<PAGE>
Registration No. 333-8460
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 2
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST BANCORP
(Exact name of registrant as specified in its charter)
Commonwealth of Puerto Rico Not yet applied for
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1519 Ponce de Leon Avenue
Santurce
San Juan, Puerto Rico 00908-0146
(Address of principal executive offices, including Zip Code)
(787) 729-8200
Copies to:
ANGEL ALVAREZ-PEREZ, Esq. ANTONIO R. SIFRE, Esq.
President and Fiddler, Gonzalez & Rodriguez, LLP
Chief Executive Officer 254 Munoz Rivera Avenue
First BanCorp San Juan, Puerto Rico 00918
1519 Ponce de Leon Avenue
Santurce
San Juan, Puerto Rico 00908
(Name and address of agent
for service)
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
<TABLE>
<CAPTION>
Title of each class of Amount Proposed maximum
Proposed maximum Amount of
Securities to be registered to be registered offering price per unit
Aggregate offering price registration fee
- --------------------------------------------------------------------------------
- -----------------------------------------------
<S> <C> <C>
<C> <C>
Common Stock 14,800,000 $39.50
$584,600,000.00 $172,457.00
- --------------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
<PAGE>
FIRST BANCORP
CROSS-REFERENCE SHEET
ITEM OF FORM S-4 LOCATION IN PROSPECTUS
---------------- -----------------------
1. Forepart of Registration Statement Facing Page; Cross Reference
and Outside Front Cover Page Sheet; Outside Front Cover Page of
of Prospectus. Proxy/Prospectus
2. Inside Front and Outside Inside Front Cover Page of
Back Cover Pages of Proxy/Prospectus Table of
Prospectus Contents; Available Information
3. Risk Factors, Ratio of Summary; Market Price of the
Earnings to Fixed Charges Bank's Capital Stock;
and Other Information Dividends
4. Terms of the Transaction Summary; Proposed
Formation of Bank Holding
Company; Differences in
Stockholder Rights
5. Pro Forma Financial Not Applicable
Information
6. Material Contracts With Not Applicable
the Company Being Acquired
7. Additional Information Not Applicable
Requires for Reoffering by
Persons and Parties Deemed
to be Underwriters
8. Interests of Names Experts Not Applicable
and Counsel
9. Disclosure of Commission Not Applicable
Position of Indemnification
for Securities Act Liabilities
10. Information with Respect
to S-3 Registrant Not Applicable
11. Incorporation of Certain Incorporation by Reference
Information by Reference
<PAGE>
12. Information with Respect to Not Applicable
S-2 or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
14. Information with Respect Not Applicable
Registrants Other than S-2
or S-3 Registrants
15. Information on with Respect to Not Applicable
S-2 Companies
16. Information with Respect to Not Applicable
S-2 or S-3 Companies
17. Information with Respect to Not Applicable
Companies other than S-2 or
S-3 Companies
18. Information if Proxies, Front Cover Page
Consents or Authorizations Proxy/Prospectus; Summary;
are to be Solicited Incorporation By Reference;
Management; Principal
Shareholders of The Bank.
19. Information if Proxies, Not Applicable
Consents or Authorizations are
not to be Solicited, or in an
Exchange Offer
<PAGE>
[FIRST BANK LOGO]
April 16, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of First Bank Puerto Rico (the "Bank"), at 2:00 P.M. on May
26, 1998, at the Bank's main offices located at 1519 Ponce de Leon Avenue,
Santurce, Puerto Rico (the "Meeting").
At the Meeting, you will be asked to consider and vote upon an
Agreement and Plan of Merger dated as of March 30, 1998 (the "Agreement")
between the Bank, First BanCorp ("First BanCorp"), a Puerto Rico
corporation, which will become the holding company for the Bank and First
Interim Bank ("Interim"), an interim banking corporation and wholly-owned
subsidiary of First BanCorp by way of a merger with Interim , with the Bank
as the surviving corporation (the "Merger") and every outstanding share of
common stock of the Bank will be converted into one share of common stock of
First BanCorp. Stockholders will also be asked to consider such other
business as may properly come before the Meeting. Except with respect to
procedural matters incident to the conduct of the Meeting, management is not
aware of any other matters which could come before the Meeting.
After careful consideration, your Board of Directors has determined
the Merger to be fair to and in the best interests of the Bank and its
stockholders and has approved the Agreement and the transactions
contemplated thereby, including the Merger. Consummation of the Merger
will permit First BanCorp to fully consolidate its ownership of the Bank
and will give Bank stockholders the same ownership interest in First
BanCorp.
Enclosed are a Notice of the Meeting of Stockholders and a Proxy
Statement and Prospectus which describes the Merger, its effects, the
background of the transaction and provides information on First BanCorp and
the Bank. A copy of the Agreement is included as Appendix A to the
enclosed Proxy Statement and Prospectus.
Stockholders of record at the close of business on April 10, 1998 are
entitled to notice of and to vote at the Meeting.
Under the Puerto Rico Banking Law, any stockholder of a bank involved
in a merger may object to the consideration offered to him in exchange for
his shares. If he so objects and attempts to seek an alternative
consideration, the stockholder must strictly follow the procedures outlined
in Section 15(i) of the Puerto Rico Banking Law, a copy of which is
included as Appendix C to the enclosed Proxy Statement and Prospectus.
Failure to strictly adhere to the procedures set forth in Section 15(i) of
the Puerto Rico Banking Law may result in the invalidation of any claim
against the Bank.
A vote of two-thirds (2/3) of the issued and outstanding common
stock of the Bank is required to approve the Agreement and the transactions
contemplated thereby.
Very truly yours,
/s/Angel Alvarez-Perez
Angel Alvarez-Perez, Esq.
President and Chief Executive Officer
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT IN BLANK]
<PAGE>
FIRSTBANK PUERTO RICO
1519 Ponce de Leon Avenue
Santurce, Puerto Rico 00908-0146
NOTICE OF MEETING
AND
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1988
To the Stockholders of First Bank Puerto Rico:
NOTICE IS HEREBY GIVEN that pursuant to a resolution of our Board of
Directors, Section 26 of the Banking Law of Puerto Rico, and Section 2 of our
by laws, the 1998 Annual Meeting of Stockholders of FirstBank Puerto Rico (the
"Bank") will be held at the Principal Office of the Bank located at 1519 Ponce
de Leon Avenue, Santurce, San Juan, Puerto Rico on Tuesday, May 26, 1998 at
2:00 P.M., for the purpose of considering and taking action on the following
matters.
1. To elect three (3) directors for a term of three years or until
their successors have been elected and qualified.
2. Consideration of a proposal to approve the reorganization of the
Bank into the bank holding company form of ownership by approving an
Agreement and Plan of Merger by which (a) the Bank will become a
subsidiary of a newly formed bank holding company called First
BanCorp ("First BanCorp"), and (b) every outstanding share of
common stock of the Bank will be converted into one share of common
stock of First BanCorp.
3. To ratify the appointment of Price Waterhouse as the Bank's
independent auditors for fiscal year 1998.
4. Transact such other business as may properly come before the meeting
or any adjournment thereof.
The stockholders or their representatives should register their credentials
or proxies with the Bank's Secretary on or before 2:00 P.M. of the day of the
meeting.
The Board of Directors has set April 10, 1998 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the
meeting.
San Juan, Puerto Rico
April 16, 1998
By order of the Board of Directors
Antonio R. Escriba-Oliver, Esq. Angel Alvarez-Perez, Esq.
Secretary President & CEO
THE SECURITIES TO BE ISSUED BY FIRST BANCORP IN THE REORGANIZATION HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT OR THE PROSPECTUS THE ACCOMPANYING PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT IN BLANK]
<PAGE>
FIRSTBANK PUERTO RICO
1519 Ponce de Leon Avenue
Santurce, Puerto Rico 00908-0146
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1998
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
FirstBank Puerto Rico (the "Bank") for use at the Annual Meeting of
Stockholders to be held at the Bank's main offices located at 1519
Ponce de Leon Avenue, Santurce, Puerto Rico on the 26th day of May
1998, at 2:00 p.m., and at any adjournment thereof. This Proxy
Statement is expected to be mailed to stockholders of record on or
about April 10, 1998.
SOLICITATION AND REVOCATION
Proxies in the form enclosed are solicited by and on behalf of
the Board of Directors. The persons named in the proxy form have
been designated as proxies by the Board of Directors. Shares
represented by properly executed proxies received by the Bank will
be voted at the Meeting in accordance with the instructions
specified therein. If no contrary instructions are given, each
proxy received will be voted for the matters described below. Any
proxy given pursuant to this solicitation may be revoked by the
stockholder at any time before it is exercised by (i) written
notification to the Secretary of the Bank, (ii) submitting a duly
executed proxy bearing a later date or, (iii) appearing at the
Annual Meeting and giving proper notice to the Secretary of his or
her intention to vote in person. The proxies hereby solicited may
be exercised only at the Annual Meeting and any adjournment
thereof.
VOTING SECURITIES
The Board of Directors has fixed the close of business on
April 10, 1998 as the record date for the determination of
stockholders entitled to receive notice of, and to vote at, the
annual meeting of stockholders. At the close of business on the
record date there were 14,793,026 shares of common stock issued and
outstanding, each of which is entitled to one vote at the Annual
Meeting.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information known to the Bank
as to any persons or entities which as of April 10, 1998, by
themselves or as a group, as the term is defined by section
13(d)(3) of the Securities Exchange Act of 1934 are the beneficial
owners of 5% or more of the issued and outstanding common stock of
the Bank.(1)
- - ----------------
(1) All information concerning persons who may be beneficial owners of 5%
or more of the stock is derived from Schedule 13(D) or 13(G) statements
filed and notified to the Bank and information submitted by individual
shareholders.
1
<PAGE>
BENEFICIAL OWNERS OF 5% OR MORE:
Name Number of Shares Percentage(2)
FMR Corp.
82 Devonshire Street
Boston, MA 02109 1,500,600 10.14%
Angel Alvarez-Perez
President and CEO
FirstBank
1519 Ponce de Leon Avenue
Santurce, PR 00908 1,093,801(3) 7.39%
BENEFICIAL OWNERSHIP BY DIRECTORS OR NOMINEES:
The following table sets forth information with regard to the
total number of shares beneficially owned by each member of the
Board of Directors and each Executive Officer of the Bank and by
all Directors and Executive Officers and Officers of the Bank as a
group.(4)
Name Number of Shares Percentage(5)
Directors:
Angel Alvarez-Perez 1,205,801(6) 8.02%
Jose Julian Alvarez 1,025 *
Francisco D. Fernandez 41,867 *
Armando Lopez-Ortiz 50,857 *
German E. Malaret 11,233 *
Hector M. Nevares 596,500(7) 3.97%
- - ----------------
(2) As a percentage of 14,793,026 shares issued and outstanding.
(3) Does not include 112,000 shares subject to outstanding stock options.
All such options are fully exercisable at this time.
(4) Information as to beneficial ownership by officers and directors is
derived from information submitted by each such officers or directors.
(5) As a percentage of 15,060,026 shares. This amount includes 14,793,026
shares issued and outstanding as of April 10, 1998 and 267,000 shares
subject to stock options held by officers. All outstanding stock options
are fully exercisable at this time.
(6) This amount includes 112,000 shares subject to outstanding stock options.
All such stock options are exercisable at this time.
(7) Under applicable regulations, shares are deemed to be beneficially owned
by a person if he or she directly or indirectly has or shares the power
to vote or dispose of the shares. Mr. Hector M. Nevares is the
beneficial owner of 71,500 shares; however, Mr. Nevares shares voting
power on an additional 525,000 shares over which he disclaims
2
<PAGE>
Antonio Pavia-Villamil 30,011 *
Jose Teixidor 16,250 *
Angel L. Umpierre 288,895 1.88%
Annie Astor de Carbonell, 245,462(8) 1.63%
Senior E.V.P.
Executive Officers:
Luis M. Beauchamp, Senior E.V.P. 170,012(9) 1.13%
Aurelio Aleman, Executive V.P. 20,000(10) *
Fernando Batlle, Executive V.P. 20,000(11) *
Francisco Cortes, Executive V.P. 27,060 *
Myrna Ortiz-Lizardi, Executive V.P. 9,054 *
Directors, Executive Officers and
Officers as a group (20 persons) 2,802,460 18.60%
(*) Represents less than 1%.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTORS,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
The Bylaws of the Bank provide that the Board of Directors
shall consist of such number of directors as established from time
to time by resolution of the Board of Directors of the Bank,
provided that the total number of directors shall always be an odd
number and not less than five (5) or more than fifteen (15). The
Board of Directors of the Bank has established that the Board shall
be comprised by eleven members, divided into three classes as
nearly equal in number as possible. The members of each class are
to be elected for a term of three years and until their successors
are elected and qualified. One class is elected each year on a
rotating basis.
Unless otherwise directed, each proxy executed and returned by
a stockholder will be voted for the election of the nominees listed below.
If any nominee should be unable or unwilling to stand for election at the
time of the Annual Meeting, the proxies will nominate and vote for the
replacement nominee or nominees recommended by the Board of Directors. At
this time, the Board of Directors knows of no reason why any of the persons
listed below may not be able to serve as a director if elected.
- - ----------------
ownership.
(8) This amount includes 44,500 shares, subject to outstanding stock options.
All such stock options are exercisable at this time.
(9) This amount includes 47,500 shares, subject to outstanding stock options.
All such stock options are exercisable at this time.
(10) This amount represents 20,000 shares subject to stock options granted on
February 24, 1998.
(11) This amount represents 10,000 shares subject to stock options granted on
November 13, 1997 and 10,000 shares subject to stock options granted on
February 24, 1998.
(12) This amount includes 3,000 shares subject to stock options.
3
<PAGE>
PROPOSAL #1
ELECTION OF DIRECTORS
NOMINEES FOR A THREE-YEAR TERM EXPIRING 2001
Name
Angel Alvarez-Perez, 50
President & Chief Executive Officer
President & Chief Executive Officer of the Bank since September
1990. Acting President, from August 1990 to September 1990.
Executive Vice President, from March 1990 to August 1990. Prior
to joining the Bank, practicing attorney at law specializing in
corporate and commercial law. Partner with the law firm of
Vazquez, Vizcarrondo, Alvarez, Angelet & Gonzalez, from 1987 to
February 1990. Prior to 1987, a partner with the law firm of
Dubon, Dubon & Vazquez. Director of the Federal Home Loan Bank of
New York, from December 1993 to January 1995. Member of the Board
of Directors of Visa International. Chairman of First Federal
Finance Corporation, and CEO and Director of First Leasing & Rental
Corporation.(13) Director of the Bank since 1989.
Antonio Pavia-Villamil, 70
Doctor of Medicine. Member of the medical staff of Pavia Hospital
in Santurce, Puerto Rico, since 1959. Medical Director and
Chairman of Pavia Hospital Advisory Board. Member of the Board of
First Federal Finance Corporation and First Leasing & Rental
Corporation. Director of the Bank since 1981.
Angel L. Umpierre, 68
Certified Public Accountant. Executive Vice President, director
and major stockholder of Pan Pepin, Inc. since 1974, a company
engaged in the wholesale production and distribution of bakery
products. Mr. Umpierre previously served as director of First
Federal Savings Bank from 1988 until 1990. Director of the Bank
since 1994.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ABOVE NOMINEES BE
ELECTED AS DIRECTORS. THE VOTE OF THE HOLDERS OF THE MAJORITY OF
THE TOTAL VOTES ELIGIBLE TO BE CAST AT THE ANNUAL MEETING IS
REQUIRED FOR THE ELECTION OF THE NOMINEES.
MEMBERS OF THE BOARD CONTINUING IN OFFICE
Directors Whose Terms Expire in 1999
Francisco D. Fernandez, 70
Consulting Engineer. Founder and Chief Executive Officer of Abacus
Corporation, an information systems consulting firm, since 1970.
Member of the Consulting Board of Pavia Hospital, Santurce, Puerto
Rico, until June 1996. Chairman of First Leasing & Rental
Corporation and Director of First Federal Finance Corporation.
Director of the Bank since 1981.
German E. Malaret, 69, Chairman
Doctor of Medicine. Chairman of the Board of Directors of the Bank
since 1990. Medical Director of the Puerto Rico and Caribbean
Cardiovascular Center. Former State Surgeon for the Puerto Rico
National Guard. Past
- - ----------------
(13) First Federal Finance Corporation (D/B/A Money Express-"La Financiera")
and First Federal Leasing & Rental Corporation are subsidiaries of
FirstBank doing business in Puerto Rico.
4
<PAGE>
Governor for the District of Puerto Rico of
the American College of Physicians and of the American College of
Cardiology, and Associate Professor of Medicine of the University
of Puerto Rico. Director of the Bank since 1976.
Annie Astor de Carbonell, 40
Senior Executive Vice President and Chief Financial Officer
Certified Public Accountant. Executive Vice President and Chief
Financial Officer since September 1988. Vice President and
Comptroller, from 1983 to 1984. Senior Vice President and
Comptroller, from 1984 to 1988. Prior to joining the Bank, Senior
Auditor at Peat Marwick Mitchell & Co. Director of Puerto Rico
Telephone Company since January 1993, elected Chairperson in 1997.
Member of the Board of Trustees of the Sacred Heart University from
1991 to 1995, Chairperson from 1993 to 1995. Director of First
Leasing & Rental Corporation and First Federal Finance Corporation.
Joined the Bank in 1983. Director of the Bank since July 1995.
Directors Whose Terms Expire in 2000
Name
Jose Julian Alvarez, 64(14)
President and CEO, La Cruz Azul de Puerto Rico, a non-profit health
association, since January 1995. Executive Director, La Cruz Azul
de Puerto Rico, from 1981 to December 1994. Member of the Puerto
Rico Chamber of Commerce and former president (1990 to 1991). Past
member of the Board of Directors of Banco Central Corporation from
April 1987 to January 1996. Director of the Bank since November
1996.
Armando Lopez-Ortiz, 68
Consulting Engineer. President of Blythe Industries until
retirement in 1981. Member of the Board of Ready Mix Concrete,
Inc. until 1995. Director of First Federal Finance Corporation and
First Leasing & Rental Corporation. Director of the Bank since
1986.
Hector M. Nevares, 47
Vice Chairman Suiza Foods Corp., from 1996 to present. President
and Chief Executive Officer of Suiza Dairy Corporation, from 1981
to 1996. Partner in Suiza Realty, S.E. Member of the Board of
Directors of the Government Development Bank for Puerto Rico, from
1989 to 1993. Director of the Bank since June 1993.
Jose Teixidor, 44
Executive Vice President and General Manager, B. Fernandez & Hnos.,
Inc., importers and distributors of grocery products, beer, wines
and liquors. Member of the Board of Directors of El Nuevo Dia,
Inc. Director of the Bank since January 1994.
SENIOR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth information with respect to
senior executive officers of FirstBank who are not directors.
Luis M. Beauchamp, 55
Senior Executive Vice President and Chief Lending Officer
Appointed Executive Vice President in October 1990. General
Manager for New York banking operations for
- - ----------------
(14) Not related to the President and CEO Angel Alvarez-Perez.
5
<PAGE>
Banco de Ponce, from
1988 to 1990. Regional Manager for Ecuador and Colombia operations
and corporate finance for Central American operations of The Chase
Manhattan Bank, N.A. ("Chase"), from 1968 to 1988, Country Manager
for Mexico for Chase, from 1986 to 1988; Manager of wholesale
banking in Puerto Rico of Chase, from 1984 to 1986. Member of the
Board of Directors of First Federal Finance Corporation. Joined
the Bank in 1990.
Aurelio Aleman, 39
Executive Vice President - Consumer Banking
Appointed Executive Vice President in February 1998. Vice
President of CitiBank, N.A., responsible for wholesale and retail
automobile financing and retail mortgage business, from 1996 to
1998 . Vice President of The Chase Manhattan Bank, N.A.,
Responsible for managing bank operations and technology for
corporate, capital markets and consumer banking environment in
Puerto Rico and eastern Caribbean region, from 1994 to 1996.
Joined the Bank in February 1998.
Fernando L. Batlle, 31
Executive Vice President
President & Chief Operations Officer of First Federal Finance Corp.
Appointed Executive Vice President in October 1997. Managing
Director Neva Management Corporation, from April 1996 to October
1997. Senior Vice President of the Investments Department of the
Bank, from December 1994 to April 1996. Vice President Secondary
Market of the Bank, from December 1994 to April 1996. MBA Program
Harvard Business School, from September 1992 to June 1994.
Obtained MBA in June 1994. Assistant Vice President of Puerto Rico
Home Mortgage, from 1989 to August 1992. Joined the Bank in
December 1994 to April 1996 and re-joined the Bank in October 1997.
Francisco Cortes-Aguayo, 55
Executive Vice President - Residential Mortgage Banking and
Administrative Services Real Estate Mortgage Division, from December 1990
to December 1996. Senior Vice President/Group Executive of Bank Facilities
from 1989 to 1990. Senior Vice President of Operations from 1983 to 1989.
Joined the Bank in 1967.
Myrna Ortiz-Lizardi, 50
Executive Vice President
Branch Banking and Operations
Appointed Executive Vice President of Branch Banking in February
1996. Senior Vice President of Branch Banking from 1990 to
February 1996. Senior Vice President of Administration Group from
1988 to 1990. Joined the Bank in 1974.
OTHER MANAGEMENT OFFICERS
Nicolas Badillo-Vega, 50
Senior Vice President - Information Systems
Appointed Senior Vice President and Information Systems Director in
October 1991. Vice President Assistant Director of Information
Systems, from December 1990 to December 1996. Prior to that, Vice
President and Director of Information Systems, Banco de Ponce.
Joined the Bank in 1989.
Luis Cabrera-Marin, 28
Senior Vice President - Treasury and Investments
Appointed Senior Vice President of the Investment and Treasury
Department in May 1997 and Executive Trust Officer since January
1998. Director of Asset Management Government Development Bank of
Puerto Rico, from August 1995 to 1997. Investment Executive
Oriental Financial Services, Inc. Puerto Rico, from
6
<PAGE>
August 1994 to August 1995. Financial Consultant CitiBank, N.A., from
April 1994 to August 1994. Joined the Bank in 1997.
Antonio R. Escriba-Oliver, 63
Senior Vice President - Secretary
Appointed Secretary of the Board of Directors since 1987. Legal
Counsel to the Bank, from 1985 to 1987. Prior to joining the Bank,
attorney at law in private practice. Secretary of the Boards of
First Leasing & Rental Corporation and First Federal Finance
Corporation. Joined the Bank in 1985.
Aida Garcia, 46
Senior Vice President - Human Resources
Senior Vice President since April 1992. Director and Vice
President of Human Resources since May 1990. Second Vice
President, Human Resources, from 1988 to 1990. Human Resources
Director of Dr. Federico Trilla Hospital in Carolina, Puerto Rico,
from 1982 to 1988. Joined the Bank in 1988.
Fernando Iglesias, 60
Senior Vice President - Special Loan Division
Group Executive for Operations for the Bank from 1986 to 1990.
Senior Vice President of Branch Administration from 1986 to 1987.
Joined the Bank in 1985.
Roger Lay, 61
Senior Vice President - Internal Auditor
Internal Auditor of the Bank, from 1984 to present. Comptroller,
Caguas Federal Savings Bank, From 1982 to 1984. Joined the Bank in
1984.
John A. Ortiz, 42
Senior Vice President/Consumer Lending
Joined the Bank as Senior Vice President Consumer Lending in
October 1997. Regional Strategic and Compliance Manager CitiBank
N.A., from March 1996 to September 1997. Vice President Customer
Services & Quality Manager CitiBank, N.A., from February 1995 to
February 1996. Branch Director CitiBank, N.A., from 1991 to
February 1995.
Haydee Rivera, 43
Senior Vice President, Branch Banking Operations
Appointed Senior Vice President in December 1996. Vice President
Branch Operations, from 1993 to 1996. Joined the Bank in 1981.
Jose H. Rodriguez, 47
Senior Vice President, Branch Administration
Appointed Senior Vice President in March 1996. Vice President,
Branch Administration, from 1992 to March 1996. Joined the Bank
in 1974.
Josianne Rossello, 43
Senior Vice President, Marketing & Public Relations Director
Appointed Senior Vice President in January 1997. Vice
President/Marketing Director, Banco Santander de Puerto Rico, from
November 1994 to January 1997. Marketing Manager, Sprint United
Telephone, Orlando, Florida, from October 1993 to October 1994.
President, CitiCorp Card Services, Puerto Rico, from 1985 to 1990.
Joined the Bank in January 1997.
7
<PAGE>
Angel Suarez Ortiz, 41
Senior Vice President, Automobile Financing
Vice President, Automobile Financing, f rom June 1992 to June 1996.
Joined the Bank in October 1988.
Laura Villarino-Tur, 39
Senior Vice President - Comptroller
Certified Public Accountant. Appointed Senior Vice President -
Comptroller in 1987. Vice President, Assistant Comptroller from
1984 to 1987. Prior to joining the Bank, Staff Auditor with Peat
Marwick Mitchell & Co. Joined the Bank in 1984.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held 12 regular meetings and 3 special
meetings during fiscal 1997. Each of the incumbent directors,
attended in excess of 75% of the aggregate of the total meetings of
the Board of Directors and meetings of the committees on which they
served.
EXECUTIVE COMMITTEE
In accordance with the Bylaws of the Bank, the Board of
Directors has established an Executive Committee, which, during the
intervals between meetings of the Board, may exercise the powers of
the Board of Directors except with regard to a limited number of
matters, which include: the declaring of dividends; amending the
Charter or Bylaws of the Bank; approving or recommending to the
stockholders a plan of merger, consolidation or conversion; the
sale, lease, or other disposition of all or substantially all of
the property and assets of the Bank or its dissolution. All
actions of the Executive Committee are submitted to the full Board
for review and ratification. The members of the Executive
Committee are German E. Malaret, Chairman, Angel Alvarez-Perez,
President and CEO Armando Lopez-Ortiz, Antonio Pavia-Villamil,
Francisco D. Fernandez, Hector M. Nevares, and Angel L. Umpierre.
The Executive Committee did not meet during fiscal 1997.
AUDIT COMMITTEE
The Bank has a standing Audit Committee composed of four
outside directors who are not and have never been involved in the
day-to-day management of the Bank. The functions of the Audit
Committee include review of the reports of examination from the
Bank's regulatory agencies, examinations and comments from the
Bank's independent accountants, the Bank's Internal Auditor and
Compliance Officer regarding their findings and comments on the
internal controls of the Bank, audit procedures and actions taken
by management with regards to such matters. The Committee has the
power at its discretion to order interim and surprise audits. The
members of the Committee are German E. Malaret, Chairman; Armando
Lopez-Ortiz; Francisco D. Fernandez; and Jose Julian Alvarez.
During fiscal 1997 the Audit Committee met a total of 12 times.
INTERNAL LOAN REVIEW COMMITTEE
The Internal Loan Review Committee is composed of three
outside directors who are responsible for monitoring the Bank's
Internal Loan Review Program, which evaluates the quality of the
Bank's assets and provides for an early identification of possible
problem assets. The Committee also monitors the corrective actions
taken to minimize loss potential from such loans and makes
recommendations to the Board of Directors with regard to the
adequacy of reserves. The members of the Committee are Antonio
Pavia-Villamil, Chairman; Francisco D. Fernandez and Angel L.
Umpierre. During fiscal 1997 the Internal Loan Review Committee
met a total of four times.
8
<PAGE>
EXPANDED ASSETS LIABILITY MANAGEMENT & INVESTMENT COMMITTEE
The Board of Directors has designated three outside directors
who together with the members of Management's Investment Committee
comprise the Committee. The Committee is responsible for
monitoring the investment performance of the Bank and for the
formulation of investment strategy, including issues related to
liquidity and asset and liability management. The members of the
Committee include outside directors Francisco D. Fernandez,
Chairman; Hector M. Nevares and Jose Teixidor as well as Angel
Alvarez-Perez, President & CEO; Annie Astor de Carbonell, Senior
Executive Vice President; Luis M. Beauchamp, Senior Executive Vice
President; Fernando Batlle, Executive Vice President; Luis M.
Cabrera, Senior Vice President; and Alan Udall, Chief Economist.
During fiscal 1997, the Expanded Assets Liability Management &
Investment Committee met a total of 11 times.
EDP STEERING COMMITTEE
The Board of Directors has designated four outside directors
to participate with management in the EDP Steering Committee. The
Committee is responsible for establishing guidelines for the
strategic direction of the Information Services of the Bank and
ensuring that such development is in accordance with the business
strategies of the Bank. The Committee evaluates and recommends to
the Board of Directors all major electronic equipment and
information systems products and monitors their development, and
monitors all new developments in the Bank's Business Resumption
process. The Committee is also responsible for evaluating the
process of the Bank's year 2000 project. The Members of the EDP
Steering Committee are outside directors Francisco D. Fernandez,
Chairman, Jose Julian Alvarez, German E. Malaret, and Jose
Teixidor, as well as Angel Alvarez-Perez, President and CEO; Annie
Astor de Carbonell, Executive Vice President; Luis M. Beauchamp,
Senior Executive Vice President; Aurelio Aleman, Executive Vice
President; Fernando Batlle, Executive Vice President; Francisco
Cortes-Aguayo, Executive Vice President; Myrna Ortiz-Lizardi,
Executive Vice President; and Nicolas Badillo, Senior Vice
President. The Committee met nine times during fiscal 1997.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for administering
the Bank's executive compensation program, including the stock
option plans, and for evaluating the performance of the Bank's key
executives, including that of the President and CEO. The members
of the Compensation Committee are German E. Malaret, Francisco D.
Fernandez and Antonio Pavia-Villamil. During fiscal 1997 the
Compensation Committee met once.
