0001104659-11-056392.txt : 20111017 0001104659-11-056392.hdr.sgml : 20111017 20111017172608 ACCESSION NUMBER: 0001104659-11-056392 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20111017 DATE AS OF CHANGE: 20111017 GROUP MEMBERS: OAKTREE AIF HOLDINGS, INC. GROUP MEMBERS: OAKTREE AIF INVESTMENTS, L.P. GROUP MEMBERS: OAKTREE CAPITAL GROUP HOLDINGS GP, LLC GROUP MEMBERS: OAKTREE CAPITAL GROUP HOLDINGS, L.P. GROUP MEMBERS: OAKTREE CAPITAL GROUP, LLC GROUP MEMBERS: OAKTREE CAPITAL I, L.P. GROUP MEMBERS: OAKTREE FF INVESTMENT FUND AIF (DELAWARE), L.P. GROUP MEMBERS: OAKTREE FUND AIF SERIES, L.P. SERIES I GROUP MEMBERS: OAKTREE FUND GP AIF, LLC GROUP MEMBERS: OAKTREE FUND GP I, L.P. GROUP MEMBERS: OAKTREE FUND GP III, L.P. GROUP MEMBERS: OAKTREE FUND GP, LLC GROUP MEMBERS: OAKTREE HOLDINGS, LLC GROUP MEMBERS: OAKTREE PRINCIPAL FUND V (DELAWARE), L.P. GROUP MEMBERS: OCM HOLDINGS I, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST BANCORP /PR/ CENTRAL INDEX KEY: 0001057706 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 660561882 STATE OF INCORPORATION: PR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-54677 FILM NUMBER: 111144327 BUSINESS ADDRESS: STREET 1: 1519 PONCE DE LEON AVE STREET 2: SANTURCE CITY: SAN JUAN STATE: PR ZIP: 00908-0146 BUSINESS PHONE: 7877298200 MAIL ADDRESS: STREET 1: 1519 PONCE DE LEON AVE STREET 2: PO BOX 9146 CITY: SAN JUAN STATE: PR ZIP: 00908-0146 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Oaktree Capital Group Holdings GP, LLC CENTRAL INDEX KEY: 0001403525 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 333 SOUTH GRAND AVENUE STREET 2: 28TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: (213) 830-6300 MAIL ADDRESS: STREET 1: 333 SOUTH GRAND AVENUE STREET 2: 28TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 SC 13D 1 a11-28060_1sc13d.htm SC 13D

 

 

UNITED STATES

 

 

SECURITIES AND EXCHANGE COMMISSION

 

 

Washington, D.C. 20549

 

 

 

 

 

SCHEDULE 13D

 

 

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO

RULE 13D-2(A)

 

Under the Securities Exchange Act of 1934
(Amendment No.     )*

 

First BanCorp

(Name of Issuer)

 

Common Stock, par value $0.10 per share

(Title of Class of Securities)

 

318672102

(CUSIP Number)

 

Todd Molz

Managing Director and General Counsel

Oaktree Capital Group Holdings GP, LLC

333 South Grand Avenue, 28th Floor

Los Angeles, California 90071

(213) 830-6300

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

 

October 7, 2011

(Date of Event Which Requires Filing of this Statement)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

 

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

 

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 


 


 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Principal Fund V (Delaware), L.P.

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
WC

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
PN

 

1



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Fund GP, LLC (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
OO

 


(1)           Solely in its capacity as the general partner of Oaktree Principal Fund V (Delaware), L.P.

 

2



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Fund GP I, L.P. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
PN

 


(1)           Solely in its capacity as the managing member of Oaktree Fund GP, LLC.

 

3



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Capital I, L.P. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
PN

 


(1)           Solely in its capacity as the general partner of Oaktree Fund GP I, L.P.

 

4


 


 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
OCM Holdings I, LLC (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
OO

 


(1)           Solely in its capacity as the general partner of Oaktree Capital I, L.P.

 

5



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Holdings, LLC (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
OO

 


(1)           Solely in its capacity as the managing member of OCM Holdings I, LLC.

 

6



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Capital Group, LLC (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power

 

8.

Shared Voting Power
41,155,686

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
41,155,686

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
41,155,686

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
20.1%

 

 

14.

Type of Reporting Person
OO

 


(1)           Solely in its capacity as the managing member of Oaktree Holdings, LLC

 

7



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Capital Group Holdings, L.P. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power

 

8.

Shared Voting Power
49,746,992

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
49,746,992

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
49,746,992

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
24.3%

 

 

14.

Type of Reporting Person
PN

 


(1)           Solely in its capacity as the holder of a majority of the voting units of Oaktree Capital Group, LLC and Oaktree AIF Holdings, Inc.

 

8


 


 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Capital Group Holdings GP, LLC (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power

 

8.

Shared Voting Power
49,746,992

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
49,746,992

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
49,746,992

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
24.3%

 

 

14.

Type of Reporting Person
OO

 


(1)           Solely in its capacity as the general partner of Oaktree Capital Group Holdings, L.P.

 

9



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree FF Investment Fund AIF (Delaware), L.P. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
WC

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
8,591,306

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
8,591,306

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
8,591,306

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
4.2%

 

 

14.

Type of Reporting Person
PN

 

10



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Fund AIF Series, L.P. – Series I (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
8,591,306

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
8,591,306

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
8,591,306

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
4.2%

 

 

14.

Type of Reporting Person
PN

 


(1)           Solely in its capacity as the general partner of Oaktree FF Investment Fund AIF (Delaware), L.P.

 

11



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Fund GP AIF, LLC (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
8,591,306

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
8,591,306

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
8,591,306

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
4.2%

 

 

14.

Type of Reporting Person
OO

 


(1)           Solely in its capacity as the general partner of Oaktree Fund AIF Series, L.P. – Series I.

