FIRST BANCORP
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908
(787) 729-8200
NOTICE OF MEETING AND PROXY STATEMENT
----------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 2005
To the Stockholders of First BanCorp Puerto Rico:
NOTICE IS HEREBY GIVEN that pursuant to a resolution of the Board of Directors
and Section 2 of the Corporation's Bylaws, the Annual Meeting of Stockholders of
First BanCorp will be held at its principal offices located at 1519 Ponce de
Leon Avenue, Santurce, Puerto Rico, on Thursday, April 28, 2005, at 2:00 p.m.,
for the purpose of considering and taking action on the following matters, all
of which are more completely set forth in the accompanying Proxy Statement:
1. To elect three (3) directors for a term of three years or until
their successors have been elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's Independent Registered Public Accounting Firm for
fiscal year 2005.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The stockholders or their representatives should register their credentials or
proxies with the Corporation's Secretary on or before 2:00 p.m. of the day of
the meeting.
The Board of Directors has set March 14, 2005, as the record date for the
determination of stockholders entitled to notice of, and to vote at, the
meeting.
San Juan, Puerto Rico
March 22, 2005
By order of the Board of Directors
Carmen Gabriella Szendrey-Ramos, Esq. Angel Alvarez-Perez, Esq.
Secretary Chairman, President & CEO
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT AT THE MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY PROXY. YOU MAY REVOKE ANY PROXY THAT YOU
GIVE IN WRITING OR IN PERSON AT ANY TIME PRIOR TO ITS EXERCISE.
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FIRST BANCORP
1519 Ponce De Leon Avenue
Santurce, Puerto Rico 00908
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2005
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of First BanCorp ("the Corporation")
for use at the Annual Meeting of Stockholders to be held at the Corporation's
main offices located at 1519 Ponce de Leon Avenue, Santurce, Puerto Rico, on
April 28, 2005, at 2:00 p.m., and at any adjournment thereof. This Proxy
Statement is expected to be mailed to stockholders of record on or about March
29, 2005.
SOLICITATION AND REVOCATION
Proxies in the form enclosed are solicited by and on behalf of the Board
of Directors. The persons named in the proxy form have been designated as
proxies by the Board of Directors. Shares represented by properly executed
proxies received will be voted at the Meeting in accordance with the
instructions you specify in the proxy. If you do not give instructions to the
contrary, each proxy received will be voted for the matters described below. Any
proxy given as a result of this solicitation may be revoked, at any time before
it is exercised, by the stockholder in the following manner: (i) submitting a
written notification to the Secretary of First BanCorp, (ii) submitting a duly
executed proxy bearing a later date, or (iii) appearing at the Annual Meeting
and giving proper notice to the Secretary of his or her intention to vote in
person. The proxies that are being solicited may be exercised only at the Annual
Meeting of First BanCorp or at any adjournment of the Meeting.
Each proxy solicited hereby gives discretionary authority to the Board of
Directors of the Corporation to vote the proxy with respect to (i) the election
of any person as director if any nominee is unable to serve, or for good cause
will not serve; (ii) matters incident to the conduct of the meeting; (iii) the
approval of minutes of the previous Annual Meeting held on April 29, 2004; and
(iv) such other matters as may properly come before the Annual Meeting. Except
with respect to procedural matters incident to the conduct of the Annual
Meeting, the Board of Directors is not aware of any business which may properly
come before the Annual Meeting other than that described in this Proxy
Statement. However, if any other matters come before the Annual Meeting, it is
intended that proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the person voting those proxies.
VOTING SECURITIES
The Board of Directors has fixed the close of business on March 14, 2005,
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the Annual Meeting of Stockholders. At the close of
business on the record date there were 40,393,155 shares of the issued and
outstanding common stock of the Corporation in circulation, each of which is
entitled to one vote at the Annual Meeting.
The presence, either in person or by proxy, of at least a majority of the
Corporation's issued and outstanding shares of common stock in circulation is
necessary to constitute a quorum. For purposes of determining quorum,
abstentions and broker non-votes will be treated as shares that are present and
entitled to vote. A broker non-vote results when a broker or nominee has
expressly indicated that it does not have discretionary authority to vote on a
particular matter. Action with respect to Proposal 1: Election of three
Directors for a three year term, Proposal 2: Ratification of Appointment of
Independent Registered Public Accounting Firm shall be taken by a majority of
the total votes present in person or by proxy and entitled to vote. Therefore,
as to such prospect, abstentions and broker non-votes will have the same effect
as a vote against the proposals. Each share of common stock is entitled to one
vote for the proposals to be considered.
