes the successor.

         "Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.

         "Conversion Price" shall have the meaning set forth in the Certificate
of Designation.

         "Doral" means Doral Mortgage Corporation, a Puerto Rico corporation.

         "Doral Federal" means Doral Federal Savings Bank, a federal savings
bank organized under the laws of the United States, and the successor thereto
following its conversion to a Puerto Rico chartered bank.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect.

         "FHLMC" means the Federal Home Loan Mortgage Corporation.

         "FNMA" means the Federal National Mortgage Association.

         "GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.

         "GNMA" means the Government National Mortgage Association.

         "Governmental Authority" shall mean any nation or government, any
state, commonwealth or other political subdivision or instrumentality thereof,
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

         "Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.

         "Lien" means any mortgage, pledge, security interest, conditional sale
or other title retention agreement or other similar lien.



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         "Market Price" shall have the meaning set forth in the
Certificate of Designation.

         "Material Adverse Effect" shall mean a material adverse effect with
respect to (a) the business, operations or financial condition of the Company or
Doral, (b) the ability of the Company to pay and perform its obligations
hereunder and under the Securities, or (c) the validity or enforceability of
this Agreement or the Securities or the rights and remedies of the Holders
hereunder or thereunder.

         "Material Amount" means, at any time, ten percent (10%) of the
Company's consolidated stockholders' equity, as set forth in the most recent
annual or quarterly financial statements of the Company delivered to the
Holders.

         "Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.

         "Officers' Certificate" means a certificate signed by two
Officers.

         "Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Holders. The counsel may be an employee of or counsel to the
Company.

         "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.

         "Requirements of Law" shall mean, as to any Person, the Articles or
Certificate of Incorporation and By-laws or other organizational or governing
documents of such Person, any law, treaty, rule or regulation, and any final and
binding determination of an arbitrator or determination of a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.

         "SEC" means the Securities and Exchange Commission or any
successor to such entity's functions.

         "Shares" means shares of common stock of the Company issuable upon
conversion of the Securities.

         "Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests



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(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) the
Company, (ii) the Company and one or more Subsidiaries or (iii) one or more
Subsidiaries.

         SECTION 1.2. RULES OF CONSTRUCTION. Unless the context otherwise
requires:

                  (1)      a term has the meaning assigned to it;

                  (2)      an accounting term not otherwise defined has the
         meaning assigned to it in accordance with GAAP;

                  (3)      "or" is not exclusive;

                  (4)      "including" means including, without limitation;
         and

                  (5)      words in the singular include the plural and words
         in the plural include the singular.

                                    ARTICLE 2

                     EXCHANGE OF DEBENTURES FOR SECURITIES;
                             TERMS OF THE SECURITIES

         SECTION 2.1. EXCHANGE OF DEBENTURES FOR SECURITIES. On the closing
dated of the exchange, which shall be a date mutually agreed by the parties
after the satisfaction of the condition set forth in Section 7.1(i), the Company
shall issue and deliver the Securities to Popular. Effective on such closing
date, the Debenture Purchase Agreement shall terminate and cease to have any
force and effect.

         SECTION 2.2. TERMS OF THE SECURITIES. On or prior to the closing date
of the exchange, the Company shall file with the Department of State of Puerto
Rico a Certificate of Designation in the Form of Exhibit A (the "Certificate of
Designation") creating the series of preferred stock constituting the
Securities. The terms of Exhibit A, including the definitions contained therein,
are incorporated herein by reference as if fully set forth herein.

         The Securities shall be substantially in the form of Exhibit B, which
is hereby incorporated in and expressly made a part of this Agreement. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage



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(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Security shall be dated the date of its issuance.

                                    ARTICLE 3

                                    COVENANTS

         SECTION 3.1. SEC REPORTS. The Company shall provide Popular within 10
days after it files them with the SEC copies of its annual report and of the
information, documents and other reports which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event
the Company is at any time no longer subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, it shall continue to provide to Popular
reports containing substantially the same information as would have been
required to be filed with the SEC had the Company continued to have been subject
to such reporting requirements. In such event, such reports shall be provided at
the times the Company would have been required to provide reports had it
continued to have been subject to such reporting requirements.

         SECTION 3.2. LINE OF BUSINESS. The Company and its Subsidiaries shall
continue to engage in the business of mortgage banking and lending, servicing
mortgage loans and other financial services (including banking) as their
principal business.

         SECTION 3.3. SOURCE OF INCOME. The Company shall do or cause to be done
all things necessary or proper within its control to ensure that interest paid
on the Securities will not constitute income from sources within the United
States or will be otherwise totally exempt from or otherwise not subject to
United States income taxes when received by Popular under the applicable
provisions of the Code as currently in effect. If the Company violates its
covenant set forth in this Section, and Popular submits a claim in writing to
the Company to the effect that it has or will be required to pay United States
income taxes in respect of dividends paid or accrued on the Securities held by
Popular, the dividend rate on the Securities will be increased such that the
incremental amount of dividends will be equal, with respect to any period, to
the sum of (i) any additional income taxes (after deducting any taxes no longer
payable as a result of such change in the source of income) Popular was or will
be required to pay with respect to dividends paid or accrued on the Securities
held by Popular during such period, and with respect to payments of additional
dividends under this Section, after giving effect to any credit relating to such
dividends that Popular is entitled to take, and (ii) any penalties and interest
that have been or will be assessed against Popular with respect



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to the late payment of such taxes. The payment of such additional dividends
shall be the exclusive remedy for violation of this covenant.

         SECTION 3.4. COMPLIANCE CERTIFICATE. The Company shall deliver to
Popular within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any violation by the Company of its covenants hereunder and whether
or not the signers know of any such violation that occurred during such period.
If they do, the certificate shall describe the violation, its status and what
action the Company is taking or proposes to take with respect thereto.

         SECTION 3.5. FURTHER INSTRUMENTS AND ACTS. Upon request of Popular, the
Company will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Agreement.

                                    ARTICLE 4

                               REGISTRATION RIGHTS

         SECTION 4.1.  REGISTRATION OF SECURITIES AND SHARES.  (a)
         No Registration under Securities Act. Neither the Securities nor the
Shares have been registered under the Act. Each Holder, by acceptance of a
Security, represents that it is acquiring the Securities to be issued to it for
its own account for investment and not with a view to distribution thereof or
with any present intention of distributing or selling any of such Securities
except in compliance with the Act, provided that the disposition of such
Holder's property shall at all times be within its control, and agrees not to
sell, transfer, pledge or hypothecate any Securities or any Shares unless a
registration statement is effective for such Securities or Shares under the Act
or in the opinion of such Holder's counsel (a copy of which opinion shall be
delivered and shall be reasonably acceptable to the Company) such transaction is
exempt from the registration requirements of the Act; provided that Securities
and Shares issued to such Holder may be transferred to any affiliate of such
Holder, without any such registration or opinion, subject to the foregoing
restriction on any further sale, transfer, pledge or hypothecation by such
affiliate.

         The Company will comply with the reporting requirements of Sections 13
and 15(d) of the Exchange Act (whether or not is shall be required to do so
pursuant to such Sections) and will comply with all other public information
reporting requirements



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of the SEC (including, without limitation, Rule 144 promulgated by the SEC under
the Act) from time to time in effect and relating to the availability of an
exemption from the Act for sale of restricted securities. The Company also will
cooperate with the Holders of the Securities and with each holder of any Shares
in supplying such information as may be necessary for any such holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Act for the sale of restricted securities.

                  (b) "Piggyback" Registration. Whenever the Company proposes to
file under the Act a registration statement relating to the issuance or sale of
any of its Capital Stock (other than a registration statement (i) required to be
filed in respect of employee benefit plans of the Company on Form S-8 or any
successor form from time to time in effect, (ii) on Form S-4 or any successor
form, (iii) with respect to any dividend reinvestment plan of the Company, or
(iv) pursuant to subsection (c) of this Section), the Company shall at least 30
days prior to such filing give effective written notice of such proposed filing
to the registered holder of each Security or Share. Upon receipt by the Company
not more than 15 days after such effective notice of a written request or
written requests from one or more of such holders for registration of Securities
or Shares, the Company shall (i) include in such registration statement or in a
separate registration statement concurrently filed, and shall use its best
efforts to cause such registration statement to become effective with respect to
the Securities or the Shares as to which such holder or holders request
registration and (ii) if such proposed registration is in connection with an
underwritten offering, upon request of such holder or holders cause the managing
underwriter therefor to include in such offering the Securities or Shares as to
which such holder or holders request such inclusion, on terms and conditions
comparable to those of the other securities to be offered, provided such holders
accept the terms of the under writing as agreed between the Company and the
underwriter selected by the Company (provided such terms are consistent with
this Agreement), and provided further that the Company shall have the right to
postpone or withdraw any registration effected pursuant to this subsection (b)
without any obligation to any holder of Securities or Shares.

                  (c) Demand Registration. Whenever one or more registered
holders of Securities or Shares shall make a written request to the Company to
register under the Act Securities having an aggregate liquidation preference of
at least $5,000,000, or (in the case of any person initially buying at least
$2,500,000 in aggregate liquidation preference of Securities) constituting all
the Securities held by such holders,



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or at least 285,000 Shares (or such other number of Shares as shall result after
giving effect to consolidations or subdivisions of the common stock of the
Company after September 25, 1995), or (in the case of any person initially
owning at least 150,000 Shares or initially owning Securities convertible into
at least 150,000 Shares) constituting all the Shares of such holder, either
issuable upon conversion of such Securities or held by such holder or holders,
the Company within five days after such request is effective shall promptly give
written notice of such request to all registered holders of outstanding
Securities or Shares other than the holder or holders making such request, such
notice stating the estimated approximate date of filing such registration
statement, and shall thereupon promptly file a registration statement with
respect to and use its best efforts to register the Securities or Shares of or
pertaining to the holder or holders making such request and each other holder of
Securities or Shares from whom written request for registration is effective or
received on or before the later to occur of (i) the twentieth day after the
effective date of such notice by the Company or (ii) the thirtieth day prior to
the estimated date of filing specified in such notice.

                  The Company shall not be required to effect any registration
(other than on Form S-3 or any successor form relating to secondary offerings)
within 120 calendar days after the effective date of any other registration
statement of the Company relating to debt or equity securities of the Company
(in the case of a demand for registration of Securities) or to equity securities
of the Company (in the case of a demand for registration of Shares) made
pursuant to this subsection (c) or in which the holders of the Securities and
the Shares had the opportunity to participate pursuant to Section 10.1(b).

                  If at the time of any request to register Securities or Shares
pursuant to this subsection (c), the Company is engaged or has fixed plans to
engage within thirty (30) days of the time of the request in a registered public
offering as to which the holders of the Securities and the Shares may include
Securities or Shares pursuant to Section 10.1(b) or is engaged in any other
activity that, in the good faith determination of the Company's Board of
Directors, would be adversely affected by the requested registration to the
material detriment of the Company, then the Company may at its option direct
that such request be delayed for a period not in excess of 120 calendar days
from the effective date of such offering or the date of commencement of such
other material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any two year period.




