AMENDMENT NO. 1 TO THE PURCHASE AGREEMENT
AMENDMENT NO. 1 TO THE
PURCHASE AGREEMENT
This Amendment No. 1, dated as of September 1, 2020 (this “Amendment”), to the Stock Purchase Agreement, dated as of October 21, 2019 (as amended, modified or supplemented from time to time in accordance with its terms, the “Purchase Agreement”), by and between FirstBank Puerto Rico, a bank organized under the laws of the Commonwealth of Puerto Rico (“Buyer”), Santander Holdings USA, Inc., a Virginia corporation (“Seller”), and, solely for purposes of Article IV, Section 5.03 and Article X, First BanCorp., a corporation organized under the laws of the Commonwealth of Puerto Rico (“Buyer Parent”).
WHEREAS, in accordance with Section 10.02 of the Purchase Agreement, the parties hereto wish to amend the Purchase Agreement as set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. Defined Terms: Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.
2. Amendments.
(a) The definition of “Loan Loss Reserve Amount” in the Purchase Agreement is hereby amended and restated in its entirety as follows:
“Loan Loss Reserve Amount” means, as of the Measurement Time, the sum of: (a) the product of (i) the aggregate unpaid outstanding principal balance of all Extensions of Credit originated on or before the Reference Balance Sheet Date multiplied by (ii) 2.8%; plus (b) the product of (i) the aggregate unpaid outstanding principal balance of all Extensions of Credit originated from July 1, 2019 through the Closing Date multiplied by (ii) 0.8%; plus (c) Twenty-Nine Million Seven Hundred Thousand Dollar ($29,700,000.00). For the avoidance of doubt, (I) the calculation of “Loan Loss Reserve Amount” shall not include any loan loss reserves or other amounts attributable to the Non-Performing Assets that have been sold or otherwise transferred pursuant to the Seller Non-Performing Assets Transfers, and (II) any Extension of Credit that is a commercial line of credit or credit card shall be deemed to have been originated on or before the Reference Balance Sheet Date if the commitment for such Extension of Credit or credit card relationship existed as of the Reference Balance Sheet Date even if such Extension of Credit has been renewed or drawn at any time following the Reference Balance Sheet Date. In the event that any partial charge-off is taken with respect to any Extension of Credit originated on or before the Reference Balance Sheet Date, the Loan Loss Reserve Amount applicable to such Extension of Credit shall be the lower of (1) 2.8% of the outstanding unpaid principal balance of such Extension of Credit as of the Closing Date and (2) (x) 2.8% of the outstanding unpaid principal balance of such Extension of Credit as of the Reference Balance Sheet Date, less (y) 2.8% of any principal payments made after the Reference Balance Sheet Date through the Closing Date, less (z) any partial charge-off taken; provided that no such Loan Loss Reserve Amount may be less than zero ($0). In the event that any partial charge-off is taken with respect to any Extension of Credit originated from July 1, 2019 through the Closing Date (any such Extension of Credit, a “Specified Charge-Off Loan”), the Loan Loss Reserve Amount applicable to such Extension of Credit shall be (A) 0.8% of the outstanding unpaid principal balance of such Extension of Credit as of the
1
Closing Date, less (B) any partial charge-off taken; provided that no such Loan Loss Reserve Amount may be less than zero ($0).
(b) Section 3.32 in the Purchase Agreement is hereby amended to include the below as subsections (m) and (n):
“(m) The Extensions of Credit set forth on Schedule 1 to that certain Amendment No. 1 to this Agreement, dated as of September 1, 2020, by and among Buyer, Buyer Parent and Seller (the “Closing Amendment”) shall be reflected on the Estimated Balance Sheet as having an aggregate book value of zero ($0.00), to the extent such Extensions of Credit have been fully reserved or charged-off as of the Measurement Time.
“(n) Schedule 2 to the Closing Amendment sets forth a true, correct and complete list of all loans and Extensions of Credit that are owned by the Companies (as of June 30, 2020) that have been affected by one or more borrower relief programs in connection with the Disasters (as of June 30, 2020).”