BENEFICIAL OWNERSHIP OF SECURITIES
The following sets forth information known to the Corporation as to the
persons or entities, which as of March 1, 2005, by themselves or as a group, as
the term is defined by section 13(d) (3) of the Securities Exchange Act of 1934,
are the beneficial owners of 5% or more of the issued and outstanding common
stock of the Corporation in circulation. All information concerning persons who
may be beneficial owners of 5% or more of the stock is derived from Schedule
13(D) or 13(G) statements filed and notified to the Corporation.
1
BENEFICIAL OWNERS OF 5% OR MORE:
Name NUMBER OF SHARES PERCENTAGE
--------------------------------------------------------------------------------
FMR Corp 3,987,640 9.873%
82 Devonshire Street
Boston, MA 02109
Angel Alvarez-Perez 3,764,459(1),(2) 9.320%
Chairman, President and CEO
First BanCorp
1519 Ponce de Leon Avenue
Santurce, PR 00908
Barclays Global Investors 2,939,408 7.277%
45 Fremont Street
San Francisco, CA 94105
Garity & Co., Capital Management 2,725,368 6.748%
1414 Banco Popular Center
Hato Rey, Puerto Rico 00918
BENEFICIAL OWNERSHIP BY DIRECTORS OR NOMINEES:
The following table sets forth information with regard to the total number
of shares of the Corporation's common stock beneficially owned by each current
member of the Board of Directors and each nominee to the Board of Directors and
each current executive officer and by all current directors and executive
officers as a group. Information regarding the beneficial ownership by executive
officers and directors is derived from information submitted by such executive
officers and directors.
NAME NUMBER OF SHARES (2) PERCENTAGE (3)
-------------------------------------------------------------------------------------------
DIRECTORS
Angel Alvarez-Perez, 3,764,4591 8.11%
Chairman, President and CEO
Jose Julian Alvarez-Bracero4 9,750 *
Annie Astor-Carbonell,
Senior Executive Vice President and CFO 927,386 2.00%
Jorge L. Diaz 8,7005 *
Jose L. Ferrer-Canals 0 *
Jose Menendez-Cortada 4,907 *
Richard Reiss-Huyke 0 *
Jose Teixidor 60,370 *
Sharee Ann Umpierre-Catinchi 33,7506 *
EXECUTIVE OFFICERS:
Luis M. Beauchamp, Senior Executive VP 727,436 1.57%
Aurelio Aleman, Executive VP 211,000 *
Fernando L. Batlle, Executive VP 231,445 *
Randolfo Rivera, Executive VP 159,450 *
Dacio Pasarell, Executive VP 22,000 *
Current Directors and Executive Officers as a group 6,161,654 13.27%
* Represents less than 1%
-------------------
(1) Includes 10,650 shares owned by the spouse of Mr. Alvarez-Perez.
(2) In the case of executive officers, the number of shares includes option
grants that the executive officer may exercise within 60 days. The number
of these options is as follows: Angel Alvarez-Perez, 1,236,000; Annie
Astor-Carbonell, 199,500; Luis Beauchamp, 190,400; Aurelio Aleman,
186,000; Fernando L. Batlle, 147,000; Dacio Pasarell, 12,000; and Randolfo
Rivera, 152,780.
(3) The percentages are based on the shares issued, outstanding and in
circulation as of March 1, 2005, plus all outstanding options that the
executive officers may exercise within sixty days.
(4) Not related to Chairman Angel Alvarez-Perez.
(5) Includes 8,400 shares owned by the spouse of Mr. Diaz.
(6) Excludes 92,000 shares of Preferred Stock held in trust in favor of the
daughters of Ms. Umpierre-Catinchi, for which she is the trustee. Includes
4,500 shares owned jointly with her spouse. Excludes 1,045,535 shares
owned by Ms. Umpierre-Catinchi's father and former director Angel L.
Umpierre, to which Ms. Umpierre-Catinchi disclaims ownership.