CREDIT COMMITTEE
The Board has established a Credit Committee composed of at
least three outside members of the Board, the President and CEO and
the Chief Lending Officer. The Credit Committee evaluates loan
applications in excess of $1 million and may approve loans up to a
maximum of $5 million. The members of the Credit Committee are
Antonio Pavia-Villamil, Chairman; Armando Lopez-Ortiz; Jose
Teixidor; Hector M. Nevares; Angel Alvarez-Perez; Luis M.
Beauchamp; Aurelio Aleman; and Fernando Batlle. During fiscal 1997
the Credit Committee met a total of 13 times.
NOMINATING COMMITTEE
Pursuant to Article I, Section 14, of the Bylaws of the Bank,
the Board of Directors acts as the Nominating Committee for
selecting the nominees for the election of directors at the next
succeeding Annual Meeting of Stockholders. No nominations for
directors except those made by the Nominating Committee shall be
voted upon at the Annual Meeting unless other nominations by
stockholders are made in writing and delivered
9
<PAGE>
to the Secretary of the Bank at least thirty (30) days prior to the date
of the annual meeting. Upon delivery, such nominations by stockholders
shall be posted in a conspicuous place in each branch of the Bank and
ballots bearing the names of such nominee or nominees will be provided
for use by the stockholders at the Annual Meeting.
COMPENSATION OF DIRECTORS
During fiscal 1997 Non-employee Directors of FirstBank were
entitled to a fee of $900 per each regular meeting of the Board
attended and $500 per each special or extraordinary meeting of the
Board or of any standing committee of the Board attended, with the
exception of the Chairman, who receives $1,800 for each regular
meeting of the Board attended. Officers of the Bank do not receive
any fees for service on the Board of the Bank, its subsidiaries or
any committee.
The following table sets forth fees to outside Directors of the Bank
for meetings held by the Board of Directors, Committees, and Subsidiaries
of the Bank.
BOARD, COMMITTEES AND SUBSIDIARIES MEETINGS
<TABLE>
<CAPTION>
First
Board of
Internal Money Express Leasing Total
Director Directors Expanded Audit Credit EDP
Loan Compensation FFCorp & Rental Fees
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
German Malaret, Chairman $21,300 $6,000 $3,500
$500 $31,300
Jose Julian Alvarez, Director $12,300 *$3,000 $3,000
$15,300
Francisco Fernandez,
Director $12,300 $5,500 $6,000 $4,500
$2,000 $500 $1,600 $1,600 $34,000
Armando Lopez Ortiz, Director $11,400 $6,000 $5,500
$1,600 $800 $26,300
Hector M. Nevarez, Director $10,900 **$500
$10,900
Antonio Pavia, Director $11,400 $6,000
$2,000 $500 $1,600 $1,600 $23,300
Jose Teixidor, Director $12,300 $4,500 $5,500 $3,000
$25,300
Angel Umpierre, Director $10,900
$2,000 $12,900
Total $102,800 $10,000 $18,000 $17,500 $14,000
$6,000 $1,500 $4,800 $4,000 $178,100
</TABLE>
* Mr. Jose Julian Alvarez was appointed to the Audit Committee effective
April 1997.
** Mr. Hector Nevares was appointed to the Credit Committee effective
November 1997.
COMPENSATION OF EXECUTIVE OFFICERS
The summary compensation table set forth below discloses
compensation for the Bank's Chief Executive Officer and the most
highly paid executive officers of FirstBank or its subsidiaries who
worked with the Bank or such subsidiaries, during any period of
such fiscal year and whose total cash compensation for fiscal 1997
exceeded $100,000 (named executives).
10
<PAGE>
Summary Compensation
- -----------------------------------------------------------------------------
Name & Principal Position Year Salary($) Bonus($) Other(15)
Compensation($)
- -----------------------------------------------------------------------------
Angel Alvarez-Perez, 1997 550,007 300,000 5,700
President and CEO 1996 547,987 175,000 3,780
1995 475,000 150,000 4,660
- -----------------------------------------------------------------------------
Mike E. Romeu(16) 1997 319,646 -0- 1,895
Former Senior 1996 322,673 100,000 3,780
Executive Vice President 1995 280,000 80,000 4,423
- -----------------------------------------------------------------------------
Annie Astor de Carbonell, 1997 265,000 80,000 5,555
Executive Vice President 1996 261,661 75,000 3,780
and Chief Financial Officer 1995 240,000 60,000 4,484
- -----------------------------------------------------------------------------
Luis M. Beachamp, 1997 265,008 90,000 5,320
Executive Vice President 1996 244,334 75,000 3,780
and Chief Lending Officer 1995 200,000 50,000 5,223
- -----------------------------------------------------------------------------
Myrna Ortiz-Lizardi, 1997 130,000 40,000 4,935
Executive Vice President 1996 128,308 42,500 3,777
Branch Banking 1995 112,733 25,000 4,134
- -----------------------------------------------------------------------------
Senior Executive Officers and 1997 2,035,834 642,192 59,364
Other Management Officers 1996 2,172,753 585,219 59,571
as a group (17 persons) 1995 2,008,000 497,879 69,106
- -----------------------------------------------------------------------------
STOCK OPTION PLAN
On April 27, 1987 the Stockholders adopted the Bank's first
stock option plan (the "1987 Plan"). On January 21, 1997 the tenth
anniversary of its effective date, the 1987 plan expired and no new
stock options may be granted under such Plan. As of expiration of
the Plan there remained 150,000 shares of common stock subject to
unexercised stock options granted during the life of the plan. At
such expiration date there also remained 1,449,352 shares still
available for stock options. This amount was set aside for the new
1997 Plan which was approved by the Stockholders of the Bank on
April 19, 1997 (the "1997 Plan"). Any options granted after the
Expiration of the 1987 Plan must be granted under the 1997 Plan.
No options granted under the 1997 Plan prior to stockholder
approval was exercisable prior to such approval.
The 1997 Stock Option Plan, as well as its predecessor the
1987 Plan, hereinafter collectively referred to as (the "Plans"),
are intended to encourage optionees to remain in the employ of the
bank and to assist the Board of Directors and Management in its
effects to attract and to recruit qualified officers to serve the
Bank and/or its subsidiaries.
- - ----------------
(15) Represents Bank's pro rata contribution to the executive's participation
in the Bank's Defined Contribution Retirement Plan.
(16) Mr. Mike E. Romeu resigned as Senior Executive Vice President effective
October 27, 1997 and as director of the Bank effective January 19, 1998.
11
<PAGE>
The Plans, enables the Bank to grant options for the purchase
of shares of the stock of the Bank to officers and other employees
(i.e. persons employed 1,000 hours or more per year) of the Bank
and/or Subsidiaries. The stock subject to such stock options shall
be authorized but unissued shares of the Bank's $1.00 par value
common stock. The number of shares for which options may be
granted under the 1997 Plan is 1,449,352 shares, subject to
adjustment for any stock dividend, stock split or any other
relevant change in the Bank's capitalization.
The Plans are administered by the Compensations Committee (the
"Committee"), whose members are all outside directors appointed by
the Board of Directors. All members of the Committee meet the
criteria of "disinterested persons" within the meaning of Rule 16b-3 of
the Securities Exchange Act of 1934 (the "Act"). The Committee has
absolute discretion to select which eligible persons will be granted
stock options, the number of shares of common stock that may be subject
to such options, whether stock appreciation rights will be granted for
such options and generally to determine the terms and conditions in
accordance with the Plan. Effective January 21, 1987 no new options
may be granted under the 1987 Plan. According to the terms of the
Plans all options must be granted within ten years of the effective
dates of the Plans. All options granted expire on the date specified
in each individual option agreement which date will not be later than
the tenth anniversary of the date the option was granted.
The 1997 Plan may be amended at any time by the Board of
Directors, subject to any applicable regulatory limitation or
regulatory approval requirement. However, shareholder approval is
required if an amendment increase the number of shares of common
stock that may be subject to options materially changes the
eligibility criteria, changes the minimum purchase price or
increases the maximum term of the options.
The Plans provide that no person shall be eligible for a stock
option grant if at the date of such grant such person beneficially
owns more than ten percent (10%) of the outstanding common stock of
the Bank. In addition, pursuant to the change of control
provisions contained in Section 12 of the Banking Law of Puerto
Rico as amended (7 L.P.R.A. Sec.39), to the extent that by the
exercise of an option a person would acquire the beneficial
ownership of five percent (5%) or more of then issued and
outstanding common stock of the Bank, such person most obtain the
approval of the Commissioner of Financial Institution prior to the
exercise of such option. An eligible person may hold more than one
option at the time. The purchase price of options granted shall
not be less than the fair market value of the Bank's common stock
at the date of the grant.
Options granted under the Plans are not transferable other
than by will or the laws of descent and distribution. During the
life of the optionee the options may be exercised only by such
optionee. In the event of the death or disability of an optionee,
options may be exercised whether or not exercisable at the time of
such death within one year after the date of such death or
disability, but not later than the date when the option would
otherwise have expired.
If the employment of an employee is terminated by retirement
in accordance with the Bank's normal retirement policies or is
voluntarily or involuntarily terminated within one year after the
date of a change in control. the option may be exercised within
three months of such occurrence whether or not the option is
exercisable at such time, but not later than the date that the
option would otherwise have expired.
Options may be exercised by payment of the fair market price
per share established in the Option Agreement, as adjusted for any
changes in capitalization if applicable. Payment may be in cash or
at the election of the optionee, common stock of the Bank having an
aggregate fair market value to or less than the total option price
(i.e. purchase price multiplied by the number of shares bought),
plus cash. At the discretion of the Committee the optionee could
be granted stock appreciations rights with respect to an option.
12
<PAGE>
As of December 31, 1997 there were a total of 117,000 shares
subject to unexercised options granted under the 1987 Plan and
120,000 under the 1997 plan. Except to the extent limited by the
Puerto Rico Internal Revenue Code of 1994, as amended, all
outstanding options are exercisable now.
OPTION/GRANTS IN LAST FISCAL YEAR
The table set forth below discloses the information regarding
the stock options granted to the Bank's chief executive officers
and the most highly paid executives during 1997 under the Bank's
Stock Option Plan.
Shares %
Underlying Granted Exercise Value(1)
Options/SAR in Fiscal Base Expiration Grant Date
Name Granted Year Price Date Present
Angel Alvarez Perez 52,000 43% 31.25 11/13/2007 $501,956
Luis Beauchamp 19,000 16% 31.25 11/13/2007 183,407
Annie Astor de Carbonell 16,000 13% 31.25 11/13/2007 153,008
Fernando Batlle 10,000 8% 31.25 11/13/2007 96,530
Myrna Ortiz Lizardi 3,000 2% 31.25 11/13/2007 28,959
Total 82%
(1) The Black/Scholes pricing model was used to value these
stock options. Options were granted at $31.25 which was the
market date on the date of grant of November 13, 1997.
Options were granted for a term of ten years and, except to
the extent limited by the stock option plan, are exercisable
at any time during the term of the option.
In calculating the value of such options, the following
assumptions were made:
* Risk free rate (5.830%): obtained from a U.S.
Federal Government obligation maturing close to
expiration date of the options.
* Volatility (29.917): Volatility assumption of
29.917 is the historical price volatility of the
Bank's closing stock price as measured by standard
deviation of day-to-day logarithmic price changes.
* The historical growth rates of dividends were used
to project future dividends.
Based on the above assumptions, the theoretical value of
the stock options granted on November 13, 1997 is $9.653.
This valuation does not take into account the non-
transferability or forfeiture provisions of the Stock
Option Plan.
The table set forth below discloses the aggregated the
options/SAR exercises and value realized and the number of
unexercised options SAR's and the value thereof with regards to
FirstBank's Chief Executive Officer and the most highly paid
executives (named executives) as of December 31, 1997 under the
Plans.
13
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
Number of Unexercised In
Unexercised the-Money
Shares Options at Options at
Acquired Value 12/31/97(1) 12/31/97(2)
Name on Exercise(#) Realized Exercisable(#) Exercisable($)
Angel Alvarez-Perez -0- -0- 112,000 1,446,002
Annie Astor de Carbonell -0- -0- 44,500 666,188
Luis M. Beauchamp -0- -0- 47,500 673,313
Fernando Batlle -0- -0- 10,000 23,250
Myrna Ortiz-Lizardi -0- -0- 3,000 7,125
Mike E. Romeu(3) 33,000 696,761 10,000 -0-
(1) As of December 31, 1997 the average price at which the named executives
could have exercised their outstanding options was $11.5833 for options granted
on 11/28/94 and $31.25 for options granted on 11/13/97. As of 12/31/97 the
following named executives had outstanding options granted on 11/28/94: Angel
Alvarez-Perez 60,000; Annie Astor de Carbonell, 28,500; Luis M. Beauchamp,
28,500. The following hold options granted on 11/13/97: Angel Alvarez-Perez
52,000; Annie Astor de Carbonell 16,000; Luis M. Beauchamp 19,000; Annie Astor
de Carbonell 28,500; Fernando Battle 10,000 and Myrna Ortiz Lizardi 3,000. All
options were granted at an exercise price equal to the market price of
FirstBank's common stock of the Stock Option Plans which provides for
adjustments in the number and price of options due to changes in
capitalization resulting from stock dividends or splits, the options granted
on November 28, 1994 have been adjusted to reflect the stock split
distributed in June 1995.
(2) Realizable value.
(3) During fiscal 1997 Mr. Mike E. Romeu exercised his options to acquire
33,000 shares of FirstBank Common Stock at an average price of $11.5833, such
options were granted at an exercise price equal to the market price of
FirstBank stock on the date of grant. Mr. Romeu resigned his position as
Senior Executive Vice President effective October 27, 1997.
EMPLOYMENT AGREEMENTS
The following discloses information regarding the employment
agreements of the named executives with FirstBank.
Name Effective Date Current Base Salary($) Term of Years
Angel Alvarez-Perez 03-01-90 550,000 3
Annie Astor de Carbonell 09-28-89 265,000 3
Luis M. Beauchamp 10-01-90 265,000 3
Aurelio Aleman 02-24-98 200,000 4
Fernando Batlle 10-27-97 200,000 3
Myrna Ortiz-Lizardi 08-16-90 130,000 3
The agreements provide that the term of each will be
automatically renewed on the second anniversary of the agreement.
Notwithstanding such contract, FirstBank will be able to terminate
the contracting officer at any time; however, unless such
termination is for cause, the contracting officer will continue to
be entitled to the compensation provided in the contract for the
remaining term thereof. "Cause" is defined to include personal
dishonesty, incompetence, willful misconduct, breach of fiduciary
duty, intentional failure to perform stated
14
<PAGE>
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease and desist order or
any material breach of any provision of the Employment Agreement.
In the event of a "change in control" of the Bank as defined
in the employment agreements, and if the contracting officer is
terminated other than for cause within two years after the
occurrence of such "change of control," such officer will be
entitled to a lump sum severance payment equal to his or her then
current annual salary multiplied by the term of years for which
such contracting officer's employment agreement was to be effective
on the date into which it was entered. The severance payment that
each of the contracting officers would have received if his or her
agreement had been terminated as of December 31, 1997, pursuant to
a change of control of the Bank, was: Angel Alvarez-Perez,
$1,650,000; Annie Astor de Carbonell, $795,000; Luis M. Beauchamp,
$795,000; Myrna Ortiz-Lizardi, $390,000; Aurelio Aleman, $800,000;
and Fernando Batlle, $600,000.
Pursuant to the employment agreements, a "change in control"
shall be deemed to have taken place if: a third person, including
a group as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, becomes the beneficial owner of shares of the Bank
having 25% or more of the total number of votes which may be cast
for the election of directors of the Bank or which, by cumulative
voting, if permitted by the Bank's charter or Bylaws, would enable
such third person to elect 25% or more of the directors of the
Bank; or if, as a result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sales of
assets or contested election, or any combination of the foregoing
transactions, the persons who were directors of the Bank before
such transactions shall cease to constitute a majority of the Board
of the Bank or any successor institution.
DEFINED CONTRIBUTION RETIREMENT PLAN
The Bank has a Defined Contribution Retirement Plan under
Section 165(e) of Puerto Rico's Internal Revenue Law(17) which
provides participating employees with retirement, death, disability
and termination of employment benefits in accordance with their
participation. The Plan is administered by State Mutual Life
Assurance Company of America. The plan complies with the "Employee
Retirement Income Security Act of 1974 (ERISA)" and the "Retirement
Equity Act of 1984 (ERA)." The Bank's employees are eligible to
participate in the plan after completing one year of service and
there is no age requirement. An individual account is maintained
for each participant and benefits are paid based solely on the
amount of each participant's account.
Participating employees may defer from 1% to 10% of their
annual salary, up to a maximum of $7,500.00 into the plan on a pre-tax
basis as employee salary savings contributions. Commencing
in fiscal 1997 the Bank contributed 25% of each eligible participants
salary savings contribution to the Plan, however no match is
provided for salary savings contributions which are in excess of 4%
of compensation. In addition, at the end of the fiscal year, the
Bank may make, but is not obligated to do so, additional
contributions in an amount determined by the Board of Directors;
however, the maximum of any additional contribution in any year may
not exceed 15% of the total compensation of all eligible employees
participating in the plan and no basic monthly or additional annual
matches need be made on years during which the Bank incurs a loss.
All contributions to the plan are invested in the Allamerica
Retirement and Investment Service Family of Funds, which comprises
five investment funds; a Managed Stock Fund, an Indexed Stock Fund,
a Diversified Bond Fund, A Government Security Fund, and a Money
Market Fund. Participants' direct investments of both
- - ----------------
(17) Section 165(e) of the Commonwealth of Puerto Rico Internal Revenue Law
is similar to Section 401(k) of the Federal Internal Revenue Code.
15
<PAGE>
employee and employer contributions into one or more of the investment funds.
Each quarter, participants are allowed to change their investment
selections for future contributions or transfer existing account
balances between funds.
In fiscal 1997 the total contribution to the Plan by the Bank
amounted to $540,000, which funds were distributed on a pro rata
basis among all participating employees. The table below sets
forth the total of the Bank's contribution during fiscal 1997 to
the named executives of the Bank who participate in the Plan.
Name Total Bank Contribution(18)
Angel Alvarez-Perez $5,700
Mike E. Romeu $4,046
Annie Astor de Carbonell $5,555
Luis M. Beauchamp $5,320
Myrna Ortiz-Lizardi $4,935
REPORT OF THE COMPENSATION COMMITTEE
FirstBank's executive compensation program is administered by
the Compensation Committee of the Board of Directors which is
composed by Messrs. German E. Malaret, Antonio Pavia-Villamil and
Francisco D. Fernandez, none of whom is, or has ever been an
employee of the Bank.
Executive Compensation Policy
The Bank operates in a highly competitive industry where the
quality, creativity and professionalism of its executives is of
utmost importance to the success, profitability and growth of the
institution. The underlying philosophy of any effective
compensation program must be to retain and recruit top executives
who will make significant contributions to the promotion and
achievement of the institutional goals which will ultimately result
in enhanced shareholder value.
Accordingly, FirstBank has put in place a compensation policy
which is designed to retain and reward key executives who
demonstrate the capacity to lead the Bank in achieving its business
objectives in this highly competitive industry.
Objectives
* Stimulate behavior that will lead to the attainment of the
Bank's goals.
* Provide additional short-term and long-term variable
compensation to enable implementation of a pay-for-performance
package.
During fiscal 1997 the Committee met once to review the Bank's
performance as a whole and the performance of the named executives
in relation with the performance goals previously set forth. The
Committee took into consideration the Performance of FirstBank in
comparison with the performance of other bank's in the community as
well as the performance of the Bank in relation to other
institutions of similar size and complexity of loan portfolio and
other assets. On the basis of their analysis the Committee took
the following actions with regard to the Names Executives.
- - ----------------
(18) Pro rata Bank contributions to the Plan of named executives are
included in the Summary Compensation Table.
16
<PAGE>
Incentive Bonus
The Executive Compensation program provides for an incentive
bonus plan whose purpose is to maximize the efficiency and
effectiveness of the operation of the Bank. The Committee has
designated the CEO and the Executive Vice Presidents of the Bank as
plan participants. The incentive bonus is linked to the
performance of the Bank as a whole as well as the achievement of
individual goals. On November 13, 1997 the Committee recommended
performance Bonus to the following Names Executives: Luis M.
Beauchamp, Senior Executive Vice President $90,000; Annie Astor de
Carbonell, Senior Executive Vice President $80,000; Myrna Ortiz
Lizardi, Executive Vice President $40,000; Francisco Cortes,
Executive Vice President $21,623.
Long Term Compensation
The Executive Compensation Plan also contemplates long-term
incentive compensation in the form of stock options under the
Bank's Employee Stock Option Plan (the "SOP"). The Compensations
Committee has absolute discretion to select which of the eligible
persons will be granted stock options, whether stock appreciation
rights will be granted with such options and generally to determine
the terms and conditions of such options in accordance with the
provisions the SOP. On November 13, 1997 the Committee granted
the following options to purchase common stock of the Bank to Names
Executives Luis M. Beauchamp, 19,000; Annie Astor de Carbonell,
16,000; Fernando L. Batlle, 10,000; Myrna Ortiz Lizardi, 3,000;
Francisco Cortes, 3,000. All options were granted at an exercise
price of $31.25, which amount represents the price of the Stock as
of the close of business on the date the options were granted.
On March 25, 1997 Mr. Luis M. Beauchamp was promoted to Senior
Executive Vice President and his salary was adjusted from the
previous $245,000 to $265,000.
Compensation of Chief Executive Officer
Mr. Angel Alvarez-Perez has served as President and Chief
Executive Officer since September 1990. On November 13, 1997 the
Committee granted the President an incentive cash bonus of $300,000
as well as a long term compensation in the form of a 10 year option
to purchase 52,000 share of FirstBank common stock. The price per
share of such grant was $31.25. The incentive compensation granted
was determined in accordance with the Bank's compensation policy
described above. In making such determination the Committee took
into consideration the Bank's performance as a whole, including
significant increase in earnings experienced during fiscal 1997,
continued control of operating expenses and the achievement of
goals which are geared to ensure the Bank's continued long term
growth and the enhancement of stockholder value.
German E. Malaret
Francisco D. Fernandez
Antonio Pavia-Villamil
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has served
as an officer or employee of the Bank or of a subsidiary of the
Bank.
OTHER EMPLOYMENT BENEFITS
The Bank's executive officers are provided life,
hospitalization and medical insurance under group plans on
generally the same basis as for all other full-time employees of
the Bank. The Bank offers to all of its
17
<PAGE>
employees life insurance coverage of 250% of the employees' annual salaries
up to a maximum coverage of $500,000. In the event of accidental death, the
coverage is twice that amount. In addition, the Bank offers all of
its employees a contributory medical and hospitalization plan. The
plans are provided through Servicios de Seguros de Salud (SSS,Inc.)
and Blue Cross and Blue Shield Association of Puerto Rico.
INDEBTEDNESS OF DIRECTORS AND MANAGEMENT
Directors and officers and related parties thereof were
customers of and had transactions with the Bank in the ordinary
course of business during 1997.
Each of the loans and other extensions of credit made to
directors and officers of the Bank during 1997 were made in the
normal course of business on substantially the same terms as those
prevailing at the time they were made, including interest rates.
None such loans or other extensions of credit present more than the
normal risk of collectibility or other unfavorable features.
BUSINESS TRANSACTIONS BETWEEN FIRSTBANK
OR ITS SUBSIDIARIES AND EXECUTIVE OFFICERS OR DIRECTORS
Other than loan transactions in the normal course of the
Bank's business as stated above, the Board of Directors is not
aware of any business transaction between the Bank or its
Subsidiaries and any one of its Directors or Executive Officers.
PERFORMANCE OF FIRSTBANK'S COMMON STOCK
[Lineal graph of the values of the table below to represent the performance
of FirstBank's Common Stock]
18
<PAGE>
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
FirstBank $100 $237 $250 $483 $571 $761
S&P 500 $100 $110 $111 $153 $189 $251
S&P Regional $100 $103 $94 $142 $188 $276
Banks
</TABLE>
The stock performance graph above compares the cumulative
total shareholder return of the Bank's common stock from December
31, 1992 to December 31, 1997 with the cumulative total return of
the S&P 500 Markets Index and the S&P Regional Banks Index. The
S&P 500 Market Index is a broad index which includes a wide variety
of issuers and industries representatives of a cross section of the
market. The S&P Regional Banks Index is an index which includes
financial institutions comparable to the Bank.
PROPOSAL #2
PROPOSED REORGANIZATION INTO A BANK HOLDING COMPANY
At the Meeting, the Board of Directors will present for
shareholder approval a proposal for the reorganization of the Bank
into a bank holding company (the "Reorganization"). The
Reorganization is described in detail in the Prospectus
accompanying this Proxy Statement. By the terms of the Reorganization,
the affirmative vote of at least two-thirds of the outstanding common
stock of the Bank is required for approval. Proxies received in favor
of the Board of Directors will be voted to approve the proposed
Reorganization.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE
REORGANIZATION AS DESCRIBED IN THE PROSPECTUS ACCOMPANYING THIS
PROXY STATEMENT. THE VOTE OF TWO-THIRDS OF OUTSTANDING SHARES OF
THE BANK IS REQUIRED FOR THE APPROVAL OF THIS PROPOSAL.
PROPOSAL #3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse has been selected as the independent
accountants of the Bank for the fiscal year ending December 31,
1998. The firm will be represented at the Annual Meeting and
representatives will have the opportunity to make a statement, if
they so desire, and also will be available to respond to
appropriate questions. The affirmative vote of a majority of the
total votes eligible to be cast at the Annual Meeting is required
for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS OF
THE BANK FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998. THE VOTE OF
THE HOLDERS OF THE MAJORITY OF THE TOTAL VOTES ELIGIBLE TO BE CAST
AT THE ANNUAL MEETING IS REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
STOCKHOLDER PROPOSAL
Any proposal that a stockholder wishes to have presented at
the next Annual Meeting of the Bank must be received at the main
offices of the Bank not later than November 28, 1998. If such
proposal is in compliance with all of the requirements of FDIC
Regulation 335 (12 CFR 335) of the Securities Exchange Act
of 1934 (the
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"Act"), it will be included in the Proxy Statement and
set forth in the form of proxy issued for the next Annual Meeting
of Stockholders. All such proposals should be sent by certified
mail, return receipt requested, to the attention of the Secretary.
Upon the consummation of the Reorganization the Bank will request
to be deregistered with the FDIC as a reporting company under the Act and
therefore shall not be subject to FDIC Regulation 335. However, upon the
consummation of the Reorganization, First BanCorp shall become a reporting
company under the Act. Therefore, any proposal that a stockholder of
First BanCorp wishes to have presented at the next Annual Meeting of the
First BanCorp must be received at the main office of First BanCorp not
later than November 28, 1998. If such proposal is in compliance with all
the requirements of the Act, it will be included in the Proxy Statement and
set forth in the form of proxy issued for the next Annual Meeting of
Stockholders of First BanCorp. All such proposals should be sent by
certified mail, return receipt requested, to the attention of the Secretary
of First BanCorp.
OTHER MATTERS
Management for the Bank does not know of any business to be
brought before the Annual Meeting other than that specified herein.
However, if any other matters are properly brought before the
Meeting, it is intended that the proxies solicited hereby will be
voted with respect to those other matters in accordance with the
judgment of the person voting the proxies.
The cost of solicitation of proxies will be borne by the Bank.
FirstBank has retained the services of Kissel-Blake, Inc., a
professional proxy solicitation firm, to assist in the solicitation
of proxies. The fee arranged with Kissel-Blake, Inc. is in the
amount of $5,000 plus reimbursement for out-of-pocket expenses.
The Bank will reimburse brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them
in sending proxy materials to the beneficial owners of the Bank's
common stock. In addition to solicitation by mail, directors,
officers and employees of the Bank may solicit proxies personally
or by telephone without additional compensation.
ANNUAL REPORT
Stockholders will be sent a copy of the Bank's Annual Report
to Stockholders for the fiscal year ended December 31, 1997, prior
to or accompanying the Proxy Statement. Such Annual Report is not
part of the proxy solicitation material. Upon receipt of a written
request, the Bank will furnish to any stockholder, without charge,
a copy of the Bank's Annual Report under Section 13 of the
Securities Exchange Act of 1934 on FDIC's Form 10-K and the list of
exhibits thereto required to be filed with the Federal Deposit
Insurance Corporation under applicable law. Such written request
must set forth a good faith representation that the person making
the request is, as of March 13, 1998, the owner of record of shares
of common stock entitled to vote at the Annual Meeting and should
be directed to Antonio R. Escriba-Oliver, Secretary, FirstBank,
1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908-0146.
BY ORDER of the Board of Directors
April 16, 1998
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FIRST BANCORP
PROSPECTUS ACCOMPANYING PROXY STATEMENT
This Prospectus which accompanies the Proxy Statement of
FirstBank Puerto Rico (the "Bank") of the same date, is being
furnished to the holders of the common stock of the Bank, a bank
incorporated under the laws of the Commonwealth of Puerto Rico, in
connection with the solicitation of proxies by the board of
directors of the Bank for use at the Annual Meeting (the "Meeting")
of stockholders to be held on May 26, 1998.
This Prospectus and the Proxy Statement also serve as the
Prospectus of First BanCorp ("First BanCorp"), a Puerto Rico
corporation, under the Securities Act of 1933 with respect to the
issuance of a maximum of approximately 14,800,000 common stock, par
value $1.00 per share, in the proposed reorganization of the Bank
into a bank holding company (the "Reorganization") described
herein.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECU-
RITIES AND EXCHANGE COMMISSION, BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC") OR BY THE COMMISSIONER OF FINANCIAL
INSTITUTIONS OF PUERTO RICO NOR HAVE THE COMMISSION,
THE FDIC OR THE COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE
LOSS OF THE PRINCIPAL INVESTED.