 

12



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree Fund GP III, L.P. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
8,591,306

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
8,591,306

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
8,591,306

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
4.2%

 

 

14.

Type of Reporting Person
PN

 


(1)           Solely in its capacity as the sole member of Oaktree Fund GP AIF, LLC.

 

13



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree AIF Investments, L.P. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
8,591,306

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
8,591,306

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
8,591,306

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
4.2%

 

 

14.

Type of Reporting Person
PN

 


(1)           Solely in its capacity as the general partner of Oaktree Fund GP III, L.P.

 

14



 

CUSIP No. 318672102

 

 

1.

Names of Reporting Persons
Oaktree AIF Holdings, Inc. (1)

 

 

2.

Check the Appropriate Box if a Member of a Group

 

 

(a)

 x

 

 

(b)

 o

 

 

3.

SEC Use Only

 

 

4.

Source of Funds
Not Applicable

 

 

5.

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e):     o

 

 

6.

Citizenship or Place of Organization
Delaware

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With:

7.

Sole Voting Power
0

 

8.

Shared Voting Power
8,591,306

 

9.

Sole Dispositive Power
0

 

10.

Shared Dispositive Power
8,591,306

 

 

11.

Aggregate Amount Beneficially Owned by Each Reporting Person
8,591,306

 

 

12.

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares   o

 

 

13.

Percent of Class Represented by Amount in Row (11)
4.2%

 

 

14.

Type of Reporting Person
CO

 


(1)           Solely in its capacity as the general partner of Oaktree AIF Investments, L.P.

 

15



 

CUSIP No. 318672102

Schedule 13D

 

 

Item 1.                                                           Security and Issuer.

 

This statement on Schedule 13D (this “Schedule 13D”) relates to the shares of common stock, par value $0.10 per share (“Common Stock”), of First BanCorp, a Puerto Rico chartered financial holding company (the “Issuer”).  The address of the principal executive office of the Issuer is 1519 Ponce de Leon Avenue, San Juan, Puerto Rico 00908.

 

Item 2.                                                           Identity and Background.

 

(a)-(c) & (f)

 

This Schedule 13D is filed jointly, pursuant to a joint filing agreement attached hereto as Exhibit 1, by:

 

(1)                                  Oaktree Principal Fund V (Delaware), L.P., a Delaware limited partnership (the “PF V Fund”), whose principal business is investing in entities over which there is the potential for such fund to exercise significant influence;

 

(2)                                  Oaktree Fund GP, LLC, a Delaware limited liability company (“Oaktree Fund GP”), whose principal business is to serve as, and perform the functions of, the general partner of certain investment funds, including PF V Fund;

 

(3)                                  Oaktree Fund GP I, L.P., a Delaware limited partnership (“Oaktree Fund GP I”), whose principal business is (i) to serve as, and perform the functions of, the general partner of certain investment funds or to serve as, and perform the functions of, the managing member of the general partner of certain investment funds, including Oaktree Fund GP, or (ii) to act as the sole shareholder of certain controlling entities of certain investments funds;

 

(4)                                  Oaktree Capital I, L.P., a Delaware limited partnership (“Oaktree Capital I”), whose principal business is to (i) serve as, and perform the functions of, the general partner of Oaktree Fund GP and (ii) hold limited partnership interests in Oaktree Fund GP I;

 

(5)                                  OCM Holdings I, LLC, a Delaware limited liability company (“Oaktree Holdings I”), whose principal business is to serve as, and perform the functions of, the general partner of Oaktree Capital I;

 

(6)                                  Oaktree Holdings, LLC, a Delaware limited liability company (“Oaktree Holdings”), whose principal business is to serve as, and perform the functions of, the managing member of Oaktree Holdings I;

 

(7)                                  Oaktree Capital Group, LLC, a Delaware limited liability company (“OCG”), whose principal business is to serve as the holding company and controlling entity for each of the general partner and investment advisor of certain investment funds and separately managed accounts.

 

(8)                                  Oaktree Capital Group Holdings, L.P., a Delaware limited partnership (“OCGH”), whose principal business is to hold voting interests in OCG and other interests in each of the general partner and investment advisor of certain investment funds and separately managed accounts.

 

(9)                                  Oaktree FF Investment Fund AIF (Delaware), L.P., a Delaware limited partnership (the “AIF Fund” and, together with the PF V Fund, the “Investors”), whose principal business is

 

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CUSIP No. 318672102

Schedule 13D

 

 

investing in entities over which there is the potential for such fund to exercise significant influence;

 

(10)                            Oaktree Fund AIF Series, L.P. — Series I, a Delaware limited partnership (“Oaktree AIF”), whose principal business is to serve as, and perform the functions of, the general partner of the AIF Fund;

 

(11)                            Oaktree Fund GP AIF, LLC, a Delaware limited liability company (“Oaktree GP AIF”), whose principal business is to serve as, and perform the functions of, the general partner of Oaktree AIF;

 

(12)                            Oaktree Fund GP III, L.P., a Delaware limited partnership (“Oaktree GP III”), whose principal business is to (i) serve as, and perform the functions of, the sole member of Oaktree GP AIF and (ii) to hold limited partnership interests of AIF Series;

 

(13)                            Oaktree AIF Investments, L.P., a Delaware limited partnership (“Oaktree AIF Investments”), whose principal business is to serve as, and perform the functions of, the general partner of Oaktree GP III;

 

(14)                            Oaktree AIF Holdings, Inc., a Delaware corporation (“Oaktree AIF Holdings”), whose principal business is to serve as, and perform the functions of, the general partner of Oaktree AIF Investments;

 

(15)                            Oaktree Capital Group Holdings GP, LLC, a Delaware limited liability company (“OCGH GP,” and together with PF V Fund, Oaktree Fund GP, Oaktree Fund GP I, Oaktree Capital I, Oaktree Holdings I, Oaktree Holdings, OCG, OCGH, AIF Fund, Oaktree AIF, Oaktree GP AIF, Oaktree GP III, Oaktree AIF Investments and Oaktree AIF Holdings, collectively, the “Reporting Persons”), whose principal business is the serve as, and perform the functions of, the general partner of OCGH.