2
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTORS OF
FIRST BANCORP, DIRECTORS WHOSE TERMS CONTINUE AND
EXECUTIVE OFFICERS OF THE CORPORATION
The Bylaws of the Corporation provide that the Board of Directors shall
consist of a number of members fixed from time to time by resolution of an
absolute majority of the Board of Directors, provided that the number of
directors shall always be an odd number and not less than five nor more than
fifteen. The Board of Directors currently number nine members. According to the
Corporation's Bylaws, the Board of Directors shall be divided into three classes
as nearly equal in number as possible. The members of each class are to be
elected for a term of three years and until their successors are elected and
qualified. One class is elected each year on a rotating basis. The members of
the Board of Directors of First BanCorp are also the members of the Board of
FirstBank Puerto Rico (the "Bank"). The Corporation's retirement policy for the
Board of Directors states that directors who reach the age of 70 may continue to
serve until the end of the term to which they were elected, but will not be
eligible to stand for reelection. For a detailed description of the Corporate
Governance and Nominating Committee's functions, responsibilities and operations
please refer to the Corporate Governance and Nominating Committee section.
The information presented below regarding the time of service on the Board
of Directors includes terms served on the Board of the Bank.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees listed below. If any
nominee should be unable or unwilling to stand for election at the time of the
Annual Meeting, the proxies will nominate and vote for the replacement nominee
or nominees recommended by the Nominating Committee. At this time, the
Nominating Committee of First BanCorp knows of no reason why any of the persons
listed below may not be able to serve as a director if elected. On February 22,
2005, the Corporate Governance and Nominating Committee approved the inclusion
of the nominees in the Corporation's 2005 proxy card. Ms. Annie Astor-Carbonell
and Messrs. Jorge L. Diaz and Jose Menendez-Cortada were recommended by
non-management directors.
PROPOSAL #1
ELECTION OF DIRECTORS
NOMINEES FOR A THREE-YEAR TERM EXPIRING 2008
ANNIE ASTOR-CARBONELL, 47
SENIOR EXECUTIVE VICE PRESIDENT - CHIEF FINANCIAL OFFICER
Certified Public Accountant. Senior Executive Vice President and Chief Financial
Officer of First BanCorp since March 1997. Executive Vice President and Chief
Financial Officer from 1987 to 1997. Senior Vice President and Comptroller from
1984 to 1987. Prior to joining the Corporation, Senior Auditor at Peat Marwick
Mitchell & Co. Member of the Board of Directors of the Puerto Rico Community
Foundation during 2003 and 2004. Director of Puerto Rico Telephone Company from
January 1993 to March 1999, serving as Chairperson from 1997 to March 1999.
Member of the Board of Trustees of Sacred Heart University of Puerto Rico from
1991 to 1995, serving as Chairperson from 1993 to 1995. Director of First
Federal Finance Corporation d/b/a Money Express, First Leasing and Rental
Corporation, FirstBank Insurance Agency, Inc., First Insurance Agency, Inc.,
FirstMortgage, Inc., First Express, Inc., First Trade, Inc. and FirstBank
Overseas Corp7. Joined the Corporation in 1983. Director since 1995.
JORGE L. DIAZ, 51
Executive Vice President and member of the Board of Directors of Empresas Diaz,
Inc., general contractors; and Executive Vice President and Director of
Betteroads Asphalt Corporation, asphalt pavement manufacturers; Betterecycling
Corporation, recycled asphalt manufacturers; and Coco Beach Development
Corporation, a real estate development company. Member of the Chamber of
Commerce of Puerto Rico, the Association of General Contractors of Puerto Rico
and of the U. S. National Association of General Contractors. Member of the
Board of Trustees of Baldwin School of Puerto Rico and of Cushing Academy,
Boston, Massachusetts. Director since 1999.
JOSE MENENDEZ-CORTADA, 57
Attorney at law. Partner in charge of the corporate and tax divisions of
Martinez-Alvarez, Menendez-Cortada & Lefranc Romero, PSC. General Counsel to the
Puerto Rico Products Association from 1989 to present. General Counsel to the
Board of Bermudez & Longo, S.E. from 1985 to present. Director of Tasis Dorado
School since 2002. Director of Marvel Specialties, Inc. since 1985. Director of
the Homebuilders Association of Puerto Rico since 2002. Director of The Luis A.
Ferre Foundation, Inc., since 2002. Director since 2004.
