<PAGE> 1
As filed with the Securities and Exchange Commission on March 29, 1999.
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
FIRST BANCORP.
(Exact name of Registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO 66-0561882
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908-0146
(787) 729-8200
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
ANGEL ALVAREZ-PEREZ
CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER
FIRST BANCORP
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908-0146
(787) 729-8200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
ANTONIO R. SIFRE JOSE A. AXTMAYER
AURELIO EMANUELLI-FREESE CESAR R. ROSARIO-VEGA
FIDDLER GONZALEZ & RODRIGUEZ, LLP AXTMAYER ADSUAR MUNIZ & GOYCO, P.S.C.
FIFTH FLOOR, BBV TOWER SUITE 1400, HATO REY TOWER
254 MUNOZ RIVERA AVENUE 268 MUNOZ RIVERA AVENUE
SAN JUAN, PUERTO RICO 00918 SAN JUAN, PUERTO RICO 00918
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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TITLE OF SHARES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
Noncumulative Perpetual Monthly Income Preferred
Stock, $103,500,000 $28,773
Series A, $1.00 par value per share
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL , 1999
PROSPECTUS
3,600,000 SHARES
(FIRST BANCORP CORPORATION LOGO)
% NONCUMULATIVE PERPETUAL MONTHLY INCOME
PREFERRED STOCK, SERIES A
PRICE TO PUBLIC: $25 PER SHARE
First BanCorp. is offering to the public 3,600,000 shares of its %
Noncumulative Perpetual Monthly Income Preferred Stock, Series A. The Series A
Preferred Stock has the following characteristics:
- Annual dividends of $ per share, payable monthly, if declared by
the board of directors. Missed dividends never have to be paid.
- Redeemable at First BanCorp's option beginning on , 2004.
- No mandatory redemption or stated maturity.
There is currently no public market for the Series A Preferred Stock. The
New York Stock Exchange has approved the Series A Preferred Stock for listing
under the symbol "FBPP," subject to official notice of issuance.
INVESTING IN THESE SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public Offering Price................................ $ 25.00 $90,000,000
Underwriting Discounts............................... $ 0.7875 $ 2,835,000
Proceeds to First BanCorp............................ $24.2125 $87,165,000
</TABLE>
First BanCorp has also granted the underwriters an over-allotment option to
purchase up to 540,000 additional shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE OR
COMMONWEALTH OF PUERTO RICO SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED
BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<TABLE>
<S> <C> <C>
PAINEWEBBER INCORPORATED OF PUERTO RICO
KEEFE, BRUYETTE & WOODS, INC. POPULAR SECURITIES SANTANDER SECURITIES
MERRILL LYNCH & CO. PRUDENTIAL SECURITIES SALOMON SMITH BARNEY INC.
INCORPORATED
</TABLE>
The date of this prospectus is April , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Dividends Will Not Be Paid Unless
Declared By the Board of
Directors........................ 5
Missed Dividends Never Have To Be
Paid............................. 5
Banking Regulations May Restrict
First BanCorp's Ability to Pay
Dividends........................ 5
Payment of Dividends May Be
Restricted by FirstBank's Ability
to Pay Dividends to First
BanCorp.......................... 5
Increases in Interest Rates May
Negatively Affect First BanCorp's
Profitability.................... 5
Increases in Provisions for Loan
Losses Would Adversely Affect
First BanCorp's Profitability and
Financial Condition.............. 6
First BanCorp Is Exposed To Greater
Risk Because Its Business Is
Concentrated In Puerto Rico...... 6
First BanCorp's Business Would Be
Disrupted If Its Computer Systems
Cannot Work Properly With Year
2000 Data........................ 6
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements............ 6
Recent Developments................... 7
Use of Proceeds....................... 8
Capitalization........................ 9
Selected Financial Data............... 10
Summary of Certain Terms of the Series
A Preferred Stock................... 12
Description of Capital Stock.......... 18
Taxation.............................. 20
Underwriting.......................... 28
Incorporation of Certain Documents by
Reference........................... 29
Available Information................. 29
Legal Matters......................... 30
Experts............................... 30
</TABLE>
Prospective investors may rely only on the information incorporated by
reference or contained in this prospectus. Neither First BanCorp nor any
underwriter has authorized anyone to provide prospective investors with
information different from that incorporated by reference or contained in this
prospectus. This prospectus is not an offer to sell nor is it seeking an offer
to buy these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus is correct only as of
the date of this prospectus, regardless of the time of the delivery of this
prospectus or any sale of these securities.
i
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including the information incorporated by
reference into this prospectus and the "Risk Factors" section beginning on page
5.
Unless otherwise stated, all information in this prospectus assumes that
the underwriters will not exercise their over-allotment option to purchase any
of the 540,000 shares subject to that option.
THE COMPANY
First BanCorp. is a bank holding company organized in connection with the
bank holding company reorganization of FirstBank Puerto Rico. The holding
company reorganization was completed on October 1, 1998. First BanCorp is
subject to regulation and supervision by the Federal Reserve Board. FirstBank is
First BanCorp's only direct subsidiary.
First BanCorp is engaged in the banking business and provides a wide range
of financial services for retail and institutional clients. First BanCorp
operates its banking business under the regulations of the Federal Deposit
Insurance Corporation and the Office of the Commissioner of Financial
Institutions of Puerto Rico. At December 31, 1998, First BanCorp had
consolidated total assets of approximately $4.017 billion, consolidated total
deposits of approximately $1.775 billion and consolidated shareholders' equity
of approximately $270 million.
First BanCorp's principal executive offices are located at 1519 Ponce de
Leon Avenue, San Juan, Puerto Rico, 00908, and its telephone number is (787)
729-8200.
1
<PAGE> 5
THE OFFERING
Series A Preferred Stock
Offered.................. 3,600,000 shares; 4,140,000 shares if the
underwriters exercise their over-allotment option
in full.
Offering Price............. $25 per share.
Liquidation Preference..... If First BanCorp is liquidated or dissolved, you
will be entitled to receive $25 per share plus
accrued dividends for the current month from any
assets available for distribution. You will be
paid before any of First BanCorp's assets are
distributed to holders of common stock or any
stock ranking junior to the Series A Preferred
Stock.
Dividends.................. Dividends will be paid on the last day of each
month beginning on , 1999. The board of
directors must approve each dividend payment and
any payment it does not approve never has to be
paid. The annual dividend rate is equal to %
of the liquidation preference per share.
No Voting Rights........... You will not have any voting rights, except as
described on page 15 of this prospectus.
Redemption at First
BanCorp's Option........... Series A Preferred Stock may be redeemed beginning
on , 2004 at First BanCorp's option.
Redemption prices are discussed on page 13 of
this prospectus.
No Maturity Date or
Mandatory Redemption....... The Series A Preferred Stock does not have a
maturity date. First BanCorp is not required to
provide for the retirement of the Series A
Preferred Stock by mandatory redemption or
sinking fund payments.
Rank....................... The Series A Preferred Stock ranks senior to the
common stock of First BanCorp for purposes of
dividend rights and the distribution of assets
upon liquidation. First BanCorp may not issue
preferred stock ranking senior to the Series A
Preferred Stock without the approval of holders
of at least two-thirds of the Series A Preferred
Stock.
New York Stock Exchange
Symbol................... FBPP
2
<PAGE> 6
SUMMARY FINANCIAL DATA
You should read the summary financial information presented below together
with First BanCorp's consolidated financial statements and notes which are
incorporated by reference into this prospectus and with the historical financial
information of First BanCorp included under "Selected Financial Data" beginning
on page 10 of this prospectus.
Net income for the year ended December 31, 1996 reflects a one-time
industry-wide deposit insurance assessment of the FDIC's Savings Association
Insurance Fund of $9,115,000 before tax. Excluding this unusual item, net income
for the year ended December 31, 1996 would have amounted to $44,348,791 or $1.44
per share. Net income for the year ended December 31, 1994 reflects an
extraordinary loss net of the estimated tax of $428,874 due to the early
cancellation of $50.0 million in notes payable that were repurchased from the
FDIC. Excluding this extraordinary loss, net income for the year ended December
31, 1994 would have amounted to $30,984,831 or $1.01 per share.
The return on average assets ratio is computed by dividing net income by
average total assets for the period. The return on average equity ratio is
computed by dividing net income by average stockholders' equity for the period.
Both ratios have been computed using daily averages.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Interest Income.................. $ 166,168 $ 154,731 $ 143,496 $ 111,650 $ 103,635
Provision for Loan Losses............ $ 76,000 $ 55,676 $ 31,582 $ 30,894 $ 17,674
Gain on sale of investments and
trading............................ $ 30,192 $ 12,133 $ 3,502 $ 22,679 $ 782
Other income-excluding gain on sale
of investments and trading......... $ 28,048 $ 27,733 $ 26,113 $ 25,589 $ 17,387
Net income........................... $ 51,812 $ 47,528 $ 37,634 $ 49,101 $ 30,556
Cash dividends paid.................. $ 8,871 $ 7,197 $ 6,140 $ 2,486 $ 0
BALANCE SHEET DATA:
Total assets......................... $4,017,352 $3,327,436 $2,822,147 $2,432,816 $2,174,692
Stockholder's equity................. $ 270,368 $ 236,379 $ 191,142 $ 171,202 $ 120,015
SELECTED RATIOS:
Return on Average Assets............. 1.48% 1.63% 1.48% 2.22% 1.53%
Return on Average Equity............. 20.54% 22.30% 20.49% 33.19% 29.07%
</TABLE>
3
<PAGE> 7
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The ratios shown below measure First BanCorp's ability to generate
sufficient earnings to pay the fixed charges or expenses of its debt. First
BanCorp had no outstanding preferred stock during any of the periods covered by
the ratios shown below. The ratios of earnings to combined fixed charges were
computed by dividing earnings by combined fixed charges and expenses of its
debt.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges
Including Interest on Deposits........................... 1.36x 1.43x 1.44x 1.62x 1.55x
Excluding Interest on Deposits........................... 1.65x 1.95x 2.17x 2.58x 3.16x
</TABLE>
For purposes of computing the consolidated ratios of earnings to combined
fixed charges, earnings consist of pre-tax income from continuing operations
plus fixed charges and amortization of capitalized interest, less interest
capitalized. Fixed charges consist of interest expensed and capitalized,
amortization of debt issuance costs, and First BanCorp's estimate of the
interest component of rental expense. Ratios are presented both including and
excluding interest on deposits.
4
<PAGE> 8
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus, including the information incorporated by reference in this
prospectus, before deciding to invest in the Series A Preferred Stock.
DIVIDENDS WILL NOT BE PAID UNLESS DECLARED BY THE BOARD OF DIRECTORS
Monthly dividends will only be paid if declared by First BanCorp's board of
directors. The board of directors is not obligated or required to declare
monthly dividends.
MISSED DIVIDENDS NEVER HAVE TO BE PAID
If the board of directors does not declare a dividend for a particular
month, those dividends never have to be paid.
BANKING REGULATIONS MAY RESTRICT FIRST BANCORP'S ABILITY TO PAY DIVIDENDS
First BanCorp may not be able to pay dividends in the future if it does not
earn sufficient operational income. Federal Reserve Board policy is that a bank
holding company should pay dividends only out of its current operating earnings.
PAYMENT OF DIVIDENDS MAY BE RESTRICTED BY FIRSTBANK'S ABILITY TO PAY DIVIDENDS
TO FIRST BANCORP
Payment of dividends by First BanCorp may be restricted by FirstBank's
ability to pay dividends to First BanCorp. First BanCorp's only present source
of cash flow to pay dividends consists of dividends from FirstBank because First
BanCorp is a bank holding company with no operations of its own. FirstBank's
ability to pay dividends to First BanCorp may be restricted under certain
circumstances by Puerto Rico and Federal banking laws and regulations. In
addition, FirstBank is a party to certain contracts that may prevent it from
paying dividends to First BanCorp if it does not comply with certain terms and
conditions set forth in those contracts. For example, FirstBank issued its
7 5/8% subordinated capital notes due 2005 under an agreement that prohibits it
from paying dividends if the aggregate amount of dividends paid on its capital
stock exceeds certain limits tied to earnings and proceeds from the sale of
capital stock. As of December 31, 1998, FirstBank could have paid up to $110.8
million in dividends under that agreement.
INCREASES IN INTEREST RATES MAY NEGATIVELY AFFECT FIRST BANCORP'S PROFITABILITY
Increases in interest rates are the primary market risk affecting First
BanCorp. Interest rates are highly sensitive to many factors, such as
governmental monetary policies and domestic and international economic and
political conditions, that are beyond the control of First BanCorp.
Increases in interest rates may negatively affect the following areas of
First BanCorp's business:
- the net interest income;
- the value of holdings of securities; and
- the number of loans originated, particularly mortgage loans.
Increases in Interest Rates May Reduce Net Interest Income. Increases in
short-term interest rates may reduce net interest income, which is the principal
component of First BanCorp's earnings. Net interest income is the difference
between the amount received by First BanCorp on its interest-earning assets and
the interest paid by First BanCorp on its interest-bearing liabilities. Many of
First BanCorp's assets, like some portions of its loans and its mortgage-backed
securities, are long-term assets with fixed interest rates. In contrast, most of
First BanCorp's liabilities are short-term. When interest rates rise, First
BanCorp must pay more in interest on its liabilities while the interest earned
on its assets does not rise as quickly. This may cause First BanCorp's profits
to decrease.
Increases in Interest Rates May Reduce the Value of First BanCorp's
Holdings of Securities. Increases in interest rates may reduce the value of
First BanCorp's financial assets and have an adverse impact on its
5
<PAGE> 9
earnings and financial condition. First BanCorp owns a substantial portfolio of
mortgage-backed securities and other debt securities with fixed interest rates.
The market value of an obligation with a fixed interest rate generally decreases
when prevailing interest rates rise. A reduction in the value of First BanCorp's
financial assets may also reduce the ability of First BanCorp to record gains
from the sale of its investments and trading.
Increases in Interest Rates May Reduce Demand for Mortgage and Other
Loans. Higher interest rates increase the cost of mortgage and other loans to
consumers and businesses and may reduce demand for such loans, which hurts First
BanCorp's profits. Reduced demand for mortgage and other loans results in
reduced originations by First BanCorp and lower loan origination income.
INCREASES IN PROVISIONS FOR LOAN LOSSES WOULD ADVERSELY AFFECT FIRST BANCORP'S
PROFITABILITY AND FINANCIAL CONDITION
An increase in provisions for loan losses by First BanCorp would have an
adverse effect on First BanCorp's profitability and financial condition. First
BanCorp establishes provisions for loan losses, which lead to reductions in its
income from operations, in order to maintain its allowance for future loan
losses at a level which is deemed appropriate by its management based upon an
assessment of the quality of its loan portfolio. First BanCorp may be forced in
the future, as it has done in recent years, to increase its provisions for loan
losses as a result of various economic and other factors that have led to an
increase in its non-performing assets and actual loan losses.
FIRST BANCORP IS EXPOSED TO GREATER RISK BECAUSE ITS BUSINESS IS CONCENTRATED IN
PUERTO RICO
Because substantially all of the various types of loans originated by First
BanCorp are originated in Puerto Rico, First BanCorp is exposed to a greater
risk of delinquency and default on these loans resulting from adverse economic,
political or business developments and natural hazard risks affecting Puerto
Rico. If any such developments or risks adversely affect Puerto Rico, First
BanCorp's profitability may decrease.
FIRST BANCORP'S BUSINESS WOULD BE DISRUPTED IF ITS COMPUTER SYSTEMS CANNOT WORK
PROPERLY WITH YEAR 2000 DATA
First BanCorp could experience a significant disruption to its business
operations that could have an adverse effect on its profitability if its
computer systems and the computer systems provided by third party vendors on
which it relies are not able to properly use date calculations in the year 2000.
First BanCorp is taking steps that it believes are adequate to make sure this
does not happen. However, First BanCorp cannot assure you that these efforts
will be completely successful. Problems suffered by providers of basic services,
such as telephone, water, sewer and electricity could also have an adverse
impact on First BanCorp's daily operations. First BanCorp is in the process of
revising its existing business interruption contingency plans to address any
disruptions of these basic services.
FORWARD-LOOKING STATEMENTS
This prospectus, including information incorporated in this prospectus by
reference, contains certain "forward-looking statements" concerning First
BanCorp's operations, performance and financial condition, including its future
economic performance, plans and objectives and the likelihood of success in
developing and expanding its business. These statements are based upon a number
of assumptions and estimates which are subject to significant uncertainties,
many of which are beyond the control of First BanCorp. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate"
and similar expressions are meant to identify these forward-looking statements.
Actual results may differ materially from those expressed or implied by these
forward-looking statements.
6
<PAGE> 10
RECENT DEVELOPMENTS
UNAUDITED FIRST QUARTER RESULTS
On April , 1999, First BanCorp released its unaudited earnings for the
quarter ended March 31, 1999. First BanCorp reported net income of
$ million or $0. per diluted share for the quarter ended
March 31, 1999, compared to net income of $12.4 million or $0.42 per diluted
share for the quarter ended March 31, 1998. First BanCorp reported net interest
income of $ million for the quarter ended March 31, 1999, compared to
net interest income of $40.6 million for the quarter ended March 31, 1998.
First BanCorp had consolidated total assets of approximately
$ billion, consolidated total deposits of approximately $
billion and consolidated shareholders' equity of approximately $
million as of March 31, 1999, compared to consolidated total assets of
approximately $3.394 billion, consolidated total deposits of approximately
$1.616 billion and consolidated shareholders' equity of approximately $236.6
million as of March 31, 1998. At December 31, 1998, First BanCorp had
consolidated total assets of approximately $4.017 billion, consolidated total
deposits of approximately $1.775 billion and consolidated shareholders' equity
of approximately $270.4 million.
ANNOUNCEMENT OF PROJECT "THE NEXT 50"
On March 25, 1999, First BanCorp announced plans to simplify and streamline
its operations in order to make First BanCorp more efficient, responsive and
convenient in serving its customers. The project, known as "The Next 50," given
the beginning of its next fifty years of business, will be implemented by First
BanCorp during the next 18 months. The project involved the full time
participation of 45 employees and of outside consultants, who generated more
than 500 items of improvement to First BanCorp's operations. Once these items of
improvement are fully implemented by First BanCorp, they are expected to add
approximately $12 million in annualized recurring pre-tax earnings through cost
reductions and revenue enhancements. First BanCorp has estimated that the total
after-tax costs relating to the project will be approximately $2.8 million,
which amount will be recorded by First BanCorp as the required conditions for
accounting purposes enable it to record these costs. It is expected that these
costs will be recorded during the quarter ending June 30, 1999.
7
<PAGE> 11
USE OF PROCEEDS
The net proceeds to First BanCorp after deducting expenses from the sale of
shares of Series A Preferred Stock are estimated at approximately $86,865,000.
If the underwriters' over-allotment option is exercised in full, the net
proceeds are estimated at $99,939,750. First BanCorp intends to use the net
proceeds for general corporate purposes, which may include:
- making capital contributions and loans to its subsidiaries;
- funding possible acquisitions of banking and other financial
institutions;
- funding possible passive portfolio equity and debt investments in other
companies as permitted by applicable banking laws and regulations; and
- increasing working capital.
First BanCorp has no current agreements regarding any possible acquisitions
or passive portfolio investments.
8
<PAGE> 12
CAPITALIZATION
The following table shows the consolidated capitalization of First BanCorp
at December 31, 1998, on an actual basis and as adjusted to give effect to the
issuance of the shares of Series A Preferred Stock offered by this prospectus.
In addition to the indebtedness reflected below, First BanCorp had total
deposits of $1.775 billion at December 31, 1998. The table also assumes that the
underwriters do not exercise their over-allotment option. This table should be
read together with First BanCorp's Consolidated Financial Statements and related
notes incorporated by reference into this prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-Term Borrowings
Advances from Federal Home Loan Bank of N.Y. ............... $ 2,600 $ 2,600
Federal Funds purchased and securities sold under agreements
to repurchases............................................ 1,623,698 1,623,698
Other short term borrowings................................. 86,595 86,595
Notes payable............................................... 62,600 62,600
---------- ----------
Total Short-Term Borrowings............................ $1,775,493 $1,775,493
========== ==========
Long-Term Borrowings
Notes Payable............................................... $ 55,500 $ 55,500
Subordinated notes.......................................... 99,496 99,496
---------- ----------
Total Long-Term Borrowings............................. $ 154,996 $ 154,996
========== ==========
Stockholders' Equity
Preferred Stock, $1 par value, 50,000,000 shares authorized;
none outstanding and 3,600,000 shares of Series A
Preferred Stock, as adjusted.............................. $ 0 $ 3,600
Common stock, $1.00 par value, 250,000,000 shares
authorized; issued 29,599,552 and outstanding
29,499,552................................................ 29,600 29,600
Treasury Stock (100,000 shares at par)...................... (100) (100)
Additional Paid-in Capital.................................. 23,576 106,841
Capital Reserve............................................. 30,000 30,000
Legal Surplus............................................... 53,454 53,454
Retained Earnings........................................... 125,088 125,088
Accumulated other comprehensive income-unrealized gain on
securities available for sale net of tax.................. 8,750 8,750
---------- ----------
Total Stockholders' Equity............................. $ 270,368 $ 357,233
========== ==========
</TABLE>
9
<PAGE> 13
SELECTED FINANCIAL DATA
The following table shows certain selected consolidated financial and
operating data of First BanCorp on a historical basis for each of the five years
in the period ended December 31, 1998. This information should be read together
with First BanCorp's Consolidated Financial Statements and the related notes
incorporated by reference in this prospectus. First BanCorp has made certain
reclassifications to data for years prior to 1998 to conform to 1998
classifications. Certain amounts shown on a per share basis were recalculated,
when applicable, to retroactively consider the effect of common stock splits.