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                  (d)    Reduction in Number of Securities Included in
Registration. In the event that the managing underwriter of any registered
offering made pursuant to subsection (b) or (c) above notifies the Company in
writing that, in its opinion, the amount of securities to be included in such
registration exceeds the amount that can be sold in such offering within a price
range acceptable to the Company and the holders of the securities being offered
(or, in the case of a registration pursuant to subsection (c) above, within a
price range acceptable to the Securityholders and the holders of the Shares),
the Company will include in such registration only the amount of securities that
the Company is so advised can be sold in such offering within such price range.
In such event, the number of securities to be included in such registration
shall be allocated among the persons participating in such offering as follows:
(i) in the case of a registration relating to a primary offering by the Company,
first, the Company shall have the right to include in such registration all
securities proposed to be sold by the Company and, second, all other persons
participating in such re gistration shall have the right to include in such
registration the balance, allocated pro rata among such persons in accordance
with the number or principal amount of securities originally proposed to be sold
by them; (ii) in the case of a registration pursuant to subsection (c) above,
first, the holders of the Securities and the Shares shall have the right to
include in such registration all Securities and Shares proposed to be sold by
such holders, pro rata among such holders in the event that not all such
Securities or Shares can be included, and, second, all other persons
participating in such registration shall have the right to include in such
registration the balance; and (iii) in all other cases, pro rata among all
persons participating in the offering in accordance with the number or principal
amount of securities originally proposed to be sold by them.

                  (e)    Other Provisions Relating to Registration Rights.
In connection with any registration pursuant to this Section:

                         (i) Upon the request of the registered holder of any
Security or Shares participating in such registration, the Company will
cooperate with any underwriters (as defined in the Act) for such holder,
including, without limitation, providing such information, certificates, comfort
letters of accountants and opinions of counsel as may be reasonably requested by
such underwriters.

                        (ii) The Company shall not be required to maintain
the effectiveness of any registration statement under subsection (b) or (c) of
this Section for a period in excess of four months or, in the case of any
registration statement under subsection (b) or (c) of this Section filed on a
Form S-3



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Registration Statement under the Act, for a period in excess of six months, or
in the case of an underwritten offering, such longer period as may be required
by the Act to enable the underwriters to complete such offering.

                       (iii) The Company will furnish to each holder of
Securities or Shares (i) at least seven days prior to the filing thereof with
the SEC, a copy of the registration statement in the form in which the Company
proposes to file the same with the SEC and, not later than the effective date
thereof, a copy of any and all amendments to such registration statement, (ii)
within five days of the filing thereof with the SEC, a copy of any and all
post-effective amendments to such registration statement, and (iii) at the
request of any such holder and, in the case of a registration pursuant to
subsection (c) of this Section, the Securityholders' Managers (as defined
below), a reasonable number of copies of a preliminary prospectus and a final
prospectus (each of which shall, as of their respective dates, comply with
Section 10 of the Act and shall not, as of such dates, include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading)
covering the offering and sale by such holders of the Securities or Shares to be
covered thereby as aforesaid.

                        (iv) The Company will advise each of such holders of
the entry of any stop order suspending the effectiveness of such registration
statement or of the initiation of any proceeding for that purpose, and, if such
stop order should be entered, use its best efforts promptly to cause such stop
order to be lifted or removed.

                         (v) For such period of time (not exceeding the
maximum period of time for which the Company is required to maintain the
effectiveness of such registration statement) as any of such holders may be
required by law to deliver a prospectus in connection with a sale of any
Securities or Shares pursuant to such registration statement, if any event shall
occur as a result of which it is necessary to amend or supplement the prospectus
forming a part of such registration statement in order to correct an untrue
statement of a material fact, or an omission to state a material fact necessary
to make the statements therein, in the light of the circumstances existing when
such prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement such prospectus to comply with any law, the
Company will forthwith prepare and furnish to each of such holders and, in the
case of a registration pursuant to subsection (c) of this Section, the
Securityholders' Managers, a reasonable number of amended or supplemented
prospectuses so that statements in the prospectuses as so amended or
supplemented will



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not, in the light of the circumstances then existing, be misleading, or so that
such prospectuses will comply with law.

                        (vi) At any time prior to the filing of a regis
tration statement pursuant to subsection (c) of this Section, the holders of
Securities or Shares making or joining in a request for such registration may
select an investment banker or bankers (collectively, the "Securityholders'
Managers") which shall be satisfactory to the Company, and the offering pursuant
to such registration statement shall be made through the Securityholders'
Managers. The Company shall enter into an underwriting agreement in customary
form with the Securityholders' Managers and will indemnify the Securityholders'
Managers, their officers and directors, and each person, if any, who controls
the Securityh olders' Managers within the meaning of the Act to the same extent
as hereinafter provided with respect to the holders of Securities or Shares
requesting such registration. Such underwriting agreement will contain
indemnification and contribution provisions substantially identical to those set
forth in clauses (ix), (x), (xi) and (xii) below or otherwise acceptable to the
underwriters.

                       (vii) The Company will qualify, file or register the
Securities or Shares being registered under the securities laws of such states
of the United States of America and of the Commonwealth of Puerto Rico as may be
reasonably designated by the holders of Securities or Shares or by the
Securityholders' Managers and will obtain the consent, authorization or approval
of any governmental agency (other than any such consent, authorization or
approval required under any statute or regulation applicable to any such holders
and not applicable to investors generally) required in connection with the
issuance of the Securities or Shares being registered or in order that such
holders may publicly sell the Securities or Shares covered by such registration
statement; provided, however, that the Company shall not be required in
connection with this subsection (vii) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.

                      (viii) All fees, disbursements and expenses incurred by
the Company in connection with any registration pursuant to subsection (b) or
(c) of this Section shall be borne by the Company, including, without
limitation, all registration and filing fees, all costs of preparation and
printing (in such quantities as the holders of Securities or Shares, or the
Securityholders' Managers, may reasonably request) of any registration statement
and related prospectus and any amendments or supplements thereto, all fees and
disbursements of counsel for the Company, the expenses of complying with
applicable securities or blue sky laws, and all costs in connection with the
prepara-
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                                    -12-

tion and delivery of such legal opinions, auditors' comfort letters or other
closing documents as the holders of Securities or Shares, or as the
Securityholders' Managers, shall reasonably request. All underwriting
commissions, expenses of the Securityholders' Managers and fees and expenses of
counsel to the selling holders of Securities or Shares shall be allocated among
the holders of Securities or Shares pro rata according to the number of
Securities or Shares being registered by each such holder or in such other
manner as such holders may agree. The Company shall not be responsible for the
fees and expenses of counsel to the selling holders of Securities or Shares.

                  (ix) The Company will indemnify and hold harmless each holder 
of Securities or Shares and any underwriter (as defined in the Act) for such
holder and each person or entity, if any, who controls such holder or
underwriter within the meaning of the Act or the Exchange Act, against any
losses, claims, damages, liabilities, costs or expenses, joint or several, or
actions in respect thereof to which such holder or underwriter or controlling
person or entity may become subject under the Act, the Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses, claims,
damages, liabilities, costs, expenses or actions in respect thereof arise out
of, or are based upon, or are related to, any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which Securities or Shares of or pertaining to such holder were registered under
the Act, any preliminary prospectus, amended preliminary prospectus, or final
prospectus contained therein, or any amendment or supplement thereto, or arise
out of, or are based upon, or are related to, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse such holder or
underwriter or controlling person or entity for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided that to the extent that
any such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement or alleged untrue statement or omission or alleged omission
made in said registration statement, said preliminary prospectus, said amended
preliminary prospectus or said final prospectus or any said amendment or
supplement in reliance upon, and in conformity with, written information
furnished to the Company by such holder or by any underwriter for such holder
specifically for use in the preparation thereof, the Company will not be so
liable to such holder or underwriter.

                  (x) Each seller of Securities or Shares, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors and
officers and each underwriter (if any) and



<PAGE>   14

                                    -13-


each person, if any, who controls the Company or any such underwriter within the
meaning of the Act or the Exchange Act, against any losses, claims, damages, or
liabilities, joint or several, to which the Company, such directors and
officers, underwriters or controlling person may become subject under the Act,
the Exchange Act, state securities or Blue Sky laws, or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Securities or Shares were registered under the Act, any preliminary prospectus
or final prospectus contained in the registration statement, or any amendment or
supplement to the registration statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with
information relating to such seller furnished in writing to the Company by or on
behalf of such seller specifically for use in connection with the preparation of
such registration statement, prospectus, amendment, or supplement.

                  (xi) Each party entitled to indemnification under subsection
(ix) or (x) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided, the counsel for the
Indemnifying Party assuming the defense of any such claim or litigation shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this subsection (xi). The Indemnified Party shall be entitled
to retain separate counsel at its own expense, provided that the Indemnifying
Party shall pay the expense of such separate counsel if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgement or enter into settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent



<PAGE>   15

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to entry of any judgement or settle such claim or litigation without the prior
written consent of the Indemnifying Party.

                  (xii) If the indemnification provided for in clause (ix) or
(x) is due in accordance with its terms but is for any reason held by a court to
be unavailable, on grounds of policy or otherwise, then the Company and the
selling holders shall contribute to the aggregate losses, claims, damages,
liabilities and expenses to which the Company and the selling holders may be
subject in such proportion as is appropriate to reflect the relative fault of
the Company and of the selling holders in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company and the selling holders shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact relates to information supplied by the Company of by the selling
holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the selling holders agree that it would not be just and equitable if
contribution pursuant to this clause (xii) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the two immediately preceding
sentences. Notwithstanding the provisions of this clause (xii), the selling
holders shall not be required to contribute any amount in excess of the amount
by which the total price at which the Securities or Shares owned by the selling
holders were offered to the public exceeds the amount of any damages which the
selling holders have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
fraudulent misrepresentation.

                                    ARTICLE 5

                       RIGHT TO PURCHASE ADDITIONAL SHARES

         SECTION 5.1. RIGHT TO PURCHASE ADDITIONAL SHARES. The Company hereby
grants to Popular the non-transferable right to buy shares of common stock of
the Company at the Conversion Price in effect from time to time (or, in the
event that the Securities shall have been converted, at the Conversion Price
that would have been in effect if any Securities were outstanding), after giving
effect to any adjustment required by the Certificate of Designation, at any time
and from time to time that the Company takes action to issue additional shares
of its common stock on or



<PAGE>   16

                                    -15-


prior to June 30, 1999, and as a result of which the sum of (i) the Shares
issued or issuable upon conversion of the Securities and the Debentures, whether
or not then held by Popular, and (ii) any shares of common stock of the Company
previously purchased by Popular pursuant to this Section (collectively, the
"Popular Shares") represents less than 5% of the fully diluted shares of common
stock of the Company, assuming conversion of all outstanding securities
convertible into common stock of the Company, whether or not convertible at the
time, and the exercise of all outstanding options, warrants and other rights to
purchase common stock of the Company, whether or not exercisable at the time
(the "fully diluted shares").