THE SECURITIES OFFERED ARE NOT DEPOSITS AND ARE NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENTAL OR PRIVATE AGENCY.
The Bank is subject to the information reporting requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and, in
accordance therewith, files reports, proxy statements and other
information with the Federal Deposit Insurance Corporation (the
"FDIC"). Such reports, proxy statements and other information
filed by the Bank can be inspected and copied at the public
reference facilities maintained by the FDIC at the Federal Deposit
Insurance Corporation, 550 17th Street N. W., Washington, D.C.
20429. Also, said documents may be obtained by writing the FDIC's
Registration, Disclosure and Securities Operations Unit at 550 17th
Street, Rm. F-6043, Washington, D.C. 20429 or by calling (202)
898-8913 of by fax at (202) 898-3909. The common stock of the Bank
is listed on the New York Stock Exchange ("NYSE"). Reports, proxy
statements and other information concerning the Bank can inspected
and copied at the office of the New York Stock Exchange at 20 Board
Street, New York, New York 10005.
First BanCorp will not be subject to the information
requirements of the 1934 Act until after the Reorganization, and
thus has made no filings thereunder. Upon completion of the
Reorganization, First BanCorp common shares will be listed for
trading on the New York Stock Exchange, and First BanCorp will be
subject to the information requirements of the 1934 Act and will
file reports, proxy statements and other information with
Securities and Exchange Commission (the "Commission"). At the time
of such listing, the shares of common stock of the Bank will be
withdrawn from listing and registration under the 1934 Act.
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AVAILABLE INFORMATION
No dealer, salesman or other person has been authorized to
give any information or to make any representation not contained or
incorporated by reference in this Proxy Statement and Prospectus
and, if given or made, such information or representation must not
be relied as having been given. This Proxy Statement and
Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities described herein in any
jurisdiction in which it is unlawful to make such an offer or
solicitation.
Neither the delivery of this Proxy Statement and Prospectus
nor any transfer made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs
of the Bank since the date of this Proxy Statement and Prospectus.
INFORMATION INCORPORATED BY REFERENCE
The Bank's definitive proxy statement in connection with the
annual meeting of stockholders of the Bank to be held on May 26,
1998 relating to the formation of a bank holding company, filed
with the FDIC is incorporated in this Prospectus by reference.
Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for
all purposes to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which is
also incorporated by reference modifies or replaces such statement.
Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
Prospectus.
Upon written or oral request, the Corporation will furnish
without charge to each person, including any beneficial owner, to
whom this Prospectus is delivered, a copy of any or all of the
documents described above, other than exhibits thereto not
incorporated by reference into such documents. Such requests
should be addressed to First BanCorp, 1719 Ponce de Leon Avenue,
San Juan, Puerto Rico 00908, telephone (787) 729-8200, attention:
Corporate Secretary.
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SUMMARY
The following summary is qualified in its entirety by the
detailed information appearing elsewhere, or incorporated by
reference, in this Proxy Statement and Prospectus and exhibits
attached hereto.
The Bank
FirstBank Puerto Rico (the "Bank") is a publicly owned full
service commercial bank chartered under the laws of the
Commonwealth of Puerto Rico that provides a wide range of financial
services for retail and institutional clients. Its principal
executive offices are located at 1519 Ponce de Leon Avenue, San
Juan, Puerto Rico and its telephone number is (787) 729-8200. The
Bank operates under the regulations of the Federal Deposit
Insurance Corporation ("FDIC") and the Office of the Commissioner
of Financial Institutions of Puerto Rico (the "Commissioner"). The
deposits of the Bank are insured by the FDIC to the full extent
provided by law.
Structure of the Reorganization
Under the auspices of the Bank, First BanCorp has been
incorporated under the laws of the Commonwealth of Puerto Rico to
serve as the bank holding company in the Reorganization. To
facilitate the Reorganization, First Interim Bank (the "Interim")
will be established as a Puerto Rico banking corporation and a
wholly-owned subsidiary of First BanCorp. Pursuant to the
Reorganization, (i) Interim will be merged into the Bank, which
will thereafter continue the business of the Bank as a wholly-owned
subsidiary of First BanCorp and (ii) the common stockholders of the
Bank will receive one share of the common stock of FirstBanCorp in
exchange for each common share of the Bank's capital stock held by
them at the time of the merger. (See "PROPOSED FORMATION OF BANK
HOLDING COMPANY -- Plan of Reorganization and Description of
Proposed Merger").
Reason for the Reorganization
The Reorganization will give the Bank greater flexibility in
continuing those services it presently provides to its customers
and in responding in the future to changing market conditions and
the changing needs of the community. (See "PROPOSED FORMATION OF
BANK HOLDING COMPANY - Reasons for the Reorganization".)
Federal and Puerto Rico Income Tax Consequences
It is intended that the Reorganization will be treated as a
tax-free reorganization and that the exchange by the Bank's
shareholders of their shares of the Bank's common stock for First
BanCorp common shares will constitute a tax-free exchange under
sections 1112(b)(3) and 1112(g)(1)(B) of the Puerto Rico Internal
Revenue Code of 1994, as amended ("PRIRC"). It is also intended
that the Reorganization will be treated as a tax-free
reorganization under sections 368(a)(1)(B), 361 and 367 of the
United States Internal Revenue Code of 1986, as amended ("USIRC")
and that the exchange by the Bank's shareholders, other than United
States persons (within the meaning of section
7701(a)(30) of the USIRC) who own more than 5% of the Bank's common
stock, of their shares of the Bank's common stock for First BanCorp
common shares will constitute a tax-free exchange for purposes of
United States income tax laws. United States shareholders who own
more than 5% of the Bank's shares prior to the Reorganization may not
be subject to current taxation under United States income tax laws if
they comply with the notification requirements in Section 6038B of the
USIRC and enter into gain recognition agreement with the United
States Internal Revenue Service. Moreover, it is intended that
United States shareholders who own more than 5% of the Bank's
common stock prior to the Reorganization and who are Puerto Rico
resident individuals will be entitled to exclude from gross income
for federal income tax purposes, any gain
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from the exchange of Bank shares for First BanCorp common shares, in
accordance with Section 933 of the USIRC. See "PROPOSED FORMATION OF BANK
HOLDING COMPANY-Tax Consequences of the Reorganization."
Certain Changes Affecting Stockholders
The rights of the Bank's stockholders are governed by the
Puerto Rico Banking Law (the "Banking Law") whereas the rights of
the shareholders of First BanCorp will be governed by the Puerto
Rico General Corporation Law (the "General Corporation Law"). This
change in applicable law will in itself cause some changes in
stockholder rights. In addition, the Articles of Incorporation and
By-Laws of FirstBanCorp contain certain provisions in connection
with the removal of directors and the approval of business
combinations that were not included in the Articles of
Incorporation and By-Laws of the Bank. See "PROPOSED FORMATION OF
BANK HOLDING COMPANY-Differences in Stockholders Rights."
Differences in the rights of Stockholders
As a result of the Reorganization, certain differences arise
from the change of governing law, as well as from distinctions
between the articles of incorporation and by-laws of the Bank and
the articles of incorporation and by-laws of First BanCorp. The
following is a summary of the material differences in the rights of
Stockholders. See "PROPOSED FORMATION OF BANK HOLDING COMPANY-
Differences in Stockholder Rights."
Issuance of Capital Stock. Under the articles of
incorporation of the Bank, the authorized capital stock of the Bank
is 200,000,000 shares of common stock, par value $1.00 per share,
and 20,000,000 shares of preferred stock, par value $1.00 per
share. Under the articles of incorporation of First BanCorp, the
authorized capital stock of First BanCorp is 250,000,000 shares of
common stock, par value $1.00 per share and 50,000,000 shares of
preferred stock, par value $1.00 per share.
Payment of Dividends. The ability of the Bank to pay
dividends on its common stock is restricted by the Banking Law, by
the Federal Deposit Insurance Act and by FDIC regulations. In
general terms, the Banking Law provides that when the expenditures
of a bank are greater than receipts, the excess of expenditures
over receipts shall be charged against the undistributed profits of
the bank and the balance, if any, shall be charged against the
required reserve fund of the Bank. If there is no sufficient
reserve fund to cover such balance in whole or in part, the
outstanding amount shall be charged against the bank's capital
account. The Banking Law provides that until said capital
has been restored to its original amount, and the reserve fund is
restored to twenty prevent (20%) of the original capital, the bank
may not declare any dividends. In general terms, the Federal Deposit
Insurance Act and FDIC regulations restrict the payment of
dividends when a bank is undercapitalized, when the bank has failed
to pay FDIC insurance assessments, or when there are safety and
soundness concerns regarding such bank.
First BanCorp will not be subject to these restrictions on its
ability to pay dividends, and will be subject only to certain
restrictions generally imposed on Puerto Rico corporations (i.e.,
that dividends may be paid out only from the corporation's net
assets in excess of capital or in the absence of such excess, from
the corporation's net earnings for such fiscal year and/or the
preceding fiscal year). The Federal Reserve Board has also issued
a policy statement that provides that insured banks and bank
holding companies should generally pay dividends only out of
current operating earnings. It is important to point out that
after the Reorganization, First BanCorp's principal source of
income initially will consist of dividends, if any, from the Bank,
and the existing restrictions on the Bank's ability to pay
dividends will continue in effect.
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Indemnification of Directors and Officers. The articles of
incorporation of First BanCorp requires First BanCorp to indemnify
any director, officer, employee or agent of First BanCorp for
liability and for the expenses incurred in defending against such
liability arising from actions taken in respect of his position if
such actions were taken in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests
of First BanCorp, or with respect to a criminal proceeding, if he
had no reasonable cause to believe that his action was unlawful.
Special Meetings of the Shareholders. Under the Bank's
articles of incorporation, a Special Meeting of stockholders may be
called by the President or the Board of Directors if either is of
the opinion that such a meeting is necessary or by the request of
stockholders representing twenty percent (20%) of the paid-in
capital entitled to vote at the meeting. The General Corporation
Law and the articles of incorporation of First BanCorp do not
specify a procedure for calling a Special Meeting of stockholders.
The by-laws of First BanCorp provide that a Special Meeting of
stockholders may be called by the President or the Board of
Directors.
Stockholder Approval of Mergers and Appraisal Rights.
Although under the General Corporation Law, First BanCorp can
accomplish a merger or consolidation or a transfer of all its
assets with approval of the holders of a majority of the issued and
outstanding voting stock, First BanCorp's articles of incorporation
requires that business combinations, which include mergers,
reorganizations, consolidations and sales of substantially all of
the assets of First BanCorp, must be approved by the affirmative
vote of holders of not less than seventy-five percent (75%) of the
total number of outstanding shares of First BanCorp to the extent
such business combinations have not been approved by the majority
of the directors of the board of directors of First BanCorp.
Amendment of Articles of Incorporation and By-laws. Under
First BanCorp's articles of incorporation, amendments to the
articles of incorporation require the approval of not less than a
majority of the total number of outstanding shares of capital stock
(both common and preferred voting in the aggregate) of First
BanCorp and, if such amendment concerns provisions of the articles
of incorporation which relates to the removal of directors or
governs the approval of business
combinations, the approval of not less than seventy-five percent (75%)
of the total number of outstanding shares of capital stock of First
BanCorp is required. An absolute majority of the Board of Directors
has the power to adopt, amend or repeal the by-laws of First BanCorp;
provided that any by-laws adopted, amended or repealed by the Board of
Directors may be amended or repealed, and any by-laws may be adopted,
by the stockholders of First BanCorp.
Notice of Stockholders Meeting. The General Corporation Law
and the by-laws of First BanCorp require that notice be sent to
stockholders at least ten (10) days, but not more than sixty (60)
days, prior to the date for each such meeting. The General
Corporation Law does not require that notices to stockholders'
meeting be published in newspapers.
Board of Committees. The General Corporation Law and the by-laws
of First BanCorp provide that the Board of Directors of the
Bank may, by resolution adopted by a majority of the full Board,
from time to time appoint, any number of committees composed of one
(1) or more directors.
New Business at Annual Meetings. The by-laws of the Bank
provide that any new business proposed by a shareholder to be taken
up at an annual meeting shall be stated in writing and filed with
the Secretary of the Bank at least five (5) days before the date of
the annual meeting. First BanCorp has no similar provisions in its
by-laws.
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Government Regulation and Supervision
After the Reorganization, First BanCorp will be subject to the
Federal Bank Holding Company Act of 1956, as amended (the "Bank
Holding Company Act"), and will be subject to regulation adopted by
the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") with respect to its operations as a bank holding
company. The Bank will continue to be subject to regulation by the
FDIC and the Commissioner. The deposits of the Bank will continue
to be insured by the FDIC to the full extent provided by law. See
"SUPERVISION AND REGULATION"
Rights of Dissenting Stockholders
The rights of dissenting stockholders are governed by the
Banking Law. Any stockholder of the Bank shall be entitled to
receive from the Bank payment of the value of his shares if the
Reorganization is consummated if he or she (1) does not vote in
favor of the Reorganization, (2) records with the Bank at the time
of the Annual Meeting, or within twenty days thereafter, his or her
opposition to the Merger and (3) demand payment for his or her
shares. Once the Reorganization is consummated, such dissenting
shareholder may petition the Superior Court of Puerto Rico to have
the value of his shares appraised. See "PROPOSED FORMATION OF BANK
HOLDING COMPANY-Rights of Dissenting Stockholders.
Board of Directors
The Board of Directors of First BanCorp is comprised of the
same persons who are presently the directors of the Bank. Approval
of the Reorganization by the holders of the Bank's common
stock will be deemed to be a confirmation by First BanCorp's shareholders
of such persons as the directors of First BanCorp without further
action and without changes in classes or terms.
Capitalization Structure After the Reorganization
After the Reorganization, the Bank will continue to have the
same number of shares outstanding that it had outstanding prior to
the Reorganization. All shares of common stock of the Bank will be
held by First BanCorp. Immediately after the Reorganization, First
BanCorp will have outstanding the same number of shares of common
stock of the Bank that were issued and outstanding immediately
prior to the Reorganization. First BanCorp common shares will be
held by the persons who were common shareholders of the Bank prior
to the Reorganization.
Stock Exchange Listing
The shares of common stock of the Bank are currently traded on
the New York Stock Exchange under the stock symbol "FBP". It is a
condition precedent to the Reorganization that First BanCorp
common shares be listed for trading on the New York Stock Exchange.
See "PROPOSED FORMATION OF BANK HOLDING COMPANY--Market Price and
Dividends of Bank's Stock and listing of First BanCorp Common
Shares."
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VOTING RIGHTS AND THE VOTE REQUIRED FOR APPROVAL
OF THE REORGANIZATION
Only holders of record of the common stock of the Bank at the
close of business on April 10, 1998 (the "Record Date") are
entitled to notice of, and to vote at, the Meeting with respect to
the Reorganization. On the Record Date, 14,793,026 shares of the
Bank's common stock were outstanding and eligible to be voted at
the Meeting on this issue. Approval of the Reorganization requires
the affirmative vote of holders of two-thirds of the outstanding
shares of common stock of the Bank. With respect to the
Reorganization each share of common stock is entitled to vote on
the matter will have one vote.
PROPOSED FORMATION OF BANK HOLDING COMPANY
PLAN OF REORGANIZATION AND DESCRIPTION OF PROPOSED MERGER
The Reorganization will be accomplished pursuant to an
Agreement and Plan of Merger dated as of March 31, 1998 (the
"Merger Agreement"). A copy of the Merger Agreement is attached
hereto as Appendix A. The following discussion does not purport to
be complete and is qualified in its entirety by reference to the
Merger Agreement. All stockholders are urged to read the Merger
Agreement in its entirety.
First BanCorp is a newly organized Puerto Rico corporation
which was formed under the auspices of the Bank solely for the
purpose of effecting the Reorganization and, therefore, First
BanCorp has no prior operating history. First BanCorp has
organized First Interim Bank ("Interim") as its wholly-owned
subsidiary. If the Reorganization is approved by the stockholders
of the Bank, and subject to satisfaction of all other conditions
set forth in the Merger Agreement, Interim will be merged with and
into the Bank, with the Bank as the surviving entity (the
"Merger"). Upon the Effective Date (as defined herein) of the
Reorganization, each share of common stock of the Bank outstanding
immediately prior to the Reorganization (other than shares as to
which dissenters' rights are perfected as described below in
"Rights of Dissenting Stockholders") will automatically by
operation of law be exchanged for shares of First BanCorp common
stock equal to the number of shares of common stock of the Bank
that were issued and outstanding immediately prior to the Effective
Date of the Reorganization.
After the Reorganization, the former holders of the
outstanding common stock of the Bank (who do not exercise their
dissenters' rights) will be the holders of all of the outstanding
First BanCorp common shares. First BanCorp will own all of the
outstanding common stock of the Bank. Thus, because First BanCorp
will hold all of the issued and outstanding voting stock of the
Bank, the Bank is described as a "wholly-owned" subsidiary of First
BanCorp following the Reorganization.
After the Reorganization, the Bank will continue its existing
business and operations as a wholly-owned subsidiary of First
BanCorp and the consolidated capitalization, assets, liabilities,
income and financial statements of First BanCorp immediately
following the Reorganization will be substantially the same as
those of the Bank immediately prior to consummation of the
Reorganization. The articles of incorporation and the by-laws of
the Bank will continue in effect, and will not be
affected in any manner by the Reorganization. The name "FirstBank
Puerto Rico" will continue to be utilized. The corporate existence
of the Bank will continue unaffected and unimpaired by the Reorganization.
The Board of Directors of the Bank and First BanCorp believe
that the Reorganization is in the best interests of the
shareholders of the Bank, as further detailed below under "Reasons
for the Reorganization." The Merger Agreement has been approved by
the Board of Directors of the Bank and the Board of Directors of
First BanCorp and Interim, and has been executed by authorized
officers of each company. If the Bank's shareholders
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approve the Merger Agreement and Reorganization and the other conditions
described below under "Conditions Precedent to the Reorganization"
are satisfied, the Merger and Reorganization will become effective
upon the filing of the Merger Agreement with Secretary of State of
the Commonwealth of Puerto Rico (the "Effective Date").
REASONS FOR THE REORGANIZATION
The reasons for the Reorganization are to permit greater
flexibility to the Bank in meeting the financial needs of its
customers and to provide a vehicle for growth and potential
geographic diversification. Generally, Puerto Rico banks are not
permitted to own or operate other banks or to engage in any
business other than banking, whereas bank holding companies are
permitted to acquire and operate more than one bank and to engage
in activities closely related to banking. Bank holding companies
may also establish or acquire companies engaged in activities
closely related to banking with operations and offices located in Puerto
Rico and outside the island as well. For examples of the types of
activities closely related to banking in which bank holding
companies are permitted to engage, see "Supervision and
Regulation," below. While First BanCorp is not presently engaged
in negotiations and there are no current arrangements or agreements
for the acquisition of other banks or companies engaged in
activities closely related to banking, and while no assurance can
be given that any such acquisitions will be made, the Board of
Directors of the Bank believes that the possibility of making
acquisitions, afforded by the bank holding company reorganization
for which proxies are being solicited, represents a potentially
attractive growth possibility. The Board of Directors of the Bank
also believes that First BanCorp may provide additional funding
sources for the Bank, as well as better access to diverse money and
capital markets. Additionally, a bank holding company, in the
opinion of the Board of Directors of the Bank, will be in a better
position to respond to the competitive environment in which it is
operating, characterized in larger part by the activities of bank
holding companies in Puerto Rico as well as nationally. In
general, the Board of Directors of the Bank believes that operating
as a bank holding company will serve the interests of the banking
public and the shareholders of the Bank by improving the capability
for service in a highly competitive environment.
TREATMENT OF STOCK CERTIFICATES
After the Reorganization, the former holders of the Bank's
common stock (who do not exercise their dissenters' rights) will be
entitled to exchange their Bank stock certificates for new
certificates evidencing the same number of First BanCorp common
shares. Until so exchanged, the Bank stock certificates will, for
all purposes, represent the same number of First BanCorp Common
Shares as the number of shares of the Bank's common stock
previously represented, and the holders of such certificates (who
do not exercise their dissenters' rights) will have all of the
rights of holders of First BanCorp common shares.
Instructions with respect to the exchange of stock
certificates will be sent to all holders or record on the Effective
Date of the Reorganization of shares of the Bank's common stock as
soon as practicable after the consummation of the Reorganization.
The Bank of New York, the transfer agent for the Bank's common
stock, will act in the same capacity for First BanCorp's common
stock.
CONDITIONS PRECEDENT TO THE REORGANIZATION
The following conditions must be met before the Reorganization
will be consummated: (1) the approval of the Merger Agreement by
the votes of two-thirds of the shares of the aggregate issued
common stock of the Bank; (2) the approval of the Merger Agreement
by the votes of two-thirds of the shares of the issued common stock
of Interim; (3) the approval of the merger of the Bank and Interim
by the Commissioner and the filing of the Merger Agreement so
approved with the Secretary of State of the Commonwealth of Puerto
Rico; (4) the
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lapse of any applicable waiting period required after
giving notice to, or receiving approval from, the Federal Reserve
Board of First BanCorp's notice to become a bank holding company;
(5) the approval of the FDIC of the Bank's and Interim's
application to merge and the lapse of any applicable waiting
period; (6) the Bank's receipt of a ruling from the Secretary of
the Treasury of Puerto Rico or an opinion letter from Fiddler,
Gonzalez & Rodriguez, LLP, counsel to the Bank, with respect to the
Puerto Rico income tax consequences of the Reorganization; (7) the
Bank's receipt of a ruling from the United States Internal Revenue
Service or an opinion letter from Fiddler, Gonzalez & Rodriguez,
LLP, counsel to the Bank, with respect to the United States income
tax consequences of the Reorganization; and (8) First BanCorp
common shares are approved for listing by the New York Stock
Exchange.
DIFFERENCES IN STOCKHOLDER RIGHTS
As a result of the Reorganization, holders of the common stock
of the Bank, whose rights are presently governed by the Banking Law
and the articles of incorporation and by-laws of the Bank, will
become stockholders of First BanCorp, a Puerto Rico corporation.
Accordingly, their rights will be governed by the General
Corporation Law and the articles of incorporation and by-laws of
First BanCorp. Certain differences arise from this change of
governing law, as well as from distinctions between the articles of
incorporation and by-laws of the Bank and the articles of
incorporation and by-laws of First BanCorp. The following
discussion is not intended to be a complete statement of the
differences affecting the rights of stockholders, but summarizes
material differences in stockholder rights. The articles of
incorporation and by-laws of First BanCorp and the articles of
incorporation and by-laws of the Bank are attached hereto as
Appendix B. All stockholders are urged to read the articles of
incorporation and by-laws of First BanCorp and the articles of
incorporation and by-laws of the Bank.
Issuance of Capital Stock. Under the articles of
incorporation of the Bank, the authorized capital stock of the Bank
is 200,000,000 shares of common stock, par value $1.00 per share,
and 20,000,000 shares of preferred stock, par value $1.00 per
share. Under the articles of incorporation of First BanCorp, the
authorized capital stock of First BanCorp is 250,000,000 shares of
common stock, par value $1.00 per share and 50,000,000 shares of
preferred stock, par value $1.00 per share.
Payment of Dividends. The ability of the Bank to pay
dividends on its common stock is restricted by the Banking Law, by
the Federal Deposit Insurance Act and by FDIC regulations. In
general terms, the Banking Law provides that when the expenditures
of a bank are greater than receipts, the excess of expenditures
over receipts shall be charged against the undistributed profits of
the bank and the balance, if any, shall be charged against the
required reserve fund of the Bank. If there is no sufficient
reserve fund to cover such balance in whole or in part, the
outstanding amount shall be charged against the bank's capital
account. The Banking Law provides that until said capital has been
restored to its original amount, and the reserve fund is restored
to twenty prevent (20%) of the original capital, the bank may not
declare any dividends. In general terms, the Federal Deposit
Insurance Act and FDIC regulations restrict the payment of
dividends when a bank is undercapitalized, when the bank has failed
to pay FDIC insurance assessments, or when there are safety and
soundness concerns regarding such bank.
First BanCorp will not be subject to these restrictions on its
ability to pay dividends, and will be subject only to certain
restrictions generally imposed on Puerto Rico corporations (i.e.,
that dividends may be paid out only from the corporation's net
assets in excess of capital or in the absence of such excess, from
the corporation's net earnings for such fiscal year and/or the
preceding fiscal year). The Federal Reserve Board has also issued
a policy statement that provides that insured banks and bank
holding companies should generally pay dividends only out of
current operating earnings. It is important to point out that
after the Reorganization, First BanCorp's
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principal source of income initially will consist of dividends, if any,
from the Bank, and the existing restrictions on the Bank's ability to pay
dividends will continue in effect.
Indemnification of Directors and Officers. The articles of
incorporation of the Bank authorize indemnification of directors
and officers. The Banking Law exempts directors of bank from
personal liability for their acts as directors of the Bank, unless
such acts were willful violations of laws or the statutes of the
Bank or were willful infractions of any lawful resolution adopted
by the shareholders of the Bank. Under the General Corporation
Law, directors and officers of First BanCorp are liable if they
knowingly cause to be published or give out any written statement
or report of the condition of First BanCorp that is false in any
material respect. The articles of incorporation of First BanCorp
requires First BanCorp to indemnify any director, officer, employee
or agent of First BanCorp for liability and for the expenses
incurred in defending against such liability arising from actions
taken in respect of his position if such actions were taken in good
faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of First BanCorp, or with respect to
a criminal proceeding, if he had no reasonable cause to believe
that his action was unlawful. Under certain circumstances, First
BanCorp may advance to such person amounts to cover the expenses or
litigation. The articles of incorporation of First BanCorp contain
provisions eliminating the personal liability of directors and
officers of First BanCorp for monetary damages to the fullest
extent permitted by the General Corporation Law.
Special Meetings of the Shareholders. Under the Bank's
articles of incorporation, a Special Meeting of stockholders may be
called by the President or the Board of Directors if either is of
the opinion that such a meeting is necessary or by the request of
stockholders representing twenty percent (20%) of the paid-in
capital entitled to vote at the meeting. The General Corporation
Law and the articles of incorporation of First BanCorp do not
specify a procedure for calling a Special Meeting of stockholders.
The by-laws of First BanCorp provide that a Special Meeting of
stockholders may be called by the President or the Board of
Directors. The General Corporation Law, in contrast to the Banking
Law, does permit stockholders to take action in lieu of a meeting
if the required amount of stockholders necessary to approve such
action consent to such action in writing and such consent is filed
in the designated office of the corporation.
Stockholder Approval of Mergers and Appraisal Rights. Under
the articles of incorporation of the Bank, the approval required
for a merger or consolidation is that established by the Banking
Law, which is two-thirds of the holders of the Bank's capital
stock. Although under the General Corporation Law, First BanCorp
can accomplish a merger or consolidation or a transfer of all its
assets with approval of the holders of a majority of the issued and
outstanding voting stock, First BanCorp's articles of incorporation
requires that business combinations, which include mergers,
reorganizations, consolidations and sales of substantially all of
the assets of First BanCorp, must be approved by the affirmative
vote of holders of not less than seventy-five percent (75%) of the
total number of outstanding shares of First BanCorp to the extent
such business combinations have not been approved by the majority
of the directors of the board of directors of First BanCorp. Under
the Banking Law, holders of the Bank's outstanding capital stock
who do not approve a merger or consolidation are entitled to
appraisal rights. Under the General Corporation Law, the
stockholders of First BanCorp who do not approve a merger or
consolidation are also entitled to appraisal rights.
Amendment of Articles of Incorporation and By-laws. Under the
Banking Law, the Bank may amend its articles of incorporation if
such amendment is approved by the votes of the majority of their
entire capital stock of the Bank and if such amendment is approved
by the Commissioner and is filed with the Secretary of State of the
Commonwealth of Puerto Rico. The by-laws of the Bank may be
amended under the Banking Law by a majority vote of the capital
stock of the Bank present at a general meeting of the stockholders
of the Bank if more than one-half of the capital stock is present
at such meeting. Under First BanCorp's articles of incorporation,
amendments to the articles of incorporation require the approval of
not less than a majority of the
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total number of outstanding shares of capital stock (both common and
preferred voting in the aggregate) of First BanCorp and, if such amendment
concerns provisions of the articles of incorporation which relates to the
removal of directors or governs the approval of business
combinations, the approval of not less than seventy-five percent
(75%) of the total number of outstanding shares of capital stock of
First BanCorp is required. An absolute majority of the Board of
Directors has the power to adopt, amend or repeal the by-laws of
First BanCorp; provided that any by-laws adopted, amended or
repealed by the Board of Directors may be amended or repealed, and
any by-laws may be adopted, by the stockholders of First BanCorp.
Notice of Stockholders Meeting. The Banking Law and the by-laws
of the Bank require that notice be provided to stockholders of
not less than thirty (30) days before a meeting of stockholders and
that such notice be published twice a week for four consecutive
weeks immediately preceding the date of the meeting in two
newspapers of general circulation in Puerto Rico. The General
Corporation Law and the by-laws of First BanCorp require that
notice be sent to stockholders at least
ten (10) days, but not more than sixty (60) days, prior to the date
for each such meeting. The General Corporation Law does not require
that notices to stockholders' meeting be published in newspapers.
Board of Committees. The Banking Law and the by-laws of the
Bank provide that the Board of Directors of the Bank may, by
resolution adopted by a majority of the full Board, from time to
time appoint, any number of committees composed of not less than
three (3) directors. The General Corporation Law and the by-laws
of First BanCorp provide that the Board of Directors of the Bank
may, by resolution adopted by a majority of the full Board, from
time to time appoint, any number of committees composed of one (1)
or more directors.