Net income for the year ended December 31, 1996 reflects a one-time
industry-wide deposit insurance assessment of the FDIC's Savings Association
Insurance Fund of $9,115,000 before tax. Excluding this unusual item, net income
for the year ended December 31, 1996 would have amounted to $44,348,791 or $1.44
per share. Net income for the year ended December 31, 1994 reflects an
extraordinary loss net of the estimated tax of $428,874 due to the early
cancellation of $50.0 million in notes payable that were repurchased from the
FDIC. Excluding this extraordinary loss, net income for the year ended December
31, 1994 would have amounted to $30,984,831 or $1.01 per share.
The return on average assets ratio is computed by dividing net income by
average assets for the period. The return on average equity ratio is computed by
dividing net income by average stockholders' equity for the period. The average
equity to average assets ratio is computed by dividing average assets for the
period by average stockholders' equity. The efficiency ratio is computed by
dividing the amount of other operating expenses by the sum of net interest
income and other income, excluding the gain on sale of investments and trading,
and excluding the gain on sale of a subsidiary that was sold in 1995. All ratios
have been computed using daily averages and on a taxable equivalent basis.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE RESULTS)
<S> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENTS:
Total interest income..................... $321,298 $285,160 $256,523 $208,488 $180,309
Total interest expense.................... 155,130 130,429 113,027 96,838 76,674
-------- -------- -------- -------- --------
Net interest income....................... 166,168 154,731 143,496 111,650 103,635
Provision for loan losses................. 76,000 55,676 31,582 30,894 17,674
-------- -------- -------- -------- --------
Net interest income after provision for
loan losses............................ 90,168 99,055 111,914 80,756 85,961
Gain on sale of investments and trading... 30,192 12,133 3,502 22,679 782
Other income -- excluding gains on sale of
investments and trading................ 28,048 27,733 26,113 25,589 17,387
Other operating expenses.................. 91,798 83,268 82,498 65,628 60,760
Unusual item -- SAIF assessment........... -- -- 9,115 -- --
-------- -------- -------- -------- --------
Income before income tax provision and
extraordinary item..................... 56,610 55,653 49,915 63,396 43,370
Provision for income tax.................. 4,798 8,125 12,281 14,295 12,385
-------- -------- -------- -------- --------
Income before extraordinary item.......... 51,812 47,528 37,634 49,101 30,985
Extraordinary item........................ -- -- -- -- (429)
-------- -------- -------- -------- --------
Net income................................ $ 51,812 $ 47,528 $ 37,634 $ 49,101 $ 30,556
======== ======== ======== ======== ========
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE RESULTS)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE RESULTS DILUTED:
Income before extraordinary item... $ 1.74 $ 1.58 $ 1.22 $ 1.58 $ 1.01
Extraordinary item................. -- -- -- -- (.02)
Net income per common share........ $ 1.74 $ 1.58 $ 1.22 $ 1.58 $ 0.99
Cash dividends declared............ $ 0.30 $ 0.24 $ 0.20 $ 0.08 $ 0
Average shares outstanding......... 29,586 30,036 30,794 30,592 29,977
Average shares diluted............. 29,858 30,204 30,952 31,118 30,859
BALANCE SHEET DATA:
Loans and loans held for sale (net
of unearned interest)........... $2,120,054 $1,959,301 $1,896,074 $1,556,606 $1,501,273
Allowance for possible loan
losses.......................... 67,854 57,712 55,254 55,009 37,413
Investments........................ 1,800,489 1,276,900 830,980 785,747 595,555
Total assets............... 4,017,352 3,327,436 2,822,147 2,432,816 2,174,692
Deposits........................... 1,775,045 1,594,635 1,703,926 1,518,367 1,493,445
Borrowings......................... 1,930,488 1,461,582 889,669 700,610 538,080
Total capital.............. 270,368 236,379 191,142 171,202 120,015
Book value per common share, end of
year............................ 9.17 7.93 6.32 5.51 3.99
REGULATORY CAPITAL RATIOS:
Total capital to risk weighted
assets.......................... 17.39% 17.26% 15.25% 16.17% 9.76%
Tier 1 capital to risk weighted
assets.......................... 11.55% 11.07% 9.32% 9.93% 8.50%
Tier 1 capital to average assets... 6.59% 7.44% 6.65% 6.82% 5.74%
SELECTED FINANCIAL RATIOS:
Net income to average total
assets.......................... 1.48% 1.63% 1.48% 2.22% 1.53%
Interest rate spread............... 4.76% 5.30% 5.46% 5.07% 5.23%
Net interest income to average
earning assets.................. 5.27% 5.83% 6.03% 5.59% 5.65%
Net yield on average earning
assets.......................... 9.83% 10.45% 10.63% 10.12% 9.63%
Net cost on average interest
bearing liabilities............. 5.07% 5.15% 5.17% 5.05% 4.40%
Net income to average total
equity.......................... 20.54% 22.30% 20.49% 33.19% 29.07%
Average total equity to average
total assets.................... 7.22% 7.32% 7.23% 6.68% 5.27%
Dividend payout ratio.............. 17.12% 15.14% 16.32% 5.06% --
Efficiency ratio................... 46.46% 45.45% 47.66% 47.71% 49.88%
</TABLE>
11
<PAGE> 15
SUMMARY OF CERTAIN TERMS OF THE SERIES A PREFERRED STOCK
The following summary contains a description of the material terms of the
Series A Preferred Stock. The summary is subject to and qualified in its
entirety by reference to First BanCorp's Certificate of Incorporation and to the
Certificate of Designation creating the Series A Preferred Stock (the
"Certificate of Designation"), copies of which are incorporated by reference as
exhibits to the registration statement of which this prospectus is a part.
DIVIDENDS
If declared at the option of First BanCorp's board of directors, holders of
record of the Series A Preferred Stock will be entitled to receive cash
dividends in the amount of $ per share each year, which is equivalent
to % of the liquidation preference of $25.00 per share. First BanCorp is
not required to declare or pay dividends on the Series A Preferred Stock, even
if it has funds available for the payment of such dividends. Dividends may only
be paid out of funds that are legally available for this purpose.
Dividends on the Series A Preferred Stock will accrue from its date of
original issuance and will be payable on the last day of each month in United
States dollars beginning on , 1999. Payment of dividends will be made
to the holders of record of the Series A Preferred Stock as they appear on the
books of First BanCorp on the second Business Day immediately preceding the
relevant date of payment. In the case of the dividend payable on ,
1999, this dividend will cover the period from the date of issuance of the
Series A Preferred Stock to , 1999. If any date on which dividends are
payable is not a Business Day, then payment of the dividend will be made on the
next Business Day without any interest or other payment in respect of the delay.
If December 31 of any year is not a Business Day, then the dividend payable on
such date will be made on the immediately preceding Business Day. A "Business
Day" is a day other than a Saturday or Sunday or a general banking holiday in
San Juan, Puerto Rico or New York, New York.
Dividends on the Series A Preferred Stock will be noncumulative. If the
board of directors does not declare a dividend for any monthly dividend period
on the Series A Preferred Stock, then the holders of Series A Preferred Stock
will not have a right to receive a dividend for that monthly dividend period,
whether or not dividends on the Series A Preferred Stock are declared for any
future monthly dividend period.
Dividends for any monthly dividend period will be paid in equal
installments in the amount of $0. per share. The aggregate payment made to
each holder will be rounded to the next lowest cent. The amount of dividends
payable for any period shorter than a full monthly dividend period will be
computed on the basis of the actual number of days elapsed in that period.
Dividend payments will be mailed to the record holders of the Series A
Preferred Stock at their addresses appearing on the register for the Series A
Preferred Stock.
The terms of the Series A Preferred Stock do not permit First BanCorp to
declare, set apart or pay any dividend or make any other distribution of assets
on, or redeem, purchase, set apart or otherwise acquire shares of common stock
or of any other class of stock of First BanCorp ranking junior to the Series A
Preferred Stock as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of First BanCorp, unless
certain conditions are met. Those conditions are (1) all accrued and unpaid
dividends on the Series A Preferred Stock for the twelve monthly dividend
periods ending on the immediately preceding dividend payment date shall have
been paid or are paid contemporaneously, (2) the full monthly dividend on the
Series A Preferred Stock for the then current month has been or is
contemporaneously declared and paid or declared and set apart for payment, and
(3) First BanCorp has not defaulted in the payment of the redemption price of
any shares of Series A Preferred Stock called for redemption. See "Redemption at
the Option of First BanCorp." The above limitations do not apply to stock
dividends or other distributions made in stock of First BanCorp ranking junior
to the Series A Preferred Stock as to the payment of dividends and as to the
distribution of assets. The above limitations also do not apply to conversions
or exchanges for stock of First BanCorp ranking junior to the Series A Preferred
Stock as to the payment of dividends and as to the distribution of assets.
12
<PAGE> 16
If First BanCorp is unable to pay in full the dividends on the Series A
Preferred Stock and on any other shares of stock of equal rank as to the payment
of dividends with the Series A Preferred Stock, all dividends declared upon the
Series A Preferred Stock and any such other shares of stock will be declared pro
rata. In this event, each share of Series A Preferred Stock and of the other
classes of stock of equal rank will receive dividends in the same proportion as
the $25.00 per share liquidation preference of the Series A Preferred Stock
bears to the per share liquidation preference of the other classes of equally
ranked stock.
For a discussion of the tax treatment of distributions to stockholders see
"Taxation," "Puerto Rico Taxation," and "United States Taxation."
NO CONVERSION OR EXCHANGE RIGHTS
The Series A Preferred Stock will not be convertible into or exchangeable
for any other securities of First BanCorp.
REDEMPTION AT THE OPTION OF FIRST BANCORP
First BanCorp may not redeem the shares of the Series A Preferred Stock
prior to , 2004. On and after that date, First BanCorp may redeem the
Series A Preferred Stock for cash, at its option, in whole or in part, at the
redemption prices shown below plus accrued and unpaid dividends for the then
current monthly dividend period to the redemption date. The redemption prices
for the twelve month periods beginning on , 2004 are shown below.
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
2004........................................................ $25.50
2005........................................................ 25.25
2006 and thereafter......................................... 25.00
</TABLE>
In the event that First BanCorp elects to redeem less than all of the
outstanding shares of the Series A Preferred Stock, the shares to be redeemed
will be allocated pro rata or by lot as may be determined by the board of
directors, or by any other method as the board of directors may consider fair.
Any method chosen by First BanCorp will conform to any rule or regulation of any
national or regional stock exchange or automated quotation system on which the
shares of the Series A Preferred Stock may at the time be listed or eligible for
quotation.
First BanCorp will mail a notice of any proposed redemption to the holders
of record of the shares of Series A Preferred Stock to be redeemed, at their
address of record, not less than 30 nor more than 60 days prior to the
redemption date. The notice of redemption to each holder of shares of Series A
Preferred Stock will specify the number of shares of Series A Preferred Stock to
be redeemed, the redemption date and the redemption price payable to the holder
upon redemption, and shall state that from and after the redemption date
dividends will cease to accrue. If First BanCorp redeems less than all the
shares owned by a holder, the notice shall also specify the number of shares of
Series A Preferred Stock of the holder which are to be redeemed and the numbers
of the certificates representing such shares. Any notice mailed in accordance
with these procedures shall be conclusively presumed to have been properly
given, whether or not the stockholder receives this notice. The failure by First
BanCorp to give this notice by mail, or any defect in the notice, to the holders
of any shares designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Series A Preferred Stock.
If the redemption notice is properly mailed and First BanCorp pays the
redemption price, from and after the redemption date, all dividends on the
shares of Series A Preferred Stock called for redemption shall cease to accrue
and all rights of the holders of the shares being redeemed as stockholders of
First BanCorp shall cease on the redemption date. Holders will retain the right
to receive the redemption price upon presentation of their stock certificates.
If First BanCorp redeems less than all the shares represented by any
certificate, a new certificate representing the unredeemed shares shall be
issued without cost to the holder.
13
<PAGE> 17
At its option, First BanCorp may, on or prior to the redemption date,
irrevocably deposit the entire amount payable upon redemption of the shares of
the Series A Preferred Stock to be redeemed with a bank or trust company
designated by First BanCorp having its principal office in New York, New York,
San Juan, Puerto Rico, or any other city in which First BanCorp shall at that
time maintain a transfer agent with respect to its capital stock, and having a
combined capital and surplus of at least $50,000,000. The depositary will hold
this amount in trust for payment to the holders of the shares of the Series A
Preferred Stock to be redeemed. If the deposit is made and the funds deposited
are immediately available to the holders of the shares of the Series A Preferred
Stock to be redeemed, First BanCorp will no longer have any obligation to make
payment of the amount payable upon redemption of the shares of the Series A
Preferred Stock to be redeemed. Following the deposit, except as discussed in
the next paragraph, holders of these shares shall look only to the depositary
for payment.
Any funds remaining unclaimed at the end of two years after the redemption
date for which these funds were deposited shall be returned to First BanCorp.
After the funds are returned to First BanCorp, the holders of shares called for
redemption shall look only to First BanCorp for the payment of the redemption
price. Any interest accrued on any funds deposited with the depositary will
belong to First BanCorp and shall be paid to it on demand.
After the redemption of any shares of the Series A Preferred Stock, the
redeemed shares will have the status of authorized but unissued shares of
preferred stock, without designation as to series, until these shares are once
more designated as part of a particular series by the board of directors of
First BanCorp.
Certain Regulatory Considerations Affecting Redemptions
Under current regulations, First BanCorp may not redeem the Series A
Preferred Stock, without the prior approval of the Federal Reserve Board.
Ordinarily, the Federal Reserve Board will not permit a redemption unless (1)
the shares are redeemed with the proceeds of a sale of common stock or perpetual
preferred stock, or (2) the Federal Reserve Board determines that First
BanCorp's condition and circumstances warrant the reduction of a source of
permanent capital.
Also, under Puerto Rico law, First BanCorp may not redeem any shares of its
capital stock unless the assets remaining after the redemption are sufficient to
pay any debts for which payment has not otherwise been provided.
LIQUIDATION PREFERENCE
Upon any liquidation, dissolution, or winding up of First BanCorp, the
record holders of shares of Series A Preferred Stock will be entitled to receive
out of the assets of First BanCorp available for distribution to shareholders,
before any distribution is made to holders of common stock or any other equity
securities of First BanCorp ranking junior upon liquidation to the Series A
Preferred Stock, the amount of $25.00 per share plus an amount equal to any
accrued and unpaid dividends for the current monthly dividend period to the date
of payment.
If First BanCorp is liquidated or dissolved and the amounts payable with
respect to the Series A Preferred Stock and any other shares of stock of equal
rank upon liquidation are not paid in full, the holders of the Series A
Preferred Stock and of the other shares will share ratably in any such
distribution of assets in proportion to the full liquidation preferences to
which each would otherwise be entitled. After payment of the full amount of the
liquidation preference to which they are entitled, the holders of shares of
Series A Preferred Stock will not be entitled to any further participation in
any distribution of assets of First BanCorp.
A consolidation or merger of First BanCorp with any other corporation, or
any sale, lease or conveyance of all or any part of the property or business of
First BanCorp, shall not be deemed to be a liquidation, dissolution, or winding
up of First BanCorp.
14
<PAGE> 18
VOTING RIGHTS
Holders of the Series A Preferred Stock will not be entitled to receive
notice of or attend or vote at any meeting of stockholders of First BanCorp,
except as described below.
If First BanCorp does not declare and pay dividends in full on the Series A
Preferred Stock for eighteen monthly dividend periods, whether consecutive or
not, the holders of outstanding shares of the Series A Preferred Stock, together
with the holders of any other shares of stock having the right to vote for the
election of directors solely in the event of any failure to pay dividends,
acting as a single class, will be entitled to appoint two additional members of
the board of directors of First BanCorp. They will also have the right to remove
any member so appointed from office and appoint another person in place of such
member. To make this appointment, the holders of a majority in liquidation
preference of these shares must send written notice to First BanCorp of the
appointment or pass a resolution adopted by a majority of holders at a separate
general meeting of those holders called for this purpose.
Not later than 30 days after the right of holders of Series A Preferred
Stock to elect directors arises, if written notice by a majority of the holders
has not been given as provided for in the preceding sentence, the board of
directors of First BanCorp or an authorized board committee is required to call
a separate general meeting for this purpose. If the board of directors fails to
convene this meeting within the 30-day period, the holders of 10% of the
outstanding shares of the Series A Preferred Stock and any such other stock will
be entitled to convene the meeting.
The provisions of the Certificate of Incorporation and By-laws of First
BanCorp relating to the convening and conduct of general meetings of
stockholders will apply to any separate general meeting of this type. Any member
of the board of directors appointed as described above shall vacate office if
First BanCorp resumes the payment of dividends in full on the Series A Preferred
Stock and each other series of stock having similar voting rights for twelve
consecutive monthly dividend periods, subject always to the revesting of the
right of holders of the Series A Preferred Stock, together with the holders of
any other shares of stock having the right to vote for the election of directors
solely in the event of any failure to pay dividends, acting as a single class,
to elect two directors as provided above in the event of any subsequent failure
on the part of First BanCorp to pay dividends at the stated rate for eighteen
monthly dividend periods, whether consecutive or not.
The Certificate of Incorporation of First BanCorp requires a minimum of
five members of the board of directors and a maximum of fifteen members and that
the number of members must always be an odd number. The actual number of
directors is established by a resolution adopted by the absolute majority of the
members of First BanCorp's board of directors. As of the date of this
prospectus, First BanCorp's board of directors consisted of eleven members.
Any change or cancellation of the rights and preferences of the Series A
Preferred Stock will require the approval of holders of at least two thirds of
the outstanding aggregate liquidation preference of the Series A Preferred
Stock. This approval can by evidenced either by a consent in writing or by a
resolution passed at a meeting of the holders of the Series A Preferred Stock.
The authorization or issuance of any shares of First BanCorp ranking senior to
the Series A Preferred Stock as to dividend rights or rights on liquidation or
similar events, will be considered a change requiring the consent of the Series
A Preferred Stock. Conversely, the authorization or issuance of shares ranking,
as to dividend rights or rights on liquidation or similar events, on a parity or
junior to the Series A Preferred Stock, will not be considered a change or
abrogation of the rights of the Series A Preferred Stock and the consent of the
holders of the Series A Preferred Stock will not be required in connection with
this action.
No vote of the holders of the Series A Preferred Stock will be required for
First BanCorp to redeem or purchase and cancel the Series A Preferred Stock in
accordance with the Certificate of Incorporation of First BanCorp or the
Certificate of Designation for the Series A Preferred Stock.
First BanCorp will cause a notice of any meeting at which holders of the
Series A Preferred Stock are entitled to vote to be mailed to each record holder
of the Series A Preferred Stock. Each notice will contain (1) the date of the
meeting, (2) a description of any resolution to be proposed for adoption at the
meeting, and (3) instructions for deliveries of proxies.
15
<PAGE> 19
Certain Regulatory Issues Related to Voting Rights
Under regulations adopted by the Federal Reserve Board, if the holders of
shares of Series A Preferred Stock become entitled to vote for the election of
directors as described above, the Series A Preferred Stock could be deemed a
"class of voting securities." In this instance, a holder, other than a natural
person, of 25% or more of the Series A Preferred Stock could then be subject to
regulation as a bank holding company in accordance with the Bank Holding Company
Act. A holder, other than a natural person, of 5% that otherwise exercises a
"controlling influence" over First BanCorp could also be subject to regulation
under the Bank Holding Company Act. In addition, at any time the Series A
Preferred Stock is deemed a class of voting securities, (1) any other bank
holding company may be required to obtain the approval of the Federal Reserve
Board to acquire or retain 5% or more of the outstanding shares of Series A
Preferred Stock, and (2) any person other than a bank holding company may be
required to file with the Federal Reserve Board under the Change in Bank Control
Act to acquire or retain 10% or more of such series.
Section 12 of the Puerto Rico Banking Law requires that the Commissioner of
Financial Institutions of Puerto Rico approve any change of control involving a
bank organized under the Banking Law. The Banking Law requires that the
Commissioner be informed not less than 60 days prior to any transfer of voting
stock of a Puerto Rico bank that results in any person owning, directly or
indirectly, more than 5% of the outstanding voting stock 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. The Commissioner has made an administrative determination
that these provisions of the Banking Law are applicable to a change in control
of First BanCorp.
Pursuant to the Banking Law, if the Commissioner receives notice of a
proposed transaction that may result in a change of control of First BanCorp,
the Commissioner is required to investigate and determine whether a change of
control has occurred. The Commissioner will issue an authorization for the
transfer of control of First BanCorp if the results of its investigations are in
its judgment satisfactory. The decision of the Commissioner is final and
unreviewable.
RANK
The Series A Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution, rank:
- senior to all classes of common stock of First BanCorp, and to all other
equity securities issued by First BanCorp the terms of which specifically
provide that those equity securities will rank junior to the Series A
Preferred Stock;
- on a parity with all other equity securities issued by First BanCorp the
terms of which specifically provide that those equity securities will
rank equal to the Series A Preferred Stock; and
- junior to all equity securities issued by First BanCorp the terms of
which specifically provide that those equity securities will rank senior
to the Series A Preferred Stock.