         The maximum number of shares subject to the right granted in this
Section and issuable at any time upon exercise of the right granted in this
Section shall be equal to the lesser of (i) the remainder of (A) 0.0499 times
the total number of fully diluted shares of common stock of the Company at such
time minus (B) the total number of Popular Shares and (ii) the remainder of (A)
200,000 (adjusted for combinations and subdivisions of the common stock of the
Company after September 25, 1995) minus (B) the total number of shares
previously purchased by Popular upon exercise of the right granted in this
Section.

         The right granted in this Section may be exercised by Popular no later
than 90 days after receipt by Popular of notice from the Company of a
transaction resulting in a reduction of the percentage ownership of the common
stock of the Company represented by the Popular Shares. In the event that
Popular shall at any time fail to exercise such right within such period of time
after such notice, the reference in clause (i)(A) above shall be changed to the
percentage ownership of the common stock of the Company represented by the
Popular Shares after the transaction in connection with which such notice was
given.

         Upon notice from Popular of its intention to exercise the right granted
in this Section at any time, the Company may, at its option, instead of issuing
the number of shares to be purchased by Popular, pay to Popular with respect to
each such share an amount equal to the difference between the Market Price of
such shares and the Conversion Price in effect at the time. In such event, the
reference in clause (i)(A) above shall be changed as set forth in the preceding
paragraph as if Popular had not exercised its right.

         The right granted in this Section shall expire upon the purchase of 90%
or more of the outstanding common stock of the Company pursuant to a tender
offer for all the outstanding shares of common stock of the Company or pursuant
to a merger or consolidation of the Company in which, in both the case of a



<PAGE>   17
                                    -16-



tender offer and of a merger or consolidation, the shares of Capital Stock of
the Company shall be converted into the right to receive cash, non-convertible
debt securities, non-convertible preferred stock or shares of common stock
representing in the aggregate less than 20% of the outstanding common stock of
the surviving or resulting corporation.

         No person, including any person acquiring Securities or Shares from
Popular, other than Popular or any successor entity, shall have any rights under
this Article.

         SECTION 5.2. REGISTRATION RIGHTS AND CERTAIN OTHER MATTERS. Holders of
shares of common stock of the Company issued upon the exercise of the right
granted in Section 5.1 shall have the same registration rights with respect to
such shares that holders of Securities or Shares have under Article 4, which
Article 4 shall apply, mutatis mutandis, to such shares issued upon the exercise
of the right granted in Section 5.1. References to "Shares" in such Article 4
and references to shares of common stock of the Company in Section C.3 of the
Certificate of Designation shall be deemed to include, mutatis mutandis, shares
of common stock of the Company issued or issuable upon the exercise of the right
granted in Section 5.1, except that the Company shall not be obligated to list
such shares as provided in Section C.3 of the Certificate of Designation until
the actual issuance thereof.

                                    ARTICLE 6

                         REPRESENTATIONS AND WARRANTIES

         As an inducement to Popular to enter into this Agreement and to
purchase the Securities, the Company represents and warrants to Popular that:

         SECTION 6.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW AND CONTRACTUAL
OBLIGATIONS. Each of the Company and Doral (a) is duly organized, validly
existing and in good standing as a corporation under the laws of the
Commonwealth of Puerto Rico and in each jurisdiction where its ownership of
property or conduct of business requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect; (b) has the
corporate power and authority and the legal right to own and operate its
property and to conduct business in the manner in which it does and proposes so
to do; and (c) is not in violation of any Requirement of Law or any Contractual
Obligation if such violation could have a Material Adverse Effect.

         SECTION 6.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The Company has the corporate power and authority to execute, deliver and
perform this Agreement and the Securities



<PAGE>   18
                                    -17-



and has taken all necessary corporate actions to authorize such execution,
delivery and performance. This Agreement and the Securities, when issued, have
been or will have been duly executed and delivered on behalf of the Company and
constitute or will constitute legal, valid and binding obligations of the
Company, enforceable against it in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and by general
principles of equity.

         SECTION 6.3. NO LEGAL OR CONTRACTUAL BAR. The execution, delivery and
performance of this Agreement and the Securities, including the use of the
proceeds of the Securities, do not and will not (a) violate any Requirement of
Law or any Contractual Obligation of the Company or any of its Subsidiaries, (b)
require any license, consent, authorization, approval or any other action by, or
any notice to or filing or registration with, any Governmental Authority or any
other Person, other than the filing with the Secretary of State of the
Commonwealth of Puerto Rico of a certified copy of the resolution of the Board
of Directors approving the issuance of the Securities and the terms of this
Agreement, or (c) result in the creation or imposition of any Lien on any asset
of the Company or any of its Subsidiaries.

         SECTION 6.4. FINANCIAL INFORMATION. (a) The consolidated balance sheet
of the Company and its consolidated Subsidiaries as at December 31, 1996 and the
related consolidated statements of income, retained earnings and cash flows for
the fiscal year then ended, including in each case the related schedules and
notes, reported on by Price Waterhouse, true copies of which have been
previously delivered to Popular, are complete and correct and fairly present the
consolidated financial condition of the Company and its consolidated
Subsidiaries as at the date thereof and the consolidated results of operations
and cash flows for such period, in accordance with GAAP applied on a consistent
basis.

         (b) The unaudited consolidated balance sheet of the Company and Doral
and their consolidated Subsidiaries as at March 31, 1997, and the related
unaudited consolidated statements of income, retained earnings and cash flows
for the three-month period then ended, certified by the chief financial officer
of the Company, true copies of which have been previously delivered to Popular,
are complete and correct and fairly present the consolidated financial condition
of the Company and its consolidated Subsidiaries as at the date thereof and the
consolidated results of operations and cash flows for such periods in conformity
with GAAP applied on a basis consistent



<PAGE>   19
                                    -18-



with the financial statements referred to in subsection (a) of this Section,
subject to normal year-end audit adjustments.

         (c) Neither the Company nor Doral has any material liability of any
kind, whether accrued, contingent, absolute, determined, determinable or
otherwise, and no condition, situation or set of circumstances exists that could
be reasonably expected to result in such a liability, in each case that is not
reflected in the financial statements referred to in Section 6.4(a) or 6.4(b).
Any such material liability arising in the future will be reflected in the
financial statements delivered to Popular pursuant to Section 3.1.

         (d) Since December 31, 1996, no material adverse change has occurred in
the business, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole.

         SECTION 6.5. NO MATERIAL LITIGATION. Except as set forth on Schedule
6.5, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Company,
threatened by or against the Company or any of its Subsidiaries, or against any
of the Company's or any such Subsidiary's properties or revenues that, if
adversely determined, could alone, or with any other litigation, investigation
or proceeding, affect the business, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole, in excess of a Material
Amount or could have a Material Adverse Effect.

         SECTION 6.6. TAXES. The Company and each of its Subsidiaries have filed
or caused to be filed all tax returns that are required to be filed and have
paid all taxes shown to be due and payable on such returns or on any assessments
made against them or any of their property other than taxes and assessments that
are being contested in good faith by appropriate proceedings and as to which the
Company or such Subsidiary has established adequate reserves in conformance with
GAAP.

         SECTION 6.7. INVESTMENT COMPANY ACT. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and is not controlled by any "investment company".

         SECTION 6.8. SUBSIDIARIES. The Company has no Subsidiaries other than
Doral, Doral Federal, Centro Hipotecario de Puerto Rico, Inc., RSC Corp., AAA
Financial Services Corporation, and First Florida Realty Corporation. The
Company owns, directly or through another Subsidiary, one hundred percent (100%)
of the stock of each such Subsidiary, and all of the stock of each such



<PAGE>   20
                                    -19-



Subsidiary has been duly issued and is fully paid and nonassessable.

         SECTION 6.9. USE OF PROCEEDS. The proceeds of the sale of the
Debentures were used by the Company for its general corporate purposes,
including to finance its general working capital needs and to purchase mortgage
loans and mortgage servicing rights.

         SECTION 6.10. ERISA. (a) No Prohibited Transactions, accumulated
funding deficiencies (as described in Section 302 of ERISA), withdrawals from
Multiemployer Plans or Reportable Events have occurred with respect to any Plans
or Multiemployer Plans that, in the aggregate, could subject the Company or any
of its Subsidiaries to any material tax, penalty or other liability where such
tax, penalty or liability is not covered in full, for the benefit of the Company
or such Subsidiary, by insurance; (b) no notice of intent to terminate a Plan
has been filed, nor has any Plan been terminated under Section 4041 of ERISA,
nor has the Pension Benefit Guaranty Corporation instituted proceedings to
terminate, or appoint a trustee to administer, a Plan and no event has occurred
or condition exists that might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan;
(c) the present value of all benefits liabilities (as defined in Section
4001(a)(16) of ERISA) under all Plans (based on the actuarial assumptions used
to fund the Plans) does not exceed the assets of the Plans; and (d) the
execution, delivery and performance by the Company of this Agreement and the
Securities and the use of the proceeds thereof will not involve any Prohibited
Transaction. For purposes of this Section, the following terms shall have the
following meanings:

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may from time to time be supplemented or amended, and the rules and
regulations issued thereunder as from time to time in effect.

         "ERISA Affiliate" shall mean each trade or business, including the
Company, whether or not incorporated, that together with the Company would be
treated as a single employer under Section 4001 of ERISA.

         "Multiemployer Plan" shall mean a plan described in Section 4001(a)(3)
of ERISA to which the Company or any ERISA Affiliate is required to contribute
on behalf of any of its employees.

         "Plan" shall mean any plan (other than a Multiemployer Plan) subject to
Title IV of ERISA maintained for employees of the Company or any ERISA Affiliate
(and any such plan no longer



<PAGE>   21
                                    -20-



maintained by the Company or any of its ERISA Affiliates to which the Company or
any of its ERISA Affiliates has made or was required to make any contributions
during the five years preceding the date on which such plan ceased to be
maintained).

         "Prohibited Transaction" shall mean any transaction described in
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or the
transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c)(1) of the Code that is not exempt by reason of
Section 4975(c)(2) or Section 4975(d) of the Code, or the transitional rules of
Section 2003(c) of ERISA.

         "Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, a cessation of operations described in
Section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under Section 401(a)(29) of the Code, or a failure to make a payment
required by Section 412(m) of the Code and Section 302(e) of ERISA when due.

         SECTION 6.11. AGENCY APPROVALS. Each of the Company and Doral is a
FHLMC approved Seller/Servicer, a HUD Direct Endorsement Lender, and a VA
approved Lender in good standing, and the Company is a FNMA approved
Seller/Servicer and a GNMA approved Issuer/Servicer.

         SECTION 6.12. SOLVENCY. Each of the Company and Doral is able to pay
its debts as they mature. The aggregate estimated fair market value of each of
the Company's and Doral's assets is greater than the Company's or Doral's
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities and any and all obligations hereunder and under the Securities),
respectively. Each of the Company and Doral has capital sufficient to carry on
the business and transactions in which it is engaged and all business and
transactions in which it proposes to engage.