 

Set forth in Annex A attached hereto is a listing of the directors, executive officers, members, general partners and controlling persons, as applicable, of each Reporting Person (collectively, the “Covered Persons”).  Annex A is incorporated herein by reference.  Each of the Covered Persons that is a natural person is a United States citizen.

 

The principal business address of each Reporting Person and each Covered Person is c/o Oaktree Capital Management, L.P., 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071.

 

(d)-(e)

 

During the last five years, none of the Reporting Persons, and to the best of their knowledge, none of the Covered Persons (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceedings was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 

17



 

CUSIP No. 318672102

Schedule 13D

 

 

Item 3.                                                           Source and Amount of Funds or Other Consideration.

 

On June 24, 2011, the Investors entered into an Investment Agreement (as amended and restated, the “Investment Agreement”) with the Company, which was amended and restated on July 14, 2011.  Pursuant to the Investment Agreement, the Company agreed to sell to the Investors an aggregate of 49,746,992 shares of Common Stock (the “Shares”) at a price of $3.50 per share in cash for an aggregate purchase price of $174,114,474.

 

On October 7, 2011 (the “Closing Date”), pursuant to the terms and subject to the conditions contained in the Investment Agreement, the Investors consummated the purchase of the Initial Shares, which was funded from the Investors’ contributed capital.

 

Item 4.                                                           Purpose of Transaction.

 

The Investors and the other Reporting Persons acquired the Shares for investment purposes pursuant to the Investment Agreement.  The Investors intend to participate in the management of the Issuer through representation on the Issuer’s Board of Directors.  For further information, see Items 2, 3 and 6 hereof, which are incorporated herein by reference.

 

The Reporting Persons will continuously evaluate the Issuer’s businesses and prospects, alternative investment opportunities and all other factors deemed relevant in determining whether additional interests in securities of the Issuer will be acquired by the Investors or whether the Investors will dispose of shares of the securities of the Issuer.  At any time, additional securities of the Issuer may be acquired or some or all of the securities of the Issuer beneficially owned by the Reporting Persons may be sold, in either case in the open market, in privately negotiated transactions or otherwise, based upon, among other things, prevailing market prices of the securities of the Issuer.  On October 12, 2011, the Investors agreed to acquire an additional 937,493 shares of Common Stock from an existing shareholder of the Company pursuant to a privately-negotiated transaction at a price of $3.50 per share in cash for an aggregate purchase price of $3,281,225, which is expected to close during the week of October 17 and will be funded from the Investors’ contributed capital.  The PF V Fund would acquire 775,588 shares of Common Stock and the AIF Fund would acquire 161,905 shares of Common Stock, constituting approximately 0.5% of the issued and outstanding Common Stock.

 

Other than as described in this Schedule 13D, none of the Reporting Persons or, to their best knowledge, any Covered Persons have any current plans or proposals that would be related to or would result in any of the matters described in Items 4(a)-(j) of Schedule 13D; however, as part of its ongoing evaluation of this investment and investment alternatives, the Reporting Persons may consider such matters in the future and, subject to applicable law, may formulate a plan with respect to such matters, and, from time to time, the Reporting Persons may hold discussions with or make formal proposals to management or the Board of Directors of the Issuer, other shareholders of the Issuer or other third parties regarding such matters.

 

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CUSIP No. 318672102

Schedule 13D

 

 

Item 5.                                                           Interest in Securities of the Issuer.

 

(a)-(b)

 

As of the date of this Schedule 13D, the Investors own an aggregate of 49,746,992 shares of Common Stock, of which 41,155,686 shares of Common Stock are owned directly by the PF V Fund and 8,591,306 shares of Common Stock are owned directly by the AIF Fund, constituting approximately 24.3% of the issued and outstanding Common Stock.

 

Oaktree Fund GP, in its capacity as the general partner of the PF V Fund, has the ability to direct the management of the PF V Fund’s business, including the power to vote and dispose of securities held by the PF V Fund; therefore, Oaktree Fund GP may be deemed to beneficially own the shares of Common Stock of the Issuer held by the PF V Fund.

 

Oaktree Fund GP I, in its capacity as the managing member of Oaktree Fund GP, has the ability to direct the management of Oaktree Fund GP’s business, including the power to direct the decisions of Oaktree Fund GP regarding the vote and disposition of securities held by the PF V Fund; therefore, Oaktree Fund GP I may be deemed to beneficially own the shares of Common Stock of the Issuer held by the PF V Fund.

 

Oaktree Capital I, in its capacity as the general partner of Oaktree Fund GP I, has the ability to direct the management of Oaktree Fund GP I’s business, including the power to direct the decisions of Oaktree Fund GP I regarding the vote and disposition of securities held by the PF V Fund; therefore, Oaktree Capital I may be deemed to have indirect beneficial ownership of the shares of the Issuer’s Common Stock held by the PF V Fund.

 

Oaktree Holdings I, in its capacity as the general partner of Oaktree Capital I, has the ability to direct the management of Oaktree Capital I’s business, including the power to direct the decisions of Capital I regarding the vote and disposition of securities held by the PF V Fund; therefore, Oaktree Holdings I may be deemed to have indirect beneficial ownership of the shares of the Issuer’s Common Stock held by the PF V Fund.

 

Oaktree Holdings, in its capacity as the managing member of Oaktree Holdings I, has the ability to direct the management of Oaktree Holding I’s business, including the power to direct the decisions of Oaktree Holdings I regarding the vote and disposition of securities held by the PF V Fund; therefore, Oaktree Holdings may be deemed to have indirect beneficial ownership of the shares of the Issuer’s Common Stock held by the PF V Fund.