For this purpose, the term "equity securities" does not include debt
securities convertible into or exchangeable for equity securities.
First BanCorp may not issue shares ranking, as to dividend rights or rights
on liquidation, winding up and dissolution, senior to the Series A Preferred
Stock, except with the consent of the holders of at least two-thirds of the
outstanding aggregate liquidation preference of the Series A Preferred Stock.
See "Voting Rights" above.
TRANSFER AGENT; DIVIDEND DISBURSING AGENT; REGISTRAR
The Bank of New York will initially act as the transfer agent, dividend
disbursing agent and registrar for the Series A Preferred Stock. Holders of the
Series A Preferred Stock may contact The Bank of New York, at the following
address: The Bank of New York, 101 Barclay Street 22W, New York, New York 10286,
telephone number (212) 495-1784.
16
<PAGE> 20
The transfer of a share of Series A Preferred Stock may be registered upon
the surrender of the certificate evidencing the share of Series A Preferred
Stock to be transferred, together with the form of transfer endorsed on it duly
completed and executed, at the office of the transfer agent and registrar.
Registration of transfers of shares of Series A Preferred Stock will be
effected without charge by or on behalf of First BanCorp, but upon payment of
any tax or other governmental charges which may be imposed in relation to it or
the giving of an indemnity as the transfer agent and registrar may require.
First BanCorp will not be required to register the transfer of a share of
Series A Preferred Stock after the share has been called for redemption.
REPLACEMENT OF LOST CERTIFICATES
If any certificate for a share of Series A Preferred Stock is mutilated or
alleged to have been lost, stolen or destroyed, the holder may request a new
certificate representing the same share. First BanCorp will issue a new
certificate subject to delivery of the old certificate or, if alleged to have
been lost, stolen or destroyed, compliance with the conditions as to evidence of
ownership, indemnity and the payment of out-of-pocket expenses of First BanCorp
as First BanCorp may determine.
NO PREFERENTIAL RIGHTS TO PURCHASE ADDITIONAL SECURITIES
Holders of the Series A Preferred Stock will have no preemptive or
preferential rights to purchase or subscribe for any securities of First
BanCorp.
NO REPURCHASE AT THE OPTION OF THE HOLDERS
Holders of the Series A Preferred Stock will have no right to require First
BanCorp to redeem or repurchase any shares of Series A Preferred Stock.
NO MANDATORY REDEMPTION OR SINKING FUNDING OBLIGATION
The shares of Series A Preferred Stock are not subject to any mandatory
redemption, sinking fund or similar obligation.
PURCHASE OF SHARES BY FIRST BANCORP
First BanCorp may, at its option, purchase shares of the Series A Preferred
Stock from holders thereof from time to time, by tender, in privately negotiated
transactions or otherwise.
17
<PAGE> 21
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL
First BanCorp is authorized to issue 250,000,000 shares of common stock,
$1.00 par value, and 50,000,000 shares of preferred stock, $1.00 par value. The
following is a summary of certain rights and privileges of the common stock and
preferred stock. Statements in this summary are qualified in their entirety by
reference to First BanCorp's Certificate of Incorporation and to the General
Corporation Law of Puerto Rico.
COMMON STOCK
As of March 15, 1999, there were 29,145,552 issued and outstanding shares
of common stock of First BanCorp. As of that date, a total of 3,124,518 of First
BanCorp's authorized but unissued shares of common stock were reserved for
issuance in connection with FirstBank's 1997 Stock Option Plan. The common stock
is listed on the New York Stock Exchange under the symbol "FBP." The holders of
the common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders. Each share of common stock has the
same relative rights as, and is identical in all respects with, each other share
of common stock. There are no cumulative voting rights for the election of
directors.
In the event of the liquidation, dissolution or distribution of assets of
First BanCorp, the holders of common stock are entitled to share ratably in the
assets legally available for distribution to common stockholders. The common
stock has no redemption, conversion or sinking fund privileges.
Subject to any dividend preferences which may be established with respect
to any series of preferred stock, the holders of common stock are entitled to
receive, pro rata, dividends when and as declared by the board of directors out
of funds legally available for the payment of dividends.
Holders of common stock do not have preemptive rights to subscribe for or
purchase additional securities of First BanCorp. The Bank of New York is the
transfer agent and registrar for the common stock.
PREFERRED STOCK
First BanCorp's Certificate of Incorporation authorizes the board of
directors to approve the issuance of shares of preferred stock with such
designations and preferences as the board of directors may from time to time
determine. The board of directors is authorized, generally without stockholder
approval, to fix the designation, voting powers, preferences, limitations or
restrictions, and relative rights of any series of First BanCorp's preferred
stock at the time of issuance. As of the date of this prospectus, none of the
authorized shares of First BanCorp's preferred stock is issued and outstanding.
RESTRICTIONS OF ACQUISITION OF FIRST BANCORP
Certain provisions of First BanCorp's Certificate of Incorporation and
By-Laws may have the effect of discouraging unilateral tender offers or other
attempts to take over and acquire First BanCorp. The following discussion is a
general summary of those provisions of First BanCorp's Certificate of
Incorporation and By-Laws which may be deemed to have a potential
"anti-takeover" effect. Reference should be made in each case to First BanCorp's
Certificate of Incorporation and By-Laws, copies of which are incorporated by
reference as exhibits to the registration statement of which this prospectus is
a part.
Classified Board of Directors. First BanCorp's Certificate of
Incorporation contains provisions relating to the board of directors and
provides, 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 of
each class expiring each year. Said provision provides 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, said provision would cause any person who may be
attempting to take over First BanCorp to have to deal with the current board of
directors
18
<PAGE> 22
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 of
shareholders.
Vacancies on the Board of Directors. First BanCorp's Certificate 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, and 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 Certificate of Incorporation and By-Laws of
First BanCorp provide that at a meeting of stockholders called expressly for the
removal of directors, any director may be removed for cause by a vote of 75% of
the shares then entitled to vote at an election of directors. Notwithstanding
the above, directors may be removed if required by regulatory authorities or by
law.
Approval of Business Combinations. The Certificate of Incorporation of
First BanCorp requires in cases of certain business combinations, such as
mergers, consolidations, reclassifications of securities and sale or other
transfer of all or substantially all of the assets of First BanCorp, that such
transactions must be approved by the affirmative vote of holders of not less
than 75% of the total number of outstanding shares of First BanCorp, subject to
certain limited exceptions described in Article Tenth of the Certificate of
Incorporation of First BanCorp.
Amendment of Certificate of Incorporation. Amendments to First BanCorp's
Certificate 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 the article of the Certificate of Incorporation which
governs the removal of directors and the approval of certain business
combinations, the approval of not less than 75% of the total number of
outstanding shares of capital stock of First BanCorp.
Special Meetings of Stockholders. First BanCorp's By-Laws provide that
special meetings of stockholders, for any purpose or purposes, may be called by
the President or by the board of directors.
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<PAGE> 23
TAXATION
GENERAL
In the opinion of Fiddler Gonzalez & Rodriguez, LLP, counsel to First
BanCorp, the following discussion summarizes the material Puerto Rico and United
States tax considerations relating to the purchase, ownership, sale, exchange
and redemption of Series A Preferred Stock.
This discussion does not intend to describe all of the tax considerations
that may be relevant to a particular investor in light of that person's
particular circumstances and does not describe any tax consequences arising
under the laws of any state, locality or taxing jurisdiction other than Puerto
Rico and the United States. This discussion is based on the tax laws of Puerto
Rico and the United States as in effect on the date of this prospectus, and
regulations, administrative pronouncements and judicial decisions available on
or before such date and now in effect. All of the foregoing are subject to
change, which change could apply retroactively and could affect the continued
validity of this summary.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE APPLICATION TO YOUR
PARTICULAR SITUATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE
APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX.
PUERTO RICO TAXATION
The following discussion does not intend to cover all aspects of Puerto
Rico taxation that may be relevant to a purchaser of Series A Preferred Stock in
light of the purchaser's particular circumstances, or to purchasers subject to
special rules of taxation, such as life insurance companies, special
partnerships, Subchapter N corporations, registered investment companies, and
certain pension trusts.
For purposes of the discussion below, the term "Puerto Rico corporation" is
used to refer to a corporation organized under the laws of Puerto Rico and the
term "foreign corporation" is used to refer to a corporation organized under the
laws of a jurisdiction other than Puerto Rico.
OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED STOCK
Taxation of Dividends.
General. Distributions of cash or other property made by First BanCorp on
the Series A Preferred Stock will be treated as dividends to the extent that
First BanCorp has current or accumulated earnings and profits. To the extent
that a distribution exceeds First BanCorp's current and accumulated earnings and
profits, the distribution will be applied against and reduce the adjusted tax
basis of the Series A Preferred Stock in the hands of the holder. The excess of
any distribution of this type over the adjusted tax basis will be treated as
gain on the sale or exchange of the Series A Preferred Stock and will be subject
to income tax as described below.
The following discussion regarding the income taxation of dividends on
Series A Preferred Stock received by individuals not residents of Puerto Rico
and foreign corporations not engaged in a trade or business in Puerto Rico
assumes that dividends will constitute income from sources within Puerto Rico.
Generally, a dividend paid by a Puerto Rico corporation will constitute income
from sources within Puerto Rico unless the corporation has derived less than 20%
of its gross income from sources within Puerto Rico for the three taxable years
preceding the year of the declaration of the dividend or for such part of such
period as the corporation has been in existence. First BanCorp has represented
that it has derived more than 20% of its gross income from Puerto Rico sources
on an annual basis since its incorporation in 1998.
Individual Residents of Puerto Rico and Puerto Rico Corporations. In
general, individuals who are residents of Puerto Rico will be subject to a
special 10% income tax (the "10% Special Tax") on dividends paid on the Series A
Preferred Stock. This tax is generally required to be withheld by First BanCorp.
An individual may elect for this withholding not to apply, and in that case he
or she will be required to include the amount of the dividend as ordinary income
and will be subject to income tax thereon at the normal income tax rates, which
may be up to 33%.
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<PAGE> 24
Puerto Rico corporations will be subject to income tax on dividends paid on
the Series A Preferred Stock at the normal corporate income tax rates, subject
to the dividend received deduction discussed below. In the case of a Puerto Rico
corporation, no withholding will be imposed on dividends paid on the Series A
Preferred Stock. The dividend received deduction will be equal to 85% of the
dividend received, but the deduction may not exceed 85% of the corporation's net
taxable income. Based on the applicable maximum Puerto Rico normal corporate
income tax rate of 39%, the maximum effective income tax rate on these dividends
will be 5.85% after accounting for the dividend received deduction.
As a practical matter, dividends on the Series A Preferred Stock held in
street name through foreign financial institutions or other securities
intermediaries not engaged in trade or business in Puerto Rico will generally be
subject to a separate 10% withholding tax imposed on foreign corporations. See
"-- Foreign Corporations." Accordingly, individuals resident of Puerto Rico who
desire to file an election out of the applicable 10% Special Tax and applicable
withholding tax should have their shares of Series A Preferred Stock issued and
registered in their own names. Similarly, Puerto Rico corporations that own
shares of Series A Preferred Stock and wish to avoid the withholding imposed on
foreign corporations should have their shares issued and registered in their own
names in order to ensure that no withholding is made on dividends.
United States Citizens Not Residents of Puerto Rico. Dividends paid on the
Series A Preferred Stock to a United States citizen who is not a resident of
Puerto Rico will be subject to the 10% Special Tax which will be withheld by
First BanCorp. These individuals may elect for the withholding not to apply, and
in that case he or she will be required to include the amount of the dividend as
ordinary income and will be subject to income tax thereon at the normal income
tax rates, which may be up to 33%. Notwithstanding this election, a separate 10%
withholding tax will be required on the amount of the dividend unless the
individual timely files with First BanCorp a withholding exemption certificate
to the effect that the individual's gross income from sources within Puerto Rico
during the taxable year does not exceed $1,300 if single or $3,000 if married.
Withholding exemption certificates will only be accepted by First BanCorp or its
agent from individuals who have the shares of Series A Preferred Stock
registered in their names. Individuals who hold shares of Series A Preferred
Stock in street name will not be eligible to file with First BanCorp or its
agent withholding exemption certificates.
Individuals Not Citizens of the United States and Not Residents of Puerto
Rico. Dividends paid on the Series A Preferred Stock to any individual who is
not a citizen of the United States and who is not a resident of Puerto Rico will
generally be subject to a 10% tax which will be withheld at source by First
BanCorp.
Foreign Corporations. The income taxation of dividends paid on the Series
A Preferred Stock to a foreign corporation will depend on whether or not the
corporation is engaged in a trade or business in Puerto Rico.
A foreign corporation that is engaged in a trade or business in Puerto Rico
will be subject to the normal corporate income tax rates applicable to Puerto
Rico corporations on their net income that is effectively connected with the
trade or business in Puerto Rico. This income will include net income from
sources within Puerto Rico and certain items of net income from sources outside
Puerto Rico that are effectively connected with the trade or business in Puerto
Rico. Net income from sources within Puerto Rico will include dividends on the
Series A Preferred Stock. A foreign corporation that is engaged in a trade or
business in Puerto Rico will be entitled to claim the 85% dividend received
deduction discussed above in connection with Puerto Rico corporations.
In general, foreign corporations that are engaged in a trade or business in
Puerto Rico are also subject to a 10% branch profits tax. However, dividends on
the Series A Preferred Stock received by these corporations will be excluded
from the computation of the branch profits tax liability of these corporations.
A foreign corporation that is not engaged in a trade or business in Puerto
Rico will be subject to a 10% withholding tax on dividends received on the
Series A Preferred Stock.
Partnerships. Partnerships are generally taxed in the same manner as
corporations. Accordingly, the preceding discussion with respect to corporations
is equally applicable in the case of most partnerships.
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<PAGE> 25
Taxation of Gains upon Sales or Exchanges Other Than Redemptions.
General. The sale or exchange of Series A Preferred Stock will give rise
to gain or loss equal to the difference between the amount realized on the sale
or exchange and the tax basis of the Series A Preferred Stock in the hands of
the holder. Any gain or loss that is required to be recognized will be a capital
gain or loss if the Series A Preferred Stock is held as a capital asset by the
holder and will be a long-term capital gain or loss if the stockholder's holding
period of the Series A Preferred Stock exceeds six months.
Individual Residents of Puerto Rico and Puerto Rico Corporations. Gain on
the sale or exchange of Series A Preferred Stock by an individual resident of
Puerto Rico or a Puerto Rico corporation will generally be required to be
recognized as gross income and will be subject to income tax. If the stockholder
is an individual and the gain is a long-term capital gain, the gain will be
taxable at a maximum rate of 20%.
If the stockholder is a Puerto Rico corporation and the gain is a long-term
capital gain, the gain will qualify for an alternative tax rate of 25%.
United States Citizens Not Residents of Puerto Rico. A United States
citizen who is not a resident of Puerto Rico will not be subject to Puerto Rico
income tax on the sale or exchange of Series A Preferred Stock if the gain
resulting therefrom constitutes income from sources outside Puerto Rico.
Generally, gain on the sale or exchange of Series A Preferred Stock will be
considered to be income from sources outside Puerto Rico if all rights, title
and interest in or to the Series A Preferred Stock are transferred outside
Puerto Rico, and if the delivery or surrender of the instruments that evidence
the Series A Preferred Stock is made to an office of a paying or exchange agent
located outside Puerto Rico. If the gain resulting from the sale or exchange
constitutes income from sources within Puerto Rico, an amount equal to 20% of
the payments received will be withheld at the source; and if the gain
constitutes a long-term capital gain, it will be subject to a tax at a maximum
rate of 20%. The amount of tax withheld at source will be creditable against the
shareholder's Puerto Rico income tax liability.
Individuals Not Citizens of the United States and Not Residents of Puerto
Rico. An individual who is not a citizen of the United States and who is not a
resident of Puerto Rico will be subject to the rules described above under
"-- United States Citizens Not Residents of Puerto Rico." However, if the gain
resulting from the sale or exchange of Series A Preferred Stock constitutes
income from sources within Puerto Rico, an amount equal to 25% of the payments
received will be withheld at the source; provided, that if the gain resulting
from the sale or exchange represents a capital gain from sources within Puerto
Rico, the individual will generally be subject to tax on this gain at a fixed
rate of 29%. The amount of tax withheld at source will be creditable against the
shareholder's Puerto Rico income tax liability.
Foreign Corporations. A foreign corporation that is engaged in a trade or
business in Puerto Rico will generally be subject to Puerto Rico corporate
income tax on any gain realized on the sale or exchange of Series A Preferred
Stock if the gain is (1) from sources within Puerto Rico or (2) from sources
outside Puerto Rico and effectively connected with a trade or business in Puerto
Rico. Any such gain will qualify for an alternative tax of 25% if it qualifies
as a long-term capital gain.
In general, foreign corporations that are engaged in a trade or business in
Puerto Rico will also be subject to a 10% branch profits tax. In the computation
of this tax, any gain realized by these corporations on the sale or exchange of
Series A Preferred Stock and that is subject to Puerto Rico income tax will be
taken into account. However, a deduction will be allowed in the computation for
any income tax paid on the gain realized on the sale or exchange.
A foreign corporation that is not engaged in a trade or business in Puerto
Rico will generally be subject to a corporate income tax rate of 29% on any
capital gain realized on the sale or exchange of Series A Preferred Stock if the
gain is from sources within Puerto Rico. Gain on the sale or exchange of Series
A Preferred Stock will generally not be considered to be from sources within
Puerto Rico if all rights, title and interest in or to the Series A Preferred
Stock are transferred outside Puerto Rico, and if the delivery or surrender of
the instruments that evidence the Series A Preferred Stock is made to an office
of a paying or exchange agent located outside Puerto Rico. If the gain resulting
from the sale or exchange constitutes income from sources within Puerto Rico, an
amount equal to 25% of the payments received will be withheld at the source and
be
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<PAGE> 26
creditable against the shareholder's Puerto Rico income tax liability. In the
case of such foreign corporation, no income tax will be imposed if the gain
constitutes income from sources outside Puerto Rico.
Partnerships. Partnerships are generally taxed as corporations.
Accordingly, the discussion with respect to corporations is equally applicable
to most partnerships.
Taxation of Redemptions.
A redemption of shares of the Series A Preferred Stock for cash will be
treated as a distribution taxable as a dividend to the extent of First BanCorp's
current or accumulated earnings and profits if the redemption is essentially
equivalent to a dividend. Under regulations issued by the Department of the
Treasury of Puerto Rico (1) a redemption of stock that completely terminates a
shareholder's interest in a corporation does not constitute a dividend, and (2)
certain pro rata redemptions among all the shareholders will be treated as a
dividend. In situations not described by these regulations, the Department of
the Treasury of Puerto Rico will generally follow principles applied by United
States courts and the United States Internal Revenue Service under the United
States Internal Revenue Code, as amended to date (the "Code"), in determining
whether a distribution is essentially equivalent to a dividend. The Department
of the Treasury of Puerto Rico, however, is not bound by such principles and is
free to adopt a different rule.
If the redemption of the Series A Preferred Stock is not treated as a
dividend, it will generally generate gain or loss that will be measured as
provided above under "-- Taxation of Gains upon Sales or Exchanges Other Than
Redemptions" for a sale or exchange of Series A Preferred Stock. Gain on the
redemption of Series A Preferred Stock will generally be recognized and will be
subject to income tax. If the stockholder of the Series A Preferred Stock is an
individual resident of Puerto Rico and the gain is a long-term capital gain, the
gain will be taxable at a maximum rate of 20%. If the stockholder is a Puerto
Rico corporation and the gain is a long-term capital gain, the gain will qualify
for the alternative tax rate of 25%.
If the stockholder of the Series A Preferred Stock is an individual who is
not a resident of Puerto Rico or a foreign corporation or foreign partnership,
any gain realized by the holder on the redemption of the Series A Preferred
Stock that is not taxable as a dividend may be subject to Puerto Rico income tax
if the gain constitutes income from sources within Puerto Rico or is effectively
connected with a trade or business conducted by the holder in Puerto Rico. The
Puerto Rico income tax law does not provide clear rules in this area. As a
result thereof, these prospective shareholders should be aware that gain
realized from a redemption of the Series A Preferred Stock may be treated as
income from sources within Puerto Rico or income effectively connected with a
trade or business in Puerto Rico and subject to income tax accordingly.
ESTATE AND GIFT TAXATION
The transfer of Series A Preferred Stock by inheritance or gift by an
individual who is a resident of Puerto Rico at the time of his or her death or
at the time of the gift will not be subject to estate and gift tax if the
individual is a citizen of the United States who acquired his or her citizenship
solely by reason of birth or residence in Puerto Rico. Other individuals should
consult their own tax advisors in order to determine the appropriate treatment
for Puerto Rico estate and gift tax purposes of the transfer of the Series A
Preferred Stock by death or gift.
MUNICIPAL LICENSE TAXATION
Individuals and corporations that are not engaged in a trade or business in
Puerto Rico will not be subject to municipal license tax on dividends paid on
the Series A Preferred Stock or on any gain realized on the sale, exchange or
redemption of the Series A Preferred Stock.
A corporation or partnership, Puerto Rico or foreign, that is engaged in a
trade or business in Puerto Rico will generally be subject to municipal license
tax on dividends paid on the Series A Preferred Stock and on the gain realized
on the sale, exchange or redemption of the Series A Preferred Stock if the
dividends or gain are attributable to that trade or business. The municipal
license tax is imposed on the volume of business of the
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<PAGE> 27
taxpayer, and the tax rates range from a maximum of 1.5% for financial
businesses to a maximum of 0.5% for other businesses.