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(7) First Federal Finance Corporation d/b/a Money Express, First Leasing and
Rental Corporation, First Insurance Agency, Inc., First Trade, First
Mortgage, Inc., First Express, Inc. and FirstBank Overseas Corp. are
wholly owned subsidiaries of FirstBank Puerto Rico; and First Bank
Insurance Agency, Inc. is a wholly owned subsidiary of First BanCorp
Puerto Rico.
3
THE NOMINATING COMMITTEE RECOMMENDS THAT THE ABOVE NOMINEES BE
ELECTED AS DIRECTORS. THE VOTE OF THE HOLDERS OF THE MAJORITY OF THE
TOTAL VOTES ELIGIBLE TO BE CAST AT THE ANNUAL MEETING IS REQUIRED FOR THE
ELECTION OF THE NOMINEES.
DIRECTORS WHOSE TERMS EXPIRE IN 2006
JOSE JULIAN ALVAREZ-BRACERO, 71
January 1, 1999 to present, Executive Director of "Fundacion Cruz Azul de Puerto
Rico, Inc."; President and Chief Executive Officer of La Cruz Azul de Puerto
Rico, a medical insurance provider, from 1995 until retirement on December 31,
1998. Executive Director, La Cruz Azul de Puerto Rico from 1981 to December
1994. Member of the Puerto Rico Chamber of Commerce, serving as President from
1990 to 1991. Established the Interamerican Commerce Council jointly with the
Organization of American States. Secretary General of the Olympic Committee.
President of the Dr. Garcia Rinaldi Foundation, dedicated to funding health
treatment for low-income heart patients. Past member of the Board of Directors
of Banco Central Corporation, from April 1987 to January 1996. Director since
November 1996.
JOSE TEIXIDOR, 51
Chief Executive Officer and President, B. Fernandez & Hnos., Inc. Chairman of
the Board, Pan Pepin Inc.; Chairman of the Board, Baguettes, Inc. President,
Eagle Investment Fund, Inc. President Swiss Chalet Inc.; Member of the Board of
Directors of El Nuevo Dia, Inc.; Member of the Puerto Rico Chamber of Commerce
and of the Industry and Food Distribution Chamber of Commerce. President of the
Distributors and Manufacturers Association; Member of the Wholesalers Chamber of
Puerto Rico. Director since January 1994.
RICHARD REISS-HUYKE, 57
Financial and management consultant specializing in crisis intervention,
financial planning, negotiations, valuations and litigation support since 1979.
Director of Banco Santander Puerto Rico from February 1979 to February 2003, and
Director of Santander BanCorp from May 2000 to February 2003. Employed by
Bacardi Corporation in a number of different capacities, including Chief
Financial Officer, Chief Operating Officer, Vice President and Director from
1973 to 1979. Member of the Board of Directors and the audit committee of Pepsi
Cola Puerto Rico Bottling Company, from February 1996 to July 1998. President of
the Board of Directors of the State Insurance Fund of Puerto Rico. Director
since 2003.
MEMBERS OF THE BOARD CONTINUING IN OFFICE DIRECTORS
WHOSE TERMS EXPIRE IN 2007
ANGEL ALVAREZ-PEREZ, 57
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Chairman, President & Chief Executive Officer of First BanCorp since November
1998. President and Chief Executive Officer of FirstBank since 1990, and
Chairman since August 1999. Executive Vice President from March 1990 to August
1990. Prior to joining the Corporation, attorney at law, specializing in
corporate and commercial law. Partner with the law firm of Vazquez, Vizcarrondo,
Alvarez, Angelet & Gonzalez from 1987 to February 1990. Director of VISA
International from 1996 until 2004. President of the Puerto Rico Bankers
Association from 1997 to 1998. Director of the Federal Home Loan Bank of New
York from December 1993 to January 1995. Chairman and CEO of First Federal
Finance Corporation d/b/a Money Express, First Leasing & Rental Corporation,
FirstBank Insurance Agency, Inc., First Insurance Agency, Inc., First Trade,
Inc., FirstMortgage, Inc., First Express, Inc. and FirstBank Overseas Corp.
Director since 1989.
JOSE L. FERRER-CANALS, 45
Doctor of Medicine in private urology practice. Commissioned a Captain in the
United States Air Force in March 1991 and appointed Chief of Aeromedical Service
of the 482nd Medical Squadron, December 1992. Member American Association of
Clinical Urologists, Alpha Omega Alpha Medical Honor Society since 1986. Member
Hospital Pavia Peer Group Review Committee, Hospital Pavia, San Juan, Puerto
Rico, from 1995 to present. Medical Faculty Representative to Hospital Pavia
from 1996 to 1998. Professor of Flight Physiology and Aerospace Medicine,
InterAmerican University of Puerto Rico. Member of Board of Directors of
American Cancer Society, Puerto Rico Chapter, 1999 to present. Director since
2001.