 

OCG, in its capacity as the managing member of Oaktree Holdings, has the ability to direct the management of Oaktree Holdings’ business, including the power to direct the decisions of Oaktree Holdings regarding the vote and disposition of securities held by the PF V Fund; therefore, OCG may be deemed to have indirect beneficial ownership of the shares of the Issuer’s Common Stock held by the PF V Fund.

 

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CUSIP No. 318672102

Schedule 13D

 

 

Oaktree AIF, in its capacity as the general partner of the AIF Fund, has the ability to direct the management of the AIF Fund’s business, including the power to vote and dispose of securities held by the AIF Fund; therefore, Oaktree Fund GP may be deemed to beneficially own the shares of Common Stock of the Issuer held by the AIF Fund.

 

Oaktree GP AIF, in its capacity as the general partner of Oaktree AIF, has the ability to direct the management of Oaktree AIF’s business, including the power to direct the decisions of Oaktree AIF regarding the vote and disposition of securities held by the AIF Fund; therefore, Oaktree GP AIF may be deemed to beneficially own the shares of Common Stock of the Issuer held by the AIF Fund.

 

Oaktree GP III, in its capacity as the sole member Oaktree GP AIF, has the ability to direct the management of Oaktree GP AIF’s business, including the power to direct the decisions of Oaktree GP AIF regarding the vote and disposition of securities held by the AIF Fund; therefore, Oaktree GP III may be deemed to beneficially own the shares of Common Stock of the Issuer held by the AIF Fund.

 

Oaktree AIF Investments, in its capacity as the general partner of Oaktree GP III, has the ability to direct the management of Oaktree GP III’s business, including the power to direct the decisions of Oaktree GP III regarding the vote and disposition of securities held by the AIF Fund; therefore, Oaktree AIF Investments may be deemed to beneficially own the shares of Common Stock of the Issuer held by the AIF Fund.

 

Oaktree AIF Holdings, in its capacity as the general partner of Oaktree AIF Investments, has the ability to direct the management of Oaktree AIF Investments’ business, including the power to direct the decisions of Oaktree AIF Investments regarding the vote and disposition of securities held by the AIF Fund; therefore, Oaktree AIF Holdings may be deemed to beneficially own the shares of Common Stock of the Issuer held by the AIF Fund.

 

OCGH, in its capacity as (i) the majority holder of the voting units of OCG, has the ability to appoint and remove directors of OCG and, as such, may indirectly control the decisions of OCG regarding the vote and disposition of securities held by the PF V Fund and (ii) the controlling shareholder of Oaktree AIF Holdings, has the ability to appoint and remove directors of Oaktree AIF Holdings and, as such, may indirectly control the decisions of OCG regarding the vote and disposition of securities held by the AIF Fund; therefore, OCGH may be deemed to have indirect beneficial ownership of the shares of the Issuer’s Common Stock held by each of the PF V Fund and the AIF Fund.

 

OCGH GP, in its capacity as the general partner of OCGH, has the ability to direct the management of OCGH’s business, including the power to direct the decisions of OCGH regarding the vote and disposition of securities held by the PF V Fund and the AIF Fund; therefore, OCGH GP may be deemed to have indirect beneficial ownership of the shares of the Issuer’s Common Stock held by the PF V Fund and the AIF Fund.

 

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CUSIP No. 318672102

Schedule 13D

 

 

With respect to the shares of Common Stock reported herein, each of the Reporting Persons may be deemed to have sole voting and dispositive power or the sole power to direct the vote and disposition of the number of shares of Common Stock which such Reporting Person may be deemed to beneficially own as set forth above.

 

Pursuant to Rule 13d-4 of the Act, the Reporting Persons declare that filing this Schedule 13D shall not be construed as an admission that any such person is, for the purposes of Section 13(d) and/or Section 13(g) of the Act, the beneficial owner of any securities covered by this Schedule 13D except to the extent of such person’s pecuniary interest in shares of Common Stock, and except to the extent of its pecuniary interest, such beneficial ownership is expressly disclaimed by each Reporting Person, other than the Investors.

 

To the knowledge of the Reporting Persons, none of the Covered Persons directly owns any shares of Common Stock; provided, however, that because of each Covered Person’s status as a manager, general partner, director, executive officer or member of a Reporting Person, a Covered Person may be deemed to be the beneficial owner of the shares of Common Stock beneficially owned by such Reporting Person.  Except to the extent of their pecuniary interest, each of the Covered Persons disclaims beneficial ownership of the shares of the Issuer’s Common Stock reported herein and the filing of this Schedule 13D shall not be construed as an admission that any such Covered Person is the beneficial owner of any securities covered by this statement.

 

All ownership percentages of the securities reported in this Schedule 13D are based upon 204,245,466 shares of Common Stock outstanding as of October 7, 2011, as represented by the Issuer on October 7, 2011.

 

(c)

 

Other than the transactions described in Item 3, none of the Reporting Persons, and to the best of their respective knowledge, none of the Covered Persons has effected any transaction involving the Issuer’s Common Stock during the last 60 days from the date hereof.

 

(d)

 

Except as set forth in this Item 5, no other person is known to have the right to receive or the power to direct the receipt of dividends from, or proceeds from the sale of, the Shares.

 

(e)

 

Not applicable.

 

Item 6.                                                           Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

 

On June 24, 2011, the Issuer entered into the Investment Agreement, which was amended and restated on July 14, 2011, pursuant to which, on the Closing Date, the Issuer issued an aggregate of 41,155,686 shares of Common Stock to the PF V Fund and 8,591,306 shares of Common Stock to the AIF Fund.

 

For further information, see Item 4, which are incorporated herein by reference.