PROPERTY TAXATION
The Series A Preferred Stock will not be subject to property tax.
UNITED STATES TAXATION
The following discussion is limited to the United States federal tax
consequences of the ownership and disposition of the Series A Preferred Stock by
U.S. Holders, as defined below, and corporations organized under the laws of
Puerto Rico ("PR Corporations"). This discussion is based on the Code, existing
and proposed regulations of the U.S. Department of the Treasury promulgated
thereunder, administrative pronouncements and judicial decisions, all of which
are subject to change, even with retroactive effect. This discussion deals only
with Series A Preferred Stock held by initial purchasers as capital assets
within the meaning of Section 1221 of the Code. It does not discuss all of the
tax consequences that may be relevant to a purchaser in light of that person's
particular circumstances or to purchasers subject to special rules, such as
entities that are taxed under the Code as partnerships, Subchapter S
corporations, life insurance companies, tax exempt entities, dealers in
securities, financial institutions, or to persons whose functional currency is
not the U.S. dollar.
As used herein, the term "U.S. Holder" means a beneficial owner of Series A
Preferred Stock that does not own directly, constructively or by attribution,
10% or more of the voting stock of the First BanCorp and is, for United States
federal income tax purposes:
- a citizen or resident of the United States,
- a corporation organized under the laws of a state of the United States,
- a corporation organized under the laws of the United States or of any
political subdivision thereof, or
- an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
The term "U.S. Holder" does not include individual Puerto Rico residents
who are not citizens or residents of the United States nor does it include PR
Corporations. As used herein, the term "Puerto Rico U.S. Holder" means an
individual U.S. Holder who is a bona fide resident of Puerto Rico during the
entire taxable year.
OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED STOCK
Taxation of Dividends.
General. Dividends on the Series A Preferred Stock will constitute gross
income from sources outside the United States if less than 25% of the gross
income from all sources of First BanCorp for the three-year period ending with
the close of its taxable year preceding the declaration of such dividends (or
for such part of such period as First BanCorp has been in existence) was
effectively connected with a trade or business within the United States. Since
its incorporation in 1998, First BanCorp has not been engaged in a trade or
business in the United States, and therefore less than 25% of First BanCorp's
gross income has been effectively connected with the conduct of a trade or
business in the United States. Additionally, First BanCorp expects that in the
future less than 25% of its gross income will be effectively connected with the
conduct of a trade or business within the United States. Accordingly, dividends
on the Series A Preferred Stock distributed by First BanCorp will constitute
gross income from sources outside the United States so long as First BanCorp
continues to meet such gross income test.
U.S. Holders other than Puerto Rico U.S. Holders. Subject to the
discussion under "-- Passive Foreign Investment Company Rules" below,
distributions made with respect to the Series A Preferred Stock, including the
amount of any Puerto Rico taxes withheld on the distribution, will be includable
in the gross
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<PAGE> 28
income of a U.S. Holder, other than a Puerto Rico U.S. Holder, as foreign source
gross income to the extent the distributions are paid out of current or
accumulated earnings and profits of First BanCorp as determined for United
States federal income tax purposes. These dividends will not be eligible for the
dividends received deduction generally allowed to U.S. Holders that are
corporations. To the extent, if any, that the amount of any distribution by
First BanCorp exceeds its current and accumulated earnings and profits as
determined under United States federal income tax principles, the excess will be
treated first as a tax-free return of the U.S. Holder's tax basis in the Series
A Preferred Stock and thereafter as capital gain.
Subject to certain conditions and limitations contained in the Code, the
Puerto Rico income tax imposed on dividends distributed by First BanCorp in
accordance with Puerto Rico law will be eligible for credit against the U.S.
Holder's United States federal income tax liability. See "Puerto Rico
Taxation -- Ownership and Disposition of Series A Preferred Stock -- Taxation of
Dividends" above. For purposes of calculating a U.S. Holder's United States
foreign tax credit limitation, dividends distributed by First BanCorp will
generally constitute foreign source "passive income" or, in the case of certain
U.S. Holders (those predominantly engaged in the active conduct of a banking,
financing or similar business), foreign source "financial services income."
Puerto Rico U.S. Holders. In general, and subject to the discussion under
"-- Passive Foreign Investment Company Rules" below, distributions of dividends
made by First BanCorp on the Series A Preferred Stock to a Puerto Rico U.S.
Holder will constitute gross income from sources within Puerto Rico, will not be
includable in the stockholder's gross income and will be exempt from United
States federal income taxation. In addition, for United States federal income
tax purposes, no deduction or credit will be allowed that is allocable to or
chargeable against amounts so excluded from the Puerto Rico U.S. Holder's gross
income.
PR Corporations. In general, distributions of dividends made by First
BanCorp on the Series A Preferred Stock to a PR Corporation will not, in the
hands of the PR Corporation, be subject to United States income tax if the
dividends are not effectively connected with a United States trade or business
of the PR Corporation. The Code provides special rules for PR Corporations that
are "Controlled Foreign Corporations," "Personal Holding Companies," "Foreign
Personal Holding Companies," or "Passive Foreign Investment Companies."
Taxation of Capital Gains upon Sales or Exchanges Including Redemptions.
U.S. Holders other than Puerto Rico U.S. Holders. A U.S. Holder, other
than a Puerto Rico U.S. Holder, will recognize gain or loss on the sale or other
disposition of Series A Preferred Stock, including redemptions treated as sales
or exchanges of the Series A Preferred Stock under Section 302 of the Code, in
an amount equal to the difference between the U.S. Holder's adjusted tax basis
in the Series A Preferred Stock and the amount realized on the sale or other
disposition. Subject to the discussion under "-- Passive Foreign Investment
Company Rules" below, the gain or loss will be a capital gain or loss. U.S.
Holders should consult their own tax advisors concerning the treatment of
capital gains and losses. Redemptions of the Series A Preferred Stock that are
not treated as sales or exchanges under Section 302 of the Code will generally
be subject to income tax under the Code as dividends.
Gain recognized by a U.S. Holder on the sale or other disposition of Series
A Preferred Stock generally will be treated as United States source income.
Puerto Rico U.S. Holders. In general, and subject to the discussion under
"-- Passive Foreign Investment Company Rules" below, gain from the sale or
exchange of the Series A Preferred Stock, including redemptions treated as sales
or exchanges of the Series A Preferred Stock under Section 302 of the Code, by a
Puerto Rico U.S. Holder that is a resident of Puerto Rico for purposes of
Section 865 of the Code (1) will constitute income from sources within Puerto
Rico, (2) will not be includable in the stockholder's gross income and (3) will
be exempt from United States federal income taxation. Also, no deduction or
credit will be allowed that is allocable to or chargeable against amounts so
excluded from the Puerto Rico U.S. Holder's gross income. Redemptions of the
Series A Preferred Stock that are not treated as sales or exchanges under
Section 302 of the Code will generally be subject to income tax under the Code
as dividends.
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<PAGE> 29
PR Corporations. In general, any gain derived by a PR Corporation from the
sale or exchange of the Series A Preferred Stock will not, in the hands of the
PR Corporation, be subject to United States income tax if the gain is not
effectively connected with a United States trade or business of the PR
Corporation. The Code provides special rules for PR Corporations that are
"Controlled Foreign Corporations," "Personal Holding Companies," "Foreign
Personal Holding Companies," or "Passive Foreign Investment Companies."
Redemptions of the Series A Preferred Stock that are not treated as sales or
exchanges under Section 302 of the Code will generally be subject to income tax
under the Code as dividends.
Backup Withholding. Certain noncorporate U.S. Holders may be subject to
backup withholding at the rate of 31% on dividends paid or the proceeds of a
sale, exchange or redemption of Series A Preferred Stock. Generally, backup
withholding applies only when the taxpayer fails to furnish or certify a proper
taxpayer identification number or when the payor is notified by the IRS that the
taxpayer has failed to report payments of interest and dividends properly. U.S.
Holders should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining any applicable
exemption.
PASSIVE FOREIGN INVESTMENT COMPANY RULES
The Code provides special rules for distributions received by U.S. Holders
on stock of a Passive Foreign Investment Company ("PFIC") as well as amounts
received from the sale or other disposition of PFIC stock. For purposes of these
rules pledges are considered dispositions.
Based upon certain proposed Treasury Regulations under the PFIC provisions
of the Code (the "Proposed Regulations"), First BanCorp believes that it has not
been a PFIC for any of its prior taxable years and expects to conduct its
affairs in a manner so that it will not meet the criteria to be considered a
PFIC in the foreseeable future. If, contrary to First BanCorp's expectation, the
Series A Preferred Stock were considered to be shares of a PFIC for any fiscal
year, a U.S. Holder would generally be subject to special rules, regardless of
whether First BanCorp remains a PFIC, with respect to (1) any "excess
distribution" by First BanCorp to the U.S. Holder and (2) any gain realized on
the sale, pledge or other disposition of Series A Preferred Stock. An "excess
distribution" is, generally, any distributions received by the U.S. Holder on
the Series A Preferred Stock in a taxable year that are greater than 125% of the
average annual distributions received by the U.S. Holder in the three preceding
taxable years, or the U.S. Holder's holding period for the Series A Preferred
Stock if shorter.
Under these rules, (1) the excess distribution or gain would be allocated
ratably over the U.S. Holder's holding period for the Series A Preferred Stock,
(2) the amount allocated to the current taxable year and any taxable year prior
to the first taxable year in which First BanCorp is a PFIC would be taxed as
ordinary income, and (3) the amount allocated to each of the other taxable years
would be subject to tax at the highest rate of tax in effect for the applicable
class of taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed on the resulting tax attributable to each such year.
As an alternative to these rules, if First BanCorp were a PFIC and
effective for taxable years of U.S. Holders beginning after December 31, 1997,
U.S. Holders may, in certain circumstances, elect a mark-to-market treatment
with respect to their Series A Preferred Stock, provided that the Series A
Preferred Stock will constitute "marketable stock" for purposes of these rules.
In general, the Proposed Regulations provide that Puerto Rico U.S. Holders
would be subject to the rule described in (3) above only to the extent that any
excess distribution or gain is allocated to a taxable year during which the
individual held the Series A Preferred Stock and was not a bona fide resident of
Puerto Rico during the entire taxable year or, in certain cases, a portion
thereof.
Under current law, if First BanCorp is a PFIC in any year, a U.S. Holder
who beneficially owns Series A Preferred Stock during that year must make an
annual return on IRS Form 8621 that describes any distributions received from
First BanCorp and any gain realized on the disposition of Series A Preferred
Stock.
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<PAGE> 30
ESTATE AND GIFT TAXATION
The transfer of Series A Preferred Stock by inheritance or gift by an
individual who is a resident of Puerto Rico at the time of his or her death or
at the time of the gift will not be subject to U.S. federal estate and gift tax
if the individual is a citizen of the United States who acquired his or her
citizenship solely by reason of birth or residence in Puerto Rico. Other
individuals should consult their own tax advisors in order to determine the
appropriate treatment for U.S. federal estate and gift tax purposes of the
transfer of the Series A Preferred Stock by death or gift.
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<PAGE> 31
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), First BanCorp has agreed to sell to each of the
underwriters named below, and each of the underwriters severally has agreed to
purchase from First BanCorp, the aggregate number of shares of Series A
Preferred Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBERS OF
UNDERWRITERS SHARES(1)
- ------------ ----------
<S> <C>
PaineWebber Incorporated of Puerto Rico.....................
Keefe, Bruyette & Woods, Inc................................
Merrill Lynch & Co..........................................
Popular Securities, Inc.....................................
Prudential Securities Incorporated..........................
Santander Securities Corporation of Puerto Rico.............
Salomon Smith Barney, Inc...................................
---------
Total............................................. 3,600,000
</TABLE>
- ---------------------
(1) Assumes no exercise of the underwriters' over-allotment option.
Under the terms and conditions of the Underwriting Agreement, First BanCorp
is obligated to sell, and the underwriters are obligated to purchase, all of the
shares of Series A Preferred Stock shown in the table above, if any of the
shares of Series A Preferred Stock are purchased.
The underwriters propose to offer the shares of Series A Preferred Stock to
the public initially at the public offering price set forth on the cover page of
this prospectus and to certain selected dealers at the public offering price
less a concession not to exceed $ per share. After the offering to the
public, the public offering price and the concession to selected dealers may be
changed by the underwriters.
First BanCorp has granted the underwriters an option exercisable for 30
days from the date of this prospectus, to purchase up to 540,000 additional
shares of Series A Preferred Stock to cover over-allotments, if any, at the
initial public offering price, less the underwriting discounts, as shown on the
cover page of this prospectus. If the underwriters exercise this option, then
each of the underwriters will have a firm commitment, subject to certain
conditions contained in the Underwriting Agreement, to purchase a number of
option shares proportionate to the underwriter's initial commitment as indicated
in the table above. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the shares of Series A
Preferred Stock offered hereby.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by First BanCorp as well as the
proceeds received by First BanCorp from the offering, before deducting expenses.
The amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase up to an additional 540,000 shares.
<TABLE>
<CAPTION>
TOTAL,
ASSUMING
FULL EXERCISE OF
OVER-ALLOTMENT
PER SHARE TOTAL OPTION
--------- ----------- ----------------
<S> <C> <C> <C>
Public Offering Price.................................... $ 25.00 $90,000,000 $103,500,000
Underwriting Discount.................................... $ 0.7875 $ 2,835,000 $ 3,260,250
Proceeds to First BanCorp................................ $24.2125 $87,165,000 $100,239,750
</TABLE>
Until the distribution of the Series A Preferred Stock is completed, rules
of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for and purchase the Series A Preferred Stock. As an
exception to these rules, the underwriters may engage in certain transactions
that stabilize the price of the Series A Preferred Stock. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Series A Preferred Stock.
28
<PAGE> 32
If the underwriters create a short position in the Series A Preferred Stock
in connection with the offering, i.e., if the underwriters sell more shares of
Series A Preferred Stock than are set forth on the cover page of this
prospectus, they may reduce that short position by purchasing shares of Series A
Preferred Stock in the open market. The underwriters may also elect to reduce
any short position by purchasing all or part of the over-allotment option
described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of these purchases.
First BanCorp estimates that the total expenses of this offering, excluding
underwriting discounts and commissions, will be $300,000.
In connection with this offering, First BanCorp has agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make in respect thereof.
The Series A Preferred Stock has been approved for listing on the New York
Stock Exchange under the symbol "FBPP," subject to official notice of issuance.
Several of the underwriters have from time to time been customers of,
engaged in transactions with, or performed services for, First BanCorp and its
subsidiaries in the ordinary course of business. The underwriters may continue
to do so in the future.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows First BanCorp to "incorporate
by reference" the information it files with them, which means First BanCorp can
disclose important information to you by referring to these documents. The
information included in the following documents is incorporated by reference and
is considered a part of this prospectus. The most recent information that First
BanCorp files with the SEC automatically updates and supersedes previously filed
information. First BanCorp has previously filed the following document with the
SEC and is incorporating it by reference into this prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1998;
First BanCorp also incorporates by reference all documents filed by it
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, after the date of this prospectus and until all the shares being offered
by this prospectus are sold.
First BanCorp will provide, at no cost, to each person, including a
beneficial owner, to whom this prospectus is delivered, upon written or oral
request, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to these documents unless such exhibits are specifically
incorporated by reference into such documents. Requests for copies should be
directed to First BanCorp, Attention: Antonio R. Escriba-Oliver, Secretary, 1519
Ponce de Leon Avenue, San Juan, Puerto Rico, 00908; telephone number: (787)
729-8200.
AVAILABLE INFORMATION
First BanCorp files annual, quarterly and current reports, proxy statements
and other information with the SEC. First BanCorp has also filed with the SEC a
Registration Statement on Form S-3, to register the Series A Preferred Stock
being offered in this prospectus. This prospectus, which forms part of the
Registration Statement, does not contain all of the information included in the
Registration Statement. For further information about First BanCorp and the
shares of Series A Preferred Stock offered in this prospectus, you should refer
to the Registration Statement and its exhibits.
You may read and copy any document filed by First BanCorp with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. First BanCorp files its SEC
29
<PAGE> 33
materials electronically with the SEC, so you can also review First BanCorp's
filings by accessing the web site maintained by the SEC at http://www.sec.gov.
This site contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC. You can
also obtain more information about First BanCorp by visiting our web site at
http://www.1bankpr.com.
LEGAL MATTERS
The validity of the shares of Series A Preferred Stock offered hereby will
be passed upon for First BanCorp by Fiddler Gonzalez & Rodriguez, LLP, San Juan,
Puerto Rico. As of April , 1999, attorneys working at Fiddler Gonzalez &
Rodriguez, LLP owned, in the aggregate, approximately shares of common
stock of First BanCorp. Certain legal matters will be passed upon for the
underwriters by Axtmayer Adsuar Muniz & Goyco, P.S.C., San Juan, Puerto Rico.
EXPERTS
The consolidated financial statements of First BanCorp as of December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, incorporated by reference into this prospectus, have been so incorporated
in reliance on the report of PricewaterhouseCoopers, LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
30
<PAGE> 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,600,000 SHARES
(FIRST BANCORP CORPORATION LOGO)
% NONCUMULATIVE PERPETUAL MONTHLY INCOME
PREFERRED STOCK, SERIES A
PRICE TO PUBLIC: $25 PER SHARE
------------------------------
PROSPECTUS
------------------------------
PAINEWEBBER INCORPORATED
OF PUERTO RICO
------------------------------
KEEFE, BRUYETTE & WOODS, INC.
MERRILL LYNCH & CO.
POPULAR SECURITIES
PRUDENTIAL SECURITIES INCORPORATED
SANTANDER SECURITIES
SALOMON SMITH BARNEY INC.
April , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 35
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than commissions
and fees of the underwriters. All of the amounts shown are estimates except the
Securities and Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- --------
<S> <C>
Securities and Exchange Commission registration fee......... $ 28,773
NASD filing fee............................................. 10,850
Printing and engraving expenses............................. 40,000
New York Stock Exchange listing fee......................... 44,825
Accounting fees and expenses................................ 50,000
Legal fees and expenses..................................... 120,000
Miscellaneous expenses...................................... 5,552
--------
Total............................................. $300,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Article 4.09 of the Puerto Rico General Corporation Law authorizes
Puerto Rico corporations to indemnify their officers and directors against
liabilities arising out of pending or threatened actions, suits or proceedings
to which they are or may be made parties by reason of being directors or
officers. Such rights of indemnification are not exclusive of any other rights
to which such officers or directors may be entitled under any by-law, agreement,
vote of stockholders or otherwise. The Certificate of Incorporation provides
that First BanCorp shall indemnify its directors, officers and employees to the
fullest extent permitted by law. First BanCorp also maintains directors' and
officers' liability insurance on behalf of its directors and officers.
(b) Article Ninth, Section 1 of the Certificate of Incorporation provides
that First BanCorp 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 First BanCorp) by reason of the fact
that he is or was a director, officer, employee or agent of First BanCorp or is
or was serving at the request of First BanCorp as a director, officer, employer
or agent of another corporation or 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
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of First BanCorp, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Article Ninth, Section 2 of the Certificate of Incorporation provides that
First BanCorp 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 First BanCorp to procure a judgment in its favor by reason of
the fact that such person acted in any of the capacities set forth above,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar standards
set forth in the preceding paragraph, except that no indemnification may be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to First BanCorp unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication or liability, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Article Ninth, Section 3 of the Certificate of Incorporation provides that
to the extent a director, officer, employee or agent of First BanCorp has been
successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in Sections 1 and 2 of Article Ninth of the Certificate
of Incorporation or
II-1
<PAGE> 36
in the 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. Section 4 of Article Ninth of the Certificate of
Incorporation provides that any indemnification by First BanCorp under Sections
1 and 2 of Article Ninth of the Certificate of Incorporation shall be made only
as authorized in the specific case upon a determination that indemnification of
such person is proper under the circumstances because such person 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, (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, or (c) by the stockholders.
Section 5 of Article Ninth of the Certificate of Incorporation provides
that First BanCorp shall pay expenses incurred in defending a civil or criminal
action, suit or proceeding in advance of the final disposition of such action,
suit or proceeding. First BanCorp must make such advanced payments if it
receives an undertaking by or on behalf of any person covered by Section 1 of
Article Ninth of the Certificate of Incorporation to repay such amounts, if it
is ultimately determined that he is not entitled to be indemnified by First
BanCorp as authorized in Article Ninth of the Certificate of Incorporation.
Sections 6 and 7 of Article Ninth of the Certificate of Incorporation
provide that indemnification provided for by Sections 1 and 2 of Article Ninth
of the Certificate of Incorporation shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and that First BanCorp
may purchase and maintain insurance on behalf of a director, officer, employee
or agent of First BanCorp against any liability asserted against such person or
incurred by such person in any such capacity or arising out of such person's
status as such whether or not First BanCorp would have the power to indemnify
such person against such liabilities under such Sections 1 and 2 of Article
Ninth of the Certificate of Incorporation.