SHAREE ANN UMPIERRE-CATINCHI, 45
Doctor of Medicine. Assistant Professor at the University of Puerto Rico's
Department of Obstetrics and Gynecology from 1993 to present. Director of the
Division of Gynecologic Oncology of the University of Puerto Rico's School of
Medicine from 1993 to present. Board Certified by the National Board of Medical
Examiners, American Board of Obstetrics and Gynecology and the American Board of
Obstetrics and Gynecology, Division of Gynecologic Oncology. Director since
2003.
4
SENIOR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information with respect to executive officers of the
Corporation and of the Bank who are not directors.
LUIS M. BEAUCHAMP, 62
SENIOR EXECUTIVE VICE PRESIDENT, WHOLESALE BANKING EXECUTIVE AND CHIEF LENDING
OFFICER
Senior Executive Vice President, wholesale banking, from March 1997 to present,
Chief Lending Officer from March 1997 to present. Executive Vice President,
Chief Lending Officer From 1990 to March 1997. General Manager - New York
banking operations, Banco de Ponce from 1988 to 1990. Held the following
responsibilities at the Chase Manhattan Bank, N.A.: Regional Manager for Ecuador
and Colombia operations and corporate finance for Central American operations,
from 1968 to 1988; Country Manager for Mexico from 1986 to 1988; Manager,
wholesale banking in Puerto Rico from 1984 to 1986. Director of First Leasing
and Rental Corporation, First Federal Finance Corp. d/b/a Money Express,
FirstBank Insurance Agency, Inc., First Insurance Agency, Inc., First Express,
Inc., FirstMortgage, Inc. and FirstBank Overseas Corp. Joined the Corporation in
1990.
AURELIO ALEMAN, 46
EXECUTIVE VICE PRESIDENT AND CONSUMER BANKING EXECUTIVE
Executive Vice President, consumer banking, FirstBank, since 1998. From 1996 to
1998, Vice President, CitiBank, N.A., responsible for wholesale and retail
automobile financing and retail mortgage business. Vice President, Chase
Manhattan Bank, N.A., banking operations and technology for corporate capital
markets from 1994 to 1996. President and Director of First Leasing and Rental
Corporation, First Federal Finance Corporation d/b/a Money Express, and of
FirstBank Insurance Agency, Inc., Director of First Insurance Agency, Inc.,
FirstMortgage, Inc. and First Express, Inc. Joined the Corporation in 1998.
FERNANDO L. BATLLE, 38
EXECUTIVE VICE PRESIDENT - RETAIL AND MORTGAGE BANKING EXECUTIVE
Executive Vice President, Sales and Distribution, Mortgage Banking Group and
Virgin Islands operations. Managing Director, Neva Management Corporation, an
investment management firm, from April 1996 to October 1997. Senior
VP-Investments Department and Treasurer of FirstBank from 1994 to April 1996;
and Vice President, Secondary Market at FirstBank, Puerto Rico, from June 1994
to December 1994. Harvard Business School from September 1992, obtaining MBA in
June 1994. Assistant VP, Puerto Rico Home Mortgage, from 1989 to August 1992.
President and Director of First Express, Inc., First Trade, Inc. and First
Insurance Agency, Inc. Director of FirstMortgage, Inc., First Leasing and Rental
Corporation, First Federal Finance Corporation d/b/a Money Express, FirstBank
Insurance Agency, Inc. and FirstBank Overseas Corp. Rejoined the Corporation in
October 1997.
RANDOLFO RIVERA, 51
EXECUTIVE VICE PRESIDENT - COMMERCIAL BANKING EXECUTIVE
Executive Vice President in charge of corporate banking, middle market,
international, government and institutional, structure finance and cash
management areas of FirstBank. Vice President and component executive for local
companies, public sector and institutional markets for Chase Manhattan Bank,
N.A. in Puerto Rico from April 1990 to December 1996. Corporate Finance
Executive in charge of the Caribbean and Central American region for Chase
Manhattan Bank in Puerto Rico from January 1997 to May 1998. Joined the
Corporation in May 1998.