New Business at Annual Meetings. The by-laws of the Bank
provide that any new business proposed by a shareholder to be taken
up at an annual meeting shall be stated in writing and filed with
the Secretary of the Bank at least five (5) days before the date of
the annual meeting. First BanCorp has no similar provisions in its
by-laws.
TAX CONSEQUENCES OF THE REORGANIZATION
Puerto Rico Tax Consequences of the Reorganization
The Bank filed a ruling request with the Secretary of Treasury
of Puerto Rico on February 26, 1998 requesting the following
rulings, among others, in connection with the Reorganization: (1)
that the Reorganization, including the creation and merger of
Interim into the Bank, will be treated as a tax-free reorganization
under Sections 1112(b)(3) and 1112(g)(1)(B)of the Puerto Rico
Internal Revenue Code ("PRIRC"). The Reorganization shall be
considered as one in which First BanCorp transferred shares of its
voting stock to the holders of shares of stock in the Bank (other
than dissenters) in exchange for the shares of stock of the Bank
held by such holders on a one to one basis; (2) each of Bank,
Interim and First BanCorp shall constitute a "party to a
reorganization" for purposes of Section 1112(g)(3); (3) that
pursuant to Sections 1112(b)(3), 1112(b)(4) and 1112(o) no gain or
loss will be recognized by the Bank, Interim, First BanCorp, or by
the stockholders of the Bank upon the exchange of shares of the
Bank's common stock for First BanCorp Common Shares; (4) that
pursuant to Section 1114(a)(7) the basis of First BanCorp Common
Shares received by each stockholder of the Bank will be the same as
the basis of the shares of the Bank's common stock held by such
stockholder immediately prior to the Reorganization; (5) that the
basis of First BanCorp in the Bank's common stock shall be the same
as the basis of said shares in the hands of the Bank shareholders;
(6) that pursuant to Section 1112(b)(2) the holding period of
First BanCorp Common Shares received by each stockholder of the
Bank will include the holding period of the shares of the Bank's
common stock held by such stockholder immediately prior to the
Reorganization; (7) that the holding period of First BanCorp in the
shares of the Bank's common stock shall include the period for
which the previous owner of such shares held the same;
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(8) that pursuant to Section 1112(a) Bank shareholders who exercise
their rights as dissenters will have to recognize gain or loss on the
exchange of shares of stock for cash equal to the difference
between the amount of cash received and the adjusted basis of their
Bank stock surrendered in the exchange; (9) any income realized on
the Reorganization by Non-Resident Shareholders that exercise the
Offshore Option shall constitute income from sources without Puerto
Rico under Section 1123(e) and pursuant to Sections 1147 and 1150,
no income tax withholding at the source shall be required on any
part of any payments or other
transfers made to, or in respect of, such shareholders; (10) any
income realized on the Reorganization by any Non-Resident Shareholders
that exercise the Offshore Option shall not be subject to income tax
if such shareholders are alien individuals and such income is effectively
connected with a trade or business in Puerto Rico of such shareholders;
and (11) before and after the Reorganization, the Bank shall constitute
one and the same taxpayer with the same tax attributes. There can be no
assurance that the Secretary of the Treasury of Puerto Rico will
issue the rulings as requested by the Bank. As mentioned above, it
is a condition precedent to the Reorganization that the Bank
receives a ruling from the Secretary of the Treasury of Puerto Rico
or an opinion letter from Fiddler, Gonzalez & Rodriguez, LLP,
counsel to the Bank, with respect to the Puerto Rico income tax
consequences of the Reorganization.
United States Tax Consequences of the Reorganization
The Bank filed a ruling request with the United States
Internal Revenue Service (the "IRS") on February 18, 1998
requesting certain rulings. If these rulings are issued: (1) the
exchange by the Bank's shareholders (other than United States
shareholders who own 5% or more of both the total voting power and
the total value of the Bank's common stock) of the Bank's common
stock for First BanCorp Common Shares will constitute a tax-free
exchange for purposes of Section 367 of the United States Internal
Revenue Code ("USIRC"), and (2) United States shareholders who own
5% or more of both the total voting power and the total value of
the Bank's common stock and who are Puerto Rico resident
individuals for the entire taxable year in which the Reorganization
occurs will be able to exclude from gross income for federal
income tax purposes any gain from the exchange of the Bank's common
stock for First BanCorp Common Shares. There can be no assurance
that the IRS will issue the rulings as requested by the Bank. As
mentioned above it is a condition precedent to the Reorganization
that the Bank receives a ruling from the IRS or an opinion letter
from Fiddler, Gonzalez & Rodriguez, LLP, counsel to the Bank, with
respect to the United States income tax consequences of the
Reorganization.
United States shareholders who are not Puerto Rico resident
individuals and who own 5% or more of both the total voting power
and the total value of the Bank's shares prior to the
Reorganization may not be subject to current taxation under United
States income tax laws if they comply with the reporting
requirement in Section 6038B of the USIRC and enter into gain
recognition agreement with the IRS. Pursuant to such gain
recognition agreement the 5% or more shareholder would have to file
an amended income tax return to recognize gain if First BanCorp
were to dispose of the Bank within a certain period of time. The
term of the gain recognition agreement would be five years (if
United States shareholders own less than 50% of the total voting
power and the total value of the stock) or ten years (if United
States shareholders own more than 50% of the total voting power and
the total value of the stock). If the aforementioned requirements
are not complied with the shareholder will recognize gain on the
Reorganization and incur a penalty of 25% of the gain recognized.
EACH BANK STOCKHOLDER SHOULD CONSULT ITS TAX COUNSEL AS TO THE
SPECIFIC FEDERAL AND STATE TAX CONSEQUENCES OF THE REORGANIZATION,
IF ANY, TO SUCH STOCKHOLDERS. GAIN OR LOSS FOR UNITED STATES
INCOME TAX PURPOSES MAY BE RECOGNIZED IN THE CASE OF ANY BANK
STOCKHOLDER WHO RECEIVES PAYMENT IN CASH FOR THE VALUE OF SHARES AS
A RESULT OF THE EXERCISE OF RIGHTS AS A DISSENTING STOCKHOLDER.
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REGULATORY APPROVALS
Puerto Rico. Under the Banking Law, the Commissioner has all
supervisory powers over commercial banks to carry out the policies
contained in such law. These powers include the issuance of rules
and regulations, issuance of branch and other permits, annual
inspections and examinations, the levying and collection of fines,
the filing of certain reports and the approval of certain actions
and transactions.
(1) Change in Control. Section 12 of the Banking Law
requires the prior approval of the Commissioner to obtain control
of any bank organized under the Banking Law.
In any transfer of voting and outstanding capital stock of any
bank organized under the laws of Puerto Rico to any person or
entity that, upon consummation of the transfer, will become the
owner, directly or indirectly, of more than 5% of the voting and
outstanding capital stock of said bank, the parties to the transfer
are required under Section 12 of the Banking Law to inform the
Commissioner of the details thereof at least 60 days prior to the
date said transfer is to be effected. The Banking law does not
contain any provision allowing for the extension of such 60-day
time period, nor does it preclude the Commissioner from issuing his
determination at any time during the 60-day period. The transfer
requires the approval of the Commissioner if it results in a change
of control of the bank. For the purposes of Section 12 of the
Banking Law, the term "control" means the power to, directly or
indirectly, direct or influence decisively the administration or
the norms of the bank.
Pursuant to Section 12(d) of the Banking Law, as soon as the
Commissioner receives notice of a proposed transaction that may
result in the control or change of control of a bank, the
Commissioner shall have the duty to make the necessary
investigations with respect to (1) experience and moral and
financial responsibility of the person or entity that is acquiring
the control; (2) whether such experience and moral and financial
responsibility warrant the efficient functioning of the bank; (3)
whether the transfer of control of the bank jeopardizes the
interests of the depositors, creditors or stockholders of the bank;
and (4) the public interest, if any, involved in the change of
control. The Commissioner shall issue authorization for the
transfer of control of the bank if the result of his investigations
are in his judgment satisfactory. The resolution of the
Commissioner is final.
(2) Approval of the Merger. Section 15(c) of the
Banking Law provides that once a merger agreement is approved by
the shareholders as required under the Banking Law and the Bank'
articles of incorporation, the merger agreement shall be submitted
to the Commissioner for approval or disapproval. In making the
determination, the Commissioner shall consider, among other
factors, the public interest. The Commissioner is required to
serve notice of his determination by registered mail within the
term of 90 days from the date the merger agreement is submitted to
him. The Banking Law does not contain any provision allowing for
the extension of such 90-day period, nor does it preclude the
Commissioner from issuing his determination before the end of said
90-day period. The merger becomes effective upon the filing of the
merger agreement with the Department of State of the Commonwealth
of Puerto Rico in accordance with the Banking Law.
On March 3, 1998, the Bank filed with the Commissioner a
notice under Section 12 of the Banking Law. The notice under
Section 12 requests the Commissioner's determination that the
Reorganization will not result in a change of control of the Bank
for purposes of Section 12 of the Banking Law. There can be no
assurance that the Commissioner will issue a favorable
determination under Section 12 of the Banking Law, or that such
determination will not contain unacceptable conditions. The final
approval of the Merger will be requested from the Commissioner
concurrent with or after the Reorganization and Merger are approved
by the Bank's Stockholders at the Annual Meeting.
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Federal Deposit Insurance Corporation. The Merger also
requires the approval of the FDIC under the Bank Merger Act. The
Bank Merger Act requires the FDIC to take into consideration, among
other things, the financial and managerial resources and future
prospects of the entities involved and the convenience and needs of
the communities to be served.
The Bank Merger Act prohibits the FDIC from approving the
Merger if it results in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United
States, or if the effect in any section of the country may be
substantially to lessen competition or to tend to create a
monopoly, or if the Merger would in any other manner be in a
restraint of trade, unless the FDIC finds that the anti-competitive
effects of the Merger are clearly outweighed in the public interest
by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In
addition, under the Community Reinvestment Act the FDIC must take
into account the record of performance of the institutions in
meeting the credit needs of the entire community.
Under the Bank Merger Act, the Merger may not be consummated
until the 15th calendar day following the date of FDIC approval,
during which time the United States Department of Justice may
challenge the Merger on antitrust grounds. The commencement of an
antitrust action would stay the effectiveness of the FDIC's
approval unless a court specifically orders otherwise. In any such
action, the court would review de novo the issues presented.
The Bank Merger Act also provides for the publication of
notice and public comment on the application and interested parties
may comment on or request a hearing on the application. The
granting of a hearing or the comments of third parties could delay
the FDIC approval required for completion of the Merger (and thus
the Reorganization). In addition, court challenges to the FDIC
approval, if any, could delay the consummation of the Merger (and
thus the Reorganization).
On or about April 20, 1998 the Bank and Interim will file an application
with the FDIC under the Bank Merger Act. There can be no assurance
that the FDIC will approve the Merger or that such approval, if
granted, will not contain unacceptable conditions.
Federal Reserve Board. Notice of the Reorganization must be
given to the appropriate Federal Reserve Bank not less than 30 days
prior to the Effective Date, pursuant to the expedited
notice procedure under Section 3(a)(5) of the Bank Holding Company Act,
and after the Effective Date First BanCorp must register as a bank
holding company. Section 3(a)(5) of the Bank Holding Company Act
was added by the Riegle Community Development and Regulatory
Improvement Act of 1994 to provide a simplified notice procedure
alternative to the bank holding company application process under
Section 3(a) of the Bank Holding Company Act for certain
reorganizations in which the owners of a bank seek to reorganize
their ownership interests into a bank holding company structure.
The applicable regulation issued by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") provides that
the Reorganization can be effected if during the thirty day period
neither the appropriate Federal Reserve Bank nor the Federal
Reserve Board objects to the proposal or requires that an
application be filed requesting the prior approval of the Federal
Reserve Board under Section 3(a) of the Bank Holding Company Act.
First BanCorp will file a notice with the Federal Reserve Bank of
New York under the expedited notice procedure on or about April 20, 1998.
There can be no assurance that neither the Federal Reserve Bank of
New York nor the Federal Reserve Board will object to the
Reorganization or will require that an application be filed under
Section 3(a) of the Bank Holding Company Act.
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Neither First BanCorp nor the Bank is aware of any other
governmental approvals or actions that are required for
consummation of the Merger and the Reorganization except as
described above. Should any other approval or action be required,
it is presently contemplated that such approval or action would be
sought. There can be no assurance that any such approval or
action, if needed, could be obtained and, if such approval or
actions are obtained, there can be no assurance as to the timing
thereof.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to the Banking Law, holders of the Bank's capital
stock may demand payment of the value of their shares of the Bank's
capital stock instead of receiving First BanCorp Common Shares, in
the case of common stockholders of the Bank. A full description of
appraisal rights of dissenting stockholders is contained in Section
15(i) of the Banking Law, as amended, which is attached hereto as
Appendix C. A shareholder electing to make such a demand must (i)
not vote in favor of the Merger Agreement; (ii) record his
opposition to the Reorganization at the time of the annual Meeting
or within twenty days thereafter; and (iii) demand payment of his
shares. If the Reorganization is carried out, such stockholder
may, within sixty days after the Effective Date of the
Reorganization and upon ten days written notice to the Bank,
petition the Court of the First Instance, Superior Section of San
Juan of the Commonwealth of Puerto Rico for the appointment of one
appraiser who shall estimate and determine the value of the
stockholder's shares. Upon due appointment and the completion of
the valuation the appraiser shall deliver to the Bank, and to such
stockholder if he demands it, a copy of their report. The Bank
shall pay the determined value and the stockholder shall cease to
be a stockholder of the Bank or to have any interest therein.
STOCK OPTION PLANS
The Bank maintains a stock related plan, the 1997 Stock Option
Plan (the "1997 Plan"). From and after the Effective Date, First
BanCorp common shares will be used in lieu of shares of the
Bank's common stock whenever stock is required in connection with the
Bank's 1997 Stock Option Plan. Amendments to the 1997 Plan to
provide for the foregoing will take effect of the Effective Date.
The approval of the Merger and the Reorganization also will
constitute shareholder approval of amendments to the 1997 Plan
providing for the future use of First BanCorp common shares in lieu
of shares of the Bank's common stock thereunder.
AMENDMENT OR TERMINATION
The Board of Directors of either the Bank or Interim may cause
the Merger Agreement to be terminated or deferred if such Board
determines in its sole discretion that such termination or deferral
would be advisable. Such deferral or termination may occur at any
time prior to the Effective Date and may occur notwithstanding
shareholder approval. Any amendment to the Merger Agreement that
would materially alter the terms of the Reorganization as presented
to shareholders in this Prospectus would require shareholder
approval.
DIVIDENDS
It is the intention of First BanCorp to follow the Bank's
policy of declaring and paying a cash dividend quarterly. The
following table sets forth the cash dividends paid by the Bank each
of the past previous three years. No cash dividends were declared on 1993
or 1994.
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1995 1996 1997
Common Shares 15,541,751 15, 203,851 14,957,651
(Outstanding as of 12/31)
Per Share $0.08 $0.10 $0.12
The declaration and payment of future dividends by First
BanCorp on its common stock will depend upon its earnings and
financial condition and upon other factors not determinable at
present. After the Reorganization, it is anticipated that First
BanCorp will obtain the funds needed for payment of its dividends
and expenses from the Bank, chiefly in the form of dividends.
MARKET PRICE OF THE BANK'S CAPITAL STOCK
The common stock of the Bank is traded in the New York Stock
Exchange. The following table set forth the range of market prices
for the Bank's stock over the last two years.
Period
Close High Low
1997 Quarter Ended
March 31 25.38 28.75 25.00
June 30 23.38 27.25 23.38
September 30 32.50 35.50 25.06
December 31 34.06 37.63 30.25
1996 Quarter Ended
March 31 24.00 24.25 20.63
June 30 23.00 24.13 20.13
September 30 25.58 23.13 20.00
December 31 26.00 28.38 22.25
It is a condition precedent to the Reorganization that the
common stock of First BanCorp be listed by the New York Stock
Exchange.
MANAGEMENT
Directors
Upon completion of the Reorganization the directors of First
BanCorp will continue to be, the same persons who are at present
directors of the Bank.
Approval of the Reorganization by holders of the Bank's common
stock will be deemed to be the confirmation by First BanCorp
shareholders of such persons as directors of First BanCorp, without
further action and without changes in classes or terms.
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Officers
The officers of First BanCorp are, and upon completion of the
Reorganization will continue to be, the following persons, each of
whom holds identical positions with the Bank:
Name Title
Angel Alvarez Perez, Esq. President and Chief Executive Officer
Luis M. Beauchamp Senior Executive Vice President
Annie Astor de Carbonell Senior Executive Vice President
Aurelio Aleman Executive Vice President
Fernando Batlle Executive Vice President
Francisco Cortes-Aguayo Executive Vice President
Mayra Ortiz-Lizardi Executive Vice President
Antonio Escriba-Oliver, Esq. Senior Vice President and Secretary
Laura Villarino-Tur, CPA Senior Vice President
PRINCIPAL SHAREHOLDERS OF THE BANK
For information in connection with the beneficial ownership of the
capital stock of the Bank please refer to the "Beneficial Ownership of
Securities" section of this Proxy/Prospectus.
THE BANK
General
The Bank is the second largest independent commercial bank
headquartered in the U.S. Commonwealth of Puerto Rico and the
fourth largest depository institution in Puerto Rico based on total
assets. The Bank had total assets of $3.327 billion, total
deposits of $1.595 billion and total tangible stockholders' equity
of $236.4 million at December 31, 1997. First chartered in 1948,
FirstBank was originally the first savings and loan association
established in Puerto Rico. It has been a stockholder-owned
institution since January 1987. Effective at the close of business
on October 31, 1994, FirstBank converted to Puerto Rico chartered
commercial bank. The Bank employs approximately 1,600 full time
professionals.
The Bank's strategy emphasizes in consumer lending, primarily
auto loans, personal loans and credit cards. In addition, the Bank
continues to develop commercial mortgage lending as a secondary
area of concentration. In pursuit of profitable growth in these
selected lines of business consistent with effective risk
management, the Bank has strengthened its capital base, built
reserves for possible loan losses and improved asset/liability
management. During the past two years the Bank has also increased
its portfolio of asset based commercial loans. Management believes
that the Bank has accomplished these goals while maintaining a low
cost, highly efficient operating structure.
The Bank conducts its business through its main office located
in San Juan, Puerto Rico, 34 full-service banking branches in
Puerto Rico and two in the U.S. Virgin Islands of St. Thomas and
St. Croix. The Bank also has 12 loan origination offices in Puerto
Rico focusing on personal loans and credit cards, and nine loan
origination offices focusing on auto loans. The Bank views these
loan offices as an effective, low cost method of accessing
geographical areas where the Bank currently does not have a branch.
This strategy also allows the Bank to test an area's potential
before making the capital commitment necessary to establish a
full-service
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banking branch. In addition, through its wholly-owned
subsidiaries, the Bank operated 26 loan offices in Puerto Rico
specializing in small personal loans and three offices specializing
in vehicle rental as of December 31, 1997.
FirstBank is subject to supervision, examination and
regulation by the Office of the Commissioner of Financial
Institutions of Puerto Rico and the Federal Deposit Insurance
Corporation, which insures its deposits through the Savings
Association Insurance Fund ("SAIF").
History of the Bank
The Bank was organized in 1948 as Puerto Rico's first
federally-chartered mutual savings and loan association, adopted a
federal savings bank charter in 1983 and converted to stock form in
1987. The Bank was the largest thrift institution in Puerto Rico
at the time of its conversion to a commercial bank in October 1994.
Prior to 1982, FirstBank's business, like that of most thrift
institutions, consisted of attracting deposits from the general
public and making long-term, fixed-rate residential mortgage loans.
From 1983 to 1987, the Bank diversified its asset base through the
origination of consumer and commercial
loans as permitted by the Garn-St. Germain Act of 1982. During 1987,
the Bank converted from mutual to stock form of ownership. The capital
infusion resulting from this conversion enabled the Bank to exceed its
then-applicable minimum regulatory capital requirements. However, the
enactment of the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA") in August 1989 had a significant adverse impact on
the Bank's regulatory capital. FIRREA required the Bank to deduct
from its regulatory capital $34.3 million of cumulative preferred
stock held by the Federal Savings and Loan Insurance Corporation
Resolution Fund, a division of the FDIC. Accordingly, under the
Office of the Thrift Supervision ("OTS") capital regulations that
became effective in December 1989 as a result of FIRREA, the Bank
failed to meet the minimum capital requirements.
By 1990, the greatly increased volume of commercial loans in
the Bank's portfolio began to evidence deterioration, primarily due
to poor operational and administrative infrastructure, poor lending
decisions and a failure to implement the management controls and
effective loan review systems necessary to handle the growth in the
commercial loan portfolio. In June 1990, the Bank was required to
enter into a Supervisory Agreement with the OTS. Thrift regulatory
authorities have barred certain of these former executive officers
from working in the banking industry because of their conduct of
the business of the Bank up to 1990. On November 21, 1995, the
former President of the Bank was indicted by a federal grand jury
on six counts of bank fraud, misapplication of funds, conspiracy
and related charges. This individual has not been employed by or
involved in any way in the management of the Bank since 1990 to the
present. Thrift authorities and the Department of Justice did not
bring any charges against the Bank and the Bank's insurer agreed to
indemnify the Bank for any losses arising out of the activities of
these former executive officers.
In August 1990, Angel Alvarez-Perez, Esq., and his management
team assumed the leadership of the Bank. The new management team
took several specific steps to increase the Bank's regulatory
capital, control costs, improve asset quality, increase reserves
and refocus the operations of the Bank. Effective July 1991, the
Bank exchanged its original cumulative preferred stock and warrants
to purchase common stock of the Bank in order to qualify the
outstanding amount as tier 1 capital. With this change, the Bank
was able to return to full regulatory capital compliance by the
first quarter of 1992. The Bank repurchased the preferred stock
and warrants from the FDIC in August 1993, and was released from
the Supervisory Agreement in October 1993. The Bank also launched
a major cost-cutting program that reduced operating expenses by
$5.2 million in 1991 as compared to 1990. This focus on cost
control is now part of the corporate culture of the Bank. The new
management also thoroughly revised the Bank's underwriting
standards and implemented various compliance initiatives. In
addition, management made a strategic decision to focus the Bank's
efforts on consumer lending and away from unsecured commercial and
construction lending activities. The Bank's conversion from a thrift
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to a commercial bank charter in October 1994 was an
important step in the implementation of this strategic plan. A
thrift charter is designed for an institution that concentrates on
mortgage lending and places limitations on consumer and commercial
lending. Management believes that the Bank's commercial bank
charter, which does not have such limitations, gives the Bank
significantly more flexibility to pursue its strategy.
Management's efforts have led to consistent increases in the
Bank's earnings. The Bank's retention of such earnings has enabled
it to develop capital ratios significantly in excess of those
required by the FDIC. At December 31, 1997, the Bank's capital
ratios qualified it as "well capitalized", the highest ranking
available under the capital standards set by the FDIC. Through
significantly improved cost controls, the Bank has been able to
achieve an efficiency ratio of approximately 45%, a level
significantly below the averages for both local Puerto Rico and
mainland United States depository institutions. Also, the Bank's
non-performing assets have decreased from a high of $104.4 million
in 1991 to $64.5 million at December 31, 1997, while the allowance
for loan losses as a percent of non-performing loans has increased
from 32.3% to 89.5% in the same time period.
Market Area and Competition
Puerto Rico is the main service area of the Bank, accounting
for substantially all of the Bank's earnings. The Puerto Rico
banking market is highly competitive. As of December 31, 1997,
Puerto Rico had 16 banking institutions as well as one savings & loan
association and 171 credit unions or cooperatives. At December 31, 1997
the Puerto Rico banking system had $22.4 billion of loans outstanding and
a total deposit base of $24.2 billion. The credit union or cooperative
system had $2.7 billion of loans outstanding and a deposit base of $2.6
billion. (All these statistics according to industry
statistics published by the Commissioner.) The Bank ranked fourth
based on total assets as of December 31, 1997. The other largest
banks in order of size were Banco Popular de Puerto Rico, Banco
Santander Puerto Rico and CitiBank, N.A. Puerto Rico banks are
subject to the same federal laws, regulations and supervision that
apply to similar institutions on the United States mainland.
In addition, the Bank competes with brokerage firms with
retail operations, credit unions, cooperatives, small loan
companies, mortgage banks and savings institutions in Puerto Rico.
The Bank encounters intense competition in attracting and
retaining deposits and in its consumer and commercial lending. The
Bank competes for loans with other financial institutions, some of
which are larger and have available resources greater than those of
the Bank. There can be no assurance that in the future the Bank
will be able to continue to increase its deposit base or originate
loans in the manner or on the terms on which it has done so in the
past.
Management believes that the Bank has been able to compete
effectively for deposits and loans by offering a variety of
transaction account products and loans with competitive features,
by pricing its products at competitive interest rates and by
offering convenient branch locations and emphasizing the quality of
its service. The Bank's ability to originate loans depends
primarily on the rates and fees charged and the service it provides
to its borrowers in making prompt determinations as to whether it
will fund particular loan requests.
Subsidiaries
The Bank has two wholly-owned subsidiaries: First Federal
Finance Corp. D.B.A. Money Express "La Financiera" ("Money
Express") and First Leasing and Rental Corporation ("First
Leasing").
Money Express is engaged in the origination of small personal
loans, and at December 31, 1997 was operating through 26 offices in
Puerto Rico.
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First Leasing is engaged in leasing various types of vehicles,
and to a lesser extent, in the daily rental of vehicles. First
Leasing operates through a centralized service facility and three
other strategically located offices.
Branches and Offices
As of December 31, 1997 the Bank owned three main offices
premises, 11 branch premises, and four loan centers. All these
premises are located in Puerto Rico. In addition, as of December
31, 1997, the Bank leased in Puerto Rico 23 branch premises, 40
loan centers and seven other banking facilities. In addition, the
Bank leased two branch premises in the Virgin Islands. Management
believes that the Bank's properties are well maintained and are
suitable for the Bank's business as presently conducted. See
Appendix D for a list of the properties owned and leased by the
Bank.
INFORMATION CONCERNING FIRST BANCORP
First BanCorp was incorporated on March 17, 1998 under the
General Corporation Law. Its principal office is at 1519 Ponce de
Leon, Santurce, San Juan, Puerto Rico 00908 and its phone number is
(787) 729-8200.
First BanCorp is authorized to issue 250,000,000 shares of
common stock, par value $1.00 per share, and 50,000,000 shares of
preferred stock, par value $1.00 per share. Prior to the
Reorganization, there will be no shares of First BanCorp issued and
outstanding.
Immediately prior to the Reorganization, First BanCorp will
own the original issue of 10,000 shares of Interim's common stock.
This stock will be acquired with the proceeds of a loan in the
amount of $10,000 from the Bank. On the Effective Date, each of
those shares of Interim's common stock held by First BanCorp will
be converted into the right to receive from the Bank $1.00 per
share. First BanCorp will apply the $10,000 received due to such
conversion to retire its loan from the Bank. Immediately
thereafter, the Bank will issue to First BanCorp a number of shares
of its common stock equal to the number of shares of common stock
of the Bank issued and outstanding immediately prior to the
Reorganization. After the Reorganization, First BanCorp will own
all the common stock of the Bank.
DESCRIPTION OF FIRST BANCORP'S CAPITAL STOCK
First BanCorp Common Stock
The holders of First BanCorp Common Shares are entitled to one
vote for each share held of record on all matters submitted to a
vote of stockholders. Each share of First BanCorp common stock has
the same relative rights as, and in identical in all respect with,
each other share of First BanCorp common stock. The Board of
Directors without stockholder approval can issue preferred stock
with voting and conversion rights which could adversely affect the
voting power of the common stockholders. See "DESCRIPTION OF FIRST
BANCORP'S CAPITAL STOCK - Preferred Stock" below.
Subject to the rights of holders of any outstanding shares of
preferred stock in the event of the liquidation, dissolution or
distribution of assets of First BanCorp, the holders of First
BanCorp common shares are entitled to share ratably in the assets
of First BanCorp legally available for distribution to
stockholders. First BanCorp common shares have no redemption,
conversion or sinking fund privileges, and holders of First BanCorp
common shares have no preemptive rights to subscribe for other
shares issued by First BanCorp.
Subject to any dividend preferences which may be established
with respect to preferred stock, the holders of First BanCorp
common shares are entitled to receive, pro rata, dividends when and
as declared by the Board
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of Directors out of funds legally available therefor. The shares
of First BanCorp common stock to be issued as part of the Reorganization
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable.
First BanCorp Preferred Stock
First BanCorp articles of incorporation authorize its Board of
Directors to fix the designation, voting powers, preferences,
limitations and relative rights of First BanCorp's preferred stock
or series of preferred stock at the time of issuance. The holders
of First BanCorp common shares may be adversely affected since
preferred stock issued in the future may be designated with special
rights or preference by the Board of Directors over holders of
First BanCorp common shares as to dividends, liquidation right,
voting rights (e.i., separate class right to approve a merger or
sale of substantially all the assets of First BanCorp's and other
matters). The issuance of preferred stock under certain
circumstances may have the effect of delaying or preventing a
change in control of First BanCorp.
Restrictions on Acquisition of First BanCorp
Certain provisions of First BanCorp's articles of
incorporation and by-laws may have the effect of discouraging
unilateral tender offers or other attempts to take over and acquire
the business of First BanCorp. The following discussion is a
general summary of those provisions of First BanCorp's articles of
incorporation and by-laws which might be deemed to have a potential
"anti-takeover" effect. Reference should be made in each case to
First BanCorp's articles of incorporation and by-laws or to the
Bank's articles of incorporation and by-laws, which are attached
hereto as Appendix B.