(c) The resolutions of the Board of Directors adopted on March 23, 1999
approving the issuance and sale of the Series A Preferred Stock provide that, to
the extent permitted by First BanCorp's Certificate of Incorporation and
applicable law. First BanCorp (i) will indemnify and hold harmless the directors
and executive officers and their attorney-in-facts who signed this Registration
Statement against any losses, claims, damages or liabilities they may become
subject under the Securities Act of 1933, the Securities Exchange Act of 1934,
any state securities or insurance laws or regulations of any other jurisdiction,
insofar as such losses, claims, damages or liabilities arise in connection with
this Registration Statement or any other registration statement filed in
connection with the Series A Preferred Stock and (ii) shall reimburse each such
person for any legal or other expenses reasonably incurred by him in connection
with investigating or defending any such action or claims.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement.
4(a) -- Form of Series A Preferred Stock Certificate.
4(b) -- Certificate of Designation designating the terms of Series A
Preferred Stock.
4(c) -- Certificate of Incorporation of First BanCorp.(1)
4(b) -- By-Laws of First BanCorp.(1)
5 -- Opinion regarding legality and consent of Fiddler Gonzalez &
Rodriguez, LLP.
8 -- Opinion regarding tax matters of Fiddler Gonzalez &
Rodriguez, LLP.
12 -- Statement re: Computation of Ratio of Earnings to Combined
Fixed Charges and Preference Security Dividends.
23.1 -- Consent of PricewaterhouseCoopers LLP.
</TABLE>
II-2
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <C> <S>
23.2 -- Consent of Fiddler Gonzalez & Rodriguez, LLP (included in
the opinion of counsel filed as Exhibit 5 hereto).
24 -- Powers of Attorney (included on Pages II-4 to II-6).
</TABLE>
- ---------------------
(1) Incorporated by reference to the Form S-4 Registration Statement (Reg. No.
333-08640), filed by First BanCorp. with the Commission on April 15, 1998,
as amended.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement 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.
The Registrant hereby undertakes that:
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities
Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of First
BanCorp pursuant to the provision described under Item 15 above, or otherwise,
First BanCorp has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by First BanCorp of expenses incurred or paid by a director, officer, or
controlling person of First BanCorp 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, First BanCorp 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 38
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and 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 23rd day of March, 1999.
FIRST BANCORP.
By: /s/ Angel Alvarez Perez
------------------------------------
Angel Alvarez Perez
Chairman of the Board, Chief
Executive
Officer and President
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Angel Alvarez Perez and Annie Astor de Carbonell and each of them, each with
full power to act without the other, his or her true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the same offering as this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Angel Alvarez Perez Chairman, Chief Executive March 23, 1999
- ----------------------------------------------------- Officer and President
Angel Alvarez Perez
/s/ Annie Astor de Carbonell Senior Executive Vice March 23, 1999
- ----------------------------------------------------- President, Chief Financial
Annie Astor de Carbonell Officer and Director
/s/ Laura Villarino Tur Senior Vice President and March 23, 1999
- ----------------------------------------------------- Comptroller
Laura Villarino Tur
/s/ Jose Julian Alvarez Director March 23, 1999
- -----------------------------------------------------
Jose Julian Alvarez
/s/ Rafael Bouet Souffront Director March 23, 1999
- -----------------------------------------------------
Rafael Bouet Souffront
/s/ Francisco D. Fernandez Director March 23, 1999
- -----------------------------------------------------
Francisco D. Fernandez
</TABLE>
II-4
<PAGE> 39
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Armando Lopez Ortiz Director March 23, 1999
- -----------------------------------------------------
Armando Lopez Ortiz
/s/ German E. Malaret Director March 23, 1999
- -----------------------------------------------------
German E. Malaret
/s/ Hector M. Nevares Director March 23, 1999
- -----------------------------------------------------
Hector M. Nevares
/s/ Antonio Pavia Villamil Director March 23, 1999
- -----------------------------------------------------
Antonio Pavia Villamil
/s/ Jose Teixidor Director March 23, 1999
- -----------------------------------------------------
Jose Teixidor
/s/ Angel L. Umpierre Director March 23, 1999
- -----------------------------------------------------
Angel L. Umpierre
</TABLE>
II-5
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement.
4(a) -- Form of Series A Preferred Stock Certificate.
4(b) -- Certificate of Designation designating the terms of Series A
Preferred Stock.
4(c) -- Certificate of Incorporation of First BanCorp.(1)
4(d) -- By-Laws of First BanCorp.(1)
5 -- Opinion regarding legality and consent of Fiddler Gonzalez &
Rodriguez, LLP.
8 -- Opinion regarding tax matters of Fiddler Gonzalez &
Rodriguez, LLP.
12 -- Statement re: Computation of Ratio of Earnings to Combined
Fixed Charges and Preference Security Dividends.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Fiddler Gonzalez & Rodriguez, LLP (included in
the opinion of counsel filed as Exhibit 5 hereto).
24 -- Powers of Attorney (included on Pages II-4 to II-6).
</TABLE>
- ---------------
(1) Incorporated by reference to the Form S-4 Registration Statement (Reg. No.
333-08640), filed by First BanCorp. with the Commission on April 15, 1998,
as amended.
<PAGE> 1
EXHIBIT 1
3,600,000 Shares
FIRST BANCORP.
__% Noncumulative Perpetual Monthly Income Preferred Stock, Series A
UNDERWRITING AGREEMENT
_____________, 1999
PAINEWEBBER INCORPORATED OF PUERTO RICO
As lead underwriter of the several Underwriters
named in Schedule 1
American International Plaza, PH
Hato Rey, Puerto Rico 00918
Ladies and Gentlemen:
FIRST BANCORP., a Puerto Rico corporation (the "Company"), proposes to
sell an aggregate of 3,600,000 shares (the "Firm Shares") of the Company's __%
Noncumulative Perpetual Monthly Income Preferred Stock, Series A (the "Preferred
Stock"), which are to be issued and sold by the Company to you and the other
underwriters named in Schedule 1 hereto (collectively, the "Underwriters"), for
whom you are acting as representative (the "Representative"). The Company also
has agreed to grant to you and the other Underwriters an option (the "Option")
to purchase up to an additional 540,000 shares of Preferred Stock (the "Option
Shares") on the terms and for the purposes set forth in Section 1(b) hereto. The
Firm Shares and the Option Shares are hereinafter collectively referred to as
the "Shares."
The Company hereby confirms as follows its agreements with the
Representative and the several other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, the Company agrees to sell to each Underwriter and
each Underwriter, severally and not jointly, agrees to purchase from the Company
at a purchase price of $24.2125 per share, the number of Firm Shares set forth
opposite the name of such Underwriter in Column (1) of Schedule 1 hereto, plus
such
<PAGE> 2
2
additional number of Firm Shares which such Underwriter may become obligated to
purchase pursuant to Section 9 hereof.
(b) Subject to all the terms and conditions of this Agreement,
the Company grants the Option to the several Underwriters to purchase, severally
and not jointly, the Option Shares at the same price per share as the
Underwriters shall pay for the Firm Shares. The Option may be exercised only to
cover overallotments in the sale of the Firm Shares by the Underwriters and may
be exercised in whole or in part at any time and from time to time on or before
the 30th day after the date of this Agreement (or on the next business day if
the 30th day is not a business day), upon notice (the "Option Shares Notice") in
writing or by telephone (confirmed in writing) by the Representative to the
Company no later than 5:00 p.m., Atlantic Standard time, at least two and no
more than five business days before the date specified for closing in the Option
Shares Notice (the "Option Closing Date") setting forth the aggregate number of
Option Shares to be purchased and the time and date for such purchase. On the
Option Closing Date, the Company will issue and sell to the Underwriters the
number of Option Shares set forth in the Option Shares Notice and each
Underwriter will purchase such percentage of the Option Shares as is equal to
the percentage of Firm Shares that such Underwriter is purchasing hereunder, as
adjusted by the Representative in such manner as it deems advisable to avoid
fractional shares.
2. Delivery and Payment. Delivery of the Firm Shares shall be made to
the Representative for the accounts of the Underwriters at the office of
Axtmayer Adsuar Muniz & Goyco, P.S.C., counsel to the Underwriters, 268 Munoz
Rivera Ave.,Suite 1400, Hato Rey, P.R. 00918, against payment of the purchase
price by wire transfer of immediately available funds to the bank account
designated by the Company. Such payment shall be made at 10:00 a.m., New York
City time, on the third full business day following the date of this Agreement,
or at such other time on such other date, not later than seven business days
after the date of this Agreement, as may be agreed upon by the Company and the
Representative (such date is hereinafter referred to as the "Closing Date").
Time shall be of the essence and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder.
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the
Representative shall request at least two business days prior to the Closing
Date or the Option Closing Date, as the case may be, by written notice to the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be.
<PAGE> 3
3
The cost of original issue tax stamps, if any, in connection with the
issuance, sale and delivery of the Firm Shares and Option Shares by the Company
to the respective Underwriters shall be borne by the Company. The Company will
pay and save each Underwriter and any subsequent holder of the Shares harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying Federal, state or Commonwealth of Puerto Rico stamp and other
transfer taxes, if any, which may be payable or determined to be payable in
connection with the original issuance, sale or delivery to such Underwriter of
the Firm Shares and Option Shares.
3. Representations and Warranties of the Company. The Company
represents, warrants and covenants to each Underwriter that:
(a) A registration statement on Form S-3 (Registration No.
333-_____) relating to the Shares, including a preliminary prospectus relating
to the Shares and such amendments to such registration statement as may have
been required to the date of this Agreement, has been prepared by the Company
under the provisions of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations (collectively referred to as the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. The Commission has not
issued any order preventing or suspending the use of the Prospectus (as defined
below) or any Preliminary Prospectus (as defined below) or instituted or, to the
knowledge of the Company, threatened any proceeding for that purpose. The term
"Preliminary Prospectus" as used herein means a preliminary prospectus relating
to the Shares included at any time as part of the foregoing registration
statement or any amendment thereto before it became effective under the Act and
any prospectus filed with the Commission by the Company pursuant to Rule 424(a)
of the Rules and Regulations. Copies of such registration statement and
amendments and of each related Preliminary Prospectus have been delivered to the
Representative. If such registration statement has not become effective, a
further amendment to such registration statement, including a form of final
prospectus, necessary to permit such registration statement to become effective
will be filed promptly by the Company with the Commission. If such registration
statement has become effective, a final prospectus relating to the Shares
containing information permitted to be omitted at the time of effectiveness by
Rule 430A will be filed by the Company with the Commission in accordance with
Rule 424(b) of the Rules and Regulations promptly after execution and delivery
of this Agreement. The term "Registration Statement" means the registration
statement as amended at the time it becomes or became effective (the "Effective
Date"), including all financial statements and schedules and all exhibits,
documents incorporated therein by reference and all information contained in any
final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or in a term sheet described in Rule 434 of the Rules and
Regulations in accordance with Section 4 hereof and deemed to be included
therein as of the Effective Date by Rule 430A of the Rules and Regulations and
including any registration statement filed pursuant to Rule 462(b) of the Rules
and Regulations (a "Rule 462 Registration Statement") increasing the size of the
offering. The term "Prospectus" means the prospectus relating to the Shares as
first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or, if no such filing is required, the form of final prospectus
relating to the Shares included in the Registration Statement at the Effective
Date.
<PAGE> 4
4
References herein to any document or other information incorporated by reference
in the Registration Statement shall include documents or other information
incorporated by reference in the Prospectus (or if the Prospectus is not in
existence, in the most recent Preliminary Prospectus). References herein to any
Preliminary Prospectus or the Prospectus shall be deemed to include all
documents and information incorporated by reference therein and shall be deemed
to refer to and include any documents and information filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, and so
incorporated by reference, under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(b) On the date that any Preliminary Prospectus was filed with
the Commission, the date the Prospectus is first filed with the Commission
pursuant to Rule 424(b) (if required), at all times subsequent to and including
the Closing Date and, if later, the Option Closing Date and when any
post-effective amendment to the Registration Statement becomes effective or any
amendment or supplement to the Prospectus is filed with the Commission, the
Registration Statement, each Preliminary Prospectus and the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment or supplement thereto), including the financial statements
included in the Prospectus, did or will comply with all applicable provisions of
the Act and the Rules and Regulations and did or will contain all statements
required to be stated therein in accordance with the Act and the Rules and
Regulations. On the Effective Date and when any post-effective amendment to the
Registration Statement becomes effective, no part of the Registration Statement
or any such amendment did or will contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading. At the Effective Date,
the date the Prospectus or any amendment or supplement to the Prospectus is
filed with the Commission and at the Closing Date and, if later, the Option
Closing Date, the Prospectus did not or will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing representations and warranties in this
Section 3(b) do not apply to any statements or omissions made in reliance on and
in conformity with information relating to any Underwriter furnished in writing
to the Company by the Representative specifically for inclusion in the
Registration Statement, each Preliminary Prospectus or Prospectus or any
amendment or supplement thereto. There are no contracts or other documents
required to be filed as exhibits to the Registration Statement by the Act or the
Rules and Regulations that have not been so filed. The documents which are
incorporated by reference in any Preliminary Prospectus or the Prospectus or
from which information is so incorporated by reference, when they became
effective or were filed with the Commission, as the case may be, complied in all
material respects with the requirements of the Act and the Rules and Regulations
or the Exchange Act and the rules and regulations thereunder, as applicable, and
did not, when such documents were so filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and any documents so filed and
incorporated by reference subsequent to the effective date of the Registration
Statement shall, when they are filed
<PAGE> 5
5
with the Commission, conform in all material respects with the requirements of
the Act and the Rules and Regulations and the Exchange Act and the rules and
regulations thereunder, as applicable.
(c) The only directly or indirectly controlled subsidiaries of
the Company (each, a "Subsidiary" and collectively, the "Subsidiaries") are
those listed on Exhibit A hereto. Except as set forth in the Prospectus (or if
the Prospectus is not in existence, in the most recent Preliminary Prospectus)
or as acquired in connection with the exercise of its rights as a creditor, or
pursuant to a bona fide collateral pledge arrangement, neither the Company nor
any Subsidiary owns, nor at the Closing Date and the Option Closing Date, will
own an interest in any corporation, partnership, trust, joint venture or other
business entity. The Company has been and, at the Closing Date and Option
Closing Date, will be duly organized and validly existing as a corporation under
the laws of the Commonwealth of Puerto Rico and is and, at the Closing Date and
Option Closing Date, will be in good standing with the Commonwealth of Puerto
Rico. The Company is registered as a bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA") and is and, at the Closing Date and Option
Closing Date will be in good standing with the Board of Governors of the Federal
Reserve System (the "Federal Reserve"). Each of the Subsidiaries is and, at the
Closing Date and Option Closing Date, will be a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation. Each of the Company and its Subsidiaries is and,
at the Closing Date and the Option Closing Date, will be duly qualified and in
good standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business or use of its property and assets makes such
qualification necessary, except where the failure to so qualify would not have a
material adverse effect on the condition, financial or otherwise, or the
earnings, prospects or business affairs of the Company and its Subsidiaries
taken as a whole.
(d) The outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable and are not subject to any preemptive or similar rights. The
Shares to be issued and sold by the Company will be, upon such issuance and
payment therefor, duly authorized, validly issued, fully paid and nonassessable
and will not be subject to any preemptive or similar rights. The Company has,
and, upon completion of the sale of the Shares, will have, an authorized, issued
and outstanding capitalization as set forth in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus). The description of the securities of the Company in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) is, and at the Closing Date
and, if later, the Option Closing Date, will be, complete and accurate in all
respects. No holders of securities of the Company are entitled to have such
securities registered under the Registration Statement, except where such rights
have been waived.
(e) The consolidated financial statements and the related
notes of the Company included in the Registration Statement or incorporated
therein by reference and the Prospectus (or, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) present fairly the
financial condition of the Company and its Subsidiaries as of the dates
indicated and the
<PAGE> 6
6
consolidated results of operations, and cash flows of the Company and its
Subsidiaries for the periods covered thereby, all in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the entire periods involved. PricewaterhouseCoopers LLP (the "Accountants"), who
have reported on those of such financial statements and related notes which are
audited, are independent accountants with respect to the Company and its
Subsidiaries within the meaning of the Act and the applicable and published
rules and regulations.
(f) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(g) Except as set forth in the Registration Statement and
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and prior
to the Closing Date and, if later, the Option Closing Date, (i) there has not
been, and will not have been, any material adverse change in the business,
properties, financial condition, net worth or results of operations of the
Company and its Subsidiaries considered as one enterprise, (ii) neither the
Company nor any of its Subsidiaries has entered into, or will have entered into
any material transactions other than pursuant to this Agreement, and (iii) the
Company has not, and will not have, paid or declared any dividends or other
distributions of any kind on any class of its capital stock, except for the
payment or declaration of quarterly dividends on the Company's common stock (the
"Common Stock") in the ordinary course of its business.
(h) The Company and each of its Subsidiaries have good and
marketable title to all properties and assets described in the Registration
Statement, including the documents incorporated by reference therein, and
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), as owned by it, free and clear of all liens, security
interests, restrictions, pledges, encumbrances, charges, equities, claims,
easements, leases and tenancies (collectively, "Encumbrances") other than those
described in the Registration Statement, or in the documents incorporated by
reference therein, and Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) or those that will not materially affect
the value of such properties and assets or will not interfere with the use made
and proposed to be made of such properties and assets. The Company and each of
its Subsidiaries have valid, subsisting and enforceable leases for the
properties and assets described in the Registration Statement or in the
documents incorporated by reference therein, and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) as
leased by them, free and clear of all Encumbrances, other than those described
in the Registration Statement or in the documents incorporated by reference
therein, and Prospectus (or, if the Prospectus is not in existence, the most
<PAGE> 7
7
recent Preliminary Prospectus), or those that will not materially affect the
value of such properties and assets or will not interfere with the use made and
proposed to be made of such properties and assets.
(i) The Company is not required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(j) Except as set forth in the Registration Statement, or
incorporated therein by reference, and Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), there are no actions,
suits, arbitrations, claims, governmental or other proceedings (formal or
informal), or investigations pending or threatened against or affecting the
Company or any of its Subsidiaries, or any directors, officers or shareholders
of the Company or any of its Subsidiaries in their respective capacities as
such, or any of the properties or assets owned or leased by the Company or any
of its Subsidiaries, before or by any Federal, state or Commonwealth of Puerto
Rico court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign (collectively, a "Governmental Body"),
wherein an unfavorable ruling, decision or finding would adversely affect the
business, prospects, financial condition, net worth or results of operations of
the Company and its Subsidiaries taken as a whole and would be required to be
disclosed in the Registration Statement and Prospectus (or if the Prospectus is
not in existence, in the most recent Preliminary Prospectus). Neither the
Company nor any Subsidiary is in violation of, or in default with respect to,
any law, rule, or regulation, or any order, judgment, or decree, except as
described in the Prospectus (or if the Prospectus is not in existence, in the
most recent Preliminary Prospectus) or such as in the aggregate do not now have
and can reasonably be expected in the future not to have a material adverse
effect upon the operations, business, properties, or assets of the Company and
its Subsidiaries taken as a whole; nor is the Company or any Subsidiary
presently required under any order, judgment or decree to take any action in
order to avoid any such violation or default.
(k) The Company and each of its Subsidiaries have and, at the
Closing Date and the Option Closing Date, will have all governmental licenses,
permits, consents, orders, approvals, franchises, certificates and other
authorizations (collectively, "Licenses") necessary to carry on their respective
businesses and own or lease their respective properties as contemplated in the
Registration Statement and Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). The Company and each of its
Subsidiaries have and, at the Closing Date and the Option Closing Date, will
have complied in all material respects with all laws, regulations and orders
applicable to it or its business, assets and properties. Neither the Company nor
any of its Subsidiaries is, nor, at the Closing Date and the Option Closing
Date, will be in default (nor has any event occurred which, with notice or lapse
of time or both, would constitute a default) in the due performance and
observation of any term, covenant or condition of any indenture, mortgage, deed
of trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other agreement
or instrument (collectively, a "contract or other agreement") to which they are
a party or by which their respective properties are bound or affected,
<PAGE> 8
8
the violation of which would individually or in the aggregate have a material
adverse effect on the condition, financial or otherwise, or the earnings,
prospects or business affairs of the Company and its Subsidiaries taken as a
whole. There are no governmental proceedings or actions pending or threatened
for the purpose of suspending, modifying or revoking any License held by the
Company and its Subsidiaries.
(l) No consent, approval, authorization or order of, or any
filing or declaration with, any Governmental Body is required for the
consummation of the transactions contemplated by this Agreement or in connection
with the issuance and sale of the Shares by the Company, except such as have
been obtained and such as may be required under state or Commonwealth of Puerto
Rico securities or blue sky laws or the bylaws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
purchase and distribution by the Underwriters of the Shares to be sold hereby.
(m) The Company has full power (corporate and other) and
authority to enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding agreement of the Company and is enforceable against the Company in
accordance with the terms hereof, except as rights to indemnity and contribution
may be limited by federal, state or Commonwealth of Puerto Rico securities laws
or the public policy underlying such laws. Except as disclosed in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the execution, delivery and
the performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any
Encumbrance upon any of the properties or assets of the Company or any of the
Subsidiaries pursuant to the terms or provisions of, or result in a breach or
violation of or conflict with any of the terms or provisions of, or constitute a
default under, or give any other party a right to terminate any of its
obligations under, or result in the acceleration of any obligation under, (i)
the Certificate of Incorporation or By-laws of the Company, in each case as
amended, or (ii) any contract or other agreement to which the Company or any of
the Subsidiaries is a party or by which it or any of the respective assets or
properties are bound or affected, the violation of which would individually or
in the aggregate have a material adverse effect on the condition, financial or
otherwise, or the earnings, prospects or business affairs of the Company and its
Subsidiaries, or (iii) any judgment, ruling, decree, order, law, statute, rule
or regulation of any Governmental Body applicable to the Company or any of the
Subsidiaries or their respective businesses or properties, the violation of
which would individually or in the aggregate have a material adverse effect on
the financial condition, or the earnings, prospects or business affairs of the
Company and its Subsidiaries.