                                    ARTICLE 7

                              CONDITIONS PRECEDENT

         SECTION 7.1. CONDITIONS PRECEDENT. It shall be a condition precedent to
the exchange of the Debentures for the Securities that Popular shall have
received the following documents and that the following conditions shall have
been satisfied:

         (a)      a certified copy of the resolution of the Board of
Directors of the Company approving the execution, delivery and



<PAGE>   22
                                    -21-



performance of this Agreement and the Securities and the transactions
contemplated herein and therein;

         (b) a certificate of the Secretary or an Assistant Secretary of the
Company certifying the names and true signatures of the officers of the Company
authorized to sign this Agreement and the Securities and the other documents
required to be executed and delivered hereunder, in each case dated as of the
date of exchange;

         (c) an opinion of Pietrantoni, Mendez & Alvarez, counsel for the
Company, in form and substance acceptable to Popular, covering such matters as
Popular may reasonably request, dated as of the date of exchange;

         (d) a copy of the Certificate of Incorporation of the Company and Doral
certified by the Secretary of State of Puerto Rico as of a recent date and by
the Secretary or Assistant Secretary of the Company as of the date of exchange
and a copy, stamped as filed with the Department of State of Puerto Rico, of the
Certificate of Designation in the form of Exhibit A;

         (e) a copy of the By-laws of the Company, certified by the Secretary 
or an Assistant Secretary of the Company as of the date of exchange, as being
accurate and complete;

         (f) a certificate of the applicable officer in the relevant
jurisdiction or other equivalent document certifying as of a recent date that
each of the Company and Doral is in good standing in each jurisdiction in which
each such party is qualified to conduct business;

         (g) an Officer's Certificate of the Company confirming compliance with
the covenants and confirming the accuracy of the representations set forth
herein as of the date of exchange;

         (h) evidence satisfactory to Popular that all acts and conditions
(including the obtaining of any necessary regulatory approvals and the making of
any required filings, recordings or registrations) required to be done and
performed and to have happened prior to the execution, delivery and performance
of this Agreement and the Securities and to constitute the same legal, valid and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws;

         (i) evidence satisfactory to Popular that the Company has become a
"bank holding company," as that term is defined in the Bank Holding Company Act
of 1956;



<PAGE>   23
                                    -22-



         (j) such other documents or legal opinions as Popular or its counsel 
may reasonably request, all in form and substance reasonably satisfactory to
Popular;

         (k) all documentation, including documentation for corporate and legal
proceedings in connection with the transactions contemplated by this Agreement
and the Securities, shall be reasonably satisfactory in form and substance to
Popular and its counsel;

         (l) the Company shall have paid all fees required to have been paid 
under this Agreement and the Securities;

         (m) no default or Event of Default shall have occurred and be 
continuing;

         (n) since December 31, 1996, no material adverse change shall have
occurred in the business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.

                                    ARTICLE 8

                                  MISCELLANEOUS

         SECTION 8.1. NOTICES. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:

                  If to the Company:

                           First Financial Caribbean Corporation
                           1159 Franklin Delano Roosevelt Avenue
                           San Juan, Puerto Rico 00920

                           Attention of:  Mr. Mario S. Levis

                           Telephone:  (787) 749-7108
                           Telecopier: (787) 792-4025

                  If to Popular:

                           Popular Corporation
                           Banco Popular Center
                           Hato Rey, Puerto Rico 00918

                           Attention of:  Mr. Jorge A. Junquera

                           Telephone:  (787) 754-1685
                           Telecopier: (787) 759-8900



<PAGE>   24
                                    -23-



         The Company or Popular by notice to the other may designate additional
or different addresses for subsequent notices or communications.

         Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.

         Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.

         SECTION 8.2. STATEMENTS OR OPINION. Each certificate or opinion with
respect to compliance with a covenant or condition provided for in this
Agreement shall include:

                  (1)    a statement that the person making such certificate or
         opinion has read such covenant or condition;

                  (2)    a brief statement as to the nature and scope of the 
         examination or investigation upon which the statements or opinions 
         contained in such certificate or opinion are based;

                  (3)    a statement that, in the opinion of such person, he has
         made such examination or investigation as is necessary to enable him to
         express an informed opinion as to whether or not such covenant or
         condition has been complied with; and

                  (4)    a statement as to whether or not, in the opinion of
         such person, such covenant or condition has been complied with.

         SECTION 8.3. WHEN TREASURY SECURITIES DISREGARDED. In determining
whether the Holders of the required principal amount of Securities have
concurred in any waiver or consent, Securities owned by the Company or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be disregarded and deemed not to
be outstanding. Also, subject to the foregoing, only Securities outstanding at
the time shall be considered in any such determination.

         SECTION 8.4.  LEGAL HOLIDAYS.  A "Legal Holiday" is a Saturday, a 
Sunday or a day on which banking institutions are not



<PAGE>   25
                                    -24-



normally open in the Commonwealth of Puerto Rico. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.

         SECTION 8.5. GOVERNING LAW. This Agreement and the Securities shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Puerto Rico but without giving effect to applicable principles of conflicts of
law to the extent that the application of the laws of another jurisdiction would
be required thereby.

         SECTION 8.6. SUCCESSORS. All agreements of the Company in this
Agreement and the Securities shall bind its successors.

         SECTION 8.7. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.

         SECTION 8.8. TABLE OF CONTENTS; HEADINGS. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.

         SECTION 8.9. REPRESENTATIONS AND COVENANTS BY POPULAR. Popular
represents that (i) no part of the funds being used by it to purchase the
Securities constitute assets of any employee benefit plan, as defined in Section
3 of ERISA and (ii) Popular has the corporate power and authority to execute,
deliver and perform this Agreement and has taken all necessary corporate action
to authorize such execution, delivery and performance. This Agreement has been
duly executed and delivered on behalf of Popular and constitutes the legal,
valid and binding obligation of Popular enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and by general principles of equity.

         SECTION 8.10. SURVIVAL OF CERTAIN PROVISIONS. The covenants and other
provisions set forth in Articles 1, 4, 5, 6 and 8 and in Sections 3.3 (with
respect to periods prior to the redemption or conversion of the Securities) and
3.5 shall survive the redemption or conversion of the Securities. All other
covenants and provisions of the Agreement shall expire upon redemption or
conversion of all the Securities, provided that rights or causes of action
accrued prior to such payment or conversion shall survive.



<PAGE>   26
                                    -25-



         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.

                                        FIRST FINANCIAL CARIBBEAN
                                               CORPORATION
                                        
                                        By:  /s/ MARIO S. LEVIS
                                           ----------------------------         
                                        Name:  Mario S. Levis            
                                        Title: Executive Vice President  
                                                                         
                                                                         
                                                 POPULAR, INC.           
                                                                         
                                                                         
                                                                         
                                        By:  /s/ JORGE A. JUNQUERA
                                           ----------------------------
                                        Name:  Jorge A. Junquera         
                                        Title:  Senior Executive         
                                                Vice President           
                                                 
                  



<PAGE>   27




                                                                     EXHIBIT A


                      [FORM OF CERTIFICATE OF DESIGNATION]




<PAGE>   28






                           CERTIFICATE OF DESIGNATION
       OF THE BOARD OF DIRECTORS OF FIRST FINANCIAL CARIBBEAN CORPORATION

                    8% CONVERTIBLE CUMULATIVE PREFERRED STOCK
                    (LIQUIDATION PREFERENCE $1,000 PER SHARE)

         (Pursuant to Article 5.01 of the General Corporation Law of the
Commonwealth of Puerto Rico)


         We, the undersigned, President and Secretary of FIRST FINANCIAL
CARIBBEAN CORPORATION (hereinafter called the "Corporation"), a corporation duly
organized and existing under the laws of the Commonwealth of Puerto Rico, do
hereby certify that, pursuant to the authority conferred upon the Board of
Directors of the Corporation by the Restated Certificate of Incorporation of the
Corporation, the said Board of Directors on June 16, 1997, adopted the following
resolutions creating a series of 20,000 shares of Serial Preferred Stock
designated as the "8% Convertible Cumulative Preferred Stock."

                  RESOLVED, that pursuant to the authority expressly granted to
         and vested in the Board of Directors of the Corporation in accordance
         with the provisions of its Restated Certificate of Incorporation, a
         series of Serial Preferred Stock of the Corporation be and it hereby is
         created.

                  FURTHER RESOLVED, that the directors have determined that the
         preferences and relative, participating, optional or other special
         rights of the shares of such series of Preferred Stock, and the
         qualifications, limitations or restrictions thereof, as stated and
         expressed herein, are under the circumstances prevailing on the date
         hereof fair and equitable to all the existing shareholders of the
         Corporation.

                  FURTHER RESOLVED, that the designation and amount of such
         series and the voting powers, preferences and relative, participating,
         optional or other special rights of the shares of such series of
         Preferred Stock, and the qualifications, limitations or restrictions
         thereof are as follows:

         A.       DESIGNATION AND AMOUNT

                  The shares of such series of Preferred Stock shall be
         designated as the "8% Convertible Cumulative Preferred Stock
         (Liquidation Preference $1,000 per share)" (hereinafter called the "8%
         Preferred Stock"), and the number of authorized shares constituting
         such series shall be 20,000.

         B.       DIVIDENDS

                  1. Holders of record of the 8% Preferred Stock ("Holders")
         will be entitled to receive, when, as and if declared by the Board of
         Directors of the Corporation, out of funds of the Corporation legally
         available therefor, cumulative cash dividends at the annual rate per
         share of 8% of their liquidation preferences, or $6.66 2/3 per share 
         per month.

                  2. Dividends on the 8% Preferred Stock will accrue from their
         date of original issuance and will be payable (when, as and if declared
         by the Board of Directors of the Corporation out of funds of the
         Corporation legally available therefor) monthly in arrears in United
         States dollars commencing on the last day of the month in which the 8%
         Preferred Stock is issued, and on the last day of each calendar month
         of each year thereafter to the holders of



<PAGE>   29
                                     -2-



         record of the 8% Preferred Stock as they appear on the books of the
         Corporation on the Business Day (as defined below) immediately
         preceding the relevant date of payment. In the case of the dividend
         payable in the month in which the 8% Preferred Stock is issued, such
         dividend shall cover the period from the date of issuance of the 8%
         Preferred Stock to the end of such much. In the event that any date on
         which dividends are payable is not a Business Day, then payment of the
         dividend payable on such date will be made on the next succeeding
         Business Day without any interest or other payment in respect of any
         such delay, except that, if such Business Day is in the next succeeding
         calendar year, such payment will be made on the Business Day
         immediately preceding the relevant date of payment, in each case with
         the same force and effect as if made on such date. A "Business Day" is
         a day other than a Saturday, Sunday or bank holiday in San Juan, Puerto
         Rico.

                  3. Dividends on the 8% Preferred Stock will be cumulative from
         their date of issuance, and will accrue, to the extent not paid, on the
         last day of each month.