3. Additional Acknowledgements and Agreements. The parties acknowledge and agree that:
(a) no loan or Extension of Credit that is set forth on Schedule 2 attached hereto (and no (i) residential Mortgage Loan that (A) is not set forth on Schedule 2 attached hereto and (B) after June 30, 2020 becomes subject to relief under the Joint Resolution or other future laws or regulations (x) similar to the Joint Resolution and (y) in connection with the COVID-19 pandemic or (ii) commercial loan (A) with a balance of under $3 million in unpaid principal and interest, (B) for which the borrower or obligor is not delinquent and (C) that becomes subject to relief provided by PR Bank which such relief is similar to relief provided by PR Bank that is described in the materials provided on behalf of PR Bank by Seller’s counsel to the Buyer’s counsel on May 29, June 3 and June 8, 2020 (all such materials collectively referred to as, the “Materials,” and any loan or Extension of Credit under the foregoing subclauses (i) or (ii) “New Covered Loans” and, together with the loans and Extensions of Credit set forth on Schedule 2 attached hereto, the “Subject Loans” and any relief in respect of New Covered Loans under subclauses (i)(B) or (ii)(C), as applicable, “Similar Relief”)) shall be considered to be a Non-Performing Asset pursuant to clause (iv) of the definition of Non-Performing Asset solely by virtue of being subject to or otherwise affected by one or more borrower relief programs adopted by any Governmental Authority or by the Companies in connection with the COVID-19 pandemic or with any earthquakes affecting the Companies (the pandemic and earthquakes, “Disasters,” and such borrower relief programs, the “Borrower Relief Programs”) (for the avoidance of doubt, this acknowledgment and agreement does not apply with respect to any other condition, circumstance or facts that would otherwise result in any such Subject Loans or other asset being a Non-Performing Asset), including after taking into account any regulatory interpretations relating to such programs and any extension of the relief thereunder (“Extension”), notwithstanding any “moratoriums” on collection, payment accommodation or other borrower relief thereunder, or the impact thereof on the Companies’ financial or regulatory accounting.
(b) Notwithstanding anything herein or in the Purchase Agreement to the contrary, if any Extension of Credit of the Companies (as of the Closing) was subject to a Borrower Relief Program as of June 30, 2020, but was not set forth on Schedule 2 attached hereto, Buyer shall have the right (upon written notice to Seller not later than the earlier of (x) sixty (60) days following the Closing Date and (y) the date Buyer delivers the Closing Statement to Seller) to transfer and assign, or cause to be transferred and assigned, such Extension of Credit (together with all collateral and rights to collection related thereto and any payments of principal, interest or other amounts on any such Extension of Credit received by
2
Buyer following the Closing in respect of such Extension of Credit), free and clear of any Liens (other than Permitted Liens and other Liens imposed or arising through no action or fault of Buyer or its Affiliates) not existing as of immediately prior to the Closing, as soon as practicable (and not more than ten (10) days following the earlier of (x) sixty (60) days following the Closing Date and (y) the date Buyer delivers the Closing Statement to Seller) to Seller or any of its Affiliates (as so designated by Seller). In exchange for the transfer and assignment by Buyer or its Affiliates to Seller or its Affiliates of such Extension of Credit, Seller shall pay to Buyer (or its designee), in exchange therefore, by wire transfer of immediately available funds to an account or accounts designated by Buyer, an amount in respect of each such Extension of Credit equal to (x) the book value of such Extension of Credit (as of the Measurement Time) minus (y) the loan loss reserve allowance for the applicable Extension of Credit as of the Measurement Time (and, for the avoidance of doubt, not in the manner provided for in the definition of Loan Loss Reserve Amount). For all purposes of the Closing Statement and the related calculations set forth in Section 2.06 of the Purchase Agreement, such purchase and sale (including the payment of the consideration provided for in this Section 3(b)) shall be deemed to have occurred immediately prior to the Measurement Time. Any such Extension of Credit, following the date and time it is transferred and assigned to Seller or its Affiliates, will be serviced (unless Seller otherwise directs in writing) under the Transition Loan Servicing Agreement if it is an Extension of Credit of the type and nature contemplated to be serviced under the Transition Loan Servicing Agreement;
(c) none of the following actions taken or omissions by the Companies or their Affiliates in response to the Disasters and the business environment arising therefrom will be asserted by Buyer as a breach of (A) the Seller’s obligations under Section 5.01 of the Purchase Agreement or (B) Sections 3.32(b)(iii), 3.32(b)(iv) (only in respect of enforceability to the extent arising from a Subject Loan that has been granted payment deferral terms pursuant to (x) a Borrower Relief Program described in the Materials or (y) solely in respect of New Covered Loans, Similar Relief), 3.32(f) (first, third and fourth sentences thereof and only in respect of enforceability to the extent arising from a Subject Loan that has been granted deferral terms pursuant to (x) a Borrower Relief Program described in the Materials or (y) solely in respect of New Covered Loans, Similar Relief) or 3.32(j) (first sentence only and only in respect of enforceability to the extent arising from a Subject Loan that has been granted deferral terms pursuant to (x) a Borrower Relief Program described in the Materials or (y) solely in respect of New Covered Loans, Similar Relief) of the Purchase Agreement (in each case, solely to the extent such representation or warranty ceases to be true and correct as a result of such actions taken or omissions) to the extent that such actions or omissions (for the avoidance of doubt, including such actions taken or omissions after the date hereof constituting an Extension or in respect of New Covered Loans or a continuation of the actions under Section 3(c)(v)) are (I) described in the Materials or (II) solely in respect of New Covered Loans subject to Similar Relief, in each case, and which actions or omissions are similar to the following actions or omissions described in the Materials: (i) adoption and implementation of PR Bank’s Payment Accommodation Program; (ii) the accommodations granted by PR Bank in accordance with the Commonwealth of Puerto Rico Joint Resolution #26-2020 and amendments thereto; (iii) PR Bank branch closures, to the extent such branch closures were implemented on an interim basis; (iv) the waiver by PR Bank of certain service and other banking fees; (v) PR Bank employee remote work arrangements; and (vi) PR Bank’s participation in the Small Business Administration’s Paycheck Protection Program; and