(n) No statement, representation, or warranty made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representative was or will be, when made,
inaccurate, untrue or incorrect in any material respect. Each certificate signed
by an officer of the Company and delivered to the Representative or counsel
<PAGE> 9
9
for the Underwriters shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.
(o) Neither the Company nor any of its directors, officers or
affiliates has taken, nor will he, she or it take, directly or indirectly, any
action designed, or which might reasonably be expected in the future, to cause
or result in, under the Act or otherwise, or which has constituted,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or otherwise.
(p) The Shares have been approved for listing on the New York
Stock Exchange ("NYSE"), subject only to notice of issuance.
(q) Neither the Company nor any of its Subsidiaries is
involved in any collective labor dispute with its employees nor is any such
dispute threatened or imminent.
(r) Neither the Company nor any of its Subsidiaries nor, to
the Company's best knowledge, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds of the Company or any Subsidiary in violation of
any law, rule or regulation which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus (or, if the Prospectus is
not in existence, in the most recent Preliminary Prospectus).
(s) The business, operations and facilities of the Company and
its Subsidiaries have been and are being conducted in compliance with all
applicable laws, ordinances, rules, regulations, licenses, permits, approvals,
plans, authorizations or requirements relating to occupational safety and
health, or pollution, or protection of health or the environment (including,
without limitation, those relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
substances, materials or wastes into ambient air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment
storage, disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, gaseous or liquid in nature) of any governmental department, commission,
board, bureau, agency or instrumentality of the United States, any state, or the
Commonwealth of Puerto Rico or political subdivision thereof, and all applicable
judicial or administrative agency or regulatory decrees, awards, judgments and
orders relating thereto; and neither the Company nor any of its Subsidiaries has
received any notice from any governmental instrumentality or any third party
alleging any violation thereof or liability thereunder (including, without
limitation, liability for costs of investigating or remediating sites containing
hazardous substances and/or damages to natural resources), except where failure
to so comply would not have a material adverse effect on the financial
condition, or the earnings or business affairs of the Company and its
Subsidiaries taken as a whole. The intended use and occupancy of each of the
facilities owned or operated by the Company and its Subsidiaries complies in all
material respects with all applicable codes and zoning laws and regulations, and
there is no
<PAGE> 10
10
pending or threatened condemnation, zoning change, environmental or other
proceeding or action that will in any material respect adversely affect the size
of, use of, improvements on, construction on, or access to such facilities.
(t) The Company filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof
and has paid all taxes required to be paid by it and any other assessment, fine
or penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any failure to file that would not have a material adverse
effect on the financial condition of the Company.
(u) The Company meets the requirements for use of Form S-3
under the Rules and Regulations.
(v) The deposit accounts of FirstBank Puerto Rico, a
Subsidiary of the Company ("FirstBank") are insured by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC") to
the legal maximum, and no proceeding for the termination or revocation of such
insurance is pending or threatened. FirstBank is a member in good standing of
the Federal Home Loan Bank of New York.
(w) None of the Company, FirstBank, their affiliates, or any
of their respective directors or officers is subject to any order or directive
of, or party to any agreement with, any regulatory agency having jurisdiction
with respect to its business or operations except as disclosed in the Prospectus
(or if the Prospectus is not in existence, in the most recent Preliminary
Prospectus).
4. Agreements of the Company. The Company covenants and agrees
with each of the several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date
or thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representative within a reasonable period of time prior to the filing thereof
and the Representative shall not have objected thereto in good faith.
(b) If the Registration Statement is not yet effective, the
Company will use its best efforts to cause the Registration Statement to become
effective not later than the time indicated in Section 6(a) hereof. The Company
will notify the Representative promptly, and will confirm such advice in
writing, (i) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (ii) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
<PAGE> 11
11
thereof, (iv) of the happening of any event during the period mentioned in the
first sentence of Section 4(g) that in the judgment of the Company makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of
the circumstances in which they are made, not misleading, and (v) of receipt by
the Company or any representative or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any Preliminary Prospectus or the Prospectus. If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. The Company will
prepare the Prospectus in a form approved by the Representative and will file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier time as
may be required by Rule 430A(a)(3) under the Act. If the Company has omitted any
information from the Registration Statement pursuant to Rule 430A, the Company
will use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to said Rule 430A and to notify
the Representative promptly of all such filings.
(c) If the Company elects to rely upon Rule 462(b) of the
Rules and Regulations, the Company shall file the Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) of the Rules and
Regulations by 10:00 p.m., Washington, D.C. time, on the date of this Agreement,
and the Company shall at the time of filing, either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) of the Rules
and Regulations.
(d) If, at any time when a Prospectus relating to the Shares
is required to be delivered under the Act, any event occurs as a result of
which, in the judgment of the Company or in the opinion of counsel for the
Underwriters, the Prospectus, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or the Registration Statement, as then
amended or supplemented, would include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein not
misleading, or if for any other reason it is necessary at any time to amend or
supplement the Prospectus or the Registration Statement to comply with the Act
or the Rules and Regulations, the Company will promptly notify the
Representative thereof and, subject to Section 4(b) hereof, will prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) The Company will furnish to the Representative, without
charge, two signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representative,
<PAGE> 12
12
without charge, for transmittal to each of the other Underwriters, copies of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(f) The Company will comply with all the provisions of all
undertakings contained in the Registration Statement.
(g) On the Effective Date, and thereafter from time to time
for such period as the Prospectus is required by the Act to be delivered, the
Company will deliver to each of the Underwriters, without charge, as many copies
of the Prospectus or any amendment or supplement thereto as the Representative
may reasonably request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the several Underwriters and by all dealers
to whom the Shares may be sold, both in connection with the offering or sale of
the Shares and for any period of time thereafter during which the Prospectus is
required by law to be delivered in connection therewith. If during such period
of time any event shall occur which in the judgment of the Company or counsel to
the Underwriters should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading, or in the Registration Statement in order to make any statement
therein not misleading, or if it is necessary to supplement or amend the
Prospectus or the Registration Statement to comply with law, the Company will
forthwith prepare and duly file with the Commission an appropriate supplement or
amendment thereto, and deliver to each of the Underwriters, without charge, such
number of copies thereof as the Representative may reasonably request.
(h) Prior to any public offering of the Shares by the
Underwriters, the Company will cooperate with the Representative and its counsel
in connection with the registration or qualification of the Shares for offer and
sale under the securities or blue sky laws of such jurisdictions as the
Representative may reasonably request; provided, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(i) During the period of five years commencing on the
Effective Date, the Company will furnish to the Representative and each other
Underwriter who may so request copies of such financial statements and other
periodic and special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock, and will furnish to
the Representative and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
(j) The Company will make generally available to holders of
its securities, as soon as may be practicable, but in no event later than the
last day of the fifteenth full calendar month following the calendar quarter in
which the Effective Date falls, a consolidated earnings statement (which need
not be audited but shall be in reasonable detail) for a period of 12 months
commencing
<PAGE> 13
13
after the Effective Date, and satisfying the provisions of Section 11(a) of the
Act (including Rule 158 of the Rules and Regulations).
(k) The Company will apply the net proceeds from the offering
and sale of the Shares in the manner set forth in the Prospectus under "Use of
Proceeds."
(l) The Company will not at any time, directly or indirectly,
take any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization of the price of the shares of
Preferred Stock to facilitate the sale or resale of any of the Shares.
5. Expenses.
(a) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay,
or reimburse if paid by the Representative, all costs and expenses incidental to
the performance of the obligations of the Company under this Agreement,
including, but not limited to, costs and expenses of or relating to (i) the
preparation, printing and filing by the Company of the Registration Statement
and exhibits thereto, each Preliminary Prospectus prior to or during the period
specified in the first sentence of Section 4(g) but not exceeding nine (9)
months after the Effective Date, the Prospectus and any amendment or supplement
to the Registration Statement or the Prospectus, (ii) the preparation and
delivery of certificates representing the Shares, (iii) furnishing (including
costs of shipping and mailing) such copies of the Registration Statement, the
Prospectus and any Preliminary Prospectus, and all amendments and supplements
thereto, as may be requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold, (iv)
the listing of the Shares on the NYSE, (v) any filings required to be made by
the Underwriters with the NASD, (vi) the registration or qualification of the
Shares for offer and sale under the securities or blue sky laws of such
jurisdictions designated pursuant to Section 4(h) and the preparation and
printing of preliminary, supplemental and final blue sky memoranda, (vii)
counsel and accountants to the Company, and (viii) the transfer agent for the
Shares.
(b) If the transactions contemplated by this Agreement are not
consummated or if this Agreement is terminated by the Company pursuant to any of
the provisions hereof, the Company will reimburse the Representative for all of
their accountable out-of-pocket fees and expenses (including the fees,
disbursements and other charges of their counsel) incurred by them in connection
herewith.
6. Conditions of the Obligations of the Underwriters. The
obligations of each Underwriter hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has become
effective shall be received by the Representative not later than 3:00 p.m., New
York City time, on the date of this
<PAGE> 14
14
Agreement or at such later date and time as shall be consented to in writing by
the Representative and all filings required by Rule 424 of the Rules and
Regulations and Rule 430A shall have been made. If the Company has elected to
rely upon Rule 462(b) of the Rules and Regulations, the Company has filed the
Rule 462(b) Registration Statement by 10:00 p.m., Washington D.C. time, on the
date of this Agreement.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or blue sky laws of any
jurisdiction shall be in effect, and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities, and (iv) after the date hereof no amendment or supplement
to the Registration Statement or the Prospectus shall have been filed unless a
copy thereof was first submitted to the Representative and the Representative
did not object thereto in good faith, and the Representative shall have received
certificates, dated the Closing Date and the Option Closing Date and signed by
the Chief Executive Officer of the Company and the Chief Financial Officer of
the Company (who may, as to proceedings threatened, rely upon the best of their
information and belief), to the effect of the foregoing clauses (i), (ii) and
(iii).
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not have
been a material adverse change in the general affairs, business, properties,
management, financial condition or results of operations of the Company whether
or not arising from transactions in the ordinary course of business, and (ii)
the Company shall not have sustained any material loss or interference with its
business, assets or properties from fire, explosion, flood or other casualty, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, which is not set forth in the Registration Statement and the
Prospectus.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers, directors or shareholders in their capacities as such, or any of its
assets or properties, before or by any Governmental Body in which litigation or
proceeding an unfavorable ruling, decision or finding would materially and
adversely affect the business, properties, financial condition, net worth or
results of operations of the Company.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct at the Closing Date and, with respect
to the Option Shares, at the Option Closing Date, as if made on such date, and
all covenants and agreements herein contained to be performed on the part of the
Company and all conditions herein contained to be fulfilled or complied
<PAGE> 15
15
with by the Company at or prior to the Closing Date and, with respect to the
Option Shares, at or prior to the Option Closing Date, shall have been fully
performed, fulfilled or complied with.
(f) The Representative shall have received an opinion,
dated the Closing Date and the Option Closing Date, from Fiddler Gonzalez &
Rodriguez, LLP, Puerto Rico counsel for the Company to the following effect:
(i) The Company has been duly organized and validly
existing as a corporation under the laws of the Commonwealth
of Puerto Rico and is in good standing with the Commonwealth
of Puerto Rico. Each of First Federal Finance Corporation
("First Federal"), First Leasing & Rental Corporation ("First
Leasing") and FirstBank, each a Subsidiary, is a corporation
duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation. Each
of the Company, First Federal, First Leasing and FirstBank is
duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or
conduct of its business or use of its property and assets
makes such qualification necessary, except where the failure
to so qualify would not have a material adverse effect on the
financial condition, or the earnings or business affairs of
the Company and its Subsidiaries taken as a whole;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus; the Company has duly authorized
the issuance and sale of the Shares to be sold by it
hereunder; such Shares, when issued by the Company and paid
for in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and will conform in all
material respects to the description thereof contained in the
Prospectus and will not be subject to any preemptive,
subscription or other similar rights; the Shares have been
duly authorized for listing on the NYSE, subject only to
official notice of issuance; and no holders of securities of
the Company are entitled to have such securities registered
under the Registration Statement, except for holders who have
waived any such registration rights;
(iii) The Registration Statement, including any Rule
462(b) Registration Statement, is effective under the Act; any
required filing of the Prospectus pursuant to Rule 424(b) has
been made in the manner and within the time period required by
Rule 424(b); and to the best knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement or any amendment thereto and no order directed at
any document incorporated by reference in the Registration
Statement or of the Rule 462(b) Registration Statement or any
amendment thereto has been issued, and, no proceedings for
that purpose have been instituted or are pending or are
threatened or contemplated under the Act;
<PAGE> 16
16
(iv) The Registration Statement and the Prospectus as
of its date, appeared on their face to be appropriately
responsive, in all material respects (other than the documents
incorporated therein by reference and not including the
financial statements, schedules and other financial data
contained therein, as to which such counsel need not express
any opinion), with the requirements of the Act and the related
rules and regulations thereunder;
(v) The descriptions contained and summarized in the
Registration Statement, or incorporated therein by reference,
and the Prospectus are accurate and fairly represent in all
material respects the information required to be shown in the
Registration Statement and Prospectus by the Act and the Rules
and Regulations; and the statements set forth under the
headings "Risk Factors - Banking Regulations May Restrict
First BanCorp's Ability to Pay Dividends," "Recent
Developments," "Description of Capital Stock," and "Taxation"
in the Prospectus, insofar as such statements constitute a
summary of the legal matters, documents or proceedings
referred to therein, provide an accurate summary of such legal
matters, documents and proceedings;
(vi) To the knowledge of such counsel, there are no
contracts or documents which are required by the Act to be
described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement which
are not filed or incorporated therein by reference as required
by the Act and the Rules and Regulations;
(vii) To the knowledge of such counsel after
reasonable investigation, there is not pending or threatened
against the Company or any of the Subsidiaries any legal
action or proceeding, suit, arbitration, claim, or
governmental or other proceeding (informal or formal) or
investigation before or by any Governmental Body, of a
character required to be disclosed in the Registration
Statement or the Prospectus which is not so disclosed therein
or in the materials incorporated by reference therein, and to
the knowledge of such counsel, no such proceedings have been
threatened against the Company or any of its Subsidiaries or
any of their respective assets or properties. To the knowledge
of such counsel after reasonable investigation, neither the
Company nor any Subsidiary is in violation of, or in default
with respect to, any law, rule, or regulation, or any order,
judgment or decree, except as described in the Registration
Statement or Prospectus or in the materials incorporated by
reference therein, or such as in the aggregate do not now have
and can reasonably be expected in the future not to have a
material adverse effect upon the operations, business,
properties, or assets of the Company and its Subsidiaries
taken as a whole; nor is the Company or any Subsidiary
presently required under any order, judgment or decree to take
any action in order to avoid any such violation or default;
<PAGE> 17
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(viii) The Company has full legal right, power, and
authority to enter into this Agreement and to consummate the
transactions provided for herein; this Agreement has been duly
authorized, executed and delivered by the Company; this
Agreement, assuming due authorization, execution and delivery
by each other party hereto, is a valid and binding agreement
of the Company, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to or affecting creditors' rights
generally or by general principles of equity relating to the
availability of remedies and except as rights to indemnity and
contribution may be limited by federal, state, or Commonwealth
of Puerto Rico securities laws or the public policy underlying
such laws;
(ix) None of the Company's execution or delivery of
this Agreement, its performance hereof, its consummation of
the transactions contemplated herein or its application of the
net proceeds of the offering in the manner set forth under the
caption "Use of Proceeds," conflicts or will conflict with or
results or will result in any breach or violation of any of
the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any Encumbrance upon,
any property or assets of the Company pursuant to (A) the
terms of the Certificate of Incorporation or By-laws of the
Company, in each case as amended; (B) the terms of any
contract or other agreement to which the Company is a party or
by which it is or may be bound or to which any of its
properties is or may be subject and of which such counsel has
knowledge; (C) any statute, rule or regulation of any
Governmental Body having jurisdiction over the Company or any
of its activities or properties; or (D) the terms of any
judgment, decree or order of any arbitrator or Governmental
Body having such jurisdiction and of which such counsel has
knowledge; and no consent, approval, authorization or order of
any Governmental Body has been or is required for the
Company's performance of this Agreement or the consummation of
the transactions contemplated hereby, except such as have been
obtained under the Act or may be required under state or
Commonwealth of Puerto Rico securities or blue sky laws in
connection with the purchase and distribution by the
Underwriters of the Shares;
(x) To such counsel's knowledge, the conduct of the
respective businesses of the Company and its Subsidiaries is
not in violation of any federal, state or local statute,
administrative regulation or other law, which violation is
likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole; and the Company and its
Subsidiaries have obtained all material licenses as are
necessary or required for the conduct of their businesses as
presently conducted;
(xi) The Company is not required to be registered as
an investment company under the Investment Company Act;
<PAGE> 18
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(xii) To the knowledge of such counsel, the Company
is not in any breach or violation of any of the terms or
provisions of, or in default under (nor has an event occurred
which with notice or lapse of time or both would constitute a
default or acceleration under), (A) the terms of its
Certificate of Incorporation or By-laws, in each case as
amended; (B) the terms of any contract or other agreement
known to such counsel after reasonable investigation to which
the Company is a party or by which the Company is or may be
bound or to which any of its properties or assets is or may be
subject, which breach, violation or default could have a
material adverse effect on the Company and its Subsidiaries
taken as a whole; (C) any statute, rule or regulation of any
Governmental Body having jurisdiction over the Company or any
of its activities, assets or properties, which breach,
violation or default could have a material adverse effect on
the Company and its Subsidiaries taken as a whole; or (D) the
terms of any judgment, decree or order, known to such counsel
after reasonable investigation, of any arbitrator or
Governmental Body having such jurisdiction, which breach,
violation or default could have a material adverse effect on
the Company and its Subsidiaries taken as a whole;
(xiii) The deposit accounts of FirstBank are insured
by the SAIF of the FDIC to the legal maximum, and to such
counsel's knowledge no proceeding for the termination or
revocation of such insurance is pending or threatened.
FirstBank is a member in good standing of the Federal Home
Loan Bank of New York; and
(xiv) To the knowledge of such counsel, none of the
Company or any of its Subsidiaries, or any of their respective
directors or officers is subject to any order or directive of,
or party to any agreement with, any regulatory agency having
jurisdiction with respect to the business or operations of the
Company or any of its Subsidiaries, except as disclosed in the
Registration Statement or the Prospectus or in the materials
incorporated by reference therein.
In addition, such counsel shall state that in the course of
the preparation of the Registration Statement and the Prospectus, such counsel
has participated in conferences with officers and representatives of the Company
and with the Accountants, at which conferences such counsel made inquiries of
such officers, representatives and Accountants and discussed the contents of the
Registration Statement and the Prospectus and, on the basis of the foregoing
nothing has come to such counsel's attention that causes such counsel to believe
that the Registration Statement as of the date it was declared effective and as
of the Closing Date contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of the date thereof
and as of the Closing Date, contained any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need not express any opinion with respect to the financial statements,
schedules and other financial
<PAGE> 19
19
data included in the Registration Statement or the Prospectus). Such counsel may
state that they make no representation that they have independently verified the
accuracy or completeness of the statements contained in the Registration
Statement and Prospectus.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials and, as to matters
involving the application of laws of any other jurisdiction than the
Commonwealth of Puerto Rico and the United States (to the extent satisfactory in
form and scope to counsel for the Underwriters) such counsel may rely upon the
opinion of local (including in-house) counsel to the Company. The foregoing
opinion shall also state that such counsel has no reason to believe that the
Underwriters are not justified in relying upon such opinion of local counsel,
and copies of such opinion shall be delivered to the Representative and its
counsel.
References to the Registration Statement and the Prospectus in
this paragraph (f) shall include any amendment or supplement thereto at the date
of such opinion.
(g) The Representative shall have received an opinion,
dated the Closing Date and the Option Closing Date, from Axtmayer Adsuar Muniz &
Goyco, P.S.C., counsel to the Underwriters, which opinion shall be satisfactory
in all respects to the Representative.
(h) Concurrently with the execution and delivery of this
Agreement, or, if the Company elects to rely on Rule 430A, on the date of the
Prospectus, the Accountants shall have furnished to the Representative a letter,
dated the date of its delivery (the "Original Letter"), addressed to the
Representative and in form and substance satisfactory to the Representative, to
the effect that:
(i) they are independent accountants within the
meaning of the Act and the applicable published rules and
regulations thereunder;
(ii) in their opinion, the consolidated financial
statements of the Company and its Subsidiaries audited by them
and incorporated by reference in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act, the Exchange Act and the
published rules and regulations thereunder with respect to
registration statements on Form S-3;
(iii) on the basis of procedures (but not an audit in
accordance with generally accepted auditing standards)
consisting of (a) reading the minutes of meetings of the
stockholders and the Board of Directors of the Company and its
Subsidiaries since December 31, 1998 as set forth in the
minute books through a specified date not more than five
business days prior to the date of delivery of the Original
Letter; (b) performing the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in SAS
No.