                  4. The amount of dividends payable for any monthly dividend
         period will be com puted on the basis of twelve 30-day months and a
         360-day year. The amount of dividends payable for any period shorter
         than a full monthly dividend period will be computed on the basis of
         the actual number of days elapsed in such period.

                  5. Subject to any applicable fiscal or other laws and
         regulations, each dividend payment will be made by dollar check drawn
         on a bank in New York, New York or San Juan, Puerto Rico and mailed to
         the record holder thereof at such holder's address as it appears on the
         register for such 8% Preferred Stock or, in the case of holders of
         $1,000,000 or more in aggregate liquidation preference of the 8%
         Preferred Stock, by wire transfer of immediately available funds to the
         account of such holders as notified by such holders to the Corporation.

                  6. So long as any shares of the 8% Preferred Stock remain
         outstanding, the Corporation shall not declare, set apart or pay any
         dividend or make any other distribution of assets (other than dividends
         paid or other distributions made in stock of the Corporation ranking
         junior to the 8% Preferred Stock as to the payment of dividends and the
         distribution of assets upon liquidation, dissolution or winding up of
         the Corporation) on, or redeem, purchase, set apart or otherwise
         acquire (except upon conversion or exchange for stock of the
         Corporation ranking junior to the 8% Preferred Stock as to the payment
         of dividends and the distribution of assets upon liquidation,
         dissolution or winding up of the Corporation), shares of common stock
         or of any other class of stock of the Corporation ranking junior to the
         8% Preferred Stock as to the payment of dividends or the distribution
         of assets upon liquidation, dissolution or winding up of the
         Corporation, unless all accrued and unpaid dividends on the 8%
         Preferred Stock shall have been paid or are paid contemporaneously and
         the full monthly dividend on the 8% Preferred Stock for the then
         current month has been or is contemporaneously declared and paid or
         declared and set apart for payment and unless the Corporation has not
         defaulted in the payment of the redemption price of any shares of 8%
         Preferred Stock called for redemption.

                  7. When dividends are not paid in full on the 8% Preferred
         Stock and any other shares of stock of the Corporation ranking on a
         parity as to the payment of dividends with the 8% Preferred Stock, all
         dividends declared upon the 8% Preferred Stock and any such other
         shares of stock of the Corporation will be declared pro rata so that
         the amount of dividends declared per share on the 8% Preferred Stock
         and any such other shares of stock will in all cases bear to each other
         the same ratio that the liquidation preference per share of the 8%
         Preferred Stock and any such other shares of stock bear to each other.



<PAGE>   30
                                     -3-



                  8. Holders of record of the 8% Preferred Stock will not be
         entitled to any dividend, whether payable in cash, property or stock,
         in excess of the dividends provided for herein on the shares of 8%
         Preferred Stock. The Corporation may, however, at its discretion,
         declare a special dividend in an amount sufficient to allow the
         Corporation to pay dividends on any stock of the Corporation ranking
         junior to the 8% Preferred Stock in compliance with the provisions of
         Section B.6 above.

         C.       CONVERSION

                  1. A holder of a share of 8% Preferred Stock may convert it
         into common stock of the Corporation at any time before the close of
         business on December 1, 2005 (the "Expiration Date"). If a share of 8%
         Preferred Stock is called for redemption, the holder may convert it at
         any time before the close of business on the redemption date. The
         initial conversion price is $17.50 per share of common stock of the
         Corporation, subject to adjustment in certain events as provided in
         subsection 4 below (as so adjusted from time to time, the "Conversion
         Price"). To determine the number of shares of common stock of the
         Corporation issuable upon conversion of a share of 8% Preferred Stock,
         divide (a) the aggregate liquidation preference of the shares of 8%
         Preferred Stock to be converted, plus the total amount of accrued but
         unpaid dividends on such shares to the date of conversion by (b) the
         Conversion Price in effect on the conversion date. The Corporation will
         deliver a check for any fractional share.

                  2. To convert a share of 8% Preferred Stock a Holder must (1)
         complete and sign the conversion election on the back of the
         certificate, (2) surrender the certificate to the Corporation, (3)
         furnish appropriate endorsements and transfer documents if required by
         the Corporation, and (4) pay any transfer or similar tax if required.

                  3. Reservation, Listing and Issuance of Shares. The
         Corporation will at all times have authorized, and reserve and keep
         available, free from preemptive rights, for the purpose of enabling it
         to satisfy any obligation to issue shares of common stock of the
         Corporation upon the conversion of shares of 8% Preferred Stock, the
         number of shares of common stock of the Corporation deliverable upon
         conversion of the outstanding shares of 8% Preferred Stock. The
         Corporation will, at its expense, cause the shares of common stock of
         the Corporation deliverable upon conversion of the 8% Preferred Stock
         to be listed (subject to issuance or notice of issuance of such shares)
         on all stock exchanges on which the common stock is listed not later
         than the date such common stock is so listed. The Corporation agrees to
         list such shares (subject to issuance or notice of issuance) on
         NASDAQ-NMS, to the extent not already listed, promptly after the date
         of this Certificate of Designation.

                           Before taking any action which could cause an
         adjustment pursuant to subsec tion 4 below reducing the Conversion
         Price below the then par value (if any) of the shares of common stock
         of the Corporation, the Corporation will take any corporate action
         which may be necessary in order that the Corporation may validly and
         legally issue at the Conversion Price as so adjusted shares of common
         stock of the Corporation that are fully paid and non-assessable.

                           The Corporation covenants that all shares of common
         stock of the Corporation deliverable upon conversion of the 8%
         Preferred Stock will, upon issuance in accordance with the terms
         hereof, be (i) duly authorized, fully paid and non-assessable, and (ii)
         free from all taxes with respect to the issuance thereof and from all
         liens, charges and security interests created by the Corporation.




<PAGE>   31
                                     -4-



                  4. Adjustments of Conversion Price and Number of Shares of
         Common Stock Issuable upon Conversion of the 8% Preferred Stock. (i)
         Adjustment of Conversion Price upon Issuance of Common Stock. If and
         whenever, after September 25, 1995, the Corporation shall issue or sell
         any shares of common stock (except upon conversion of one or more of
         the 8.25% convertible subordinated debentures due January 1, 2006 or of
         one or more shares of the 8% Preferred Stock or upon exercise by
         Popular, Inc. of certain rights to purchase shares of common stock of
         the Corporation set forth in Article 5 of the Exchange Agreement dated
         July 9, 1997, between the Corporation and Popular, Inc.) for a
         consideration per share less than the Market Price (as hereinafter
         defined) at the time of such issue or sale, then, forthwith upon such
         issue or sale, the Conversion Price shall be reduced to the price
         (calculated to the nearest cent) determined by multiplying the
         Conversion Price in effect immediately prior to the time of such issue
         or sale by a fraction, the numerator of which shall be the sum of (a)
         the number of shares of common stock of the Corporation outstanding
         immediately prior to such issue or sale multiplied by the Market Price
         immediately prior to such issue or sale plus (b) the consideration
         received by the Corporation upon such issue or sale, and the
         denominator of which shall be the product of (c) the total number of
         shares of common stock outstanding immediately after such issue or
         sale, multiplied by (d) the Market Price immediately prior to such
         issue or sale. No adjustment of any Conversion Price, however, shall be
         made in an amount less than $0.01 per share, but any such lesser
         adjustment shall be carried forward and shall be made at the time of,
         and together with, the next subsequent adjustment which together with
         any adjustments so carried forward shall amount to $0.01 per share or
         more.

                  (b) For the purposes of this subsection 4, the following
         provisions shall also be applicable:

                      (i) Issuance of Rights or Options. In case at any time the
         Corporation shall grant (whether directly or by assumption in a merger
         or otherwise) any rights to subscribe for or to purchase, or any
         options for the purchase of, common stock or any stock or securities
         convertible into or exchangeable for common stock (such convertible or
         exchangeable stock or securities being herein called "Convertible
         Securities") whether or not such rights or options or the right to
         convert or exchange any such Convertible Securities are immediately
         exercisable, and the price per share for which common stock is issuable
         upon the conversion of such rights or options or upon conversion or
         exchange of such Convertible Securities (determined as provided below)
         shall be less than the Market Price determined as of the date of
         granting such rights or options, then the total maximum number of
         shares of common stock issuable upon the conversion of such rights or
         options or upon conversion or exchange of the total maximum amount of
         such Convertible Securities issuable upon the conversion of such rights
         or options shall (as of the date of granting of such rights or options)
         be deemed to be outstanding and to have been issued for such price per
         share. Except as provided in clause (iii) of this subsection, no
         further adjustments of any Conversion Price shall be made upon the
         actual issue of such common stock or of such Convertible Securities
         upon conversion of such rights or options or upon the actual issue of
         such common stock upon conversion or exchange of such Convertible
         Securities. For the purposes of this clause (i), the price per share
         for which common stock is issuable upon the conversion of any such
         rights or options or upon conversion or exchange of any such
         Convertible Securities shall be determined by dividing (A) the total
         amount, if any, received or receivable by the Corporation as
         consideration for the granting of such rights or options, plus the
         minimum aggregate amount of additional consideration payable to the
         Corporation upon the conversion of all such rights or options, plus, in
         the case of such rights or options which relate to Convertible
         Securities, the minimum aggregate amount of additional consideration,
         if any, payable upon the issue or sale of such Convertible Securities
         and upon the conversion or



<PAGE>   32
                                     -5-



         exchange thereof, by (B) the total maximum number of shares of common
         stock issuable upon the conversion of such rights or options or upon
         the conversion or exchange of all such Convertible Securities issuable
         upon the conversion of such rights or options.

                                    (ii)    Issuance of Convertible Securities.
         In case the Corporation shall issue (whether directly or by assumption
         in a merger or otherwise) or sell any Convertible Securities, whether
         or not the rights to exchange or convert thereunder are immediately
         exercisable, and the price per share for which common stock is issuable
         upon conversion or exchange of such Convertible Securities (determined
         as provided below) shall be less than the Market Price, determined as
         of the date of such issue or sale of such Convertible Securities, then
         the total maximum number of shares of common stock issuable upon
         conversion or exchange of all such Convertible Securities shall (as of
         the date of the issue or sale of such Convertible Securities) be deemed
         to be outstanding and to have been issued for such price per share,
         provided that (1) except as provided in clause (iii) of this
         subsection, no further adjustments of any Conversion Price shall be
         made upon the actual issue of such common stock upon conversion or
         exchange of such Convertible Securities, and (2) if any such issue or
         sale of such Convertible Securities is made upon conversion of any
         rights to subscribe for or to purchase or any option to purchase any
         such Convertible Securities for which adjustments of any Conversion
         Price have been or are to be made pursuant to other provisions of this
         subsection (b), no further adjustment of any Conversion Price shall be
         made by reason of such issue or sale. For the purposes of this clause
         (ii), the price per share for which common stock is issuable upon
         conversion or exchange of Convertible Securities shall be determined by
         dividing (A) the total amount received or receivable by the Corporation
         as consideration for the issue or sale of such Convertible Securities,
         plus the minimum aggregate amount of additional consideration, if any,
         payable to the Corporation upon the conversion or exchange thereof, by
         (B) the total maximum number of shares of common stock issuable upon
         the conversion or exchange of all such Convertible Securities.