 

Under the Investment Agreement, the Issuer agreed to file as promptly as practicable, and in any event within 90 days after the Closing Date, a registration statement under the Securities Act of

 

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CUSIP No. 318672102

Schedule 13D

 

 

1933 to register the resale of the Shares.  In addition, the Investors are entitled to piggyback registration rights in respect of the Shares.

 

The Investors are entitled to designate a person to serve on the Issuer’s Board of Directors and another person to attend meetings of the Issuer’s Board of Directors and Board committees as an observer for as long as the Investors continue to own in the aggregate at least 25% of the number of Shares acquired on the Closing Date (the “Qualifying Ownership Interest”).  The Investors have designated Michael Harmon as their representative to the Issuer’s Board of Directors.  For as long as the Investors own the Qualifying Ownership Interest, the Investors are entitled to:  (i) acquire from the Issuer at such time as the Issuer sells any Common Stock or securities that are convertible into or exchangeable for Common Stock or include a Common Stock component up to the amount of the new securities required to maintain such Investor’s proportionate ownership interest in the Issuer prior to the issuance of the new securities; and (ii) acquire from the Issuer at such time as the Issuer offers or sells any Common Stock or securities that are convertible into or exchangeable for Common Stock, or include a Common Stock component, to any other investor that acquired Common Stock on the Closing Date or its affiliates, for the same price and on the same terms as such other offer or sale, up to the amount of new securities equal to the aggregate amount of new securities that the Issuer offers to sell to such other investor or its affiliates.  In addition, for as long as the Investors own in the aggregate at least as many shares of Common Stock as any other entity or group of affiliated entities, if the Issuer offers to sell to any entity or group of affiliated entities Common Stock or securities that are convertible into or exchangeable for Common Stock, or include a Common Stock component, that would cause that entity or group of affiliated entities to own more shares of Common Stock than the Investors, the Issuer agrees to offer to sell to the Investors, for the same price and on the same terms, a number of new securities such that the Investors will own an amount of shares of Common Stock, after giving effect to the conversion or exercise of such new securities into Common Stock, equal to the number of shares of Common Stock owned by such other entity or group of affiliated entities.

 

In connection with the investment in the Issuer, the Reporting Persons and certain of their affiliates made customary passivity and anti-association commitments (the “Commitments”) to the Board of Governors of the Federal Reserve System to ensure that the Reporting Persons and such affiliates will not, among other things, be deemed to exercise a controlling influence over the management or policies of the Issuer or any of its subsidiaries for purposes of the Bank Holding Company Act of 1956. The Commitments are attached hereto as Exhibit 3 and are incorporated herein by reference.

 

Except as described above and elsewhere in this Schedule 13D, as of the date hereof, there are no other contracts, understandings or relationships (legal or otherwise) among the parties named in Item 2 hereto and between such persons and any person with respect to any of the Shares.

 

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Investment Agreement and the Commitments filed herewith as Exhibit 2 and Exhibit 3, respectively.

 

Item 7.                                                          Material to be Filed as Exhibits.

 

The following are filed herewith as Exhibits to this Schedule 13D:

 

Exhibit 1                                                  A written agreement relating to the filing of the joint acquisition statement as required by Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended.

 

Exhibit 2                                                  Amended and Restated Investment Agreement, dated as of July 14, 2011, among the Company and the Investors.

 

Exhibit 3                                                   Commitments by Oaktree to the Board of Governors of the Federal Reserve System related to First BanCorp, dated October 3, 2011

 

22


 


 

SIGNATURE

 

After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.

 

Dated:  October 17, 2011

 

 

 

 

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

 

 

 

By:

Oaktree Fund GP, LLC, its general partner

 

By:

Oaktree Fund GP I, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

OAKTREE FUND GP, LLC

 

 

 

By:

Oaktree Fund GP I, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

OAKTREE FUND GP I, L.P.

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

[Signature Pages – Schedule 13D – Oaktree]

 

23



 

 

OAKTREE CAPITAL I, L.P.

 

 

 

By:

OCM Holdings I, LLC,

 

 

its General Partner

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OCM HOLDINGS I, LLC

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE HOLDINGS, LLC

 

 

 

By:

Oaktree Capital Group, LLC,

 

 

its Managing Member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

[Signature Pages – Schedule 13D – Oaktree]

 

24



 

 

OAKTREE CAPITAL GROUP, LLC

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE CAPITAL GROUP HOLDINGS, L.P.

 

 

 

By:

Oaktree Capital Group Holdings GP, LLC,

 

 

its general partner

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE CAPITAL GROUP HOLDINGS GP, LLC

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

[Signature Pages – Schedule 13D – Oaktree]

 

25



 

 

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

 

 

 

By:

Oaktree Fund AIF Series, L.P. — Series I, its general partner

 

By:

Oaktree Fund GP AIF, LLC, its general partner

 

By:

Oaktree Fund GP III, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE FUND AIF SERIES, L.P. — SERIES I

 

 

 

By:

Oaktree Fund GP AIF, LLC, its general partner

 

By:

Oaktree Fund GP III, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE FUND GP AIF, LLC

 

 

 

By:

Oaktree Fund GP III, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

[Signature Pages – Schedule 13D – Oaktree]

 

26



 

 

OAKTREE FUND GP III, L.P.

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE AIF INVESTMENTS, L.P.

 

 

 

 

 

By:

Oaktree AIF Holdings, Inc., its general partner

 

 

 

 

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

OAKTREE AIF HOLDINGS, INC.

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

[Signature Pages – Schedule 13D – Oaktree]

 

27


 

EX-1 2 a11-28060_1ex1.htm EX-1

EXHIBIT 1

 

JOINT FILING AGREEMENT

 

Each of the undersigned acknowledges and agrees that the foregoing Statement on Schedule 13D is filed on behalf of the undersigned.  Each of the undersigned acknowledges that it shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that he or it knows or has reason to believe that such information is inaccurate.