<PAGE> 20
20
71, "Interim Financial Information," on the unaudited
consolidated interim financial statements of the Company and
its Subsidiaries included in the Registration Statement and
reading the unaudited interim financial data for the period
from the date of the latest balance sheet incorporated by
reference in the Registration Statement to the date of the
latest available interim financial data; and (c) making
inquiries of certain officials of the Company who have
responsibility for financial and accounting matters regarding
the specific items for which representations are requested
below; nothing has come to their attention (as of a date not
more than five business days prior to the date of the delivery
of such letter) as a result of the foregoing procedures that
caused them to believe that: (1) the unaudited consolidated
interim financial statements, if any, incorporated by
reference in the Registration Statement, do not comply as to
form in all material respects with the applicable accounting
requirements of the Exchange Act and the published rules and
regulations thereunder; (2) any material modifications should
be made to the unaudited consolidated interim financial
statements, if any, incorporated by reference in the
Registration Statement, for them to be in conformity with
generally accepted accounting principles; (3) (i) at the date
of the latest available interim financial data and at a
specified date not more than five business days prior to the
date of delivery of the Original Letter there was any change
in the capital stock, deposits, federal funds purchased or
securities sold under agreements to repurchase or any
decreases in the consolidated stockholders' equity (only as to
the latest interim financial data) of the Company and its
Subsidiaries as compared with amounts shown in the December
31, 1998 balance sheet incorporated by reference in the
Registration Statement and (ii) for the period from January 1,
1999, to the latest interim financial data available which
should be no later than forty (40) days prior to the date of
delivery of the Original Letter, there were any decreases, as
compared with the corresponding period in the preceding year,
in consolidated net interest income, other income, income
before taxes or in the total or per share amounts of net
income, except in all instances for changes or decreases which
the Registration Statement discloses have occurred or may
occur, or they shall state any specific changes or decreases;
and
(iv) the information set forth under the captions
"Prospectus Summary Summary Financial and Other Data,"
"Prospectus Summary - Consolidated Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends," "Recent
Developments," "Capitalization," "Selected Financial Data,"
and "Description of Capital Stock," which is expressed in
dollars (or percentages derived from such dollar amounts) and
has been obtained from accounting records which are subject to
the internal controls of the Company's accounting system or
which has been derived directly from such accounting records
and analysis or computations, is in agreement with such
records or computations made therefrom.
<PAGE> 21
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At the Closing Date and, as to the Option Shares, the Option
Closing Date, the Accountants shall have furnished to the Representative a
letter, dated the date of its delivery, which shall confirm, on the basis of a
review in accordance with the procedures set forth in the Original Letter, that
nothing has come to their attention during the period from the date of the
Original Letter referred to in the prior sentence to a date (specified in the
letter) not more than five business days prior to the Closing Date or the Option
Closing Date, as the case may be, which would require any change in the Original
Letter if it were required to be dated and delivered at the Closing Date or the
Option Closing Date, as the case may be.
In the event that the letters referred to above set forth any
such changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representative deems such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representative, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the Registration Statement, as amended as of the date
hereof.
(i) At the Closing Date and, as to the Option Shares, the
Option Closing Date, there shall be furnished to the Representative an accurate
certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, in form and
substance satisfactory to the Representative, to the effect that to the best of
their knowledge:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus and (A)
as of the date of such certificate, (x) the Registration
Statement does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein
not misleading and (y) the Prospectus does not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading and
(B) since the Effective Date no event has occurred as a result
of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein not untrue or
misleading in any material respect;
(ii) Each of the representations and warranties of
the Company contained in this Agreement were, when originally
made, and are, at the time such certificate is delivered, true
and correct in all respects; each of the covenants required
herein to be performed by the Company on or prior to the date
of such certificate has been duly, timely and fully performed
and each condition herein required to be complied with by the
Company on or prior to the delivery of such certificate has
been duly, timely and fully complied with.
<PAGE> 22
22
(iii) No stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment
thereto and no order directed at any document incorporated by
reference in the Registration Statement or any amendment
thereto or the Prospectus has been issued, and no proceedings
for that purpose have been instituted or threatened or, to the
best of the Company's knowledge, are contemplated by the
Commission.
(j) The Shares shall be qualified for sale in such states
and possessions as the Representative may reasonably request, each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date and the Option Closing Date.
(k) Prior to the Closing Date, the Shares shall have been
accepted for listing on the NYSE, subject only to official notice of issuance.
(l) The Company shall have furnished to the
Representative such certificates, letters and other documents, in addition to
those specifically mentioned herein, as the Representative may have reasonably
requested as to the accuracy and completeness at the Closing Date and the Option
Closing Date of any statement in the Registration Statement or the Prospectus,
as to the accuracy at the Closing Date and the Option Closing Date of the
representations and warranties of the Company, as to the performance by the
Company of its obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the Underwriters.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you. The Company will furnish you with such conformed
copies of such opinions, certificates, letters and other documents as you shall
reasonably request.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person, if any, who controls each Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages or liabilities, joint or several (and actions in
respect thereof), to which they, or any of them, may become subject under the
Act or other Federal, state or Commonwealth of Puerto Rico statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement made by the Company in
Section 3 of this Agreement, (ii) any untrue statement or alleged untrue
statement of any material fact contained in (A) any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus or (B) any application or other
document, or any amendment or supplement thereto, executed by the Company or
based upon
<PAGE> 23
23
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application"), or (iii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any amendment or supplement to the Registration Statement or
the Prospectus or any Application a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, each Underwriter and each such other person for any legal or other
expenses reasonably incurred by such Underwriter or such other person in
connection with investigating defending or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability based solely upon an untrue statement
or omission or alleged untrue statement or omission in any of such documents
made in reliance upon and in conformity with information relating to any
Underwriter furnished in writing to the Company by the Representative on behalf
of any Underwriter expressly for inclusion therein; Provided, further, that such
indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or any such other person) from whom the person
asserting any such loss, claim, damage, liability or action purchased Shares
which are the subject thereof to the extent that any such loss, claim, damage or
liability (i) results from the fact that such Underwriter failed to send or give
a copy of the Prospectus (as amended or supplemented) to such person at or prior
to the confirmation of the sale of such Shares to such person in any case where
such delivery is required by the Act and (ii) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (or any amendment or supplement
thereto), unless such failure to deliver the Prospectus (as amended or
supplemented) was the result of noncompliance by the Company with Section 4(g).
This indemnity agreement will be in addition to any liability that the Company
might otherwise have. The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
or any person who controls such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act is a party to each claim, action, suit
or proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Underwriter and each such other person from all
liability arising out of such claim, action, suit or proceeding.
(b) Each Underwriter will indemnify and hold harmless the
Company, and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signed the Registration Statement
against any losses, claims, damages or liabilities (or actions in respect
thereof) to which the Company and any such director, officer or controlling
person may become subject under the Act or other federal, state or Commonwealth
of Puerto Rico statutory law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or
<PAGE> 24
24
the Prospectus or any amendment or supplement to the Registration Statement or
the Prospectus or any Application, or material fact required to be stated
therein or (ii) the omission or the alleged omission to state in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or any
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representative expressly for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company and any such director,
officer or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or any action in respect thereof. The
Company acknowledges that, for all purposes under this Agreement, the statements
set forth under the heading "Underwriting" constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representative on behalf of the Underwriters expressly for inclusion in the
Registration Statement, any Preliminary Prospectus or the Prospectus. This
indemnity agreement will be in addition to any liability that each Underwriter
might otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
or parties under this Section 7, notify such indemnifying party or parties of
the commencement thereof, but the omission so to notify the indemnifying party
or parties will not relieve it or them from any liability which it or they may
have to any indemnified party under the foregoing provisions of this Section 7
or otherwise unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against an indemnified party and it notifies an
indemnifying party or parties of its commencement, the indemnifying party or
parties against which a claim is made will be entitled to participate therein
and, to the extent that it or they may wish, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses other than reasonable costs of investigation subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the
<PAGE> 25
25
indemnifying party shall not be liable for the reasonable fees and expenses of
more than one separate counsel (in addition to the fees and expenses of local
counsel necessary in connection with any such proceedings) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by the
Representative in the case of paragraph (a) of this Section 7, representing the
indemnified parties under paragraph (a) who are parties to such action or
actions), or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the written consent of the indemnifying party, unless such indemnified
party waived its rights under this Section 7 in which case the indemnified party
may effect such a settlement without such consent.
(d) If the indemnification provided for in the foregoing
paragraphs of this Section 7 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties, on the one hand, and the indemnified party, on the other, from the
offering of the Shares or (ii) if, but only if, the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand, and the indemnified party, on the other, in connection with the
statements or omissions or alleged statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company, on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total proceeds from the offering of
the Shares (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. Relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Representative on behalf of the Underwriters, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities (or actions in respect thereof) referred to above in this
Section 7(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section
<PAGE> 26
26
7(d), no Underwriter shall be required to contribute any amount in excess of the
total underwriting discounts received by it with respect to the Shares purchased
by such Underwriter under this Agreement, less the aggregate amount of any
damages that such Underwriter has otherwise been required to pay in respect of
the same or any substantially similar claim. No person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 7(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7(d), each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act will have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, will have the same rights to contribution as the
Company, subject in each case to the provisions of this paragraph (d). Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made under this Section 7(d), notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation(s) it or they may have hereunder or otherwise than under this
paragraph (d) or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may otherwise have.
No party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).
(e) The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties of the Company contained
in this Agreement shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of the Underwriters, (ii)
acceptance of any of the Shares and payment therefor or (iii) any termination of
this Agreement.
8. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time prior to the Closing Date (or, with
respect to the Option Shares, on or prior to the Option Closing Date), by notice
to the Company from the Representative, without liability on the part of any
Underwriter to the Company if, prior to delivery and payment for the Firm Shares
(or the Option Shares, as the case may be), in the sole judgment of the
Representative, (i) trading in the Common Stock or the Preferred Stock or
securities generally shall have been suspended by the Commission or by the NYSE,
(ii) minimum or maximum prices shall have been established for the Common Stock
or the Preferred Stock or securities generally on the NYSE, or additional
material governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by any of such
market or exchange or by order of the Commission or any court or other
Governmental Authority, (iii) a general banking moratorium shall have been
declared by the United States, New York State, or Commonwealth of Puerto Rico
authorities, or (iv)
<PAGE> 27
27
any material adverse change in the financial or securities markets in the United
States or any outbreak or material escalation of hostilities or declaration by
the United States of a national emergency or war or other calamity or crisis
shall have occurred, the effect of any of which is such as to make it, in the
sole judgment of the Representative, impracticable or inadvisable to market the
Shares on the terms and in the manner contemplated by the Prospectus. Any
termination pursuant to Section 8 shall be without liability of any party to any
other party except as provided in Sections 5(a) and 7.
9. Default of Underwriters. If one or more Underwriters default in
their obligations to purchase Firm Shares or Option Shares hereunder and the
aggregate number of such Shares that such defaulting Underwriter or Underwriters
agreed but failed to purchase is ten percent or less of the aggregate number of
Firm Shares or Option Shares to be purchased by all of the Underwriters at such
time hereunder, the other Underwriters may make arrangements satisfactory to the
Representative for the purchase of such Shares by other persons (who may include
one or more of the nondefaulting Underwriters, including the Representative),
but if no such arrangements are made by the Closing Date or the related Option
Closing Date, as the case may be, the other Underwriters shall be obligated
severally in proportion to their respective commitments hereunder to purchase
the Firm Shares or Option Shares that such defaulting Underwriter or
Underwriters agreed but failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of Shares that is more than ten
percent of the aggregate number of Firm Shares or Option Shares, as the case may
be, to be purchased by all of the Underwriters at such time hereunder, and if
arrangements satisfactory to the Representative are not made within 36 hours
after such default for the purchase by other persons (who may include one or
more of the nondefaulting Underwriters, including the Representative) of the
Shares with respect to which such default occurs, this Agreement will terminate
without liability on the part of any nondefaulting Underwriter and the Company
other than as provided in Section 10 hereof. In the event of any default by one
or more Underwriters as described in this Section 9, the Representative shall
have the right to postpone the Closing Date or the Option Closing Date, as the
case may be, established as provided in Section 9 hereof for not more than seven
business days in order that any necessary changes may be made in the
arrangements or documents for the purchase and delivery of the Firm Shares or
Option Shares, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers, and
the several Underwriters set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the Company,
any of its officers or directors, any Underwriter or any controlling person
referred to in Section 7 hereof and (ii) delivery of and payment for the Shares.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 6 and 8 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
<PAGE> 28
28
11. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 1519 Ponce de
Leon Avenue, San Juan, Puerto Rico 00908, Attention: Annie Astor de Carbonell,
Senior Executive Vice President and Chief Financial Officer, or (b) if to the
Underwriters, to the office of the Representative, American International Plaza,
PH, Hato Rey, Puerto Rico 00918, Attention: Jose G. Arias, First Vice President.
Any such notice shall be effective only upon receipt. Any notice under Section 7
or 8 may be made by telex or telephone, but if so made shall be subsequently
confirmed in writing.
12. Successors. This Agreement shall inure to the benefit of and shall
be binding upon the several Underwriters, the Company, and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company contained in Section 7 of this Agreement shall
also be for the benefit of any person or persons who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Underwriters contained in Section 7 of this
Agreement shall also be for the benefit of the directors of the Company, the
officers of the Company who have signed the Registration Statement and any
person or persons who control the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act. No purchaser of Shares from any
Underwriter shall be deemed a successor because of such purchase. This Agreement
shall not be assignable by either party hereto without the prior written consent
of the other party.
13. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
<PAGE> 29
29
Very truly yours,
FIRST BANCORP.
By: ___________________________________
Name: Annie Astor de Carbonell
Title: Senior Executive Vice President
and Chief Financial Officer
Confirmed as of the date first above mentioned:
PAINEWEBBER INCORPORATED OF
PUERTO RICO
By: _____________________________
Name: Carlos V. Ubinas
Title: Executive Vice President
Acting on its behalf and as lead underwriter
of the several Underwriters named
in Schedule 1 hereof.
<PAGE> 30
30
SCHEDULE 1
UNDERWRITERS
<TABLE>
<CAPTION>
Aggregate Number
of Shares to be
Purchased
<S> <C>
PaineWebber Incorporated of Puerto Rico..................................
Keefe, Bruyette & Woods, Inc.............................................
Popular Securities, Inc..................................................
Prudential Securities Incorporated.......................................
Santander Securities Corporation of Puerto Rico..........................
Solomon Smith Barney, Inc................................................
Total =========
</TABLE>
<PAGE> 31
31
EXHIBIT A
LIST OF SUBSIDIARIES
1. FirstBank Puerto Rico
2. First Federal Finance Corporation
3. First Leasing & Rental Corporation
<PAGE> 1
EXHIBIT 4(a)
%NONCUMULATIVE PERPETUAL MONTHLY INCOME
PREFERRED STOCK, SERIES A
PAR VALUE $1.00 PER SHARE
SHARES
FIRST BANCORP.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PUERTO RICO
CUSIP
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS IS TO CERTIFY that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF % NONCUMULATIVE
PERPETUAL MONTHLY INCOME PREFERRED STOCK, SERIES A, OF THE PAR VALUE
OF $1 EACH OF FIRST BANCORP., transferable on the books of the Corporation in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Antonio Escriba-Oliver /s/ Angel Alvarez
Secretary [First BanCorp. Seal] President
COUNTERSIGNED AND REGISTERED:
Bank of New York
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE> 2
FIRST BANCORP.
The Corporation will furnish without charge to each shareholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series which the
Corporation is authorized to issue and the qualifications, limitations or
restrictions of such preferences and/or rights. Any request should be made to
the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written our in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MINACT - _______ CUSTODIAN _________
TEN ENT - as tenant by the entireties (Cust) (Minor)
JT TEN - as joint tenants with rights of survivorship Under Uniform Gifts to Minors
and not as tenants in common Act
-------------------------
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------
Please print or typewrite name and address, including
postal zip code of assignee.
- ------------------------------------------------------------------------------
________________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
______________________________________________________ Attorney, to transfer
said stock on the books of the within-named Corporation with full power of
substitution in the premises.
Dated,
---------------------
----------------------------------
<PAGE> 1
EXHIBIT 4(b)
CERTIFICATE OF DESIGNATION
OF THE BOARD OF DIRECTORS OF FIRST BANCORP.
__% NONCUMULATIVE PERPETUAL MONTHLY INCOME PREFERRED STOCK, SERIES A
(Pursuant to Article 5.01 of the General Corporation
Law of the Commonwealth of Puerto Rico)
We, the undersigned, Angel Alvarez-Perez and Antonio R. Escriba,
Chairman of the Board, Chief Executive Officer & President and Secretary,
respectively of FIRST BANCORP. (hereinafter called the "Corporation"), a
corporation duly organized and existing under the laws of the Commonwealth of
Puerto Rico, do hereby certify that, pursuant to the authority conferred upon
the Board of Directors of the Corporation by the Certificate of Incorporation of
the Corporation and resolutions adopted by the Board of Directors creating a
committee thereof known as the "Preferred Stock Designation and Pricing
Committee", the said Preferred Stock Designation and Pricing Committee on ,
__________, 1999, adopted the following resolutions creating a series of _____
shares of Preferred Stock designated as the "___% Noncumulative Perpetual
Monthly Income Preferred Stock, Series A."
RESOLVED, that pursuant to the authority expressly granted to
and vested in the Board of Directors of the Corporation in accordance
with the provisions of its Certificate of Incorporation, a series of
Preferred Stock of the Corporation be and it hereby is created.
FURTHER RESOLVED, that the Preferred Stock Designation and
Pricing Committee designated by the Board of Directors has determined
that the preferences and relative, participating, optional or other
special rights of the shares of such series of Preferred Stock, and
the qualifications, limitations or restrictions thereof, as stated and
expressed herein, are under the circumstances prevailing on the date
hereof fair and equitable to all the existing shareholders of the
Corporation.
FURTHER RESOLVED, that the designation and amount of such
series and the voting powers, preference and relative, participating,
optional or other special rights of the shares of such series of
Preferred Stock, and the qualifications, limitations or restrictions
thereof are as follows:
A. DESIGNATION AND AMOUNT
The shares of such series of Preferred Stock shall be
designated as the "__% Noncumulative Perpetual Monthly Income Preferred
Stock, Series A" (hereinafter called the "Series A Preferred Stock"),
and the number of authorized shares constituting such series shall be
________.
B. DIVIDENDS
1. Holders of record of the Series A Preferred Stock
("Holders") will be entitled to receive, when, as and if declared by
the Board of Directors of the Corporation, out of funds of the
Corporation legally available therefor, noncumulative cash dividends
at the annual rate per share of __% of their liquidation preferences,
or $____ per share per month, with each aggregate payment made to each
record holder of the Series A Preferred Stock being rounded to the
next lowest cent.
<PAGE> 2
2. Dividends on the Series A Preferred Stock will accrue from
their date of original issuance and will be payable (when, as and if
declared by the Board of Directors of the Corporation out of funds of
the Corporation legally available therefor) monthly in arrears in
United States dollars commencing on _____________, 1999, and on the
last day of each calendar month of each year thereafter to the holders
of record of the Series A Preferred Stock as they appear on the books
of the Corporation on the second Business Day (as defined below)
immediately preceding the relevant date of payment. In the case of the
dividend payable on __________, 1999, such dividend shall cover the
period from the date of issuance of the Series A Preferred Stock to
__________, 1999. In the event that any date on which dividends are
payable is not a Business Day, then payment of the dividend payable on
such date will be made on the next succeeding Business Day without any
interest or other payment in respect of any such delay, except that,
if such Business Day is in the next succeeding calendar year, such
payment will be made on the Business Day immediately preceding the
relevant date of payment, in each case with the same force and effect
as if made on such date. A "Business Day" is a day other than a
Saturday, Sunday or a general bank holiday in San Juan, Puerto Rico or
New York, New York.
3. Dividends on the Series A Preferred Stock will be
noncumulative. The Corporation is not obligated or required to declare
or pay dividends on the Series A Preferred Stock, even if it has funds
available for the payment of such dividends. If the Board of Directors
of the Corporation or an authorized committee thereof does not declare
a dividend payable on a dividend payment date in respect of the Series
A Preferred Stock, then the holders of such Series A Preferred Stock
shall have no right to receive a dividend in respect of the monthly
dividend period ending on such dividend payment date and the Company
will have no obligation to pay the dividend accrued for such monthly
dividend period or to pay any interest thereon, whether or not
dividends on such Series A Preferred Stock are declared for any future
monthly dividend period.
4. The amount of dividends payable for any monthly dividend
period will be computed on the basis of twelve 30-day months and a
360-day year. The amount of dividends payable for any period shorter
than a full monthly dividend period will be computed on the basis of
the actual number of days elapsed in such period.
5. Subject to any applicable fiscal or other laws and
regulations, each dividend payment will be made by dollar check drawn
on a bank in New York, New York or San Juan, Puerto Rico and mailed to
the record holder thereof at such holder's address as it appears on
the register for such Series A Preferred Stock.