                                    (iii)   Change in Option Price or Conversion
         Rate. If the purchase price provided for in any rights or options
         referred to in clause (i) above, or the additional consideration, if
         any, payable upon the conversion or exchange of Convertible Securities
         referred to in clause (i) or (ii) above, or the rate at which any
         Convertible Securities referred to in clause (i) or (ii) above are
         convertible into or exchangeable for common stock, shall change (other
         than under or by reason of provisions designed to protect against
         dilution), then the Conversion Price in effect at the time of such
         event shall forthwith be readjusted to the Conversion Price which would
         have been in effect at such time had such rights, options or
         Convertible Securities still outstanding provided for such changed
         purchase price, additional consideration or conversion rate, as the
         case may be, at the time initially granted, issued or sold.

                                    (iv)    Expiration of Options, Rights and
         Other Similar Conversion Privileges. On the expiration of any such
         option or right or the termination of any such right to convert or
         exchange such Convertible Securities, the Conversion Price then in
         effect hereunder shall forthwith be increased to the Conversion Price
         which would have been in effect at the time of such expiration or
         termination had such right, option or Convertible Security, to the
         extent outstanding immediately prior to such expiration or termination,
         never been issued, and the common stock issuable thereunder shall no
         longer be deemed to be outstanding. If the purchase price provided for
         in any such right or option referred to in clause (i) above or the rate
         at which any Convertible Securities referred to in clause (i) or (ii)
         above are convertible into or exchangeable for common stock, shall
         decrease at any time under or by reason of provisions with respect
         thereto designed to protect against dilution, then in case of the
         delivery of common stock



<PAGE>   33
                                     -6-



         upon the conversion of any such right or option or upon conversion or
         exchange of any such Convertible Security, the Conversion Price then in
         effect hereunder shall forthwith be adjusted to such respective amount
         as would have obtained had such right, option or Convertible Security
         never been issued as to such common stock and had adjustments been made
         upon the issuance of the shares of common stock delivered as aforesaid,
         but only if as a result of such adjustment the Conversion Price then in
         effect hereunder is thereby decreased.

                                    (v)     Stock Dividends.  In case the
         Corporation shall declare a dividend or make any other distribution
         upon any stock of the Corporation payable in common stock or
         Convertible Securities, any common stock or Convertible Securities, as
         the case may be, issuable in payment of such dividend or distribution
         shall be deemed to have been issued or sold without consideration.

                                    (vi)    Consideration for Stock.  In case
         any shares of common stock or Convertible Securities or any rights or
         options to purchase any such common stock or Convertible Securities
         shall be issued or sold for cash, the consideration received therefor
         shall be deemed to be the amount received by the Corporation therefor,
         without deduction therefrom of any expenses incurred or any
         underwriting commissions or concessions paid or allowed by the
         Corporation in connection therewith. In case any shares of common stock
         or Convertible Securities or any rights or options to purchase any such
         common stock or Convertible Securities shall be issued or sold for a
         consideration other than cash, the amount of the consideration other
         than cash received by the Corporation shall be deemed to be the fair
         value of such consideration as determined, in good faith and in the
         exercise of reasonable business judgment, by the board of directors of
         the Corporation, without deduction of any expenses incurred or any
         underwriting commissions or concessions paid or allowed by the
         Corporation in connection therewith. In case any shares of common stock
         or Convertible Securities or any rights or options to purchase such
         shares of common stock or Convertible Securities shall be issued in
         connection with any merger or consolidation in which the Corporation is
         the surviving corporation (other than any consolidation or merger in
         which the previously outstanding shares of common stock of the
         Corporation shall be changed into or exchanged for the stock or other
         securities of another corporation), the amount of consideration
         therefor shall be deemed to be the fair value as determined reasonably
         and in good faith by the board of directors of the Corporation of such
         portion of the assets and business of the non-surviving corporation as
         such board may determine to be attributable to such shares of common
         stock, Convertible Securities, rights or options, as the case may be.
         In the event of any consolidation or merger of the Corporation in which
         the Corporation is not the surviving corporation or in which the
         previously outstanding shares of common stock of the Corporation shall
         be changed into or exchanged for the stock or other securities of
         another corporation or in the event of any sale of all or substantially
         all of the assets of the Corporation for stock or other securities of
         any corporation, the Corporation shall be deemed to have issued a
         number of shares of its common stock for stock or securities or other
         property of the other corporation computed on the basis of the actual
         exchange ratio on which the transaction was predicated and for a
         consideration equal to the fair market value on the date of such
         transaction of all such stock or securities or other property of the
         other corporation, and if any such calculation results in adjustment of
         the Conversion Price, the determination of the number of shares of
         common stock issuable upon conversion of the Securities immediately
         prior to such merger, consolidation or sale, for purposes of subsection
         (e) below, shall be made after giving effect to such adjustment of the
         Conversion Price.

                                    (vii)   Record Date.  In case the
         Corporation shall take a record of the holders of its common stock for
         the purpose of entitling them (A) to receive a dividend or



<PAGE>   34
                                     -7-



         other distribution payable in common stock or in Convertible
         Securities, or (B) to subscribe for or purchase common stock or
         Convertible Securities, then such record date shall be deemed to be the
         date of the issue or sale of the shares of common stock deemed to have
         been issued or sold upon the declaration of such dividend or the making
         of such other distribution or the date of the granting of such right of
         subscription or purchase, as the case may be.

                                (viii)  Treasury Shares.  The number of shares
         of common stock outstanding at any given time shall not include shares
         owned or held by or for the account of the Corporation, and the
         disposition of any such shares shall be considered an issue or sale of
         common stock for the purposes of this subsection (b).

                                (ix)    Definition of Market Price.  "Market 
         Price" shall mean the average of the daily closing prices per share of
         the common stock for the ten consecutive trading days immediately
         preceding the day as of which "Market Price" is being determined,
         except that, in the case of an underwritten bona fide public offering,
         "Market Price" shall mean the initial public offering price. The
         closing price for each day shall be the last sale price regular way or,
         in case no such sale takes place on such day, the average of the
         closing bid and asked prices regular way, in either case on the New
         York Stock Exchange, or, if shares of the common stock are not listed
         or admitted to trading on the New York Stock Exchange, on the principal
         national securities exchange (including for this purpose the
         NASDAQ-NMS) on which the shares are listed or admitted to trading, or
         if the shares are not so listed or admitted to trading, the average of
         the highest reported bid and lowest reported asked prices as furnished
         by the National Association of Securities Dealers, Inc. through NASDAQ
         or through a similar organization if NASDAQ is no longer reporting such
         information. If shares of the common stock are not listed or admitted
         to trading on any exchange or quoted through NASDAQ or any similar
         organization, the "Market Price" shall be deemed to be the higher of
         (A) the book value of a share of the common stock as determined by any
         firm of independent public accountants of recognized standing, selected
         by the board of directors of the Corporation, as at the last day of any
         month ending within sixty days preceding the date as of which the
         determination is to be made or (B) the fair value thereof determined in
         good faith by an independent brokerage firm or Standard & Poor's
         Corporation as of a date which is within fifteen days of the date as of
         which the determi nation is to be made (the fees and expenses of any
         such independent public accountants, independent brokerage firm or
         other firm engaged pursuant to subclauses (A) and (B) of this clause
         (ix) to be paid by the Corporation).

                                (x)     Determination of Market Price under
         Certain Circumstances. Anything herein to the contrary notwithstanding,
         in case the Corporation shall issue any shares of common stock or
         Convertible Securities in connection with the acquisition by the
         Corporation of the stock or assets of any other corporation or the
         merger of any other corpora tion into the Corporation, the Market Price
         shall be determined as of the date the number of shares of common stock
         or Convertible Securities (or in the case of Convertible Securities
         other than stock, the aggregate principal amount of Convertible
         Securities) was determined (as set forth in a written agreement between
         the Corporation and the other party to the transaction) rather than on
         the date of issuance of such shares of common stock or Convertible
         Securities.

                                (xi)    Certain Issues Excepted.  Anything
         herein to the contrary notwithstanding, the Corporation shall not be
         required to make any adjustment of any Conversion Price in case of the
         issuance of shares of common stock (1) upon the conversion of options
         or rights relating to up to 500,000 shares (subject to adjustment for
         stock splits, stock combinations, stock dividends and similar events)
         of the Corporation's common stock granted or



<PAGE>   35


                                     -8-


         provided or to be granted or provided under the Corporation's stock
         option plan, as in effect on July 9, 1997, or (2) under the
         Corporation's restricted stock plan, as in effect on July 9, 1997, up
         to a maximum of 250,000 shares (subject to adjustment for stock splits,
         stock combinations, stock dividends and similar events), and shall not
         be required to make any such adjustment upon the granting of any
         options or rights referred to above if and to the extent that issuance
         of the shares covered thereby is excepted by this clause.

                           (c) Adjustment for Certain Special Dividends. In
         case the Corporation shall declare a dividend upon the common stock
         payable otherwise than out of earnings or earned surplus, determined in
         accordance with Generally Accepted Accounting Principles, and otherwise
         than in common stock or Convertible Securities, the Conversion Price in
         effect immediately prior to the declaration of such dividend shall be
         reduced by an amount equal, in the case of a dividend in cash, to the
         amount per share of the common stock so declared as payable otherwise
         than out of earnings or earned surplus or, in the case of any other
         dividend, to the fair value per share of the common stock of the
         property so declared as payable otherwise than out of earnings or
         earned surplus, as determined, reasonably and in good faith, by the
         board of directors of the Corporation. For the purposes of the
         foregoing a dividend other than in cash shall be considered payable out
         of earnings or earned surplus (other than revaluation or
         paid-in-surplus) only to the extent that such earnings or earned
         surplus are charged an amount equal to the fair value of such dividend,
         as determined, reasonably and in good faith, by the board of directors
         of the Corporation. Such reductions shall take effect as of the date on
         which a record is taken for the purpose of such dividend, or, if a
         record is not taken, the date as of which the holders of common stock
         of record entitled to such dividend are determined.

                           (d) Subdivision or Combination of Stock. In case the
         Corporation shall at any time subdivide the outstanding shares of
         common stock into a greater number of shares, the Conversion Price in
         effect immediately prior to such subdivision shall be proportionately
         reduced, and conversely, in case the outstanding shares of common stock
         shall be combined into a smaller number of shares, the Conversion Price
         in effect immediately prior to such combination shall be
         proportionately increased.