 

Dated as of October 17, 2011.

 

 

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

 

 

 

By:

Oaktree Fund GP, LLC, its general partner

 

By:

Oaktree Fund GP I, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

OAKTREE FUND GP, LLC

 

 

 

By:

Oaktree Fund GP I, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

OAKTREE FUND GP I, L.P.

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 



 

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE CAPITAL I, L.P.

 

 

 

By:

OCM Holdings I, LLC,

 

 

its General Partner

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OCM HOLDINGS I, LLC

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE HOLDINGS, LLC

 

 

 

By:

Oaktree Capital Group, LLC,

 

 

its Managing Member

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 



 

 

OAKTREE CAPITAL GROUP, LLC

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE CAPITAL GROUP HOLDINGS, L.P.

 

 

 

By:

Oaktree Capital Group Holdings GP, LLC,

 

 

its general partner

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE CAPITAL GROUP HOLDINGS GP, LLC

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 



 

 

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

 

 

 

By:

Oaktree Fund AIF Series, L.P. — Series I, its general partner

 

By:

Oaktree Fund GP AIF, LLC, its general partner

 

By:

Oaktree Fund GP III, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE FUND AIF SERIES, L.P. — SERIES I

 

 

 

By:

Oaktree Fund GP AIF, LLC, its general partner

 

By:

Oaktree Fund GP III, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE FUND GP AIF, LLC

 

 

 

By:

Oaktree Fund GP III, L.P., its managing member

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 



 

 

OAKTREE FUND GP III, L.P.

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Authorized Signatory

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

 

OAKTREE AIF INVESTMENTS, L.P.

 

 

 

 

 

By:

Oaktree AIF Holdings, Inc., its general partner

 

 

 

 

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

 

OAKTREE AIF HOLDINGS, INC.

 

 

 

 

 

By:

/s/ Lisa Arakaki

 

 

Name:

Lisa Arakaki

 

 

Title:

Managing Director and Assistant Secretary

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:

Martin Boskovich

 

 

Title:

Senior Vice President

 


 


 

ANNEX A

 

Oaktree Capital Group Holdings GP, LLC

The name and principal occupation of each of the members of the executive committee of Oaktree Capital Group Holdings GP, LLC and its executive officers are listed below.

 

Name

 

Principal Occupation

 

 

 

Howard S. Marks

 

Chairman of the Board of Oaktree Capital Group, LLC and Chairman of Oaktree Capital Management, L.P.

 

 

 

Bruce A. Karsh

 

President and Director of Oaktree Capital Group, LLC and President of Oaktree Capital Management, L.P.

 

 

 

John B. Frank

 

Managing Principal and Director of Oaktree Capital Group, LLC and Managing Principal of Oaktree Capital Management, L.P.

 

 

 

David M. Kirchheimer

 

Chief Financial Officer, Chief Administrative Officer and Director of Oaktree Capital Group, LLC and Chief Financial Officer, Chief Administrative Officer and Principal of Oaktree Capital Management, L.P.

 

 

 

Sheldon M. Stone

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

Larry W. Keele

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

Stephen A. Kaplan

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

Kevin L. Clayton

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

Oaktree Capital Group Holdings, L.P.

The general partner of Oaktree Capital Group Holdings, L.P. is Oaktree Capital Group Holdings GP, LLC.  There are no executive officers and directors appointed at Oaktree Capital Group Holdings, L.P.

 

Oaktree Capital Group, LLC

The name and principal occupation of each of the directors and executive officers of Oaktree Capital Group, LLC are listed below.

 



 

Name

 

Principal Occupation

 

 

 

Howard S. Marks

 

Chairman of the Board of Oaktree Capital Group, LLC and Chairman of Oaktree Capital Management, L.P.

 

 

 

Bruce A. Karsh

 

President and Director of Oaktree Capital Group, LLC and President of Oaktree Capital Management, L.P.

 

 

 

John B. Frank

 

Managing Principal and Director of Oaktree Capital Group, LLC and Managing Principal of Oaktree Capital Management, L.P.

 

 

 

David M. Kirchheimer

 

Chief Financial Officer, Chief Administrative Officer and Director of Oaktree Capital Group, LLC and Chief Financial Officer, Chief Administrative Officer and Principal of Oaktree Capital Management, L.P.

 

 

 

Sheldon M. Stone

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

Larry W. Keele

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

Stephen A. Kaplan

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

Kevin L. Clayton

 

Principal and Director of Oaktree Capital Group, LLC and Principal of Oaktree Capital Management, L.P.

 

 

 

D. Richard Masson

 

Principal Emeritus and Director of Oaktree Capital Group, LLC.

 

 

 

Robert E. Denham

 

Director of Oaktree Capital Group, LLC.  Mr. Denham is currently a partner in the law firm of Munger, Tolles & Olson LLP.

 

 

 

Wayne G. Pierson

 

Director of Oaktree Capital Group, LLC.  Mr. Pierson is currently the Chief Financial Officer and Treasurer of Meyer Memorial Trust.

 

 

 

Jay S. Wintrob

 

Director of Oaktree Capital Group, LLC.  Mr. Wintrob is currently the President and Chief Executive Officer of SunAmerica Financial Group.

 



 

Oaktree Holdings, LLC

 

The managing member of Oaktree Holdings, LLC is Oaktree Capital Group, LLC.  There are no executive officers and directors appointed at Oaktree Holdings, LLC.

 

OCM Holdings I, LLC

 

The managing member of OCM Holdings I, LLC is Oaktree Holdings, LLC.  The name and principal occupation of each of the executive officers of OCM Holdings I, LLC are listed below.

 

Name

 

Principal Occupation

 

 

 

Howard S. Marks

 

Chairman of the Board of Oaktree Capital Group, LLC and Chairman of Oaktree Capital Management, L.P.