(d) The parties will cooperate during the ten (10) Business Days following the Closing Date to ensure that no Non-Performing Assets (measured as of the Measurement Time) remained at PR Bank as of the Closing Date that were not transferred to Seller or one or more of its Affiliates prior to the Closing, including the Extensions of Credit set forth on Schedule 1, which such Extensions of Credit the parties agree (x) are Non-Performing Assets, (y) will not be transferred from PR Bank until after the Closing Date (notwithstanding the provisions of Section 5.15 of the Purchase Agreement) and (z) unless prohibited by applicable Law, will be transferred from PR Bank (or its successor) to Seller (or its Affiliates) not more
3
than five (5) days following the end of such ten (10) Business Day period (or, if not transferred at such time, as promptly thereafter as practicable). Buyer shall transfer and assign, or cause to be transferred and assigned, all such Non-Performing Assets as a whole (together with all collateral and rights to collection related thereto and any payments of principal, interest or other amounts on any such Non-Performing Assets received by Buyer following the Closing in respect of such Non-Performing Assets) to Seller, free and clear of any Liens (other than Permitted Liens and other Liens imposed or arising through no action or fault of Buyer or its Affiliates) not existing as of immediately prior to the Closing, as soon as practicable (and not more than five (5) days following the end of such ten (10) Business Day period). In exchange for the transfer and assignment by Buyer or its Affiliates to Seller or its Affiliates of such Non- Performing Assets, Seller shall pay to Buyer (or its designee), in exchange therefore, by wire transfer of immediately available funds to an account or accounts designated by Buyer, an amount in respect of such Non-Performing Assets equal to (x) the aggregate book value of such Non-Performing Assets (as of the Measurement Time) minus (y) the loan loss reserve allowance for such Non-Performing Assets as of the Measurement Time (and, for the avoidance of doubt, not in the manner provided for in the definition of Loan Loss Reserve Amount). For all purposes of the Closing Statement and the related calculations set forth in Section 2.06 of the Purchase Agreement, such purchase and sale (including the payment of the consideration provided for in this Section 3(d)) shall be deemed to have occurred immediately prior to the Measurement Time. Any such Non-Performing Asset, following the date and time it is transferred and assigned to Seller or its Affiliates, will be serviced (unless Seller otherwise directs in writing) under the Transition Loan Servicing Agreement if it is a Non-Performing Asset of the type and nature contemplated to be serviced under the Transition Loan Servicing Agreement. Nothing in this Section 3(d) shall, amend, alter or waive any right to indemnification that any Buyer Indemnified Party may have pursuant to Section 9.02 of the Purchase Agreement, including in respect of any breach of Section 5.15 of the Purchase Agreement;
(e) Prior to the assignment and transfer of any Extensions of Credit or Non-Performing Assets to Seller or its Affiliates pursuant to Section 3(b) or 3(d), Buyer or any of its Affiliates shall service and otherwise manage such Extensions of Credit and Non-Performing Assets in the ordinary course and consistent with the manner in which Buyer and its Affiliates manage its or their other similar assets, and Seller shall indemnify Buyer or its Affiliates for any Losses resulting from such service or management (unless such Losses arise from Buyer’s or its Affiliates’ willful misconduct, gross negligence or failure to treat any such Extensions of Credit or Non-Performing Assets in the ordinary course and consistent with the manner in which Buyer and its Affiliates manage its or their other similar assets);
(f) the parties shall use their respective reasonable best efforts to seek to cause the Closing to occur on September 1, 2020.
For avoidance of doubt, the foregoing reference to the Materials is solely with respect to the actions described under clause (i) through (vi) of this Section 3(c) with an understanding that they have been provided on an interim basis in connection with responding to the Disasters.
4. No Other Amendments to Purchase Agreement.
(a) On and after the date hereof, each reference in the Purchase Agreement to “this Agreement”, “herein”, “hereof”, “hereunder” or words of similar import shall mean and be a reference to the Purchase Agreement as amended hereby.
(b) Except as otherwise expressly provided herein, all of the terms and conditions of the Purchase Agreement remain unchanged and continue in full force and effect.
5. Miscellaneous. The provisions of Article X of the Purchase Agreement are
4
incorporated into, and shall apply to, this Amendment, mutatis mutandis.
6. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement, it being understood that all of the parties need not sign the same counterpart.
[Remainder of page intentionally left blank; signature page follows]
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be executed the day and year first above written.
FIRSTBANK PUERTO RICO
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: President & Chief Executive Officer
SANTANDER HOLDINGS USA, INC.
a Puerto Rico limited liability company
By: /s/ Xxxxxx X. Xxxxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Executive Vice President
FIRST BANCORP. solely for purposes of Article IV, Section 5.03 and Article V
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: President and Chief Executive Officer
[Signature Page to Amendment No. 1 to the Purchase Agreement]
6