Classified Board of Directors. First BanCorp's articles of
incorporation contain provisions relating to the Board of Directors
that provide, among other things, that the Board of Directors shall
be divided into three classes as nearly equal in number as possible
with the term of office in each class expiring each year. Such
provision will provide a greater likelihood of continuity,
knowledge and experience on the Board of Directors because at any
one time, one third of the Board of Directors would be in its
second year of service and one third of the Board of Directors
would be in its third year of service. In addition, such a
provision would cause any person who may be attempting to take over
First BanCorp to have to deal with the current Board of Directors
because such person, even if it owns a majority of the shares,
would be unable to change the majority of the Board of Directors in
any one Annual Meeting.
Vacancies on the Board of Directors. First BanCorp's articles
of incorporation provides that any vacancy occurring in the Board
of Directors (including an increase in the number of authorized
directors) may be filled by the affirmative vote of a majority of
the directors then in office, though less than a quorum of the
Board of Directors. A director elected to fill a vacancy shall
serve for the remainder of the term to which the director has been
elected and until such director's successor shall have been elected
and qualified.
Removal of Directors. Both the articles of incorporation and
by-laws of First BanCorp provide that other than a removal required
by regulatory authorities or by law, directors may be removed only
for cause at a meeting of stockholders called expressly for that
purpose by a vote of seventy-five percent (75%) of the shares then
entitled to vote at an election of directors. These provisions
were not part of the articles of incorporation and by-laws of the
Bank.
Approval of Business Combinations. One significant difference
between the articles of incorporation of the Bank and that of First
BanCorp is that articles of incorporation of First BanCorp require
in cases of Business Combinations (as the term is defined in the
article Tenth of the articles of incorporation of First BanCorp)
that such transactions must be approved by the affirmative vote of
holders of not less than seventy-five
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percent (75%) of the total number of outstanding shares of First BanCorp.
Under the Banking Law and the Bank's articles of incorporation, the approval
of the holders of two-thirds of the Bank's capital stock is required for
a merger or consolidation and under the General Corporations Act
the established voting requirement is the majority of the
outstanding capital. Therefore the voting requirements under the
articles of incorporation of First BanCorp in connection with
Business Combinations is higher than was required under the Bank's
articles of incorporation, the Banking Law and the General
Corporations Act.
Amendment of Articles of Incorporation. Under First BanCorp's
articles of Incorporation, amendments to the articles of
incorporation require the approval of not less than a majority of
the total number of outstanding shares of capital stock of First
BanCorp and, if such amendment concerns provisions of the articles
of incorporation which governs the removal of directors and the
approval of Business Combinations, the approval of not less than
seventy-five percent (75%)of the total number of outstanding shares
of capital stock of First BanCorp. Under the Banking Law and the
Bank's articles of incorporation, the Bank may amend its articles
of incorporation if such amendment is approved by the votes of the
majority of the entire capital stock of the Bank and if such
amendment is approved by the Commissioner and if filed with the
Secretary of State of the Commonwealth of Puerto Rico. The
amendments to the articles of incorporation of First BanCorp need
not be approved by the Commissioner.
INFORMATION ON INTERIM
Through the efforts of the Bank, Interim was organized as a
Puerto Rico banking corporation solely to facilitate the
Reorganization. Interim is a non-operating bank and will be merged
with and into the Bank as a result of the Reorganization. Its
principal office is the principal office of the Bank, located at
1519 Ponce de Leon Avenue, Santurce, San Juan, Puerto Rico 00908-0146,
and its phone number is (787) 729-8200.
Interim is authorized to issue 1,000,000 shares of common
stock, par value $1.00 per share. Interim has issued 10,000 shares
of its common stock to First BanCorp. On the Effective Date, each
such share will be converted into the right to receive from the
Bank $1.00 per share.
CAPITALIZATION OF INTERIM
An ordinary borrowing of $10,000 from the Bank to First
BanCorp to capitalize Interim will be repaid upon the
Reorganization and will not affect the capitalization or results of
operations of First BanCorp on a pro forma basis.
SUPERVISION AND REGULATION
First BanCorp
Bank Holding Company Activities and Other Limitations. Once
First BanCorp acquires the shares of the Bank and thereby becomes
a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (the "Bank Holding Company Act"), it will be
subject to ongoing regulation, supervision, and examination by the
Federal Reserve Board, and will be required to file with the
Federal Reserve Board periodic and annual reports and other
information concerning its own business operations and those of its
subsidiaries. In addition, under the provisions of the Bank
Holding Company, a bank holding company must obtain Federal Reserve
Board approval before it acquires directly or indirectly ownership
or control of more than 5% of the voting shares of a second bank,
and Federal Reserve Board approval must also be obtained before
such a company acquires all or substantially all of the assets of
a second bank or mergers or consolidates with another bank holding
company. The Federal Reserve Board also has authority to issue
cease and desist orders against holding companies and their non-bank
subsidiaries.
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A bank holding company is prohibited under the Bank Holding
Company Act, with limited exceptions from engaging, directly or
indirectly, in any business unrelated to the business of banking or
of managing or controlling banks. One of the exceptions to these
prohibitions permits ownership by a bank holding company of the
shares of any company if the Federal Reserve Board, after due
notice and opportunity for hearing, by regulation or order has
determined that the activities of the company in question are so
closely related to the business of banking or of managing or
controlling banks as to be a proper incident thereto. Specific
non-banking activities which the Federal Reserve Board has found to
be sufficiently closely related to the business of banking are as
follows: (1) making and servicing loans, including consumer
finance, credit cards, mortgages, commercial finance and factoring;
(2) operating as an industrial bank; (3) performing the functions
of a trust company; (4) acting as an investment or financial
advisor (including portfolio investment advice); (5) finance
leasing; (6) making investments to promote community welfare; (7)
providing bookkeeping or data processing services; (8) acting as
agent, principal or broker for insurance that is directly related
to credit extensions; (9) owning and operating a savings
association; (10) providing courier services for the internal
operations of the holding company system for checks and certain
other instrument exchanges among banks and for audit and accounting
media of a banking or financial nature; (11) providing certain
kinds of management consulting advice to depository institutions,
on an explicit fee basis; (12) issuance and sale at retail of money
orders, savings and bonds and travelers checks; (13)
real estate and personal property appraising; (14) arranging commercial
real estate equity financing; (15) providing securities brokerage
services; (16) underwriting and dealing in government obligations
and money market instruments; (17) providing foreign exchange
advice and foreign exchange transactional services; (18) futures
commission merchant for nonaffiliated persons (subject to
limitations); (19) investment advice on financial futures and
options on futures; (20) consumer financial counseling (may be
combined with portfolio advice and brokerage services); (21) tax
planning and preparation; (22) authorizing check guaranty services
for merchants; (23) operating a collection agency; and (24)
operating a credit bureau.
Limitations on Transactions with Affiliates. Transactions
between financial institutions such as the Bank and any affiliate
are governed by Sections 23A and 23B of the Federal Reserve Act.
An affiliate of a financial institution is any company or entity
which controls, is controlled by or is under common control with
the financial institution. In a holding company context, the
parent bank holding and any companies which are controlled by such
parent holding company are affiliates of the financial institution.
Generally, Sections 23A and 23B of the Federal Reserve Act (i)
limit the extent to which the financial institution or its
subsidiaries may engage in "covered transactions" with any one
affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such
transactions with all affiliates to an amount equal to 20% of such
capital stock and surplus and (ii) require that all such
transactions be on terms substantially the same, or at least as
favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making
of loans, purchase of assets, issuance of a guarantee and other
similar transaction. In addition to the restrictions imposed by
Sections 23A and 23B of the Federal Reserve Act, no financial
institution may (i) loan or otherwise extend credit to an
affiliate, except for any affiliate which engages only in
activities which are permissible for bank holding companies, or
(ii) purchase or invest in any stocks, bonds, debentures, notes or
similar obligations of an affiliate, except for affiliates which
are subsidiaries of the financial institution.
In addition, Sections 22(h) and (g) of the Federal Reserve Act
place restrictions on loans to executive officers, directors and
principal stockholders. Under -section 22(h), loans to a director,
an executive officer and to a greater than 10% stockholder of a
financial institution, and certain affiliated interests of these,
may not exceed, together with all other outstanding loans to such
person and affiliated interests, the financial institution's loans
to one borrower limit (generally equal to 15% of the institution's
unimpaired capital and surplus). Section 22(h) of the Federal
Reserve Act also requires that loans to directors, executive
officers and principal stockholders be made on terms substantially
the same as offered in comparable transactions to other persons and
also requires prior board approval for certain loans. In addition,
the aggregate amount of extensions of credit by
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a financial institution to insiders cannot exceed the institution's
unimpaired capital and surplus. Furthermore, Section 22(g) of the Federal
Reserve Act places additional restrictions on loans to executive
officers.
Capital Requirements. The Federal Reserve Board has adopted
capital adequacy guidelines pursuant to which it assesses the
adequacy of capital in examining and supervising a bank holding
company and in analyzing applications to it under the Bank Holding
Company Act. The Federal Reserve Board capital adequacy guidelines
generally require bank holding companies to maintain total capital
equal to 8% of total risk-adjusted assets, with at least one-half
of that amount consisting of Tier I
or core capital and up to one-half of that amount consisting of Tier
II or supplementary capital. Tier I capital for bank holding companies
generally consists of the sum of common stockholders' equity and
perpetual preferred stock (subject in the case of the latter to
limitations on the kind and amount of such stocks which may be included
as Tier I capital), less goodwill and, with certain exceptions,
intangibles. Tier II capital generally consists of hybrid capital
instruments, perpetual preferred stock which is not eligible to be
included as Tier I capital; term subordinated debt an intermediate-term
preferred stock; and, subject to limitations, generally allowances for
loan losses. Assets are adjusted under the risk-based guidelines to
take into account different risk characteristics, with the
categories ranging from 0% (requiring no additional capital) for
assets such as cash to 100% for the bulk of assets which are
typically held by a bank holding company, including multi-family
residential and commercial real estate loans, commercial business
loans and commercial loans. Off-balance sheet items also are
adjusted to take into account certain risk characteristics.
In addition to the risk-based capital requirements, the
Federal Reserve Board requires bank holding companies to maintain
a minimum leverage capital ratio of Tier I capital to total assets
of 3.0%. Total assets for this purpose does not include goodwill
and any other intangible assets and investments that the Federal
Reserve Board determines should be deducted from Tier I capital.
The Federal Reserve Board has announced that the 3.0% Tier I
leverage capital ratio requirement is the minimum for the top-rated
bank holding companies without an supervisory, financial or
operational weaknesses or deficiencies or those which are not
experiencing or anticipating significant growth. Other bank
holding companies will br expected to maintain Tier I leverage
capital ratios of at least 4.0% or more, depending on their overall
condition.
First BanCorp will be in compliance with the above-described
Federal Reserve Board regulatory capital requirements after the
Effective Date of the Reorganization.
The Bank
As a Puerto Rico commercial bank, the Bank is subject to, and
after the Reorganization will continue to be subject to,
supervision, examination and regulation of the Commissioner and the
FDIC. The deposits of the Bank are and will continue to br insured
by the FDIC to the maximum extent provided by law.
Federal and local banking laws comprehensively regulate banks
including, among other things, the scope of a bank's business and
activities, the types of loans and investments a bank may make, the
reserve against deposits it must maintain, the nature and amount of
collateral it mus require for certain loans, the maximum interest
rates it may pay on certain deposits, the establishment of branches
and the activities of a bank with respect to mergers and
consolidation.
FDIC Capital Requirements. The FDIC has promulgated
regulations and adopted a statement of policy regarding the capital
adequacy of state-chartered banks which, like the Bank, will not be
members of the Federal Reserve System. These requirements are
substantially similar to those adopted by the Federal Reserve Board
regarding bank holding companies, as described above.
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The FDIC's capital regulations establish a minimum 3.0% Tier
leverage capital requirement for the most highly-rated state-chartered,
non-member banks, with an additional cushion of at least 100 to 200 basis
points for all other state-chartered, non-member banks, which effectively
will increase the minimum Tier I leverage ratio for such other bank to 4.0%
to 5.0% or more. Under the FDIC's regulation, the highest-rated banks are
those that the FDIC determines are not anticipating or experiencing
significant growth and have well diversified risk, including no undue
interest rate risk exposure, excellent asset quality, high liquidity, good
earnings and, in general, which are considered a strong banking
organization and are rated composite I under the Uniform Financial
Institutions Rating System. Leverage or core capital is defined as
the sum of common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related
surplus, and minority interests in consolidated subsidiaries, minus
all intangible assets other than certain qualifying supervisory
goodwill and certain purchased mortgage servicing rights.
The FDIC also requires that banks meet a risk-based capital
standard. The risk-based capital standard for banks requires the
maintenance of total capital (which is defined as Tier I capital
and supplementary (Tier 2) capital) to risk weighted assets of 8%.
In determining the amount of risk-weight of 0% to 100%, based on
the risks the FDIC believes are inherent in the type of asset or
item. The components of Tier I capital are equivalent to those
discussed above under the 3% leverage capital standard. The
components of supplementary capital include certain perpetual
preferred stock, certain mandatory convertible securities, certain
subordinated debt and intermediate preferred stock and general
allowances for loan and lease losses. Allowance for loan and
lease losses includable in supplementary capital is limited to a
maximum of 1.25% of risk-weighted assets. overall, the amount of
capital counted toward supplementary capital cannot exceed 100% of
ore capital. As of December 31, 1997, the Bank exceeded each of
its capital requirements and was a well-capitalized institution as
defined in the FDIC regulations.
Set forth bellow are the Bank's capital ratios at December 31, 1997
based on existing FDIC guidelines.
Total Capital to risk weighted assets 17.26%
Tier 1 capital to risk weighted assets 11.07%
Tier 1 Capital to average assets 7.44%
In August 1995, the FDIC and other federal banking agencies
published a final rule modifying their existing risk-based capital
standards to provide for consideration of interest rate risk when
assessing capital adequacy of a bank. Under the final rule, the
FDIC must explicitly include a bank's exposure to declines in the
economic value of its capital due to changes in interest rates as
a factor in evaluating a bank's capital adequacy. In addition, in
August 1995, the FDIC and the other federal banking agencies
published a joint policy statement for public comment that
describes the process the banking agencies will use to measure and
asses the exposure of a bank's net economic value to changes in
interest rates. Under the policy statement, the FDIC will consider
results of supervisory and internal interest rate risk models as
one factor in evaluating capital adequacy. The FDIC intends, at a
future date, to incorporate explicit minimum requirements for
interest rate risk in its risk-based capital standards through the
use of a model developed from the policy statement, a future
proposed rule and the public comments received therefrom.
Activities and Investments. The activities and equity
investments of FDIC-insured, state-chartered banks such as the Bank
are generally limited to those that are permissible for national
banks. Under regulations dealing with equity investments, an
insured state bank generally may not directly or indirectly acquire
or retain any equity investment of a type, or in an amount, that is
not permissible for a national bank. An insured state bank is not
prohibited from, among other things, (i) acquiring or retaining a
majority interest in a subsidiary, (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or
indirect investment in the acquisition, rehabilitation or new
construction of a qualified housing project, provided that such
limited partnership
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investments may not exceed 2% of the bank's total assets, (iii)
acquiring up to 10% of the voting stock of a company that solely
provides or reinsures directors', trustees' and officers' liability
insurance coverage or bankers' blanket bond group insurance coverage
for insured depository institutions, and (iv) acquiring or retaining
the voting shares of a depository institution if certain requirements
are met. In addition, an insured state-chartered bank may not, directly,
or indirectly through a subsidiary, engage as "principal" in any activity
that is not permissible for a national ban unless the FDIC has determined
that such activities would pose no risk to the insurance fund of
which it is a member and the bank is in compliance with applicable
regulatory capital requirements. Any insured state-chartered bank
directly or indirectly engaged in any activity that is not
permitted for a national bank must cease the impermissible
activity.
Puerto Rico Banking Law. As a commercial bank organized
under the laws of Commonwealth, the Bank is subject to supervision,
examination and regulation by the Commissioner pursuant to the
Banking Law.
Section 16 of the Banking Law requires every bank to maintain
a legal reserve which shall not be less than twenty percent (20%)
of its demand liabilities, except government deposits (federal,
state and municipal) which are secured by actual collateral. The
reserve is required to be composed of any of the following
securities or combination thereof: (1) legal tender of the United
States; (2) checks on banks or trust companies located in any part
of Puerto Rico, to be presented for collection during the day
following that on which they are received; (3) money deposited in
other banks or depository institutions, subject to immediate
collection; (4) federal funds sold to any Federal Reserve Bank and
Securities purchased under agreement to resell executed by the bank
with such funds that are subject to be repaid to the bank on or
before the close of the next business day; and (5) any other asset
that the Commissioner determines from time to time.
Section 17 of the Banking Law permits Puerto Rico commercial
banks to make loans to any one person, firm, partnership or
corporation, up to an aggregate amount of fifteen percent (15%) of
paid-in capital, reserve fund of the commercial bank and any other
components that the Commissioner may determine from time to time.
If such loans are secured by collateral worth at least twenty-five
percent (25%) more than the amount of the loan, the aggregate
maximum amount may reach one third of the paid-in capital of the
commercial bank, plus its reserve fund and any other components
that the Commissioner may determine from time to time. There are
no restrictions under Section 17 of the Banking Law on the amount
of loans which are wholly secured by bonds, securities and other
evidences of indebtedness of the Government of the United States,
of the Commonwealth of Puerto Rico, or by bonds, not in default, of
authorities, instrumentalities or dependencies of the Commonwealth
of Puerto Rico or its municipalities.
Section 17 of the Banking Law also prohibits Puerto Rico
commercial banks from making loans secured by their own stock, and
from purchasing their own stock, unless such purchase is necessary
to prevent losses because of a debt previously contracted in good
faith. The stock so purchased by the Puerto Rico commercial bank
must be sold by the bank in a public or private sale within one
year from the date of purchase.
Section 25 of the Banking Law provides that no officers,
directors, agents or employees of a Puerto Rico commercial bank may
serve or discharge a position of officer, director, agent or
employee of another Puerto Rico commercial bank, financial company,
savings and loan association, trust company, company engaged in
granting mortgage loans or any other institution engaged in the
money lending business in Puerto Rico; provided, however, that this
prohibition shall not apply to affiliates of the bank, to public
financial institutions, to cooperatives, the Economic Development
Bank for Puerto Rico and the Government Development Bank for Puerto
Rico.
Section 27 of the Banking Law requires that Puerto Rico
commercial banks strike each year a general balance of their
operations, and to submit such balance for approval to a regular
general meeting of stockholders, together with an explanatory
report thereon. Section 27 of the Banking Law also requires that
at lest ten percent
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(10%) of the yearly net income of a Puerto Rico commercial bank be
credited to a reserve fund.
Section 27 of the Banking Law also provides that when the
expenditures of a Puerto Rico commercial bank are greater than
receipts, the excess of the expenditures over receipts shall be
charged against the undistributed profits of the bank, and the
balance, if any, shall be charged against the reserve fund, as a
reduction thereof. If there is no reserve fund sufficient to cover
such balance in whole or in part, the outstanding amount shall be
charged against the capital account and no dividends shall be
declared until said capital has been restored to its original
amount and the reserve fund to twenty percent (20%) of the original
capital.
LITIGATION
The Bank is involved as plaintiff or defendant in a variety of
routine litigation incidental to the normal course of business.
The Bank's Board of Directors believes that it has adequate defense
or insurance protection with respect to such litigation and that
any losses therefrom, whether or not insured, would not have a
material adverse effect on the business or financial condition of
the Bank.
Neither Interim nor First BanCorp is involved in any
litigation.
LEGAL OPINIONS
Legal matters relating to the authorization, issuance and
delivery of First BanCorp common shares pursuant to the
Reorganization and certain Federal and Puerto Rico tax matters will
be passed upon by Fiddler, Gonzalez & Rodriguez, LLP, counsel to
the Bank.
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APPENDIX A
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of March 31, 1998, among
FIRSTBANK PUERTO RICO, a bank organized under the laws of the
Commonwealth of Puerto Rico (the "Bank"), FIRST INTERIM BANK, a
bank organized under the laws of the Commonwealth of Puerto Rico
(the "Commonwealth") for the sole purpose of consummating the
transactions provided for herein (the "Interim Bank") and FIRST BANCORP,
a corporation organized under the laws of the Commonwealth of Puerto Rico
("Holding").
WHEREAS, the Bank is a bank duly organized under the Banking
Law of the Commonwealth, Act No. 55 of May 12, 1933, as amended
(the "Banking Law"), with its principal office and place of
business at 1519 Ponce de Leon Avenue, Santurce, San Juan, Puerto
Rico, with an authorized capital of 200,000,000 shares of common
stock, par value $1.00 per share and 20,000,000 shares of preferred
stock, par value $1.00 per share;
WHEREAS, the Interim Bank is a banking corporation duly organized
under the Banking Law, as amended, with its principal
office at the same address as that of Bank, with an authorized
capital of 500,000 shares of common stock, par value $1.00 per
share, with all of the shares of capital stock of the Interim Bank
to be issued prior to the consummation of the transactions
described herein to be held by Holding (except for any shares that
may be required to be held by the directors of the Interim Bank as
directors' qualifying shares); and
WHEREAS, Holding is a general business corporation organized
under the laws of the Commonwealth, with its principal office at
the same address as that of Bank, and having an authorized capital
of 250,000,000 shares of Common Stock, par value $1.00 per share
and 50,000,000 shares of Preferred Stock, par value $1.00 per
share, none of which have been issued or are currently outstanding;
and
WHEREAS, the Bank, the Interim Bank and Holding desire to
establish a bank holding company structure and in order to
implement that desire, the Boards of Directors of the Bank, the
Interim Bank and Holding have each respectively agreed unanimously
to a merger of the Interim Bank into the Bank (the "Merger") and
the issuance of shares of Holding common stock as consideration for
value received by Holding from the Merger;
NOW, THEREFORE, in consideration of the premises, the Bank,
the Interim Bank and Holding hereby make this Agreement and
prescribe the terms and conditions of the Merger and the mode of
carrying it into effect, including the rights and obligations of
Holding in connection therewith, as follows:
ARTICLE I
DEFINITION
Section 1.01 Definitions. The following terms, as used
herein, have the following respective meanings:
"Bank" means FirstBank Puerto Rico prior to the Effective
Date.
"Bank Shares" mans the shares of common stock of the Bank, par
value $1.00 per share.
"Commissioner" mean the Commissioner of Financial Institutions
of the Commonwealth.
"Continuing Bank" means FirstBank Puerto Rico on and after the
Effective Date.
"Dissenting Shares" shall have the meaning set forth in
Section 6.01.
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"Effective Date" shall have the meaning set forth in Section
4.02.
"Exercise" shall have the meaning set forth in Section 2.03.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.
"Holding" means First BanCorp, a general business corporation
organized under the laws of the Commonwealth.
"Holding Shares" means the shares of common stock of Holding,
par value $1.00 per share.
"Interim Bank" means First Interim Bank, a corporation
organized under the laws of the Commonwealth for the sole purpose
of consummating the transactions provided for herein.
"Prospectus" shall have the meaning set forth in Section
3.04(b).
"Proxy Statement" shall have the meaning set forth in Section
3.04(a).
ARTICLE III
THE MERGER
Section 2.01 Merger. On the Effective Date, the Interim Bank
shall be merged into the Bank and the Bank (hereinafter referred to
as the "Bank" prior to the Effective Date and as the "Continuing
Bank" on or after the Effective Date) shall receive into itself the
Interim Bank pursuant o the provisions of and with the effects
provided in Section 15 of the Banking Law.
Section 2.02 Conversion. Upon the Effective Date:
(a) Each Bank Share issued and outstanding immediately
prior to the Effective Date shall, without any further action
on the part of the Bank, the Interim Bank, Holding, or any
other person, constitute and be converted into and there shall
be allocated to the record holder thereof a Holding Share.
(i) Such conversion and allocation shall not in any
way preclude or prevent any such holder from exercising
his or her statutory right to dissent from the Merger and
to receive from the Continuing Bank payment of the value
of his or her Bank Shares and such other rights and
benefits as are provided by law.
(ii) On the Effective Date, each outstanding
certificate which theretofore had represented Bank
Shares, shall henceforward be deemed for all corporate
purposes as evidence of the ownership of an equal number
of Holding Shares into which the Bank Shares have been so
converted.
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(b) Each share of common stock of the Interim Bank
issued on the Effective Date shall without any further action
on the part of the Bank, the Interim Bank Holding, or any
other person constitute and be converted into the right to
receive $1.00 from the Continuing Bank and such sums shall be
delivered to the record holder thereof.
(c) On the Effective Date, the Continuing Bank shall
issue to Holding the same number of shares of its common stock
as are issued and outstanding as of the Effective Date.
Section 2.03 Certificate After the Effective Date.
(a) Upon the Effective Date, each outstanding
certificate that prior to the Effective Date had represented
Bank Shares shall henceforward be deemed for all corporate
purposes as evidence of the ownership of Holding Shares.
(b) At any time after the Effective Date, any holder of
one or more of the certificates that prior to the Effective
Date had represented Bank Shares may surrender such
certificate or certificates in proper form to Holding or to
its transfer agent and receive in exchange therefor a
certificate or certificates (as the holder requests) bearing
the name and representing an identical number of Holding
Shares.
Section 2.04 Stock Options. At the Effective Date, each
outstanding option to purchase shares of the Bank under the Bank's
1997 Stock Option Plan will be assumed by Holding. Each such
option will be exercisable in accordance with its existing terms
for the same number of shares of Holding as the number of shares of
the Bank subject to such option.
Section 2.05 Effects of the Merger. Upon the Effective Date:
(a) The name of the Continuing Bank shall be FirstBank
Puerto Rico. The main office, principal place of business,
officers and other personnel of the Continuing Bank shall be
the same as the main office, principal place of business,
officers and other personnel of the Bank immediately prior to
the Effective Date;
(b) The articles of incorporation of the Continuing Bank
shall be the articles of incorporation of the Bank, and the
by-laws of the Continuing Bank shall be the by-laws of the
Bank;
(c) The Bank and the Interim Bank shall be considered as
one sole corporate entity under the name of the Continuing
Bank, and the Continuing Bank shall thenceforth enjoy all the
rights, privileges and franchises and shall be subject o all
the restrictions, obligations and duties of the Bank and the
Interim Bank, except for the alterations provided herein;
(d) Each and all the property, shares, rights,
franchises, powers and privileges of the Bank and the Interim
Bank shall become the property of the Continuing Bank, and the
Continuing Bank shall have, as regards such property, shares,
rights, franchises, powers and privileges, the same rights as
the Interim Bank and the Bank each possessed;
(e) The Continuing Bank shall assume each and every
obligation of the Bank and the Interim Bank and shall have all
the obligations and shall be liable for all debts and the
fulfillment of all contracts and obligations of the Bank and
the Interim Bank, just as they were prior to the Effective
Date. Any reference to the Bank or the Interim Bank in any
contract, will or document, whether executed or
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taking effect
before or after the Merger, shall be considered a reference to
the Continuing Bank if not inconsistent with the other
provision of the contract, will or document. The stockholders
of the Bank and the Interim Bank shall continue to be subject
to the same obligations, claims and demands as existed against
them, if any, on or before the Effective Date;
(f) All suits, actions or other proceedings pending in
any court on the Effective Date shall continue to their
termination just as if no merger had taken place; provided,
however, that the Continuing Bank may be substituted in place
of either the Bank or the Interim Bank by order of the court
taking cognizance of the proceedings;
(g) The directors of the Continuing Bank shall consist
of the directors of the Bank on and as of the Effective Date
(the names and addresses of the current directors of the Bank
as of the date hereof are listed in Appendix I attached
hereto), which directors shall hold office in the Continuing
Bank, unless sooner removed or disqualified, until their
successors are elected at the next annual meeting of the
stockholders of the Continuing Bank or are appointed in
accordance with the by-laws of the Continuing Bank and have
qualified; and
(h) All deposit accounts of the Bank shall be and will
become deposits in the Continuing Bank without change in their
respective terms, interest rates, maturities, minimum required
balances or withdrawal rates. After the Effective Date, the
Continuing Bank will continue to issue deposit accounts on the
same basis as the Bank immediately prior to the Effective
Date.
ARTICLE III
UNDERTAKINGS
Section 3.01. Bank Stockholder Approval. The Bank undertakes
to submit this Agreement for consideration to its shareholders at
a meeting called for this purpose pursuant to Section 15(b) of the
Banking Law, or in any other manner permitted by law. Without
limiting the preceding sentence, the Bank agrees (unless such
action is not required by law):
(a) To send to the post-office address of each of the
holders of issued and outstanding Bank Shares written notice
of such meeting not less than thirty days prior to the date
fixed for the meeting. The notice shall specify the place and
purpose of the meeting at which this Agreement will be
considered;
(b) To hold a vote of the shareholders at said meeting,
in which each Bank Shares shall entitle each holder thereof to
one vote to be cast by the stockholder himself or by proxy;
(c) To cause its secretary to certify under seal of the
Ban that (i) this Agreement has been approved by the vote of
the directors of the Bank, and (ii) this Agreement has been
approved by the votes of at least two-thirds of the Bank
Shares; and
(d) To submit the Agreement as certified pursuant to
subsection (c) of this Section 3.01 to the Commissioner for
his approval or disapproval.
Section 3.02. Interim Bank Stockholder Approval. Holding
will vote all of its shares of common stock of the Interim Bank in
favor of the approval of this Agreement.