                           (e) Adjustments for Consolidation, Merger, Sale of
         Assets, Reorganization, etc. In case the Corporation (a) consolidates
         with or merges into any other corporation and is not the continuing or
         surviving corporation of such consolidation or merger, or (b) permits
         any other corporation to consolidate with or merge into the Corporation
         and the Corporation is the continuing or surviving corporation but, in
         connection with such consolidation or merger, the common stock is
         changed into or exchanged for stock or other securities of any other
         corporation or cash or any other assets, or (c) transfers all or
         substantially all of its properties and assets to any other
         corporation, or (d) effects a capital reorganization or
         reclassification of the capital stock of the Corporation in such a way
         that holders of common stock shall be entitled to receive stock,
         securities, cash or assets with respect to or in exchange for common
         stock, then, and in each such case, proper provision shall be made so
         that, upon the basis and upon the terms and in the manner provided in
         this subsection (e), the Holders, upon the conversion of each Security
         at any time after the consummation of such consolidation, merger,
         transfer, reorganization or reclassification, shall be entitled to
         receive (at the aggregate Conversion Price in effect for all shares of
         common stock issuable upon such conversion immediately prior to such
         consummation as adjusted to the time of such transaction), in lieu of
         shares of common stock issuable upon such conversion prior to such
         consummation, the stock and other securities, cash and assets to which
         such Holder would have been entitled upon such consummation if such
         Holder had so converted such Security immediately prior thereto
         (subject



<PAGE>   36
                                     -9-



         to adjustments subsequent to such corporate action as nearly equivalent
         as possible to the adjust ments provided for in this subsection 4).

                           (f) Notice of Adjustment. Upon any adjustment of the
         Conversion Price, then and in each such case the Corporation shall
         promptly deliver a notice to the registered holder of the Securities,
         which notice shall state the Conversion Price resulting from such
         adjustment, setting forth in reasonable detail the method of
         calculation and the facts upon which such calculation is based.

                           (g) Other Notices.  In case at any time:

                               (1)     the Corporation shall declare or pay any
         dividend on or make any distribution with respect to its common stock,
         other than quarterly cash dividends consistent with past practice;

                               (2)     the Corporation shall offer for 
         subscription pro rata to the holders of its common stock any additional
         shares of stock of any class or other rights;

                               (3)     there shall be any capital
         reorganization, or reclassification of the capital stock of the
         Corporation, or consolidation or merger of the Corporation with another
         corporation (other than a Subsidiary of the Corporation in which the
         Corporation is the surviving or continuing corporation and no change
         occurs in the Corporation's common stock), or sale of all or
         substantially all of its assets to, another corporation;

                               (4)     there shall be a voluntary or involuntary
         dissolution, liquidation, bankruptcy, assignment for the benefit of
         creditors, or winding up of the Corporation; or

                               (5)     the Corporation proposes to take any
         other action or an event occurs which would require an adjustment of
         the Conversion Price pursuant to subsection (h) below;

         then, in any one or more of said cases, the Corporation shall give
         written notice, addressed to each Holder at the address of such Holder
         as shown on the books of the Corporation, of (1) the date on which the
         books of the Corporation shall close or a record shall be taken for
         such dividend, distribution or subscription rights, or (2) the date
         (or, if not then known, a reasonable approximation thereof by the
         Corporation) on which such reorganization, reclassification,
         consolidation, merger, sale, dissolution, liquidation, bankruptcy,
         assignment for the benefit of creditors, winding up or other action, as
         the case may be, shall take place. Such notice shall also specify (or,
         if not then known, reasonably approximate) the date as of which the
         holders of common stock of record shall participate in such dividend,
         distribution or subscription rights, or shall be entitled to exchange
         their common stock for securities or other property deliverable upon
         such reorganization, reclassification, consolidation, merger, sale,
         dissolution, liquidation, bankruptcy, assignment for the benefit of
         creditors, winding up, or other action, as the case may be. Such
         written notice shall be given at least twenty days prior to the action
         in question and not less than twenty days prior to the record date or
         the date on which the Corporation's transfer books are closed in
         respect thereto.

                           (h) Certain Events. If any event occurs as to
         which in the reasonable opinion of the Corporation, in good faith, the
         other provisions of this subsection 4 are not strictly



<PAGE>   37
                                    -10-



         applicable but the lack of any adjustment would not in the opinion of
         the Corporation fairly protect the conversion rights of the Holders in
         accordance with the basic intent and principles hereof, or if strictly
         applicable would not fairly protect the conversion rights of the
         Holders in accordance with the basic intent and principles hereof, then
         the Corporation shall appoint a firm of independent certified public
         accountants (which may be the regular auditors of the Corporation) of
         recognized national standing, which shall give their opinion upon the
         adjustment, if any, on a basis consistent with the basic intent and
         principles established in the other provisions of this subsection 4,
         necessary to preserve, without dilution, the conversion rights of the
         Holders. Upon receipt of such opinion, the Corporation shall forthwith
         make the adjustments described therein.

                           (i) All calculations under this subsection 4 shall
         be made to the nearest cent or to the nearest one hundredth (1/100) of
         a share, as the case may be.

                           (j) In any case in which the provisions hereof
         require that an adjustment shall become effective immediately after a
         record date for an event, the Corporation may defer until the
         occurrence of such event (i) issuing to the Holder of any Security
         converted after such record date and before the occurrence of such
         event the additional shares of common stock issuable upon such
         conversion by reason of the adjustments required by such event over and
         above the shares of common stock issuable upon such conversion before
         giving effect to such adjustment and (ii) paying to such Holder any
         amount in cash in lieu of a fractional share of common stock; provided,
         however, that the Corporation shall deliver to such Holder a due bill
         or other appropriate instrument evidencing such Holder's right to
         receive such additional shares and such cash upon the occurrence of the
         event requiring such adjustment.

         D.      REDEMPTION AT THE OPTION OF THE CORPORATION

                 1. The shares of the 8% Preferred Stock are not redeemable
         prior to January 1, 2001. On and after that date, the shares of the 8%
         Preferred Stock will be redeemable in whole or in part from time to
         time at the option of the Corporation, with the consent of the Board of
         Governors of the Federal Reserve System, upon not less than thirty nor
         more than sixty days' notice by mail, at the redemption prices set
         forth below, during the twelve-month periods beginning on January 1 of
         the years set forth below, plus accrued and unpaid dividends to the
         date fixed for redemption.

<TABLE>
<CAPTION>
                      YEAR                                           REDEMPTION PRICE 
                      ----                                           ----------------
<S>                                                                    <C>    
2001 ...................................................               $   1,020.00
2002 ...................................................               $   1,015.00
2003 ...................................................               $   1,010.00
2004 ...................................................               $   1,005.00
2005 and thereafter ....................................               $   1,000.00
</TABLE>
                                        


                  2. In the event that less than all of the outstanding shares
         of the 8% Preferred Stock are to be redeemed in any redemption at the
         option of the Corporation, the total number of shares to be redeemed in
         such redemption shall be determined by the Board of Directors and the
         shares to be redeemed shall be allocated pro rata or by lot as may be
         determined by the Board of Directors or by such other method as the
         Board of Directors may approve and deem equitable, including any method
         to conform to any rule or regulation of any national or regional stock



<PAGE>   38
                                     -11-



         exchange or automated quotation system upon which the shares of the 8%
         Preferred Stock may at the time be listed or eligible for quotation.

                  3. Notice of any proposed redemption shall be given by the
         Corporation by mailing a copy of such notice to the holders of record
         of the shares of 8% Preferred Stock to be redeemed, at their address of
         record, not more than sixty nor less than thirty days prior to the
         redemption date. The notice of redemption to each holder of shares of
         8% Preferred Stock shall specify the number of shares of 8% Preferred
         Stock to be redeemed, the redemption date and the redemption price
         payable to such holder upon redemption, and shall state that from and
         after said date dividends thereon will cease to accrue. If less than
         all the shares owned by a holder are then to be redeemed at the option
         of the Corporation, the notice shall also specify the number of shares
         of 8% Preferred Stock which are to be redeemed and the numbers of the
         certificates representing such shares. Any notice which is mailed as
         herein provided shall be conclusively presumed to have been duly given,
         whether or not the stockholder receives such notice; and failure duly
         to give such notice by mail, or any defect in such notice, to the
         holders of any stock designated for redemption shall not affect the
         validity of the proceedings for the redemption of any other shares of
         8% Preferred Stock.

                  4. Notice having been mailed as aforesaid, from and after the
         redemption date (unless default be made in the payment of the
         redemption price for any shares to be redeemed), all dividends on the
         shares of 8% Preferred Stock called for redemption shall cease to
         accrue and all rights of the holders of such shares as stockholders of
         the Corporation by reason of the ownership of such shares (except the
         right to receive the redemption price, on presentation and surrender of
         the respective certificates representing the redeemed shares), shall
         cease on the redemption date, and such shares shall not after the
         redemption date be deemed to be outstanding. In case less than all the
         shares represented by any such certificate are redeemed, a new
         certificate shall be issued without cost to the holder thereof
         representing the unredeemed shares.

                  5. At its option, the Corporation may, on or prior to the
         redemption date, irrevo cably deposit the aggregate amount payable upon
         redemption of the shares of the 8% Preferred Stock to be redeemed with
         a bank or trust company designated by the Board of Directors having its
         principal office in New York, New York, San Juan, Puerto Rico, or any
         other city in which the Corporation shall at that time maintain a
         transfer agency with respect to its capital stock, and having a
         combined capital and surplus (as shown by its latest published
         statement) of at least $50,000,000 (hereinafter referred to as the
         "Depositary"), to be held in trust by the Depositary for payment to the
         holders of the shares of the 8% Preferred Stock then to be redeemed. If
         such deposit is made and the funds so deposited are made immediately
         available to the holders of the shares of the 8% Preferred Stock to be
         redeemed, the Corporation shall thereupon be released and discharged
         (subject to the provisions of Section D.6) from any obligation to make
         payment of the amount payable upon redemption of the shares of the 8%
         Preferred Stock to be redeemed, and the holders of such shares shall
         look only to the Depositary for such payment.

                  6. Any funds remaining unclaimed at the end of two years from
         and after the redemption date in respect of which such funds were
         deposited shall be returned to the Corporation forthwith and thereafter
         the holders of shares of the 8% Preferred Stock called for redemption
         with respect to which such funds were deposited shall look only to the
         Corporation for the payment of the redemption price thereof. Any
         interest accrued on any funds deposited with the Depositary shall
         belong to the Corporation and shall be paid to it from time to time on
         demand.



<PAGE>   39
                                     -12-



                  7. Any shares of the 8% Preferred Stock which shall at any
         time have been redeemed shall, after such redemption, have the status
         of authorized but unissued shares of Pre ferred Stock, without
         designation as to series, until such shares are once more designated as
         part of a particular series by the Board of Directors.

         E.      LIQUIDATION PREFERENCE

                 1. Upon any voluntary or involuntary liquidation, dissolution,
         or winding up of the Corporation, the then record holders of shares of
         8% Preferred Stock will be entitled to receive out of the assets of the
         Corporation available for distribution to shareholders, before any
         distribution is made to holders of common stock or any other equity
         securities of the Corporation ranking junior upon liquidation to the 8%
         Preferred Stock, distributions upon liquidation in the amount of $1,000
         per share plus an amount equal to any accrued and unpaid dividends to
         the date of payment. Such amount shall be paid to the holders of the 8%
         Preferred Stock prior to any payment or distribution to the holders of
         the common stock of the Corporation or of any other class of stock or
         series thereof of the Corporation ranking junior to the 8% Preferred
         Stock in respect of dividends or as to the distribution of assets upon
         liquidation.