6. So long as any shares of the Series A Preferred Stock
remain outstanding, the Corporation shall not declare, set apart or
pay any dividend or make any other distribution of assets (other than
dividends paid or other distributions made in stock of the Corporation
ranking junior to the Series A Preferred Stock as to the payment of
dividends and the distribution of assets upon liquidation, dissolution
or winding up of the Corporation) on, or redeem, purchase, set apart
or otherwise acquire (except upon conversion or exchange for stock of
the Corporation ranking junior to the Series A Preferred Stock as to
the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Corporation), shares of
common stock or of any other class of stock of the Corporation ranking
junior to the Series A Preferred Stock as to the payment of dividends
or the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, unless (i) all accrued and unpaid dividends on
the Series A Preferred Stock for the twelve monthly dividend
2
<PAGE> 3
periods ending on the immediately preceding dividend payment date
shall have been paid or are paid contemporaneously and the full
monthly dividend on the Series A Preferred Stock for the then current
month has been or is contemporaneously declared and paid or declared
and set apart for payment, and (ii) the Corporation has not defaulted
in the payment of the redemption price of any shares of Series A
Preferred Stock called for redemption.
7. When dividends are not paid in full on the Series A
Preferred Stock and any other shares of stock of the Corporation
ranking on a parity as to the payment of dividends with the Series A
Preferred Stock, all dividends declared upon the Series A Preferred
Stock and any such other shares of stock of the Corporation will be
declared pro rata so that the amount of dividends declared per share
on the Series A Preferred Stock and any such other shares of stock
will in all cases bear to each other the same ratio that the
liquidation preference per share of the Series A Preferred Stock and
any such other shares of stock bear to each other.
8. Holders of record of the Series A Preferred Stock will not
be entitled to any dividend, whether payable in cash, property or
stock, in excess of the dividends provided for herein on the shares of
Series A Preferred Stock.
C. CONVERSION
1. The Series A Preferred stock will not be convertible into
or exchangeable for any other securities of the Corporation.
D. REDEMPTION AT THE OPTION OF THE CORPORATION
1. The shares of the Series A Preferred Stock are not
redeemable prior to ______, 2004. On and after that date, the shares
of the Series A Preferred Stock will be redeemable in whole or in part
from time to time at the option of the Corporation, with the consent
of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") to the extent required by D.8 below, upon not less
than thirty nor more than sixty days' notice by mail, at the
redemption prices set forth below, during the twelve-month periods
beginning on ___________ of the years set forth below, plus accrued
and unpaid dividends to the date fixed for redemption.
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2004......................................... $ 25.50
2005......................................... $ 25.25
2006......................................... $ 25.00
</TABLE>
2. In the event that less than all of the outstanding shares
of the Series A Preferred Stock are to be redeemed in any redemption
at the option of the Corporation, the total number of shares to be
redeemed in such redemption shall be determined by the Board of
Directors and the shares to be redeemed shall be allocated pro rata or
by lot as may be determined by the Board of Directors or by such other
method as the Board of Directors may approve and deem equitable,
including any method to conform to any rule or regulation of any
national or regional stock exchange or automated quotation system upon
which the shares of the Series A Preferred Stock may at the time be
listed or
3
<PAGE> 4
eligible for quotation.
3. Notice of any proposed redemption shall be given by the
Corporation by mailing a copy of such notice to the holders of record
of the shares of Series A Preferred Stock to be redeemed, at their
address of record, not more than sixty nor less than thirty days prior
to the redemption date. The notice of redemption to each holder of
shares of Series A Preferred Stock shall specify the number of shares
of Series A Preferred Stock to be redeemed, the redemption date and
the redemption price payable to such holder upon redemption, and shall
state that from and after said date dividends thereon will cease to
accrue. If less than all the shares owned by a holder are then to be
redeemed at the option of the Corporation, the notice shall also
specify the number of shares of Series A Preferred Stock which are to
be redeemed and the numbers of the certificates representing such
shares. Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the
stockholder receives such notice; and failure duly to give such notice
by mail, or any defect in such notice, to the holders of any stock
designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Series A
Preferred Stock.
4. Notice having been mailed as aforesaid, from and after the
redemption date (unless default be made in the payment of the
redemption price for any shares to be redeemed), all dividends on the
shares of Series A Preferred Stock called for redemption shall cease
to accrue and all rights of the holders of such shares as stockholders
of the Corporation by reason of the ownership of such shares (except
the right to receive the redemption price, on presentation and
surrender of the respective certificates representing the redeemed
shares), shall cease on the redemption date, and such shares shall not
after the redemption date be deemed to be outstanding. In case less
than all the shares represented by such certificate are redeemed, a
new certificate shall be issued without cost to the holder thereof
representing the unredeemed shares.
5. At its option, the Corporation may, on or prior to the
redemption date, irrevocably deposit the aggregate amount payable upon
redemption of the shares of the Series A Preferred Stock to be
redeemed with a bank or trust company designated by the Board of
Directors having its principal office in New York, New York, San Juan,
Puerto Rico, or any other city in which the Corporation shall at that
time maintain a transfer agency with respect to its capital stock, and
having a combined capital and surplus (as shown by its latest
published statement) of at least $50,000,000 (hereinafter referred to
as the "Depositary"), to be held in trust by the Depositary for
payment to the holders of the shares of the Series A Preferred Stock
then to be redeemed. If such deposit is made and the funds so
deposited are made immediately available to the holders of the shares
of the Series A Preferred Stock to be redeemed, the Corporation shall
thereupon be released and discharged (subject to the provisions of
Section D.6) from any obligation to make payment of the amount payable
upon redemption of the shares of the Series A Preferred Stock to be
redeemed, and the holders of such shares shall look only to the
Depositary for such payment.
6. Any funds remaining unclaimed at the end of two years from
and after the redemption date in respect of which such funds were
deposited shall be returned to the Corporation forthwith and
thereafter the holders of shares of the Series A Preferred Stock
called for redemption with respect to which such funds were deposited
shall look only to the Corporation for the payment of the redemption
price thereof. Any interest accrued on any funds deposited with the
Depositary shall belong to the Corporation and shall be paid to it
from time to time on demand.
4
<PAGE> 5
7. Any shares of the Series A Preferred Stock which shall at
any time have been redeemed shall, after such redemption, have the
status of authorized but unissued shares of Preferred Stock, without
designation as to series, until such shares are once more designated
as part of a particular series by the Board of Directors.
8. To the extent required to have the Series A Preferred
Stock treated as Tier 1 capital for bank regulatory purposes or
otherwise required by applicable regulations of the Federal Reserve
Board, the shares of Series A Preferred Stock may not be redeemed by
the Company without the prior consent of the Federal Reserve Board.
E. LIQUIDATION PREFERENCE
1. Upon any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the then record holders
of shares of Series A Preferred Stock will be entitled to receive out
of the assets of the Corporation available for distribution to
shareholders, before any distribution is made to holders of common
stock or any other equity securities of the Corporation ranking junior
upon liquidation to the Series A Preferred Stock, distributions upon
liquidation in the amount of $25.00 per share plus an amount equal to
any accrued and unpaid dividends for the current monthly dividend
period to the date of payment. Such amount shall be paid to the
holders of the Series A Preferred Stock prior to any payment or
distribution to the holders of the common stock of the Corporation or
any other class of stock or series thereof of the Corporation ranking
junior to the Series A Preferred Stock in respect of dividends or as
to the distribution of assets upon liquidation.
2. If upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the amounts payable with
respect to the Series A Preferred Stock and any other shares of stock
of the Corporation ranking as to any such distribution on a parity
with the Series A Preferred Stock are not paid in full, the holders of
the Series A Preferred Stock and of such other shares will share
ratably in any such distribution of assets of the Corporation in
proportion to the full liquidation preferences to which each is
entitled. After payment of the full amount of the liquidation
preference to which they would otherwise be entitled, the holders of
shares of Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Corporation.
3. Neither the consolidation or merger of the Corporation
with any other corporation, nor any sale, lease or conveyance of all
or any part of the property or business of the Corporation, shall be
deemed to be a liquidation, dissolution, or winding up of the
Corporation.
F. VOTING RIGHTS
1. Except as described in this Section F, or except as
required by applicable law, holders of the Series A Preferred Stock
will not be entitled to receive notice of or attend or vote at any
meeting of stockholders of the Corporation.
2. If the Corporation does not pay dividends in full on the
Series A Preferred Stock for eighteen monthly dividend periods
(whether consecutive or not), the holders of outstanding shares of the
Series A Preferred Stock, together with the holders of any other
shares of stock of the Corporation having the right to vote for the
election of directors solely in the event of any failure to pay
dividends, acting as a single class without regard to series, will be
entitled, by written notice to
5
<PAGE> 6
the Corporation given by the holders of a majority in liquidation
preference of such shares or by ordinary resolution passed by the
holders of a majority in liquidation preference of such shares present
in person or by proxy at a separate general meeting of such holders
convened for the purpose, to appoint two additional members of the
Board of Directors of the Corporation, to remove any such member from
office and to appoint another person in place of such member. Not
later than 30 days after such entitlement arises, if written notice by
a majority of the holders of such shares has not been given as
provided for in the preceding sentence, the Board of Directors or an
authorized committee thereof will convene a separate general meeting
for the above purpose. If the Board of Directors or such authorized
committee fails to convene such meeting within such 30-day period, the
holders of 10% of the outstanding shares of the Series A Preferred
Stock and any such other stock will be entitled to convene such
meeting. The provisions of the Certificate of Incorporation and
By-laws of the Corporation relating to the convening and conduct of
general meetings of stockholders will apply with respect to any such
separate general meeting. Any member of the Board of Directors so
appointed shall vacate office if, following the event which gave rise
to such appointment, the Corporation shall have resumed the payment of
dividends in full on the Series A Preferred Stock and each such other
series of stock for twelve consecutive monthly dividend periods.
3. Any variation or abrogation of the rights, preferences and
privileges of the Series A Preferred Stock by way of amendment of the
Corporation's Certificate of Incorporation or otherwise (including,
without limitation, the authorization or issuance of any shares of the
Corporation ranking, as to dividend rights or rights on liquidation,
winding up and dissolution, senior to the Series A Preferred Stock)
shall not be effective (unless otherwise required by applicable law)
except with the consent in writing of the holders of at least two
thirds of the outstanding aggregate liquidation preference of the
outstanding shares of the Series A Preferred Stock or with the
sanction of a special resolution passed at a separate general meeting
by the holders of at least two thirds of the aggregate liquidation
preference of the outstanding shares of the Series A Preferred Stock.
Notwithstanding the foregoing, the Corporation may, without the
consent or sanction of the holders of the Series A Preferred Stock,
authorize and issue shares of the Corporation ranking, as to dividend
rights and rights on liquidation, winding up and dissolution, on a
parity with or junior to the Series A Preferred Stock.
4. No vote of the holders of the Series A Preferred Stock
will be required for the Corporation to redeem or purchase and cancel
the Series A Preferred Stock in accordance with the Certificate of
Incorporation of the Corporation.
5. The Corporation will cause a notice of any meeting at
which holders of any series of Preferred Stock are entitled to vote to
be mailed to each record holder of such series of Preferred Stock.
Each such notice will include a statement setting forth (i) the date
of such meeting, (ii) a description of any resolution to be proposed
for adoption at such meeting on which such holders are entitled to
vote and (iii) instructions for deliveries of proxies.
6. Except as set forth in this Section F, holders of Series A
Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote
as set forth herein) for taking any corporate action.
G. RANK
6
<PAGE> 7
The Series A Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank (i)
senior to all classes of common stock of the Corporation and to all
other equity securities issued by the Corporation the terms of which
specifically provide that such equity securities will rank junior to
the Series A Preferred Stock (or to a number of series of Preferred
Stock which includes the Series A Preferred Stock); (ii) on a parity
with all other equity securities issued by the Corporation the terms
of which specifically provide that such equity securities will rank on
a parity with the Series A Preferred Stock (or with a number of series
of Preferred Stock which includes the Series A Preferred Stock); and
(iii) junior to all equity securities issued by the Corporation the
terms of which specifically provide that such equity securities will
rank senior to the Series A Preferred Stock (or to a number of series
of Preferred Stock which includes the Series A Preferred Stock). For
this purpose, the term "equity securities" does not include debt
securities convertible into or exchangeable for equity securities.
H. FORM OF CERTIFICATE FOR SERIES A PREFERRED STOCK; TRANSFER AND
REGISTRATION
1. The Series A Preferred Stock shall be issued in registered
form only. The Corporation may treat the record holder of a share of
Series A Preferred Stock, including the Depository Trust Company and
its nominee and any other holder that holds such share on behalf of
any other person, as such record holder appears on the books of the
registrar for the Series A Preferred Stock, as the sole owner of such
share for all purposes.
2. The transfer of a share of Series A Preferred Stock may be
registered upon the surrender of the certificate evidencing the share
of Series A Preferred Stock to be transferred, together with the form
of transfer endorsed on it duly completed and executed, at the office
of the transfer agent and registrar.
3. Registration of transfers of shares of Series A Preferred
Stock will be effected without charge by or on behalf of the
Corporation, but upon payment (or the giving of such indemnity as the
transfer agent and registrar may require) in respect of any tax or
other governmental charges which may be imposed in relation to it.
4. The corporation will not be required to register the
transfer of a share of Series A Preferred Stock after such share has
been called for redemption.
I. REPLACEMENT OF LOST CERTIFICATES
If any certificate for a share of Series A Preferred Stock is
mutilated or alleged to have been lost, stolen or destroyed, a new
certificate representing the same share shall be issued to the holder
upon request subject to delivery of the old certificate or, if alleged
to have been lost, stolen or destroyed, compliance with such
conditions as to evidence, indemnity and the payment of out-of-pocket
expenses of the Corporation in connection with the request as the
Board of Directors of the Corporation may determine.
J. NO PREEMPTIVE RIGHTS
Holders of the Series A Preferred Stock will have no
preemptive or preferential rights to
7
<PAGE> 8
purchase any securities of the Corporation.
K. NO REPURCHASE AT THE OPTION OF HOLDERS; MISCELLANEOUS
Holders of Series A Preferred Stock will have no right to
require the Corporation to redeem or repurchase any shares of Series A
Preferred Stock, and the shares of Series A Preferred Stock are not
subject to any sinking fund or similar obligation. The Corporation
may, at its option, purchase shares of the Series A Preferred Stock
from holders thereof from time to time, by tender, in privately
negotiated transactions or otherwise.
The undersigned hereby certify that the capital of the Corporation
will not be reduced under or by reason of the adoption of the above resolutions
providing for the creation of the above described series of Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this Certificate to be signed by Angel Alvarez-Perez,
its Chief Executive Officer and President, and Antonio R. Escriba its
Secretary, this __ day of April, 1999.
FIRST BANCORP
By:
-----------------------------------
Angel Alvarez-Perez
[CORPORATE SEAL]
By:
-----------------------------------
Antonio R. Escriba
8
<PAGE> 1
FIDDLER GONZALEZ & RODRIGUEZ, LLP
BANCO BILBAO VIZCAYA BUILDING
254 MUNOZ RIVERA AVENUE
6TH FLOOR
HATO REY, PUERTO RICO 00918
EXHIBIT 5
March 29, 1999
First BanCorp.
1519 Ponce De Leon Avenue
San Juan, Puerto Rico 00908-0146
Dear Sirs:
In connection with the registration under the Securities Act of 1933,
as amended (the "Act"), of up to 4,140,000 shares (the "Shares") of
Noncumulative Perpetual Monthly Income Preferred Stock, Series A, $1.00 par
value per share, of First BanCorp. (the "Company") to be registered under the
Act pursuant to the Company's Registration Statement on Form S-3, to be filed
with the Securities and Exchange Commission on or about March 29, 1999 (the
"Registration Statement"), we, as your counsel, have examined such documents,
corporate records and other instruments, and such questions of law, as we have
deemed necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we are of the opinion that when the
Registration Statement shall have been declared effective, the certificate of
resolutions containing the designation of the relative rights and preferences of
the Shares has been duly filed with the Department of State of the Commonwealth
of Puerto Rico, the Shares have been issued in accordance with the authorization
of the Board of Directors of the Company, and when the Shares have been duly
countersigned by the Company's transfer agent and registrar and sold and
delivered as contemplated by the Registration Statement and the Underwriting
Agreement referred to therein, the Shares will be duly authorized and validly
issued, fully-paid and nonassessable when delivered against payment therefor.
We are members of the Bar of the Commonwealth of Puerto Rico. The
opinions expressed above are limited to the laws of the Commonwealth of Puerto
Rico and any applicable Federal laws and we do not purport to be experts in, or
to render any opinions with respect to, the laws of any state or other
jurisdiction other than the laws of the Commonwealth of Puerto Rico and the
Federal laws
<PAGE> 2
First BanCorp.
March 29, 1999
Page 2
of the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus contained in the Registration Statement. In giving
the foregoing consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Fiddler Gonzalez & Rodriguez, LLP
<PAGE> 1
FIDDLER GONZALEZ & RODRIGUEZ, LLP
BANCO BILBAO VIZCAYA BUILDING
254 MUNOZ RIVERA AVENUE
6TH FLOOR
HATO REY, PUERTO RICO 00918
EXHIBIT 8
March 29, 1999
First BanCorp.
1519 Ponce De Leon Avenue
San Juan, Puerto Rico 00908-0146
Dear Sirs:
We have acted as counsel to First BanCorp. (the "Company") in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of up to 4,140,000 shares (the "Shares") of Noncumulative Perpetual
Monthly Income Preferred Stock, Series A, $1.00 par value per share, to be
registered under the Act pursuant to the Company's Registration Statement on
Form S-3, to be filed with the Securities and Exchange Commission on or about
March 29, 1999 (the "Registration Statement").
We have examined the prospectus contained in the Registration Statement
(the "Prospectus") and we have reviewed the discussion of certain Federal and
Puerto Rico income tax considerations of the proposed offering described in the
Prospectus (the "Tax Discussion") appearing under the captions "Taxation,"
"Puerto Rico Taxation" and "United States Taxation." We have also reviewed such
other documents and instruments and have examined such questions of law as we
have considered necessary for the purposes of this opinion. In addition, we have
relied on certificates of officers of the Company as to certain factual matters.
The Tax Discussion represents our opinion regarding the material
Federal and Puerto Rico tax consequences described therein.
Our opinion is based upon the review of the Prospectus and of
applicable Federal and Puerto Rico income tax statutes, regulations, rulings and
decisions, as now in effect. A change in any of the foregoing could necessitate
a change in our opinion. In addition, our opinion pertains only to the accuracy
of the statements of law contained in the Tax Discussion. As to statements of
fact, we
<PAGE> 2
First BanCorp.
March 29, 1999
Page 2
are relying on your representation that such factual statements are accurate.
We are members of the Bar of the Commonwealth of Puerto Rico. The
opinions expressed above are limited to the laws of the Commonwealth of Puerto
Rico and any applicable Federal laws and we do not purport to be experts in, or
to render any opinions with respect to, the laws of any state or other
jurisdiction other than the laws of the Commonwealth of Puerto Rico and the
Federal laws of the United States of America.
Very truly yours,
/s/ Fiddler Gonzalez & Rodriguez, LLP
<PAGE> 1
EXHIBIT 12
FIRST BANCORP
Ratio of Earnings to Combined Fixed Charges-Excluding Interest on Deposits
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Income $ 51,812 $ 47,528 $ 37,634 $ 49,101 $ 30,556
Income 4,798 8,125 12,281 14,295 12,385
--------- --------- ---------- --------- ----------
Pre-tax net income 56,610 55,653 49,915 63,396 42,941
Fixed charges:
Interest expense 155,130 130,429 113,027 96,838 76,674
Less: Interest on deposits (70,418) (72,147) (70,964) (62,641) (57,808)
Interest capitalized -- -- -- -- --
Rental expense relating to operating
leases (1/3 of rentals) 1,053 978 965 768 762
Amortization of premiums and discounts
on indebtedness (capitalized) 1,049 -- -- 5,056 275
--------- --------- ---------- --------- ----------
Total Fixed Charges 86,814 58,302 42,701 40,021 19,873
Amortization of capitalized interest -- -- -- -- --
Less: Interest capitalized -- -- -- -- --
Earnings before income taxes and fixed
charges $143,242 $113,955 $ 92,616 $103,417 $ 62,814
Ratio of Earnings to Fixed Charges 1.65 1.95 2.17 2.58 3.16
</TABLE>
<PAGE> 2
FIRST BANCORP
Ratio of Earnings to Combined Fixed Charges-Including Interest on Deposits
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Income $ 51,812 $ 47,528 $ 37,634 $ 49,101 $ 30,556
Income Taxes 4,798 8,125 12,281 14,295 12,385
---------- ---------- ---------- ---------- ---------
Pre-tax net income 56,610 55,653 49,915 63,396 42,941
Fixed charges:
Interest expense 155,130 130,429 113,027 96,838 76,674
Interest capitalized -- -- -- -- --
Rental expense relating to operating
leases (1/3 of rentals) 1,053 978 965 768 762
Amortization of premiums and discounts
on indebtedness (expensed) -- (958) (327) -- --
Amortization of premiums and discounts
on indebtedness (capitalized) 1,049 -- -- 5,056 245
---------- ---------- ----------- ----------- ---------
Total Fixed Charges 157,232 130,449 113,665 102,662 77,681
Amortization of capitalized interest -- -- -- -- --
Less: Interest capitalized -- -- -- -- --
Earnings before income taxes and fixed
charges $213,842 $186,102 $163,580 $166,058 $120,622
Ratio of Earnings to Fixed Charges 1.36 1.43 1.44 1.62 1.55
</TABLE>
<PAGE> 1
[PRICEWATERHOUSECOOPERS LLP LETTERHEAD]
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 of our report dated
February 12, 1999, which appears on page 38 of the 1998 Annual Report to
Shareholders of First BanCorp., which is incorporated by reference in First
BanCorp.'s Annual Report on Form 10-K for the year ended December 31, 1998. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
San Juan, Puerto Rico
March 29, 1999