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Section 3.03 Regulatory Approvals. Each of Holding, the Bank
and the Interim Bank shall (i) proceed expeditiously and cooperate
fully in determining which filings are required to be made prior to
the Effective Date with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective
Date with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Date from,
governmental or regulatory authorities of the Commonwealth and the
United States (collectively, the "Regulatory Approvals") in
connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby; and (ii)
timely makes all such filings and timely seek all regulatory
Approvals; and take all other action and do all things necessary,
prior or appropriate to consummate and make effective all
transactions contemplated by this Agreement as soon as possible.
Section 3.04 Securities Matters.
(a) The Bank undertakes to prepare and file promptly a
proxy statement (the "Proxy Statement") which complies with the
requirements of the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder by the FDIC,
and which complies will all applicable federal, state and Puerto Rico
law requirements for the purpose of submitting this Agreement to its
shareholders for approval, ratification and confirmation;
(b) Holding undertakes to prepare a Prospectus (the
"Prospectus") related to the Holding Shares, which shall be
distributed to the shareholders of the Bank; and
(c) Holding and the Bank shall each provide promptly to
the other such information concerning its business and financial
condition and affairs as may be required or appropriate for
inclusion in the Prospectus or the Proxy Statement and shall cause
its counsel and auditors to cooperate in the preparation of the
Prospectus and the Proxy Statement, and the Bank shall distribute
the Proxy Statement and the Prospectus to the Bank's shareholders
in accordance with applicable federal and state law requirements.
Section 3.05 Other Undertakings. If at any time (whether
before or after the Effective Date) the Bank or the Continuing Bank
considers that any further assignment, conveyances or assurances in
law are necessary or desirable to vest, perfect or confirm of
record in the Continuing Bank the title to any property or rights
of the Bank or the Interim Bank, or otherwise to carry out the
provisions hereof, the Bank and the Interim Bank hereby undertake
through their proper officers and directors to execute and deliver
immediately any and all proper deeds, assignments and assurances on
law, and to do all things necessary or proper to vest, perfect or
confirm title to such property or rights in the Continuing Bank and
otherwise to carry out the provisions hereof.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to the Merger. The
consummation of the Merger contemplated by this Agreement is
subject to the satisfaction of the following conditions:
(a) The votes of at lest two-thirds (2/3) of the
issued and outstanding Bank Shares shall have been cast
(whether cast by holders of such shares in person or by proxy)
in favor of this Agreement at a meeting of the Bank's
stockholders called pursuant to Section 3.01;
(b) All Regulatory Approvals (or waiver or exemption
therefrom) and satisfaction of all other requirements
prescribed by law which are necessary to the consummation of
the transactions contemplated by this Agreement shall have
been obtained and all statutory waiting periods shall have
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expired, without the imposition of any condition or
requirements that would materially and adversely affect the
operations or business prospects of Holding or the Continuing
Bank following the Effective Date so as to render inadvisable
the consummation of such transaction.
(c) The Bank shall have received a ruling or rulings
from the appropriate tax authorities and/or an opinion letter
from Fiddler, Gonzalez & Rodriguez, LLP, counsel to
the Bank, satisfactory to the Bank in form and substance, with
respect to the Puerto Rico and United States income tax consequences
of the Merger; and
(d) The Holding Shares shall have been approved for
listing by the New York Stock Exchange.
Section 4.02 Effective Date. The Merger provided for herein
shall become effective on the date (the "Effective Date") as soon
as practicable after each condition precedent listed in Section
4.01 shall have been satisfied. The Merger shall become effective
at the time this Agreement is properly perfected and filed in
accordance with the Banking Law.
ARTICLE V
TERMINATION AND DEFERRAL
Section 5.01 Termination of the Merger. Prior to the
Effective Date, this Agreement may be terminated at any time by
written notice by either the Bank or the Interim Bank to the other
that its Board of Directors is of the opinion that:
(a) The number of Bank Shares that voted against
approval of this Agreement, the number of Bank Shares with
respect to which the holders thereof recorded their opposition
to the Merger or the number with respect to which demand for
payment of shares has been made is such that the consummation
of the Merger is, in the sole opinion of such Board of
Directors, inadvisable,
(b) Any action, suit, proceeding, or claim is commenced
or threatened or any claim is made that could make
consummation of the Merger, in the sole opinion of such Board
of Directors, inadvisable;
(c) It is likely that a Regulatory Approval, in the sole
opinion of such Board of Directors, will not be obtained, or
if obtained, will contain or impose any condition or
requirement that would materially and adversely affect the
operations or business prospects of Holding or the Continuing
Bank following the Effective Date so as to render inadvisable
the consummated of the Merger; or
(d) Any other reason exists that makes consummation of
the Merger in the sole opinion of such Board of Directors,
inadvisable.
Upon such determination, this Agreement shall be void and
there shall be no liability hereunder or on account of such
termination on the part of the Bank, the Interim Bank, Holding, or
the directors, officers, employees, agents or stockholders or any
of them, except that in such event the Bank will pay fees and
expenses incurred by itself, the Interim Bank and Holding in
connection with the proposed reorganization.
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Section 5.02 Deferral of Effective Date. Consummation of the
Merger herein provided may
be deferred by the Board of Directors of the Bank for a reasonable
period of time if the Board of Directors determines, in its sole
discretion, that such deferral would be in the best interest of the
Bank and the shareholders of the Bank.
ARTICLE VI
APPRAISAL RIGHTS
Section 6.01 Dissenters' Rights. Any stockholder of the Bank
who complies with all applicable provisions of law, including
without limitation Section 15(d) of the Banking Law, shall be
entitled to receive the value of the Bank Shares held by such
stockholder as provided by Section 15(d) of the Banking Law,
provided that:
(a) Any Bank Shares held by a holder who has demanded
appraisal of this Bank Shares and as of the Effective Date
has neither effectively withdrawn not lost his right to such
appraisal (the Dissenting Shares") shall not be converted in
the manner set forth in Section 2.02, but the holder thereof
shall only be entitled to such rights as are granted by the
Banking Law.
(b) Notwithstanding the provisions of paragraph (i) of
this Section 6.01, if any holder of Dissenting Shares shall
effectively withdraw or lose (through failure to perfect or
otherwise) his right to appraisal, then as of the Effective
Date or the occurrence of such event, whichever later occurs,
such Dissenting Shares shall automatically be converted as
provided in Section 2.02.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth.
Section 7.02 Amendment. This Agreement and the Exhibits
hereto may be amended by the parties hereto, by action taken by or
on behalf of their respective Board of Directors at any time before
or after approval by the stockholder of the parties; provided,
however tat after such approval, no amendment, modification or
waiver shall affect the consideration to be received by any party
or their respective shareholders. Any such amendment, modification
or waiver must be by an instrument in writing and signed on behalf
of each of the partes.
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IN WITNESS WHEREOF, the Bank, the Interim Bank and Holding
have caused this Agreement to be executed in multiple copies, by
their duly authorized officers, and have caused their corporate
seals to be hereto affixed, as of the date first above written.
FIRSTBANK PUERTO RICO
By: ________________________
Title: President
FIRST INTERIM BANK
By: ________________________
Title: President
FIRST BANCORP
By: __________________________
Title: President
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APPENDIX B
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ARTICLES OF INCORPORATION
OF FIRST BANCORP
FIRST
The name of this corporation is "First BanCorp." (hereinafter
the "Corporation").
SECOND
The principal office of the Corporation shall be located at
1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908. The
Resident Agent of the Corporation is Angel Alvarez Perez, at the
same address above.
THIRD
The term of existence of the Corporation is indefinite.
FOURTH
The purpose of the Corporation is to engage, for profit, in
any lawful act or activity for which a corporation may be organized
under the General Corporation Law of the Commonwealth of Puerto
Rico, as amended from time to time (hereinafter, as so amended, the
"Corporation Law").
FIFTH
(a) The business and activities of the Corporation shall be
under the authority of a board of directors composed of the number
of directors fixed from time to time by resolution of an absolute
majority of the board of directors within the limits established in
the By-Laws, provided that the number of directors shall always be
an odd number and not less than five (5) nor more than fifteen
(15). The board of directors shall be divided into three classes
as nearly equal in number as possible. The members of each class
shall be elected for a term of three years and until their
successors are elected and qualified. One class shall be elected
by ballot annually. A majority of the directors holding office
shall constitute a quorum at meetings of the board of directors.
(b) The directors shall have such qualifications, shall be
subject to such responsibilities, shall comply with such
requirements and shall hold office pursuant to the provisions of
the Corporation Act and the By-Laws of the Corporation.
(c) Any vacancy in the board of directors may be filled by a
majority of the votes of the directors in function. The directors
so elected shall meet all of the conditions and shall be subject to
the same responsibilities of the directors elected by the
stockholders and shall remain in their office until the next
general meeting of stockholders is held and their successors have
been duly elected and are sworn in their offices.
(d) A director may be removed only for cause at a meeting of
stockholders called expressly for that purpose by a vote of
seventy-five percent (75%) of the shares then entitled to vote at
such in election of directors. Notwithstanding the above,
directors may be removed if required by regulatory authorities or
by law.
(e) The board of directors, by resolution approved by an
absolute majority, may appoint one or more Committees, each one
composed of one or more directors of the Corporation, and such
executive or administrative officers as the board of directors may
assign. Such committees shall and may exercise those powers that
the board of directors may so delegate.
SIXTH
The authorized capital of the Corporation shall be THREE
HUNDRED MILLION DOLLARS ($300,000,000) represented by TWO HUNDRED
FIFTY MILLION (250,000,000) shares of common stock, ONE DOLLAR
($1.00) par value per share, and FIFTY MILLION (50,000,000) shares
of Preferred Stock, ONE DOLLAR ($1.00) par value per share. The
shares may be issued by the Corporation from time to time as
authorized by the board of directors without the further approval
of shareholders, except as otherwise provided in this Article Sixth
or to the extent that such approval is required by governing law, rule
or regulations.
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No shares of capital stock (including shares issuable upon
conversion, exchange or exercise of other securities) shall be
issued, directly or indirectly, to officers, directors or
controlling persons of the Corporation other than as part of a
general public offering, unless their issuance or the plan
(including stock option plans) under which they would be issued has
been approved by a majority of the total votes to be cast at a
legal meeting of stockholders.
The board of directors is expressly authorized to provide,
when it deems necessary, for the issuance of shares of preferred
stock in one or more series, with such voting powers, full or
limited, but not to exceed one vote per share, or without voting
powers; and with such designations, preferences, rights,
qualifications, limitations or restrictions thereof, as shall be
expressed in the resolution or resolutions of the board of
directors, authorizing such issuance, including (but without
limiting the generality of the foregoing) the following:
(a) the designation of such series;
(b) the dividend rate of such series, the conditions and
dates upon which the dividends shall be payable, the preference or
relation which such dividends shall bear to the dividends payable
on any other class or classes of capital stock of the Corporation,
and whether such dividends shall be cumulative or non-cumulative;
(c) whether the shares of such series shall be subject to
redemption by the Corporation, and if made subject to such
redemption, the terms and conditions of such redemption;
(d) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(e) whether the shares of such series shall be convertible
and if provision be made for conversion, the terms of such
conversion;
(f) the extent, if any, to which the holders of such shares
shall be entitled to vote; provided, however, that in no event,
shall any holder of any series of preferred stock be entitled to
more than vote for each such share;
(g) the restrictions and conditions, if any, upon the issue
or re-issue of any additional preferred stock ranking on a parity
with or prior to such shares as to dividends or upon dissolution;
and
(h) the rights of the holders of such shares upon dissolution
of, or upon distribution of assets of the Corporation, which rights
may be different in the case of a voluntary dissolution.
SEVENTH
Holders of capital stock of the Corporation, common and
preferred stock, shall not have any preemptive or preferential
right of subscription to or purchase of any shares, nor to any
obligations convertible into any shares of the Corporation; whether
now or hereafter authorized, except as the board of directors, in
its discretion, may from time to time determine and at such price
as the board of directors may from time to time fix.
EIGHTH
The Corporation shall hold at least one general annual meeting
of stockholders each year, at such place and date prescribed by the
By-Laws of the Corporation, and such other special meetings
necessary in the opinion of the President or the board of
directors.
The general annual meetings shall be convened by mailing a
notice to each stockholder at least ten (10) days, but no more than
60 days prior to the dates set forth for such meeting.
Notices of special meetings of stockholders shall contain the
same information as notices of general annual meetings of
stockholders, but shall also contain information in connection with
the reasons for the call to the meeting and in connection with the
different matters to be considered and
voted upon at the meeting. Notices prepared in accordance with these
provisions shall be required in order to hold a valid stockholders'
meeting, and dispensing therewith shall be excused only by the written
consent of the stockholders.
To form quorum at general annual meetings and at special
meetings, more than half of the paid-in capital must be represented
by shareholders in person or by proxy. If no quorum is present a
second call shall be made in accordance with the Corporation Act
and the By-Laws.
Action shall be taken only by a majority vote of stockholders
present, by vote or proxy, except as
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otherwise provided in the preceding paragraph, and in such other cases
provided by law.
NINTH
(1) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by
or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the written request of the
Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if it is
formally determined by the Board of Directors, or other committee
or entity empowered to make such determination, that he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in
a manner which he reasonably believed to be in or not opposed to the
best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(2) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the written request of the
Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if it is formally determined by
the Board of Directors, or other committee or entity empowered to
make such determination, that he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless
and only to the extent that the court in which such action was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
paragraph 1 or 2 of this Article NINTH, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(4) Any indemnification under paragraph 1 or 2 of this
Article NINTH (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth therein. Such
determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
(5) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding
as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article NINTH.
(6) The indemnification provided by this Article NINTH shall
not be deemed exclusive of any other
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rights to which those seeking
indemnification may be entitled under any statute, by-law,
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(7) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may
purchase and maintain insurance, in such amounts as the Board of
Directors deems appropriate, on behalf of any person who is or was
a director, officer, employee or
agent of the Corporation, or is or was serving at the written request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such.
(8) Notwithstanding anything contained herein to the contrary,
no indemnification may be made by the Corporation to any person if
it relates to the imposition of a fine for an infraction or
violation of any provision of the law.
TENTH
BUSINESS COMBINATIONS
A. Definitions and Related Matters:
1. Affiliate. An "Affiliate" of, or a Person "affiliated
with," a specified Person means a Person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person
specified.
2. Associate. The term "Associate" used to indicate a
relationship with any Person means:
(a) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation) of which such
Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent (10%) or more of any class of
equity securities;
(b) Any trust or other state in which such Person has a
ten percent (10%) or greater beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity;
(c) Any relative or spouse of such Person, or any
relative of such spouse who has the same home as such Person; or
(d) Any investment company registered under the
Investment Company Act of 1940 for which such Person or any
Affiliate or Associate of such Person serves as investment adviser.
3. Beneficial Owner. A person shall be considered the
"Beneficial Owner" of any shares of stock (whether or not owned of
record):
(a) With respect to which such Person or any Affiliate
or Associate of such Person directly or indirectly has or shares
(i) voting power, including the power to vote or to direct the
voting of such shares of stock and/or (ii) investment power,
including the power to dispose of or to direct the disposition of
such shares of stock;
(b) Which such Person or any Affiliate or Associate of
such Person has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding or upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise, and/or (ii) the right to vote pursuant to any agreement,
arrangement or understanding (whether such right is exercisable
immediately or only after the passage of time); or
(c) Which are Beneficially Owned within the meaning of
paragraphs (a) or (b) of this subsection 3 by any other Person with
which such first-mentioned Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding, written
or oral, with respect to acquiring, holding, voting or disposing of
any shares of stock of the Corporation or any Subsidiary of the
Corporation or acquiring, holding or disposing of all or
substantially all, or any Substantial Part, of the assets or
businesses of the Corporation or
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a Subsidiary of the Corporation.
For the purpose only of determining whether a Person is
the Beneficial Owner of a percentage specified in this Article
TENTH of the outstanding Voting Shares, such shares shall be deemed
to include any Voting Shares which may be issuable pursuant to any
agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants, options or otherwise and which are deemed to be
beneficially owned by such Person pursuant to the foregoing provisions
of this subsection 3.
4. Business Combination. A "Business Combination" means:
(a) The sale, exchange, lease, transfer or other
disposition to or with a Related Person or any Affiliate or
Associate of such Related Person by the Corporation or any of its
Subsidiaries (in a single transaction or a series of related
transactions) of all or substantially all, or any Substantial Part,
of its or their assets or business (including without limitation,
any securities issued by a subsidiary);
(b) The purchase, exchange, lease or other acquisition
by the Corporation or any of its Subsidiaries (in a single
transaction or a series of related transactions) of all or
substantially all, or any Substantial Part, of the assets or
business of a Related Person or any Affiliate or Associate of such
Related Person;
(c) Any merger or consolidation of the Corporation or
any Subsidiary thereof into or with a Related Person or any
Affiliate or Associate of such Related Person or into or with
another Person which, after such merger or consolidation, would be
an Affiliate or an Associate of a Related Person, in each case
irrespective of which Person is the surviving entity in such merger
or consolidation;
(d) Any reclassification of securities, recapitalization
or other transaction (other than a redemption in accordance with
the terms of the security redeemed) which has the effect, directly
or indirectly, of increasing the proportionate amount of Voting
Shares of the Corporation or any Subsidiary thereof which are
Beneficially Owned by a Related Person or any Affiliate or
Associate of such Related Person, or any partial or complete
liquidation, spin off, split off or split up
of the Corporation or any Subsidiary thereof;
(e) The acquisition upon the issuance thereof of
Beneficial Ownership by a Related Person or any Affiliate or
Associate of such Related Person of Voting Shares or securities
convertible into Voting Shares or any voting securities or
securities convertible into voting securities of any Subsidiary of
the Corporation, or the acquisition upon the issuance thereof of
Beneficial Ownership by a Related Person of any rights, warrants or
options to acquire any of the foregoing or any combination of the
foregoing Voting Shares or voting securities of a Subsidiary.
As used in this definition, a "series of related
transactions" shall be deemed to include not only a series of
transactions with the same Related Person but also a series of
separate transactions with a Related Person or any Affiliate or
Associate of such Related Person.
5. Continuing Director. A "Continuing Director" shall mean:
(a) A person who was a member of the Board of Directors
of the Corporation elected by the public stockholders prior to the
time that a Related Person acquired in excess of ten percent (10%)
of the stock of the Corporation entitled to vote in the election of
directors, or
(b) A person designated (before his initial election as
a director) as a Continuing Director by a majority of the then
Continuing Directors.
6. Date of Determinations. The term "Date of Determination"
means:
(a) The date on which a binding agreement (except for
the fulfillment of conditions precedent, including, without
limitation, votes of stockholders to approve such transaction) is
entered into by the Corporation, as authorized by its Board of
Directors, and another Person providing for any Business
Combination; or
(b) If such an agreement as referred to in paragraph (a)
of subsection 6 is amended so as to make it less favorable to the
Corporation and its stockholders, the date on which such
amendment is approved by the Board of Directors of the Corporation; or
(c) In cases where neither paragraphs (a) or (b) of this
subsection 6 shall be applicable, the record date for the
determination of stockholders of the Corporation entitled to notice
of and to vote upon the
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transaction in question.
A majority of the Continuing Directors shall have the
power and duty to determine the Date of Determination as to any
transaction under this Article TENTH. Any such determination shall
be conclusive and binding for all purposes of this Article TENTH.
7. Independent Majority of Stockholders. "Independent
Majority of Stockholders" shall mean the holders of a majority of
the outstanding Voting Shares that are not Beneficially Owned or
controlled, directly or indirectly, by a Related Person.
8. Person. The term "Person" shall mean any person,
partnership, corporation, group or other entity (other than the
Corporation, any Subsidiary of the Corporation or a trustee holding
stock for the benefit of employees of the Corporation or its
Subsidiaries, or any one of them, pursuant to one or more employee
benefit plans or arrangements). When two or more Persons act as a
partnership, limited partnership, syndicate, association or other
group for the purpose of acquiring, holding or disposing of shares
of stock, such partnership, syndicate, association or group shall
be deemed a "Person."
9. Related Person. "Related Person" means any Person which
is the Beneficial Owner as of the Date of Determination or
immediately prior to the consummation of a Business Combination of
ten percent (10%) or more of the Voting Shares.
10. Substantial Part. The term "Substantial Part" as used
with reference to the assets of the Corporation, of any Subsidiary
or of any Related Person means assets having a value of more than
ten percent (10%) of the total consolidated assets of the
Corporation and its Subsidiaries or of
the Related Person as of the end of the Corporation's or the Related
Person's most recent fiscal year ending prior to the time the determination
is being made.
11. Subsidiary. "Subsidiary" shall mean any corporation or
other entity of which the Person in question owns not less than
fifty percent (50%) of any class of equity securities, directly or
indirectly.
12. Voting Shares "Voting Shares" shall mean shares of the
Corporation entitled to vote generally in the election of
directors.
13. Whole Board of Directors. The total number of directors
which the Corporation would have if there were no vacancies.
14. Certain Determinations with Respect to Article TENTH.
(a) A majority of the Continuing Directors shall have
the power to determine for the purposes of this Article TENTH, on
the basis of information known to them: (i) the number of Voting
Shares of which any Person is the Beneficial Owner, (ii) whether a
Person is an Affiliate or Associate of another, (iii) whether a
Person has an agreement, arrangement or understanding with another
as to the matters referred to in the definition of "Beneficial
Owner" as hereinabove defined, (iv) whether the assets subject to
any Business Combination constitute a "Substantial Part" as
hereinabove defined, (v) whether two or more transactions
constitute a "series of related transactions" as hereinabove
defined, (vi) any matters referred to in paragraph (b) of this
subsection 14 below, and (vii) such other matters with respect to
which a determination is required under this Article TENTH.
(b) A Related Person shall be deemed to have acquired a
share of the Corporation at the time when such Related Person
became a Beneficial Owner thereof. With respect to shares owned by
Affiliates, Associates or other Persons whose ownership is
attributed to a Related Person
under the foregoing definition of Beneficial Owner, if the price paid
by such Related Person for such shares is not determinable, the price
so paid shall be deemed to be the higher of (i) the price paid upon
acquisition thereof by the Affiliate, Associate or other Person or (ii)
the market price of the shares in question (as determined by a majority
of the Continuing Directors) at the time when the Related Person became
the Beneficial Owner thereof.
15. Fiduciary Obligations. Nothing contained in this Article
TENTH shall be construed to relieve any Related Person from any
fiduciary obligation imposed by law.
B. Approval of Business Combinations:
1. Except as provided in subsection 2 below, neither the
Corporation nor any of its Subsidiaries
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shall become party to any
Business Combination without the prior affirmative vote at a
meeting of the Corporation's stockholders of:
(a) The holders of not less than seventy-five (75%) of
the outstanding Voting Shares, voting separately as a class, and
(b) An Independent Majority of Stockholders.
Such favorable votes shall be in any stockholder vote
which would be required without reference to this Section B and
shall be required notwithstanding the fact that no vote may be
required, or that some lesser percentage may be specified by law or
otherwise.
2. The provisions of subsection 1 above shall not apply to
a particular Business Combination, and such Business Combination
shall require only such stockholder vote (if any) as would be
required without reference to this Section B, if all of the
conditions set forth in paragraphs (a) through (e) below are
satisfied:
(a) The ratio of (i) the aggregate amount of the cash
and the fair market value of
the other consideration to be received per share of Common Stock of
the Corporation in such Business Combination by holders of Common
Stock other than the Related Person involved in such Business Combination,
to (ii) the market price per share of the Common Stock immediately prior
to the announcement of the proposed Business Combination, is at least as
great as the ratio of (x) the highest per share price (including
brokerage commissions, transfer taxes and soliciting dealer's
fees) which such Related Person has theretofore paid in acquiring
any Common Stock prior to such Business Combination, to (y) the
market price per share of Common Stock immediately prior to the
initial acquisition by such Related Person of any shares of Common
Stock; and
(b) The aggregate amount of the cash and the fair market
value of other consideration to be received per share of Common
Stock in such Business Combination by holders of Common Stock,
other than the Related Person involved in such Business
Combination, is not less than the highest per share price
(including brokerage commissions, transfer taxes and soliciting
dealer's fees) paid by such Related Person in acquiring any of its
holdings of Common Stock; and
(c) The consideration (if any) to be received in such
Business Combination by holders of Common Stock other than the
Related Person involved shall, except to the extent that a
stockholder agrees otherwise as to all or part of the shares which
he or she owns, be in the same form and of the same kind as the
consideration paid by the Related Person in acquiring Common Stock
already owned by it; and
(d) After such Related Person became a Related Person
and prior to the consummation of such Business Combination: (i)
such Related Person shall have taken steps to insure that the Board
of Directors of the Corporation included at all times
representation by Continuing Directors proportionate to the ratio
that the number of Voting Shares of the Corporation from time to
time owned by stockholders who are not Related Persons bears to all
Voting Shares of the
Corporation outstanding at the time in question (with a Continuing
Director to occupy any resulting fractional position among the directors);
(ii) such Related Person shall not have acquired from the Corporation,
directly or indirectly, any shares of the Corporation (except (x) upon
conversion of convertible securities acquired by it prior to
becoming a Related Person or (y) as a result of a pro rata stock
dividend, stock split or division of shares or (z) in a transaction
consummated after this Article TENTH was added to this Charter and
which satisfied all applicable requirements of this Article TENTH);
(iii) such Related Person shall not have acquired any additional
Voting Shares of the Corporation or securities convertible into or
exchangeable for Voting Shares except as a part of the transaction
which resulted in such Related Person's becoming a Related Person;
and (iv) such Related Person shall not have (x) received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by the Corporation or
any Subsidiary, or (y) made any major change in the Corporation's
business or equity capital structure or entered into any contract,
arrangement or understanding with the Corporation except any such
change, contract, arrangement or understanding as may have been
approved by the favorable vote of not less than a majority of the
Continuing Directors of the Corporation; and
(e) A proxy statement complying with the disclosure
requirements under the Securities Exchange Act of 1934 shall have
been mailed to all holders of Voting Shares for the purpose of
soliciting stockholder approval of such Business Combination. Such
proxy statement is not required to be filed with or
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approved by the applicable regulatory agency unless otherwise required
by law. Such proxy statement shall contain at the front thereof, in a
prominent place, any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing
Directors, or any of them, may have furnished in writing and, if
deemed advisable by a
majority of the Continuing Directors, an opinion of a reputable
investment banking firm as to the fairness (or lack of fairness) of
the terms of such Business Combination from the point of view of the
holders of Voting Shares other than any Related Person (such investment
banking firm to be selected by a majority of the Continuing Directors
to be furnished with all information it reasonably requests, and to be
paid a reasonable fee for its services upon receipt by the Corporation
of such opinion).
3. For purposes of paragraphs (a) and (b) of subsection 2,
in the event of a Business Combination upon consummation of which
the Corporation would be the surviving corporation or company or
would continue to exist (unless it is provided, contemplated or
intended that as part of such Business Combination or within one
year after consummation thereof a plan of liquidation or
dissolution of the Corporation will be effected), the term "other
consideration to be received" shall include (without limitation)
Common Stock retained by the stockholders of the Corporation other
than Related Persons who are parties to such Business Combination.
4. The provisions of this Section B shall not apply to any
Business Combination approved by a majority of the Whole Board of
Directors of the Corporation at any time at which the Person
involved who theretofore was or thereafter became a Related Person
was not such a Related Person or to any Business Combination
approved by a majority of the Whole Board of Directors, including
a majority of the Continuing directors, after any time at which the
Person involved became a Related Person.
C. Amendments of this Article TENTH:
Notwithstanding any other provisions of these articles of
incorporation or the Bylaws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, these
Articles of Incorporation or the By-laws of the Corporation) this
Article TENTH shall not be amended, altered, change or repealed without:
(a) The favorable vote of a majority of the Whole Board of
Directors including a majority of the Continuing Directors; and
(b) The affirmative vote of (i) the holders of seventy-five
percent (75%) or more of the outstanding Voting Shares, voting
separately as a class, and (ii) an Independent Majority of
Stockholders; provided, however, that this Section C shall not
apply to, and such vote shall not be required for, any such
amendment, change or repeal recommended to stockholder by the
favorable vote of seventy-five percent (75%) if the Whole Board of
Directors, including a majority of the Continuing Directors, and
any such amendment, change or repeal so recommended shall require
only the vote, if any, required under the applicable provisions of
law.
ELEVENTH
The power to make or alter the By-Laws shall be vested at the
regular annual meeting of Stockholders, but the board of directors
may supply any matters not covered in the By-Laws, or amend them,
adopting all such rules as may be necessary for the conduct of the
business of the Corporation as circumstances may require.
TWELFTH
In order to amend Article FIFTH on these articles of
incorporation, the affirmative vote of the holders of not less
seventy-five percent (75%) of the total number of outstanding
shares of the Corporation shall be required, notwithstanding that
applicable law would otherwise permit such amendment with the
approval of fewer shares.
Unless otherwise provided, on all other amendments to these
articles of incorporation, the affirmative vote of the holders of
not less than fifty percent (50%) of the total number of
outstanding shares of the Corporation shall be required.
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THIRTEENTH
The name, place of residence and postal address of the sole
incorporator are as follows:
Name: Place of Residence and Postal Address
Jose Alberto Sosa 100 La Sierra Ave., Apt #95
San Juan, Puerto Rico 00926
P.O.Box 22652
San Juan, Puerto Rico 00931
I, the undersigned being the sole incorporator hereinbefore
named for the purpose of executing these Articles of Incorporation
pursuant to the Corporation Law, hereby swear that the statements
contained herein are true.
Given at San Juan, Puerto Rico, this 9th day of March, 1998.