 

 

 

Bruce A. Karsh

 

President and Director of Oaktree Capital Group, LLC and President of Oaktree Capital Management, L.P.

 

Oaktree Capital I, L.P.

 

OCM Holdings I, LLC is the general partner of Oaktree Capital I, L.P.  The name and principal occupation of each of the executive officers of Oaktree Capital I, L.P. are listed below.

 

Name

 

Principal Occupation

 

 

 

Howard S. Marks

 

Chairman of the Board of Oaktree Capital Group, LLC and Chairman of Oaktree Capital Management, L.P.

 

 

 

Bruce A. Karsh

 

President and Director of Oaktree Capital Group, LLC and President of Oaktree Capital Management, L.P.

 

 

 

John B. Frank

 

Managing Principal and Director of Oaktree Capital Group, LLC and Managing Principal of Oaktree Capital Management, L.P.

 

 

 

David M. Kirchheimer

 

Chief Financial Officer, Chief Administrative Officer and Director of Oaktree Capital Group, LLC and Chief Financial Officer, Chief Administrative Officer and Principal of Oaktree Capital Management, L.P.

 



 

Oaktree Fund GP I, L.P.

 

Oaktree Capital I, L.P. is the general partner of Oaktree Fund GP I, L.P.  There are no executive officers or directors appointed at Oaktree Fund GP I, L.P.

 

Oaktree Fund GP, LLC

 

Oaktree Fund GP I, L.P. is the general partner of Oaktree Fund GP, LLC.  There are no executive officers or directors appointed at Oaktree Fund GP, LLC.

 

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

 

Oakree Fund GP, LLC is the general partner of Oaktree Principal Fund V (Delaware), L.P., which is a Delaware limited partnership.  There are no executive officers or directors appointed at Oaktree Principal Fund V (Delaware), L.P.

 

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

 

Oaktree Fund AIF Series, L.P. — Series I is the general partner of Oaktree FF Investment Fund AIF (Delaware), L.P., which is a Delaware limited partnership.  There are no executive officers or directors appointed at Oaktree FF Investment Fund AIF (Delaware), L.P.

 

Oaktree Fund AIF Series, L.P. — Series I

 

Oaktree Fund GP AIF, LLC is the general partner of Oaktree Fund AIF Series, L.P. — Series I, which is a Delaware limited partnership.  There are no executive officers or directors appointed at Oaktree Fund AIF Series, L.P. — Series I.

 

Oaktree Fund GP AIF, LLC

 

Oaktree Fund GP III, L.P. is the sole member of Oaktree Fund GP AIF, LLC, which is a Delaware limited liability company.  There are no executive officers or directors appointed at Oaktree Fund GP AIF, LLC.

 

Oaktree Fund GP III, L.P.

 

Oaktree AIF Investments, L.P. is the general partner of Oaktree Fund GP III, L.P., which is a Delaware limited partnership.  There are no executive officers or directors appointed at Oaktree AIF Investments, L.P.

 

Oaktree AIF Investments, L.P.

 

Oaktree AIF Holdings, Inc. is the general partner of Oaktree AIF Investments, L.P., which is a Delaware limited partnership.  There are no executive officers or directors appointed at Oaktree AIF Investments, L.P.

 



 

Oaktree AIF Holdings, Inc.

 

Oaktree AIF Holdings, Inc. is a Delaware corporation.  The name and principal occupation of each of the directors and executive officers of Oaktree AIF Holdings, Inc. are listed below.

 

Name

 

Principal Occupation

 

 

 

Howard S. Marks

 

Chairman of the Board of Oaktree Capital Group, LLC and Chairman of Oaktree Capital Management, L.P.

 

 

 

Bruce A. Karsh

 

President and Director of Oaktree Capital Group, LLC and President of Oaktree Capital Management, L.P.

 

 

 

Todd E. Molz

 

Managing Director, General Counsel and Secretary of Oaktree Capital Group, LLC and Managing Director and General Counsel of Oaktree Capital Management, L.P.

 


 

EX-2 3 a11-28060_1ex2.htm EX-2

Exhibit 2

 

EXECUTION COPY

 

 

 

AMENDED AND RESTATED INVESTMENT AGREEMENT

 

DATED AS OF

 

JULY 14, 2011

 

AMONG

 

FIRST BANCORP

 

AND

 

THE INVESTORS NAMED ON THE SIGNATURE PAGES HERETO

 

 



 

TABLE OF CONTENTS

 

 

 

PAGE

 

 

 

ARTICLE 1 PURCHASE OF SHARES

1

 

 

 

1.1

Purchase of Shares

1

 

 

 

ARTICLE 2 THE CLOSING TRANSACTIONS

2

 

 

 

2.1

Closing

2

 

 

 

2.2

Actions on the Closing Date

2

 

 

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

2

 

 

 

3.1

Representations and Warranties of the Company

2

 

 

 

3.2

Representations and Warranties of the Investors

19

 

 

 

ARTICLE 4 ACTIONS PRIOR TO THE TRANSACTION

21

 

 

 

4.1

Stockholder Approval

21

 

 

 

4.2

HSR Act Filings

21

 

 

 

4.3

Listing of Shares

22

 

 

 

4.4

Change of Bank Control Act and Bank Holding Company Act

22

 

 

 

4.5

Most Favored Terms

23

 

 

 

4.6

Notice of Adverse Occurrences

23

 

 

 

4.7

Reasonable Best Efforts

23

 

 

 

4.8

Election of Independent Chairman and Independent Directors; Board Representative

23

 

 

 

4.9

Access; Confidentiality

26

 

 

 

4.10

Conduct of the Business

26

 

 

 

ARTICLE 5 CONDITIONS PRECEDENT TO TRANSACTION

27

 

 

 

5.1

Conditions to the Company’s Obligations

27

 