                  2. If upon any voluntary or involuntary liquidation,
         dissolution or winding up of the Corporation, the amounts payable with
         respect to the 8% Preferred Stock and any other shares of stock of the
         Corporation ranking as to any such distribution on a parity with the 8%
         Preferred Stock are not paid in full, the holders of the 8% Preferred
         Stock and of such other shares will share ratably in any such
         distribution of assets of the Corporation in proportion to the full
         liquidation preferences to which each is entitled. After payment of the
         full amount of the liquidation preference to which they are entitled,
         the holders of shares of 8% Preferred Stock will not be entitled to any
         further participation in any distribution of assets of the Corporation.

                  3. Neither the consolidation or merger of the Corporation with
         any other corpora tion, nor any sale, lease or conveyance of all or any
         part of the property or business of the Corporation, shall be deemed to
         be a liquidation, dissolution, or winding up of the Corporation.

                  4. If the assets distributable upon any dissolution,
         liquidation, or winding up of the Corporation shall be insufficient to
         permit the payment to the holders of the 8% Preferred Stock of the full
         preferential amounts aforesaid, then such assets or the proceeds
         thereof shall be distributed among the holders of the 8% Preferred
         Stock ratably in proportion to the respective amounts the holders of
         such shares of stock would be entitled to receive if they were paid the
         full preferential amounts aforesaid.

         F.       VOTING RIGHTS

                  1. Except as described in this Section F, or except as
         required by applicable law, holders of the 8% Preferred Stock will not
         be entitled to receive notice of or attend or vote at any meeting of
         stockholders of the Corporation.

                  2. Any variation or abrogation of the rights, preferences and
         privileges of the 8% Preferred Stock by way of amendment of the
         Corporation's Restated Certificate of Incorporation or otherwise
         (including, without limitation, the authorization or issuance of any
         shares of the Corporation ranking, as to dividend rights or rights on
         liquidation, winding up and dissolution, senior to the 8% Preferred
         Stock) shall not be effective (unless otherwise required by applicable
         law) except with the consent in writing of the holders of at least a
         majority of the outstanding



<PAGE>   40
                                     -13-



         shares of the 8% Preferred Stock or with the sanction of a special
         resolution passed at a separate general meeting by the holders of at
         least a majority of the outstanding shares of the 8% Preferred Stock.
         Notwithstanding the foregoing, the Corporation may, without the consent
         or sanction of the holders of the 8% Preferred Stock, authorize and
         issue shares of the Corporation ranking, as to dividend rights and
         rights on liquidation, winding up and dissolution, on a parity with or
         junior to the 8% Preferred Stock.

                  3. No vote of the holders of the 8% Preferred Stock will be
         required for the Corporation to redeem or purchase and cancel the 8%
         Preferred Stock in accordance with the Restated Certificate of
         Incorporation of the Corporation.

                  4. The Corporation will cause a notice of any meeting at which
         holders of any series of Preferred Stock are entitled to vote to be
         mailed to each record holder of such series of Preferred Stock. Each
         such notice will include a statement setting forth (i) the date of such
         meeting, (ii) a description of any resolution to be proposed for
         adoption at such meeting on which such holders are entitled to vote and
         (iii) instructions for deliveries of proxies.

                  5. Except as set forth in this Section F, holders of 8%
         Preferred Stock shall have no special voting rights and their consent
         shall not be required (except to the extent they are entitled to vote
         as set forth herein) for taking any corporate action.

         G.       RANK

                  The 8% Preferred Stock will, with respect to dividend rights
         and rights on liquidation, winding up and dissolution, rank (i) senior
         to all classes of common stock of the Corporation and to all other
         equity securities issued by the Corporation the terms of which
         specifically provide that such equity securities will rank junior to
         the 8% Preferred Stock (or to a number of series of Preferred Stock
         which includes the 8% Preferred Stock); (ii) on a parity with all
         equity securities issued by the Corporation the terms of which
         specifically provide that such equity securities will rank on a parity
         with the 8% Preferred Stock (or with a number of series of Preferred
         Stock which includes the 8% Preferred Stock); and (iii) junior to all
         equity securities issued by the Corporation the terms of which
         specifically provide that such equity securities will rank senior to
         the 8% Preferred Stock (or to a number of series of Preferred Stock
         which includes the 8% Preferred Stock). For this purpose, the term
         "equity securities" does not include debt securities convertible into
         or exchangeable for equity securities.

         H.       FORM OF CERTIFICATE FOR 8% PREFERRED STOCK; TRANSFER AND
                  REGISTRATION

                  1. The 8% Preferred Stock shall be issued in registered form
         only. The Corporation may treat the record holder of a share of 8%
         Preferred Stock, including the Depository Trust Company and its nominee
         and any other holder that holds such share on behalf of any other
         person, as such record holder appears on the books of the registrar for
         the 8% Preferred Stock, as the sole owner of such share for all
         purposes.

                  2. The transfer of a share of 8% Preferred Stock may be
         registered upon the surrender of the certificate evidencing the share
         of 8% Preferred Stock to be transferred, together with the form of
         transfer endorsed on it duly completed and executed, at the office of
         the transfer agent and registrar.




<PAGE>   41
                                     -14-



                  3. Registration of transfers of shares of 8% Preferred Stock
         will be effected without charge by or on behalf of the Corporation, but
         upon payment (or the giving of such indemnity as the transfer agent and
         registrar may require) in respect of any tax or other governmental
         charges which may be imposed in relation to it.

                  4. The Corporation will not be required to register the
         transfer of a share of 8% Preferred Stock after such share has been
         called for redemption.

         I.       REPLACEMENT OF LOST CERTIFICATES

                  If any certificate for a share of 8% Preferred Stock is
         mutilated or alleged to have been lost, stolen or destroyed, a new
         certificate representing the same share shall be issued to the holder
         upon request subject to delivery of the old certificate or, if alleged
         to have been lost, stolen or destroyed, compliance with such conditions
         as to evidence, indemnity and the payment of out-of-pocket expenses of
         the Corporation in connection with the request as the Board of
         Directors of the Corporation may determine.

         J.       NO PREEMPTIVE RIGHTS

                  Holders of the 8% Preferred Stock will have no preemptive
         rights to purchase any securities of the Corporation.

         The undersigned hereby certify that the capital of the Corporation will
not be reduced under or by reason of the adoption of the above resolutions
providing for the creation of the above described series of Preferred Stock.

         IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President, Zoila
Levis, and its Secretary, Richard Bonini, this day of, 1997

                                        FIRST FINANCIAL CARIBBEAN CORPORATION



                                        By:___________________________________
                                                     Zoila Levis
                                                     President

[CORPORATE SEAL]

                                        By:__________________________________
                                                    Richard Bonini
                                                      Secretary





<PAGE>   42



                                                                      EXHIBIT B



                               [FORM OF SECURITY]



<PAGE>   43

<TABLE>
<S>             <C>                                                                       <C>
                8% CONVERTIBLE CUMULATIVE
                PREFERRED STOCK (LIQUIDATION
                PREFERENCE, $1,000 PER SHARE)


 NUMBER                                                                                                 SHARES
                                    FIRST FINANCIAL CARIBBEAN CORPORATION             
________                INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PUERTO RICO                 ________
                                                                     

                                                                                          SEE REVERSE FOR CERTAIN DEFINITIONS

THIS IS TO CERTIFY that




is the owner of

        FULLY PAID AND NON-ASSESSABLE SHARES OF 8% CONVERTIBLE CUMULATIVE
PREFERRED STOCK (LIQUIDATION PREFERENCE, $1,000 PER SHARE), OF THE PAR VALUE OF
$1 EACH, OF FIRST FINANCIAL CARIBBEAN CORPORATION, transferable on the books of
the Corporation in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.  This certificate is not valid until signed by
the Corporation.

        WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.

Dated:

AUTHORIZED SIGNATURE


Secretary                                       President


</TABLE>

<PAGE>   44
                     FIRST FINANCIAL CARIBBEAN CORPORATION

        The Corporation will furnish without charge to each shareholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of the 8% Convertible Cumulative Preferred
Stock (Liquidation Preference, $1,000 per share) and of each other class of
stock or series which the Corporation is authorized to issue and the
qualifications, limitations or restrictions of such preferences and/or rights. 
Any request should be made to the Secretary of the Corporation.



        The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:


<TABLE>
        <S>                                             <C>
        TEN COM -- as tenants in common                 UNIF GIFT MIN ACT -- _________________ Custodian ______________
                                                                                   (Cust)                 (Minor)
        TEN ENT -- as tenants by the entireties                              under Uniform Gifts to Minors 

        JT TEN  -- as joint tenants with right of                            Act ________________________
                   survivorship and not as tenants                                       (State)
                   in common

                     Additional abbreviations may also be used through not in the above list.
</TABLE>

        FOR VALUE RECEIVED, _________________________________ hereby sell,
assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OR ASSIGNEE

[____________________________________]_________________________________________

_______________________________________________________________________________
   Please print or typewrite name and address, including postal zip code of
                                   assignee.

_______________________________________________________________________________
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint 

________________________________________________________________________ Shares
to transfer said stock on the books of the within-named Corporation with full
power of substitution in the premises.

______________________________________________________________________ Attorney,


Dated,  ________________________


                                        _______________________________________
        


        A form of election to convert for use by holders desiring to convert
shares evidenced by the foregoing certificate is attached to the back of this
certificate.
<PAGE>   45






                           FORM OF ELECTION TO CONVERT


               (To be executed by the Holder if the Holder desires
                to convert Securities evidenced by the foregoing
                              Security certificate)


To [Name of Company]:


         The undersigned hereby irrevocably elects to convert _____ shares of
the Company's 8% Convertible Cumulative Preferred Stock (Liquidation Preference
$1,000 per Share) evidenced by the foregoing Security certificate for
________________ full shares of common stock issuable upon conversion of said
number of shares of preferred stock as provided for in the foregoing Security
certificate and in the Certificate of Designation referred to therein.

         The undersigned requests that certificates for such shares be issued in
the name of ____________________.

                                            Please insert social security or
                                               tax identification number


                                            --------------------------------

------------------------------               
(please print name and address)             --------------------------------

----------------------------------------------------------------------------


         If said number of shares of preferred stock shall not be the entire
number of shares of preferred stock evidenced by the



<PAGE>   46
                                     -2-


foregoing Security certificate, the undersigned requests that a new Security
certificate evidencing the number of shares of preferred stock not so converted
be issued in the name of and delivered to

-------------------------------------------------------------------------------
                         (please print name and address)

-------------------------------------------------------------------------------


-------------------------------------------------------------------------------

Dated: _____________                                   Name of Holder
                                                          (print):



                                                 (By:)_________________________
                                              (Title:)



Signature Guarantee:___________________________________________________________
                    (Signature must be guaranteed by a member
                    firm of the New York Stock Exchange or a
                    commercial bank or trust company)