/s/ Jose Alberto Sosa
Jose Alberto Sosa
Sole Incorporator
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BY-LAWS OF
FIRSTBANCORP
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meetings. All annual and special
meetings of stockholders shall be held at the principal office of
the Corporation or at such other place as the board of directors
may determine.
Section 2. Annual Meeting. A meeting of the stockholders of
the Corporation for the election of directors and for the
transaction of any other business of the Corporation shall be held
annually within 120 days after the end of the Corporation's fiscal
year on such date and at such time within such 120-day period as
the board of directors may determine.
Section 3. Special Meeting. Special meetings of the
stockholders, for any purpose or purposes, may be called at any
time by the President or by the board of directors.
Section 4. Conduct of Meetings. Annual and special meetings
shall be conducted in accordance with the most current edition of
Robert's Rules of Order unless otherwise prescribed by regulations
of the board of directors or these By-laws. The board of directors
shall designate, when present, either the Chairman of the Board or
President to preside at such meetings.
Section 5. Notice of Meetings. Notice of annual meetings of
stockholders shall be mailed to each stockholder of the Corporation
at least ten days (10) days, but not more than sixty (60) days
prior to the date for each such meeting.
Section 6. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the
board of directors shall fix in advance a date as the record date
for any such determination of stockholders. Such date in any case
shall be not more than fifty (50) days prior to the date on which
the particular action, requiring such determination of
stockholders, is to be taken. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as
provided in this section 6, such determination shall apply to any
adjournment thereof.
Section 7. Voting Lists. At least ten (10) days before each
meeting of the stockholders, the officer or agent having charge of
the stock transfer books for shares of the Corporation shall make
a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each.
This list of stockholders shall be kept on file at the principal
office of the Corporation and shall be subject to inspection by any
stockholder at any time during usual business hours for a period of
ten (10) days prior to such meeting. Such list shall also be
produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the
entire time of the meeting. The original stock transfer book shall
constitute prima facie evidence of the stockholders entitled to
examine such list or transfer books or to vote at any meeting of
stockholders.
Section 8. Quorum. A majority of the outstanding shares of
the Corporation entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders. If
less than a majority of the outstanding shares is represented at a
meeting, a majority of the shares so represented may adjourn the
meeting from time to time without further notice; provided that the
date of the adjourned meeting shall not be less than eight (8) days
after the date for which the first meeting was called. At such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
at the meeting as originally notified. The
stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
Section 9. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in
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writing by the
stockholder or by his duly authorized attorney in fact. Proxies
solicited on behalf of the management shall be voted as directed by
the stockholder or, in the absence of such direction, as determined
by a majority of the board of directors. Proxies must be filed
with the Secretary of the Corporation. No proxy shall be valid
more than twelve months from the date of its execution except for
a proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More
Persons. When ownership stands in the name of two or more persons,
in the absence of written instructions to the Corporation to the
contrary, at any meeting of the stockholders of the Corporation any
one or more of such stockholders may cast, in person or by proxy,
all votes to which such ownership is entitled. In the event an
attempt is made to cast conflicting votes, in person or by proxy,
by the several persons in whose names shares of stock stand, the
vote or votes to which those persons are entitled shall be cast as
directed by a majority of those holding such and present in person
or by proxy at such meeting, but no votes shall be cast for such
stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by any
officer, agent or proxy as the by-laws of such corporation may
prescribe, or, in the absence of such provision, as the board of
directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by
him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or be proxy,
but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of
a receiver may be voted by such receiver without the transfer thereof
into his name if authority to do so is contained in an appropriate order of
the court or other public authority by which receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
Neither treasury shares of its own stock held by the
Corporation nor shares held by another corporation, if a majority
of the shares entitled to vote for the election of directors of
such other corporation are held by the Corporation, shall be voted
at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Stockholders shall not be
entitled to cumulate their votes for the election of directors.
Section 13. Inspector of Election. In advance of any meeting
of stockholders, the board of directors may appoint any persons
other than nominees for office as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors
shall be either one or three. Any such appointment shall not be
altered at the meeting. If inspectors of election are not so
appointed, the Chairman of the Board or the President may, and at
the request of not fewer than ten percent (10%) of the votes
represented at the meeting shall, make such appointment at the
meeting. If appointed at the meeting, the majority of the votes
present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors in advance of the meeting or
at the meeting by the Chairman of the Board or the President.
The duties of such inspectors shall include: (i) determining
the number of shares of stock and
the voting power of each share, the shares of stock represented at the
meeting, the existence of a quorum, the authenticity, validity and effect
of proxies; (ii) receiving votes, ballots or consents; (iii) hearing and
determining all challenges and questions in any way arising in connection
with the right to vote; (iv) counting and tabulating all votes or
consents; (v) determining the result; and (vi) such acts as may be
proper to conduct the election or vote with fairness to all
stockholders.
Section 14. Nominating Committee. The board of directors
shall act as a nominating committee for selecting the management
nominees for election as directors. Except in the case of a
nominee substituted as a result of the death or other incapacity of
a management nominee, the nominating committee shall deliver
written nominations to the Secretary at least twenty (20) days
prior to the date of the annual meeting. No nominations for
directors except those made by the nominating committee shall be
voted at the annual meeting unless other
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nominations by
stockholders are made in writing and delivered to the Secretary of
the Corporation at least thirty (30) days prior to the date of the
annual meeting. Ballots bearing the name of all the persons
nominated by the nominating committee and by stockholders, shall be
provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least twenty (20) days
prior to the annual meeting, nominations for directors may be made
at the annual meeting by any stockholder entitled to vote and shall
be voted upon.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
Corporation shall be under the direction of the board of directors.
The board of directors shall annually elect a Chairman of the Board
and President from among its members and shall designate, when
present, either the Chairman of the Board or the President to
preside at its meetings.
Section 2. Number and Term. The board of directors shall
consist of such number of directors as established from time to
time by resolution of the board of directors approved by a majority
of directors; provided that, the total number of directors shall
always be an odd number and not less than five (5) or more than
fifteen (15). The board of directors shall be divided into three
classes as nearly equal in number as possible. The members of each
class shall be elected for a term of three years and until their
successors are elected and qualified. One class shall be elected
by ballot annually.
Section 3. Regular Meetings. All regular meetings of the
board of directors shall be held at the principal office of the
Corporation or at such other place as the board of directors may
determine.
Section 4. Qualification. Each director shall be of legal
age.
Section 5. Special Meetings. Special meetings of the board
of directors may be called by or at the request of the Chairman of
the Board, the president or one-third of the directors, and at such
place as the board of directors shall designate.
Section 6. Notice. Written notice of any special meeting
shall be given to each director at least two (2) business days
previous thereto if delivered personally or by fax or telegram or
at least five (5) days previous thereto if delivered by mail at the
address at which the director is most likely to be reached. Such
notice shall be deemed to be delivered when deposited in the U.S.
mail so addressed, with postage thereon prepaid if mailed or when
delivered to the telegraph company if sent by telegram. Any
director may waive notice of any meeting by a writing filed with
the Secretary. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to
the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
the purpose of, any meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting
of the board of directors, but if less than such majority is
present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned
meeting shall be given in the same manner as prescribed by Section
6 of this Article II.
Section 8. Telephonic Meetings Permitted. Members of the
board of directors, or any committee designated by the board of
directors, may participate in a meeting thereof by means of
telephone conference or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in the meeting pursuant to this Section 8
shall constitute presence in person at such meeting.
Section 9. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall
be the act of the board of directors, unless a greater number is
prescribed by applicable laws or regulations or by these By-laws.
Section 10. Resignation. Any director may resign at any time
by sending a written notice of such resignation to the principal
office of the Corporation addressed to the Chairman of the Board or
the President. Unless otherwise specified therein, such
resignation shall take effect upon receipt thereof by the Chairman of the
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Board or the President.
Section 11. Removal. At a meeting of stockholders called
expressly for that purpose, any director may be removed for cause
by a vote of seventy-five percent (75%) of the shares then entitled
to vote at an election of directors.
Section 12. Vacancies. Any vacancy occurring in the board of
directors may be filled by the affirmative vote of a majority of
the remaining directors. A director elected to fill a vacancy
shall be elected to serve until the next election of directors by
the stockholders. Any directorship to be filled by reason of an
increase in the number of directors, may be filled by election by
the board of directors for a term of office continuing only until
the next election of directors by the stockholders.
Section 13. Compensation. Directors shall receive such
reasonable compensation as may be established from time to time by
the board of directors by resolution approved by an absolute
majority thereof.
ARTICLE III
COMMITTEES
Section 1. Appointment. The board of directors, by
resolution adopted by a majority of the full Board, may, from time
to time appoint, any number of committees, composed of one or more
directors and such other administrative and executive officers as
the Board may determine.
Section 2. Authority. These committees shall and may
exercise those powers that the board of directors may so delegate
and shall have the name or names that from time to time the board
of directors may determine by resolution.
Section 3. Appointment and Term of Office. Members of the
committees shall be appointed by the Board for such terms as the
Board may determine, and all members of the committees shall serve
at the pleasure of the Board.
Section 4. Quorum. A majority of the members of any
committee shall constitute a quorum. A majority of the votes cast
shall decide every question or matter submitted to a committee.
Section 5. Ex Officio Members. The Chairman and the
President, and any officer acting in the absence of the President
shall be ex officio members of all the committees.
ARTICLE IV
OFFICERS
Section 1. Positions. The officers of the Corporation shall
be a President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall be elected by the board of directors.
The board of directors may also designate the Chairman of the Board
as an officer. The President shall be the Chief Executive Officer,
unless the board of directors designates the Chairman of the Board
as Chief Executive Officer. The offices of the Secretary and
Treasurer may be held by the same person and a Vice President may
also be either the Secretary or the Treasurer. The board of
directors may also elect or authorize the appointment of such other
officers as the business of the Corporation may require. The
officers shall have such authority and perform such duties as the
board of directors may from time to time authorize or determine.
In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their
respective offices.
Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually at the first meeting of the
board of directors held after the annual meeting of the
stockholders. If the election of officers is not held at such
meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death,
resignation or removal in the manner hereinafter provided.
Election or appointment of an officer, employee or agent shall not
of itself create contractual rights. The board of directors may
authorize the Corporation to enter into an employment contract with
any officer in accordance with regulations of the Board; but no
such contract shall impair the right of the board of directors to
remove any officer at any time in accordance with Section 3 of this
Article IV.
Section 3. Removal. Any officer may be removed by the board
of directors whenever, in its judgment, the best interest of the
Corporation will be served thereby, but such removal, other than
for cause, shall be without
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prejudice to the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be
filled by the board of directors for the unexpired portion of the
term.
Section 5. Remuneration. The remuneration of the officers
shall be fixed from time to time by the board of directors.
ARTICLE V
STOCK, STOCK CERTIFICATES AND THEIR TRANSFER
Section 1. Registered Shares. All shares of stock of the
Corporation shall be registered shares on the books of the Bank.
Notwithstanding the above, a stockholder of the Bank may request
that the Corporation issue a Certificate of Stock. In such
circumstances the stock certificates shall conform with section 3
of this Article V.
Section 2. Transfer. Shares of stock shall be transferable
on the books of the Corporation, and a transfer book shall be kept
in which all transfer of stock shall be recorded. Every person
becoming a stockholder by such transfer shall, in proportion to his
or her shares, succeed to all rights and liabilities of the prior
holder of such shares.
Section 3. Stock Certificates. Certificates of stock shall
bear the signature of the Chairman, the President or any Vice
President (which may be engraved, printed or impressed), and shall
be signed manually or by facsimile process by the Secretary or an
Assistant Secretary, or any other officer appointed by the board of
directors for that purpose, to be known as an Authorized Officer,
and the seal of the Corporation shall be engraved thereon. Each
certificate shall recite on its face that
the stock represented thereby, is transferable only upon the books of
the Corporation properly endorsed.
Section 4. Owner of Record, Attachment, Pledge. Shares of
stock are transferable by all means recognized by law, if there is
no attachment levied against them under competent authority, but as
long as the transfer is not signed and recorded in the transfer
books the Corporation shall be entitled to consider as owner
thereof the party who appears as such in said books.
Section 5. Lost or Destroyed Stock Certificates. In the
event any certificate of stock shall be lost or destroyed the Board
may order a new certificate to be issued in its place upon
receiving such proof of loss and such bond of indemnity therefor as
may be satisfactory to the board of directors. New certificates
may be issued without requiring any bond when in the judgment of
the board of directors it is proper to do so.
Section 6. Transfer Agent. The board of directors may
designate any person, whether or not an officer of the Corporation,
as stock transfer agent or registrar of the Corporation with
respect to Stock Certificates or other securities issued by the
Corporation.
ARTICLE VI
CORPORATE SEAL
Section 1. Seal. The board of directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be
under the custody of the Secretary.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation
shall be the calendar year.
Section 2. Dividends. The board of directors may from time
to time declare, and the
Corporation may pay dividends in cash or in shares of the capital stock
of the Corporation, in the manner and upon the terms and conditions
provided by applicable laws and regulations and the Corporation's Articles
of Incorporation.
Section 3. Conflict with New Laws. The provisions of these
By-laws in conflict with any and all new statutes shall become
revoked without affecting the validity of the remaining provisions
hereof.
Section 4. Unforeseen Cases and Events. Should cases and
events not provided for in these By-Laws
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arise, the board of directors shall decide on the proper action to be taken
in accordance with the authority and powers vested upon it by Law, the
Articles of Incorporation and these By-Laws.
Section 5. Amendments. These By-laws may be altered, amended
or repealed and new By-laws may be adopted in accordance with
applicable provisions of law and of the Corporation's Articles of
Incorporation.
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ARTICLES OF INCORPORATION
OF FIRSTBANK PUERTO RICO
FIRST
The name of this corporation is "FirstBank Puerto Rico"
(hereinafter the "Bank").
SECOND
The principal office of the Bank shall be located at 1519
Ponce de Leon Avenue, Santurce, Puerto Rico.
THIRD
The term of existence of the Bank is indefinite.
FOURTH
The Bank shall have all of the express, implied and incidental
powers conferred by the Puerto Rico Banking Law, 7 L.P.R.A. Section
1 et seq., (the "Banking Act") and by all amendatory acts thereof
and supplemental thereto, and such other powers as may, from time
to time, be granted by the laws of Puerto Rico to corporations
organized to carry on the business of banking. In addition, the
Bank shall have the general express powers and the incidental
powers conferred by law to corporations organized under the laws of
Puerto Rico necessary to carry on the business of banking.
FIFTH
(a) The business and activities of the Bank shall be under
the authority of a board of directors composed of the number of
directors fixed from time to time by resolution of an absolute
majority of the board of directors within the limits established in
the By-Laws, provided that the number of directors shall always be
an odd number and not less than five (5) nor more than fifteen
(15). The board of directors shall be divided into three classes
as nearly equal in number as possible. The members of each class
shall be elected for a term of three years and until their
successors are elected and qualified. One class shall be elected
by ballot annually. A majority of the directors holding office
shall constitute a quorum at meetings of the board of directors.
(b) The directors, who shall be bona fide residents of the
Commonwealth of Puerto Rico, shall have such qualifications, shall
be subject to such responsibilities, shall comply with such
requirement and shall hold office pursuant to the provisions of the
Banking Act and the By-Laws of the Bank.
(c) Any vacancy in the board of directors may be filled by a
majority of the votes of the directors in function. The directors
so elected shall meet all of the conditions and shall be subject to
the same responsibilities of the directors elected by the
stockholders and shall remain in their office until the next
general meeting of stockholders is held and their successors have
been duly elected and are sworn in their offices.
(d) The board of directors, by resolution approved by an
absolute majority, may appoint one or more Committees, each one
composed of three (3) or more directors of the Bank, and such
executive or administrative officers as the board of directors may
assign. Such committees shall and may exercise those powers that
the board of directors may so delegate.
SIXTH
The authorized capital of the Bank shall be TWO HUNDRED TWENTY
MILLION DOLLARS ($220,000,000) represented by TWO HUNDRED MILLION
(200,000,000) shares of common stock, ONE DOLLAR ($1.00) par value
per share, and TWENTY MILLION (20,000,000) shares of Preferred
Stock, ONE DOLLAR ($1.00) par value per share. The share may be
issued by the Bank from time to time as authorized by the board of
directors without the further approval of
shareholders, except as otherwise provided in this Article Sixth or
to the extent that such approval is required by governing law, rule
or regulations.
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No shares of capital stock (including shares issuable upon
Conversion, exchange or exercise of other securities) shall be
issued, directly or indirectly, to officers, directors or
controlling persons of the Bank other than as part of a general
public offering or as qualifying shares to a director, unless their
issuance or the plan (including stock option plans) under which
they would be issued has been approved by a majority of the total
votes to be cast at a legal meeting of stockholders.
The board of directors is expressly authorized to provide,
when it deems necessary, for the issuance of shares of preferred
stock in one or more series, with such voting powers, full or
limited, but not to exceed one vote per share, or without voting
powers; and with such designations, preferences, rights,
qualifications, limitations or restrictions thereof, as shall be
expressed in the resolution or resolutions of the board of
directors, authorizing such issuance, including (but without
limiting the generality of the foregoing) the following:
(a) the designation of such series;
(b) the dividend rate of such series, the conditions and
dates upon which the dividends shall be payable, the preference or
relation which such dividends shall bear to the dividends payable
on any other class or classes of capital stock of the Bank, and
whether such dividends shall be cumulative or non-cumulative;
(c) whether the shares of such series shall be subject to
redemption by the Bank, and if made subject to such redemption, the
terms and conditions of such redemption;
(d) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(e) whether the shares of such series shall be convertible
and if provision be made for Conversion, the terms of such Conversion;
(f) the extent, if any, to which the holders of such shares
shall be entitled to vote; provided, however, that in no event,
shall any holder of any series of preferred stock be entitled to
more than vote for each such share;
(g) the restrictions and conditions, if any, upon the issue
or re-issue of any additional preferred stock ranking on a parity
with or prior to such shares as to dividends or upon dissolution;
and
(h) the rights of the holders of such shares upon dissolution
of, or upon distribution of assets of the Bank, which rights may be
different in the case of a voluntary dissolution.
SEVENTH
Holders of capital stock of the Bank, common and preferred
stock, shall not have any preemptive or preferential right of
subscription to or purchase of any shares, nor to any obligations
convertible into any shares of the Bank; whether now or hereafter
authorized, except as the board of directors, in its discretion,
may from time to time determine and at such price as the board of
directors may from time to time fix.
EIGHTH
The Bank shall hold at least one general annual meeting of
stockholders each year, at such place and date prescribed by the
By-Laws of the Bank, and such other special meetings necessary in
the opinion of the President or the board of directors, or
requested by stockholders representing twenty percent (20%) of the
paid-in capital.
The general annual meetings shall be convened by mailing a
notice to each stockholder at least thirty days prior to the dates
set forth for such meeting, and in addition, said notice shall be
published twice weekly, for four consecutive weeks immediately
preceding the date of such meeting, in two
newspapers of general circulation in Puerto Rico.
Notices of special meetings of stockholders shall contain the
same information as notices of general annual meetings of
stockholders, but shall also contain information in connection with
the reasons for the call to the meeting and in connection with the
different matters to be considered and voted upon at the meeting.
Notices prepared in accordance with these provisions shall be
required in order to hold a valid stockholders' meeting, and
dispensing therewith shall be excused only by the written consent
of the stockholders.
To form quorum at general annual meetings and at special
meetings, more than half of the pain-in capital must be represented
by shareholders in person or by proxy. If no quorum is present a
second call shall be made
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in accordance with the Banking Act andthe By-Laws.
Action shall be taken only by a majority vote of stockholders
present, by vote or proxy, except as otherwise provided in the
preceding paragraph, and in such other cases provided by law.
NINTH
The Bank shall indemnify the directors, officers, and
employees of itself and its wholly-owned subsidiaries in accordance
with the following requirements:
A. Definitions and Rules of Construction
(1) (i) Action. Any judicial or administrative proceeding, or
threatened proceeding, whether civil, criminal, or otherwise,
including any appeal or other proceeding for review;
(ii) Court. Includes, without limitation, any court to which
or in which any appeal or any proceeding for review is brought.
(iii) Final Judgment. A judgment, decree, or order which is
not appealable or as to which the period for appeal has expired
with no appeal taken.
(iv) Settlement. Includes entry of a judgment by consent or
confession or a plea of guilty or nolo contendere.
(2) References in this article to any individual or other
person, including the Bank, shall include legal representatives,
successors, and assigns thereof.
B. General. Subject to paragraph (c) of this article, the
bank shall indemnify any person against whom an action is brought
or threatened because that person is or was a director, officer, or
employee of the Bank or any wholly-owned subsidiary, for:
(1) any amount for which that person becomes liable under a
judgment in such action; and
(2) in case of: (i) settlement (ii) final judgment against
him or (iii) final judgment in his favor, other than on the merits,
if a majority of the disinterested directors of the bank determine
that he was acting in good faith within the scope of his employment
or authority as he could reasonably have perceived it under the
circumstances and for a purpose he could reasonably have believed
under the circumstances was in the best interests of the bank or
its shareholders.
D. Insurance. The Bank may obtain to protect itself and
directors, officers, and employee of the bank or any wholly-owned
subsidiary from potential losses arising from claims against any of
them for alleged wrongful acts, or wrongful acts committed in their
capacity as directors, officers or employees.
E. Payment of Expenses. If a majority of directors of the
Bank concludes that, in connection with any action, any person
ultimately may become entitled to indemnification under this
article, the directors may authorize payment of expenses as they
deem warranted and in the interests of the Bank. Before making
advance payment of expenses under this paragraph, the Bank shall
obtain an agreement that the Bank will be repaid if the person on
whose behalf payment is made is later determined not to be entitled
to such indemnification.
F. Exclusiveness of Provisions. The Bank shall not
indemnify any person referred to in paragraph B of this article or
obtain insurance referred to in paragraph D of this article other
than in accordance with this article.
TENTH
The power to make or alter the By-Laws be vested at the
regular annual meeting of Stockholders, but the board of directors
may supply any matters not covered in the By-Laws, or amend them,
adopting all such rules as may be necessary for the conduct of the
business of the Bank as circumstances may require, all such rules
or amendments to be submitted at the next regular annual meeting of
Stockholders for their ratification.
ELEVENTH
The name and addresses of the incorporators and the number of
shares held by each of them, are:
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Angel Alvarez Perez Annie Astor de Carbonell
Calle Jardin S-9 1720 Gardenia St.
Garden Hills San Francisco
Guaynabo, P.R. 00966 Rio Piedras, P.R. 00927
481,702 shares 60,497 shares
Mike E. Romeu
J-19 St. No.1
Prado Alto
Guaynabo, P.R. 00966
33,890 shares
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BY-LAWS OF
FIRSTBANK PUERTO RICO
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meetings. All annual and special
meetings of stockholders shall be held at the principal office of
the Bank of at such other place as the board of directors may
determine.
Section 2. Annual Meeting. A meeting of the stockholders of
the Bank for the election of directors and for the transaction of
any other business of the Bank shall be held annually within 120
days after the end of the Bank's fiscal year on such date and at
such time within such 120-day period as the board of directors may
determine.
Section 3. Special Meeting. Special meetings of the
stockholders, for any purpose or purposes, may be called at any
time by the President or the board of directors, and shall by the
Chairman of the Board, the President or the Secretary upon the
written request of the holders of not less than twenty percent
(20%) of the paid-in capital of the Bank entitled to vote at the
meeting. The written request specified above shall state the
purpose or purposes of the meeting and shall be delivered at the
principal office of the Bank addressed to the Chairman of the
Board, the President or the Secretary.
Section 4. Conduct of Meetings. Annual and special meetings
shall be conducted in accordance with the most current edition of
Robert's Rules of Order unless otherwise prescribed by regulations
of the board of directors or these By-laws. The board of directors
shall designate, when present, either the Chairman of the Board or
President to preside at such meetings.
Section 5. Notice of Meetings. Notice of all meetings of
stockholders shall be mailed to each stockholder of the Bank at
least thirty (30) days prior to the date for each such meeting, and in
addition, a notice of each meeting of stockholders shall be
published twice a week for the four (4) consecutive weeks
immediately preceding the date of the meeting in two (2) newspapers
of general publication.
Section 6. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the
board of directors shall fix in advance a date as the record date
for any such determination of stockholders. Such date in any case
shall be not more than fifty (50) days prior to the date on which
the particular action, requiring such determination of
stockholders, is to be taken. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as
provided in this section 6, such determination shall apply to any
adjournment thereof.
Section 7. Voting Lists. At least ten (10) days before each
meeting of the stockholders, the officer or agent having charge of
the stock transfer books for shares of the Bank shall make a
complete list of the stockholders entitled to vote at such meeting,
or any adjournment thereof, arranged in alphabetical order, with
the address of and the number of shares held by each. This list of
stockholders shall be kept on file at the principal office of the
Bank and shall be subject to inspection by any stockholder at any;
time during usual business hours for a period of ten (10) days
prior to such meeting. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to
the inspection of any stockholder during the entire time of the
meeting. The original stock transfer book shall constitute prima
facie evidence of the stockholders entitled to examine such list or
transfer books or to vote at any meeting of stockholders.
Section 8. Quorum. A majority of the outstanding shares of
the Bank entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than
a majority of the outstanding shares is represented at a meeting, a
majority of the shares so represented may adjourn the meeting from
time to time without further notice; provided that the date of the
adjourned meeting shall not be less than eight (8) days after the
date for which the first meeting was called. At such adjourned
meeting at which a quorum shall be present or represented, any
business may be transacted which might have been at the meeting as
originally notified. The stockholders present at a duly organized
meeting may continue to transact business until
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adjournment, notwithstanding the withdrawal of enough stockholders
to leave less than a quorum.
Section 9. Proxies. At all meetings of stockholders,
stockholder may vote by proxy executed in writing by the
stockholder or by his duly authorized attorney in fact. Proxies
solicited on behalf of the management shall be voted as directed by
the stockholder or, in the absence of such direction, as determined
by a majority of the board of directors. Proxies must be filed
with the Secretary of the Bank. No proxy shall be valid more than
eleven months from the date of its execution except for a proxy
coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More
Persons. When ownership stands in the name of two or more persons,
in the absence of written to the Bank to the contrary, at any
meeting of the stockholders of the Bank any one or more of such
stockholders may cast, in person or by proxy, all votes to which
such ownership is entitled. In the event an attempt is made to
cast conflicting votes, in person or by proxy, by the several
persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a
majority of those holding such and present in person or by proxy at
such meeting, but no votes shall be cast for such stock if a
majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by any
officer, agent or proxy as the by-laws of such corporation may
prescribe, or, in the absence of such provision, as the board of
directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by
him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may
be voted by him, either in person or be proxy, but no trustee shall
be entitled to vote shares held by him without a transfer of such
shares into his name. Shares standing in the name of a receiver
may be voted by such receiver without the transfer thereof into his
name if authority to do so is contained in an appropriate order of
the court or other public authority by which receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
Neither treasury shares of its own stock held by the Bank nor
shares held by another corporation, if a majority of the shares
entitled to vote for the election of directors of such other
corporation are held by the Bank, shall be voted at any meeting or
counted in determining the total number of outstanding shares at
any given time for purposes at any meeting.
Section 12. Cumulative Voting. Stockholders shall not be
entitled to cumulate their votes for the election of directors.
Section 13. Inspector of Election. In advance of any meeting
of stockholders, the board of directors may appoint any persons
other than nominees for office as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors
shall be either one or three. Any such appointment shall not be
altered at the meeting. If inspectors of election are not so
appointed, the Chairman of the Board or the President may, and at
the request of not fewer than ten percent (10%) of the votes
represented at the meeting shall, make such appointment at the
meeting. If appointed at the meeting, the majority of the votes
present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors in advance of the meeting or
at the meeting by the Chairman of the Board or the President.
The duties of such inspectors shall include: (i) determining
the number of shares of stock and the voting power of each share,
the shares of stock represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies; (ii)
receiving votes, ballots or consents; (iii) hearing and determining
all challenges and questions in any way arising in connection with
the right to vote; (iv) counting and tabulating all votes or
consents; (v) determining the result; and (vi) such acts as may be
proper to conduct the election or vote with fairness to all
stockholders.
Section 14. Nominating Committee. The board of directors
shall act as a nominating committee for selecting the management
nominees of election as directors. Except in the case of a nominee
substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written
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nominations to the Secretary at least twenty (20) days prior to the
date of the annual meeting. Upon delivery, such nominations shall
be posted in a conspicuous place in each branch of the Bank. No
nominations for directors except those made by the nominating
committee shall be voted at the annual meeting unless other
nominations by stockholders are made in writing and delivered to
the Secretary of the Bank at least thirty (30) days prior to the
date of the annual meeting. Upon delivery, such nominations shall
be posted in a conspicuous place in each branch of the Bank.
Ballots bearing the name of all the persons nominated by; the
nominating committee and by stockholders shall be provided for use
at the annual meeting. However, if the nominating committee shall
fail or refuse to act at least twenty (20) days prior to the annual
meeting, nominations for directors may be made at the annual
meeting by any stockholder entitled to vote and shall be voted upon.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
Bank shall be under the direction of the board of directors. The
board of directors shall annually elect a Chairman of the Board and
President from among its members and shall designate, when present,
either the Chairman of the Board or the President to preside at its
meetings.
Section 2. Number and Term. The board of directors shall
consist of such number of directors as established from time to
time by resolution of the board of directors approved majority of
directors; provided that the total number of directors shall always
be an odd number and not less than five (5) or more than fifteen
(15). The board of directors shall be divided into three classes
as nearly equal in number as possible. The members of each class
shall be elected for a term of three years and until their
successors are elected and qualified. One class shall be elected
by ballot annually.