 

 

5.2

Conditions to the Investor’s Obligations

29

 

 

 

5.3

Waiver of Conditions to Investor’s Obligations

31

 

 

 

ARTICLE 6 ADDITIONAL AGREEMENTS

32

 

 

 

6.1

Company Obligation Regarding Adequate Public Information

32

 

 

 

6.2

Efforts to Maintain Listing

32

 

 

 

6.3

Additional Regulatory Matters

32

 

 

 

6.4

Percentage Maintenance Rights

33

 

 

 

6.5

Participation in Other Offerings

36

 

 

 

ARTICLE 7 SALE RESTRICTIONS

38

 

 

 

7.1

Restrictions on Sales of Acquired Common Stock

38

 

ii



 

ARTICLE 8 SECURITIES ACT REGISTRATION

38

 

 

 

8.1

Obligation to Register Acquired Common Stock

38

 

 

 

8.2

Obligations of the Investors Regarding Registration

43

 

 

 

8.3

Indemnification Regarding Disclosures

43

 

 

 

8.4

Assignment of Registration Rights

44

 

 

 

8.5

Lock Up Agreements

44

 

 

 

8.6

Holdback

44

 

 

 

ARTICLE 9 TERMINATION

45

 

 

 

9.1

Right to Terminate

45

 

 

 

9.2

Manner of Terminating Agreement

46

 

 

 

9.3

Effect of Termination

46

 

 

 

ARTICLE 10 INDEMNIFICATION

46

 

 

 

10.1

Indemnification Against Loss Due to Inaccuracies in Company’s Representations and Warranties or Company Failure to Fulfill Obligations

46

 

 

 

10.2

Indemnification Against Loss Due to Inaccuracies in Investor’s Representations and Warranties or Investor Failure to Fulfill Obligations

46

 

 

 

10.3

Limit on Liability for Breach of Warranty

47

 

 

 

10.4

Indemnification Sole Remedy

48

 

 

 

ARTICLE 11 ABSENCE OF BROKERS

48

 

 

 

11.1

Representations and Warranties Regarding Brokers and Others

48

 

 

 

ARTICLE 12 GENERAL

48

 

 

 

12.1

Announcement of Transaction

48

 

 

 

12.2

Expenses

49

 

 

 

12.3

Entire Agreement

49

 

 

 

12.4

Benefit of Agreement

49

 

 

 

12.5

Captions

49

 

 

 

12.6

Assignments

49

 

 

 

12.7

Notices and Other Communications

50

 

 

 

12.8

Governing Law

51

 

 

 

12.9

Consent to Jurisdiction

51

 

 

 

12.10

Remedies; Specific Performance

51

 

 

 

12.11

Non-Recourse

51

 

 

 

12.12

Waiver of Jury Trial

52

 

 

 

12.13

Amendments

52

 

 

 

12.14

Interpretation

52

 

iii



 

12.15

Mutual Drafting

52

 

 

 

12.16

Severability

52

 

 

 

12.17

Counterparts

53

 

 

 

12.18

Independent Nature of Investors’ Obligations and Rights

53

 

iv



 

LIST OF EXHIBITS

 

Exhibit A

Illustrative Pro Forma Capitalization of the Company

 

 

Exhibit B

Form of Opinion of K&L Gates LLP

 

 

Exhibit C

Form of Opinion of Martinez Odell & Calabria

 

 

Acquired Common Stock

1

Agency

15

Aggregate Purchase Price

2

Agreement

1

Bank Holding Company Act

3

Bank Regulatory Agency

14

Board Representative

26

Business Day

2

CBCA

22

Closing Date

2

Code

11

Common Stock

1

Company

1

Company 10-K

7

Company Benefit Plans

13

Company Financial Statements

9

Company Material Adverse Effect

3

Company Reports

7

Company Significant Agreement

17

Company Subsidiaries

7

Company Subsidiary

7

Environmental Law

12

ERISA

13

Exchange Act

7

FDIC

6

FDIC Consent Order

10

Federal Reserve Agreement

10

Federal Reserve Board

6

FirstBank

3

GAAP

3

Governmental Entity

5

HSR Act

6

Indemnitee

44

Information

26

Insurer

15

Intellectual Property

19

Intellectual Property Rights

18

Interim Financials

8

Investor

1

Investor Agreements

4

Investors

1

IT Assets

18

 

v



 

Loan

17

Loan Investor

15

March 10-Q

7

Material Adverse Change

9

Materially Burdensome Regulatory Condition

23

New Security

34

Nominating Committee

24

NYSE

4

Observer

25

OCFI

6

OCFI Order

10

OFAC

16

Original Agreement

1

Other Investors

4

Per Share Price

1

Piggyback Registration

40

Previously Disclosed

3

PRTD

33

Qualifying Ownership Interest

24

Registrable Securities

39

Rights Offering

1

Ruling

31

Securities Act

2

Series G Preferred Stock

1

Shelf Registration Statement

39

Special Registration

45

Tax Return

12

Taxes

12

Termination Date

46

Unlawful Gains

16

 

vi



 

AMENDED AND RESTATED INVESTMENT AGREEMENT

 

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

 

ARTICLE 1
PURCHASE OF SHARES

 

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

 

1



 

ARTICLE 2
THE CLOSING TRANSACTIONS

 

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

 

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

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

2



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(x)            Company Benefit Plans.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(kk)         Intellectual Property Rights.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 4
ACTIONS PRIOR TO THE TRANSACTION

 

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

 

4.2       HSR Act Filings.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.9                                 Access; Confidentiality.

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 5
CONDITIONS PRECEDENT TO TRANSACTION

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 6
ADDITIONAL AGREEMENTS

 

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

 

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

 

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

 

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

 

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

 

6.3                                         Additional Regulatory Matters

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     ensure the continuing application of the Ruling;

 

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