Section 3. Regular Meetings. All regular meetings of the
board of directors shall be held at the principal office of the
Bank or in any other office of the Bank within or without Puerto
Rico. Meetings of the board of directors shall not be held less
than once each month.
Section 4. Qualification. Each director shall be of legal
age and shall reside in Puerto Rico and shall have registered in
his or her name shares of the Bank at a total par value of not less
than One Thousand Dollars ($1,000).
Section 5. Directors' Oath. Each director of the Bank, when
appointed or elected, shall take an oath that he will, so far as
the duty devolves on him, diligently and honestly administer the
affairs of the Bank, and will not knowingly violate, or willingly
permit to be violated, any of the provisions of law applicable to
the bank and that he is the owner in good faith and in his own
right, of the number of shares of stock required by law to be
subscribed by him or to stand in his name on the books of the Bank
and that the same is not hypothecated, or in any way pledged as
security for any loan or debt, and, in case of reelection or
re-appointment, that such stock was not hypothecated, or in any way
pledged as security by the director making it, and certified by an
officer authorized to administer oaths, and immediately transmitted
to the Commissioner of Financial Institutions of Puerto Rico.
Section 6. Special Meetings. Special meetings of the board
of directors may be called by or at the request of the Chairman of
the Board, the president or one-third of the directors, and at such
place as the board of directors shall designate.
Section 7. Notice. Written notice of any special meeting
shall be given to each director at least two (2) business days
previous thereto if delivered personally or by fax or telegram or
at least five (5) days previous thereto if delivered by mail at the
address at which the director is mostly likely to be reached. Such
notice shall be deemed to be delivered when deposited in the U.S.
mail so addressed, with postage thereon prepaid if mailed or when
delivered to the telegraph company if sent by telegram. Any
director may waive notice of any meeting by a writing filed with
the Secretary. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to
the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
the purpose of, any meeting of the board of directors need be
specified in the notice or waiver of notice of
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such meeting.
Section 8. Quorum. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting
of the board of directors, but if less than such majority is
present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of
any adjourned meeting shall be given in the same manner as prescribed
by Section 6 of this Article II.
Section 9. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall
be the act of the board of directors, unless a greater number is
prescribed by applicable laws or regulations or by these By-laws.
Section 10. Resignation. Any director may resign at any time
by sending a written notice of such resignation to the principal
office of the Bank addressed to the Chairman of the Board or the
President. Unless otherwise specified therein, such resignation
shall take effect upon receipt thereof by the Chairman of the Board
or the President.
Section 11. Vacancies. Any vacancy occurring in the board of
directors may be filled by the affirmative vote of a majority of
the remaining directors. A director elected to fill a vacancy
shall be elected to serve until the next election of directors by
the stockholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by;
the board of directors for a term of office continuing only until
the next election of directors by the stockholders.
Section 12. Compensation. Directors shall receive such
reasonable compensation as may be established from time to time by
the board of directors by resolution approved by an absolute
majority thereof.
ARTICLE III
COMMITTEES
Section 1. Appointment. The board of directors, by
resolution adopted by a majority of the full Board, may, from time
to time appoint, any number of committees, composed of not less
than three (3) directors and such other administrative and
executive officers as the Board may determine.
Section 2. Authority. These committees shall and may
exercise those powers that the board
of directors may so delegate and shall have the name or names that from
time to time the board of directors may determine by resolution.
Section 3. Appointment. Term of Office. Members of the
committees shall be appointed by the Board for such terms as the
Board may determine, and all members of the committees shall serve
at the pleasure of the Board.
Section 4. Quorum. A majority of the members of any
committee shall constitute a quorum. A majority of the votes cast
shall decide every question or matter submitted to a committee.
Section 5. Ex Officio Members. The Chairman and the
President, and any officer acting in the absence of the President
shall be ex officio members of all the committees.
ARTICLE IV
OFFICERS
Section 1. Positions. The officers of the Bank shall be a
President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall be elected by the board of directors.
The board of directors may also designate the Chairman of the Board
as an officer. The President shall be the Chief Executive Officer,
unless the board of directors designates the Chairman of the Board
as Chief Executive Officer. The President shall be a director of
the Bank. The offices of the Secretary and Treasurer may be held
by the same person and a Vice President may also be either the
Secretary or the Treasurer. The board of directors may also elect
or authorize the appointment of such other officers as the business
of the Bank may require. The officers shall have such authority
and perform such duties as the board of directors may from time to
time authorize or determine. In the absence of action by the board
of directors, the officers shall have such powers and duties as
generally pertain to their respective offices.
Section 2. Election and Term of Office. The officers the
Bank shall be elected annually at the first
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meeting of the board of directors held after the annual
meeting of the stockholders. If the election of officers is not held
at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been
duly elected and qualified or until the officer's death, resignation
or removal in the manner hereinafter provided. Election or appointment
of an officer, employee or agent shall not of itself create contractual
rights. The board of directors may authorize the Bank to enter into an
employment contract with any officer in accordance with regulations
of the Board; but no such contract shall impair the right of the
board of directors to remove any officer at any time in accordance
with Section 3 of this Article IV.
Section 3. Removal. Any officer may be removed by the board
of directors whenever, in its judgment, the best interest of the
Bank will be served thereby, but such removal, other than for
cause, shall be without prejudice to the contractual rights, if
any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be
filled by the board of directors for the unexpired portion of the
term.
Section 5. Remuneration. The remuneration of the officers
shall be fixed from time to time by the board of directors.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. To the extent permitted by applicable
laws and regulations, and except as otherwise prescribed by these
By-laws with respect to certificates for shares, the board of
directors may authorize any officer, employee or agent of the Bank
to enter into any contract or execute and deliver any instrument in
the name and on behalf of the Bank. Such authority may be general
or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of
the Bank and no evidence of indebtedness shall be issued unless
authorized by the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts. All checks, drafts or other
orders for the payment of money, notes and other evidences of
indebtedness issued in the name of the Bank shall be signed by one
or more officers, employees or agents of the Bank in such manner as
shall from time to time be determined by the board of directors.
Section 4. Deposits. All funds of the Bank not otherwise
employed shall be deposited from time to time to the credit of the
Bank in any one of its authorized depositaries as the board of
directors select.
ARTICLE VI
STOCK, STOCK CERTIFICATES AND THEIR TRANSFER
Section 1. Transfer. Shares of stock shall be transferable
on the books of the Bank, and a transfer book shall be kept in
which all transfer of stock shall be recorded. Every person
becoming a stockholder by such transfer shall, in proportion to his
or her shares, succeed to all rights and liabilities of the prior
holder of such shares.
Section 2. Stock Certificates. Certificates of stock shall
bear the signature of the Chairman, the President or any Vice
President (which may be engraved, printed or impressed), and shall
be signed manually or by facsimile process by the Secretary or an
Assistant Secretary, or any other officer appointed by the board of
directors for that purpose, to be known as an Authorized Officer,
and the seal of the Bank shall be engraved thereon. Each
certificate shall recite on its face that the stock represented
thereby, is transferable only upon the books of the Bank properly
endorsed.
Section 3. Owner of Record, Attachment, Pledge. Shares of
stock are transferable by all
means recognized by law, if there is no attachment levied against them
under competent authority, but as long as the transfer is not signed and
recorded in the transfer books the Bank shall be entitled to consider as
owner thereof the party who appears as such in said books.
Section 4. Lost or Destroyed Stock Certificates. In the
event any certificate of stock shall be lost or destroyed the Board
may order a new certificate to be issued in its place upon
receiving such proof of loss and such bond of indemnity therefor as
may be satisfactory to the board of directors. New certificates
may be issued without requiring any bond when in the judgment of
the Board it is proper to do so.
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Section 5. Transfer Agent. The board of directors may
designate any person, whether or not an officer of the Bank, as
stock transfer agent or registrar of the Bank with respect to Stock
Certificates or other securities issued by the Bank.
ARTICLE VII
CORPORATE SEAL
Section 1. Seal. The board of directors shall provide a
suitable seal, bearing the name of the Bank, which shall be under
the custody of the Secretary.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Bank shall be
the calendar year.
Section 2. Dividends. The board of directors may from time
to time declare, and the Bank may pay dividends in cash or in
shares of the capital stock of the Bank, in the manner and upon the
terms and conditions provided by applicable laws and regulations
and the Bank's Articles of Incorporation.
Section 3. Conflict with New Laws. The provisions of these
By-laws in conflict with any and all new statutes shall become
revoked without affecting the validity of the remaining provisions
hereof.
Section 4. Unforeseen Cases and Events. Should cases and
events not provided for in these By-Laws arise, the board of
directors shall decide on the proper action to be taken in
accordance with the authority and powers vested upon it by Law, the
Articles of Incorporation and these By-Laws.
Section 5. Amendments. These By-laws may be altered, amended
or repealed and new By-laws may be adopted at any annual or special
meeting of stockholders in accordance with applicable provisions of
law and of the Bank's Articles of Incorporation.
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APPENDIX C
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SECTION 15(i) OF THE PUERTO RICO BANKING LAW AS AMENDED
DISSENTING STOCKHOLDERS RIGHTS
SECTION 15(i)
(i) If any stockholder not voting in favor of said merger or
consolidation agreement records his opposition to such merger or
consolidation at the time of the meeting, or within twenty days
thereafter, and demands payment of his shares, and if such merger
or consolidation is carried out, in such case said stockholder may,
within sixty days after the merger or consolidation, upon written
ten-day notice on said operation, petition the Court of First
Instance, Superior Section of San Juan to appoint one (1) appraiser
to estimate and determine the value of his shares, and the court
shall make such appointment. It shall also designate the date and
place where the appraiser shall first meet and shall give them such
instructions as to such procedure to be followed as the court may
deem pertinent. The court shall also specify the date and manner
in which the value of said shares shall be paid to the aforesaid
stockholder. The appraisers shall meet on the date and at the
place designated, and after taking oath, shall proceed to perform
the duties imposed on them by the court and to estimate and
determine the value of the aforesaid shares. They shall deliver a
copy of their report to the corporation and another to the
stockholder, if he demands it. All expenses incurred in
determining the value of said shares shall be for account of the
corporation. When the corporation has paid the value for the
aforesaid shares, as the same may have been fixed by the
appraisers, said shares shall be canceled and the stockholder shall
cease to be a stockholder of the corporation or to have any
interest therein, and the corporation may dispose of such shares of
stock for its own benefit. In case of emergency, when necessary
for a better protection of the interests of the depositors and of
the bank, if the merger or consolidation is approved by the votes
of the stockholders of two-thirds (2/3) of the shares, such merger
or consolidation agreement having been submitted to the
consideration for the Commissioner of Financial Institutions and
thereby approved, the stockholders who may not have agreed to said
merger shall in all respects be subject to, and be bound by, such
merger or consideration. The Commissioner of Financial
Institutions shall, in these cases, certify that the merger was
made on account of an emergency, and that, in his opinion, the same
will be beneficial to the public interest. Should the Commissioner
disapprove the merger or consolidation agreement made by reasons of
emergency, he shall, within he term of ninety days, serve notice of
his determination by registered mail on the banks interested in the
agreement. The finding of the Commissioner disapproving a merger
or consolidation agreement made for reasons of emergency shall be
conclusive and not reviewable.
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APPENDIX D
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BANK'S PRINCIPAL FACILITIES
Principal facilities owned by the Bank in Puerto Rico
Main offices:
Santurce
1519 Ponce de Leon Ave., Santurce, Puerto Rico.
EDP & Operations Center
1506 Ponce de Leon Ave., Santurce, Puerto Rico.
Auto Operations & Collections
1056 Munoz Rivera Ave., Rio Piedras, Puerto Rico
Branch offices:
Barrio Obrero
13 Street No. 521 Plaza Antonio R. Barcelo, Barrio
Obrero, Puerto Rico.
Carolina
Fragoso Avenue & Fidalgo Diaz Street, Carolina, Puerto
Rico
Condado
1319 Ashford Ave. & Cervantes St., Condado, Puerto Rico
De Diego
254 De Diego Ave., Rio Piedras, Puerto Rico.
Dorado
A-13 Street C Road No. 697, Lot 1-D, Dorado, Puerto Rico.
Forest Hill
State Road No. 167 Km. 1.3, Atenas Street, La Paz Corner,
Bayamon, Puerto Rico.
Isla Verde
State Road No. 37, Land Lot No. 6, Isla Verde Avenue,
Isla Verde, Puerto Rico.
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Miramar
670 Ponce de Leon Ave., Caribbean Tower Building,
Miramar, Puerto Rico.
Munoz Rivera
Munoz Rivera Ave. No. 876 Central Avenue Corner, Hato
Rey, Puerto Rico. (Includes personal lending and branch
administration).
San Francisco
200 De Diego & Violeta Street, Rio Piedras, Puerto Rico.
Santurce
1519 Ponce de Leon Ave., Santurce, Puerto Rico.
Principal facilities leased by the Bank in Puerto Rico
Branch offices:
Aguada
167 La Paz Street, Aguada, Puerto Rico. Lease expiration
date 08-31-00.
Aguas Buenas
Rafael Laza & Monserrate Street, Aguas Buenas, Puerto
Rico. Lease expiration date 08-12-98.
Arecibo
Arecibo Shopping Center, Road No. 2, Arecibo, Puerto
Rico. Lease expiration date 11-30-00.
Bayamon
Rexville Plaza Shopping Center, Road No. 167, Bayamon,
Puerto Rico. Lease expiration date 04-3099.
Cabo Rojo
Cabo Rojo Plaza, State Road No. 100 Km. 7.3, Cabo Rojo,
Puerto Rico. Lease expiration date 09-3005.
Caguas
Plaza Villa Blanca Shopping Center, Caguas, Puerto Rico.
Lease expiration date 04-30-98.
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Caguas III
Road No. 30, Rafael Cordero Avenue, Caguas, Puerto Rico.
Lease expiration date 11-30-99.
Caguas Consolidated
Consolidated Mall, Gautier Benitez Ave., Caguas, Puerto
Rico. Lease expiration date 11-30-08.
Carolina II
Carolina Shopping Center, Road No. 3, Roberto Clemente
Corner, Carolina, Puerto Rico. Lease expiration date 09-18-07.
Cayey
Cayey Plaza Shopping enter, Road No. 1, Cayey, Puerto
Rico. Lease expiration date 05-31-99.
El Senorial
El Senorial Shopping Center, Winston Churchil Ave. &
Parana, Rio Piedras, Puerto Rico. Lease expiration date
05-30-01.
Guayama
Plaza Guayama Shopping Center, Road No. 3, Guayama,
Puerto Rico. Lease expiration date 11-30-00.
Humacao
Road 3 Km.83 Boulevard Corner, Humacao, Puerto Rico.
Lease expiration date 05-31-01.
Manati
El Tribal Plaza, Road No. 2, Manati, Puerto Rico. Lease
expiration date 11-15-10.
Mayaguez
13 McKinley Street, Mayaguez, Puerto Rico. Lease
expiration date 10-31-01.
Plaza Las Americas
Plaza Las Americas Shopping Center, Roosevelt Ave., Hato
Rey, Puerto Rico. Lease expiration date 06-31-04.
Ponce
Centro del Sur Shopping Center, Las Americas Ave., Ponce,
Puerto Rico. Lease expiration date 07-31-04.
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Rio Hondo
Comerio Ave., Luis Pales Matos Street, Toa Baja, Puerto
Rico. Lease expiration date 05-31-11.
San Juan
300 Tanca, San Juan, Puerto Rico. Lease expiration date
08-31-11.
San Sebastian
18 Munoz Rivera, San Sebastian, Puerto Rico. Lease
expiration date 03-01-00.
Vega Baja
8 Munoz Rivera Street, Jose Julian Acosta Corner, Vega
Baja, Puerto Rico. Lease expiration date 09-30-00.
Villa Caparra
Road No. 2, Km. 7, Juan Domingo Ward, Villa Caparra,
Guaynabo, Puerto Rico. Lease expiration date 01-31-99.
Yauco
22 Paseo del Cafe, Yauco, Puerto Rico. Lease expiration
date 08-23-00.
Principal facilities leased by the Bank in the Virgin Islands
Branch Offices:
St. Croix
6 King Street, Christiansted, St. Chris, Virgin Islands.
Lease expiration date 02-28-03.
St. Thomas
4 Kronprindsens Gade, Charlotte Amalie, St. Thomas,
Virgin Islands. Lease expiration date 07-20-98.
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TABLE OF CONTENTS
PROXY STATEMENT Page
Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Solicitation and Revocation . . . . . . . . . . . . . . . . . . . . . 1
Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Beneficial Ownership of Securities. . . . . . . . . . . . . . . . . . 1
Information with Respect to Nominees for Directors,
Directors Whose Terms Continue and Executive Officers . . . . . . . . 3
Proposal #1:Election of Directors
Nominee for a three-year term expiring 2001. . . . . . . . . . . . . 4
Members of the Board Continuing in Office. . . . . . . . . . . . . . 4
Senior Executive Officers Who Are Not Directors. . . . . . . . . . . 5
Other Management Officers. . . . . . . . . . . . . . . . . . . . . . 6
Board of Directors and Committees . . . . . . . . . . . . . . . . . . 8
Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . 8
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Internal Loan Review Committee . . . . . . . . . . . . . . . . . . . 8
Expanded Asset Liability Management
and Investment Committee . . . . . . . . . . . . . . . . . . . . . . 9
EDP Steering Committee . . . . . . . . . . . . . . . . . . . . . . . 9
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . 9
Credit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . 9
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . .10
Compensation of Executive Officers . . . . . . . . . . . . . . . . .10
Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . .11
Option/Grants in Last Fiscal Year. . . . . . . . . . . . . . . . . .13
Aggregated Option/SAR Exercises
In last Fiscal Year-End Options/SAR Values . . . . . . . . . . . . .14
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . .14
Defined Contribution Retirement Plan. . . . . . . . . . . . . . . . .15
Report of the Compensation Committee. . . . . . . . . . . . . . . . .16
Compensation Committee Interlocks and Insider Participants. . . . . .17
Other Employment Benefits . . . . . . . . . . . . . . . . . . . . . .17
Indebtness of Directors and Management. . . . . . . . . . . . . . . .18
Business Transactions between FirstBank or its Subsidiaries and
Executive Officers or Directors . . . . . . . . . . . . . . . . . . .18
Performance of FirstBank's Common Stock . . . . . . . . . . . . . . .18
Proposal #2: Ratification of Reorganization into a Bank Holding
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Proposal #3: Ratification of Appointment of Independent
Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Stockholders Proposal . . . . . . . . . . . . . . . . . . . . . . . .19
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
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PROSPECTUS ACCOMPANYING PROXY STATEMENT
Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Available Information . . . . . . . . . . . . . . . . . . . . . . . .22
Information Incorporated by Reference . . . . . . . . . . . . . . . .22
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
The Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Structure of the Reorganization. . . . . . . . . . . . . . . . . . .23
Reason for the Reorganization . . . . . . . . . . . . . . . . . . .23
Federal and Puerto Rico Income tax Consequences. . . . . . . . . . .23
Certain Changes Affecting Stockholders . . . . . . . . . . . . . . .24
Differences in the Rights of Stockholders. . . . . . . . . . . . . .24
Government Regulation and Supervision. . . . . . . . . . . . . . . .26
Rights of Dissenting Stockholders. . . . . . . . . . . . . . . . . .26
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . .26
Capitalization Structure After Reorganization. . . . . . . . . . . .26
Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . .26
Voting Rights and the Vote Required for Approval of the Reorganization27
Proposed Formation of Bank Holding Company. . . . . . . . . . . . . .27
Plan of Reorganization and Description of Proposed Merger. . . . . .27
Reasons for the Reorganization . . . . . . . . . . . . . . . . . . .28
Treatment of Stock Certificates. . . . . . . . . . . . . . . . . . .28
Conditions Precedent to the Reorganization . . . . . . . . . . . . .28
Differences in Stockholder Rights. . . . . . . . . . . . . . . . . .29
Tax Consequences of the Reorganization . . . . . . . . . . . . . . .31
Puerto Rico Tax Consequences . . . . . . . . . . . . . . . . . . . .31
United States Tax Consequences . . . . . . . . . . . . . . . . . . .32
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . .33
Rights of Dissenting Shareholders. . . . . . . . . . . . . . . . . .35
Stock Options Plans. . . . . . . . . . . . . . . . . . . . . . . . .35
Amendment or Termination . . . . . . . . . . . . . . . . . . . . . .35
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Market Price of the Bank's Capital Stock. . . . . . . . . . . . . . .36
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Principal Shareholders of the Bank. . . . . . . . . . . . . . . . . .37
The Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
History of the Bank . . . . . . . . . . . . . . . . . . . . . . . .38
Market Area and Competition. . . . . . . . . . . . . . . . . . . . .39
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Branches and Offices . . . . . . . . . . . . . . . . . . . . . . . .40
Information Concerning First BanCorp. . . . . . . . . . . . . . . . .40
Description of First BanCorp's Capital Stock. . . . . . . . . . . . .40
First BanCorp's Common Stock . . . . . . . . . . . . . . . . . . . .40
First BanCorp's Preferred Stock. . . . . . . . . . . . . . . . . . .41
Restrictions of Acquisition of First BanCorp . . . . . . . . . . . .41
Information on Interim. . . . . . . . . . . . . . . . . . . . . . . .42
99
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Capitalization of Interim . . . . . . . . . . . . . . . . . . . . . .42
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . .42
First BanCorp. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
The Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
APPENDICES
Appendix A - Agreement and Plan of Merger
Appendix B -
Articles of Incorporation of First BanCorp
By-Laws of First BanCorp
Articles of Incorporation of FirstBank Puerto Rico
By-Laws of FirstBank Puerto Rico
Appendix C -
Section 15(i) of the Puerto Rico Banking Law
Appendix D -
Branches ad Offices of the Bank
99
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article Ninth of the Articles of Incorporation of the registrant provides:
(1) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
written request of the Corporation as a director, officer, employee or
agent of another Corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if it is formally
determined by the Board of Directors, or other committee or entity
empowered to make such determination, that he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had o reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure
a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the written request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if it is formally determined by the
Board of Directors, or other committee or entity empowered to make such
determination, that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such
action was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraph 1 or 2 of this
Article NINTH, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him
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in connection therewith.
(4) Any indemnification under paragraph 1 or 2 of this Article NINTH
(unless ordered by a court) shall be made by the Corporation only ad
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth therein.
Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested director s
so directs, by independent legal counsel in a written opinion, or (c) by
the stockholders.
(5) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article NINTH.
(6) The indemnification provided by this Article NINTH shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
(7) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may purchase and
maintain insurance, in such amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the written
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such.
(8) Notwithstanding anything contained herein to the contrary, no
indemnification may be made by the Corporation to any person if it related
to the imposition of a fine for an infraction or violation of any
provision of the law.
Item 21. Exhibits
The Exhibit Index immediately precedes the attached Exhibits.
Item 22. Undertakings
(1) The undersigned registrant hereby undertakes as follows; that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this
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<PAGE>
registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
other Items of the applicable form
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements for section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment tot he registration statement and
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the securities Act of 1933, each such
posteffective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim of indemnification against such
liabilities (other that the payment by the registrant of expenses incurred
or paid in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to respond to
requests of information that it is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to sent the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent tot he
effective date of the registration statement through the date responding
to the request.
(5) The undersigned registrant hereby undertakes to supply by means
of post effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in San Juan, Puerto
Rico, on the 15th day of April, 1998.
FIRST BANCORP
/s/ Angel Alvarez Perez
Angel Alvarez-Perez
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed below by the following person in
the capacity and on the dates indicated.
Dated: April 15, 1998
/s/ Angel Alvarez Perez
Angel Alvarez-Perez, Director
President and Chief Executive Officer
/s/ Annie Astor de Carbonell
Annie Astor de Carbonell, Director
Senior Executive Vice President
Principal Financial Officer
/s/ Laura Villarino-Tur
Laura Villarino-Tur, CPA
Senior Vice President - Comptroller
Principal Accounting Officer
/s/ German Malaret
German Malaret, Chairman
of the Board of Directors
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/s/ Jose Julian Alvarez
Jose Julian Alvarez, Director
/s/ Francisco D. Fernandez
Francisco D. Fernandez, Director
/s/ Armando Lopez
Armando Lopez, Director
/s/ Hector M. Nevares
Hector M. Nevarez, Director
/s/ Jose Teixidor
Jose Teixidor, Director
/s/ Angel L. Umpierre
Angel L. Umpierre, Director
/s/ Antonio Pavia Villamil
Antonio Pavia Villamil, Director
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<PAGE>
EXHIBIT INDEX
Exhibit Number
2.0 Agreement and Plan of Merger (attached as Appendix A
to the Proxy/Prospectus as part of this Registration
Statement)
3.1 Articles of Incorporation of First BanCorp (attached
as Appendix B to the Proxy/Prospectus as part of this
Registration Statement)
3.2 By-Laws of First BanCorp (attached as Appendix B to
the Proxy/Prospectus as part of this Registration
Statement)
3.3 Articles of Incorporation of FirstBank Puerto Rico
(attached as Appendix B to the Proxy/Prospectus as
part of this Registration Statement)
3.4 By-Laws of FirstBank Puerto Rico (attached as
Appendix B to the Proxy/Prospectus as part of this
Registration Statement)
4.0 Form of Stock Certificate of First BanCorp
5.0 Opinion of Fiddler, Gonzalez and Rodriguez, LLP
Re: Legality
8.0* Ruling or opinion regarding certain United States
income tax issues (Expected on or before June 30, 1998)
8.1* Ruling or opinion regarding certain Puerto Rico
income tax issues
24.1 Consent of Fiddler, Gonzalez & Rodriguez, LLP (to be
part of Exhibit 5.0)
99.1 Representation letter of officers of FirstBank Puerto
Rico and First BanCorp in connection with Financial
Statement Requirements in Filings involving the
Formation of a One-Bank Holding Company
* To be filed by post effective amendment.
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<PAGE>
Number: Shares:
_______ _______
FIRST BANCORP
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PUERTO RICO
THE CORPORATION IS AUTHORIZED TO ISSUE 250,000,000 SHARES OF COMMON STOCK
PAR VALUE $1.00 EACH
THIS CERTIFIES THAT _______________________________ IS THE OWNER OF ___________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CORPORATION'S COMMON STOCK
TRANSFERABLE ONLY IN THE BOOKS OF THE CORPORATION BY THE HOLDER THEREOF IN
PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND TO BE SEALED WITH THE SEAL OF
THE CORPORATION.
Dated __________
_____________ _____________
President Secretary
<PAGE>
The following abbreviations, when used in the inscription of the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws and regulations. Additional abbreviations may
also be used though not in the list.
TEN COM --as tenants in common UNIF GIFT MIN ACT--.....Custodian..
TEN ENT --as tenants by the entireties (Minor) under the Unfiform Gifts
JT TEN --as joint tenants with the to Minors Act............(State)
right of survivorship and
not as tenants in common
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO
............................................................................
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
............................................................................
......................................................................SHARES
REPRESENTED BY THE WITHIN CERTIFICATE, AND HEREBY IRREVOCABLY CONSTITUTES AND
APPOINTS ............................... ATTORNEY TO TRANSFER THE SAID SHARES
ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION
IN THE PREMISES.
DATED,.......................
IN THE PRESENCE OF ...................................
.............................
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular without alteration
or enlargement, or any change whatever.
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
<PAGE>
[LETTERHEAD]
April 16, 1998
Board of Directors
First BanCorp
1519 Ponce de Leon Avenue
San Juan, Puerto Rico 00908-0146
Re: Registration Statement on Form S-4,
14,800,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as special counsel of First BanCorp (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, of the
registration statement on Form S-4 (the "Registration Statement") relating to
the issuance of up to 14,800,000 shares of the Company's common stock, $1.00
par value per share (the "Shares"), in connection with the proposed merger of
First Interim Bank, a wholly-owned subsidiary of the Company with and into
FirstBank Puerto Rico all as described in the Registration Statement.
As such counsel, we have made such legal and factual examinations and
inquiries as we deemed advisable for the purpose of rendering this opinion.
Based upon the foregoing, it is our opinion that the Shares, when issued,
delivered and exchanged in the manner described in the Registration Statement,
will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement, and we consent to the use of our name and
under the heading "Legal Opinion" in the Proxy/Prospectus Statement
constituting a part thereof.
Cordially,
FIDDLER GONZALEZ & RODRIGUEZ, LLP
/s/ Antonio Sifre
By: Antonio Sifre
Partner
<PAGE>
April 15, 1998
U.S. Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
On behalf of First BanCorp and FirstBank Puerto Rico ("FirstBank") we
make the following representations in connection with the Registration
Statement on Form S-4 of First BanCorp, file number 333-8460. These
representations are made in accordance with Section F of Accounting Staff
Bulletin Topic 1.
First BanCorp and FirstBank represent as follows:
There are no anticipated changes in the shareholders' relative equity
ownership interest in the underlying bank assets, except for reedemption
of no more than a nominal number of shares of FirstBank unaffiliated
persons who dissent;
In the aggregate, only nominal borrowings are to be incurred for such
purposes as organizing the holding company, to pay nonaffiliated persons
who dissent, or to meet minimum capital requirements;
There are no new classes of stock authorized other than those
corresponding to the stock of FirstBank immedeately prior to the
reorganization;
There are no plans or arrangements to issue any additional shares to
aquire any business other than FirstBank; and,
There has been no material adverse change in the financial condition
of the bank since the latest fiscal year end included in the annual
report to shareholders.
/s/ Angel Alverez Perez /s/ Annie Astor de Carbonell
Angel Alvarez Perez Annie Astor de Carbonell
CEO & President of FirstBank Puerto Rico Senior Executive Vice President
CEO & President of First BanCorp of FirstBank Puerto Rico