DACIO A. PASARELL, 56
EXECUTIVE VICE PRESIDENT - OPERATIONS AND TECHNOLOGY AND FLORIDA REGION
EXECUTIVE
Held the following positions at Citibank N.A. in Puerto Rico: Vice President,
Retail Bank Manager, from 2000 - 2002; Vice President and Chief Financial
Officer, 1996 to 1998; Vice President, Head of Operations - Caribbean Countries,
1994 - 1996; Vice President, Mortgage and Automobile Financing; Product Manager,
Latin America, 1986 - 1994; Vice President, Mortgage and Automobile Financing
Product Manager for Puerto Rico. President of Citiseguros PR, Inc., 1998 - 2001.
Joined the Corporation in 2002.
OTHER OFFICERS OF THE CORPORATION
CASSAN PANCHAM, 44
FIRST SENIOR VICE PRESIDENT - EASTERN CARIBBEAN REGION EXECUTIVE
First Senior Vice President, Eastern Caribbean Region Executive. Director of
FirstExpress, Inc., First Trade, Inc., and First Insurance Agency, Inc. Held the
following positions at JP Morgan Chase Bank Eastern Caribbean Region Banking
Group: Vice President and General Manager, December 1999 to October 2002; Vice
President, Business, Professional and Consumer Executive, from July 1998 to
December 1999; Deputy General Manager, March 1999; Vice President, Consumer
Executive, from December 1997 to June 1998. Joined the Corporation in 2002.
5
LUIS CABRERA-MARIN, 35
SENIOR VICE PRESIDENT - TREASURY AND INVESTMENTS
Senior Vice President of the Investment and Treasury Department since May 1997.
Director of FirstBank Overseas Corp. Director of Asset Management, Government
Development Bank for Puerto Rico, from August 1995 to May 1997. Investment
Executive, Oriental Financial Services, Inc., Puerto Rico, from August 1994 to
August 1995. Joined the Corporation in 1997.
AIDA GARCIA, 53
SENIOR VICE PRESIDENT - HUMAN RESOURCES
Director of Human Resources since May 1990. Second Vice President, Human
Resources, from 1988 to 1990. Prior to joining the Corporation, Director of
Human Resources, Dr. Federico Trilla Hospital, Carolina, Puerto Rico. Joined the
Corporation in 1988.
EMILIO MARTINO, 54
SENIOR VICE PRESIDENT - CREDIT RISK MANAGEMENT
Senior Vice President and Credit Risk Management for the Corporation since June
2002. Staff Credit Executive for the Corporate and Commercial Banking Business
components since November 2004. First Senior Vice President of Banco Santander
Puerto Rico; Director for Credit Administration, Workout and Loan Review, from
1997 to 2002. Senior Vice President for Risk Area in charge of Workout, Credit
Administration, and Portfolio Assessment for Banco Santander Puerto Rico from
1996 to 1997. Deputy Country Senior Credit Officer for Chase Manhattan Bank
Puerto Rico from 1986 to 1991. Joined the Corporation in 2002.
NAYDA RIVERA-BATISTA, 31
SENIOR VICE PRESIDENT - GENERAL AUDITOR
Certified Public Accountant. Appointed Senior Vice President and General Auditor
on July 2002. Audit Manager at PricewaterhouseCoopers, LLP, from September 1996
to July 2002. Serving as member of the Board of Trustees of the Bayamon Central
University since January 2005. Joined the Corporation in 2002.
ALAN COHEN, 39
SENIOR VICE PRESIDENT - MARKETING AND PUBLIC RELATIONS
Appointed Senior Vice President in January 2005. Prior to joining the
Corporation, Sales Director, Caribbean Market Unit at Pepsico International from
2001 to 2005. Chief Marketing Officer and Senior Vice President for Banco
Santander Puerto Rico from 1999 to 2001. Group Account Director, North Latin
America-McDonald's Group, Country Manager-Dominican Republic, Home Market
Manager-Puerto Rico and Marketing Assistant-Puerto Rico, from 1991 to 1999.
Assistant to the Counselor, Office of the Governor Commonwealth of Puerto Rico,
from 1987 to 1991. Joined the Corporation in 2005.
CARMEN GABRIELLA SZENDREY-RAMOS, 37
SENIOR VICE PRESIDENT - GENERAL COUNSEL - SECRETARY OF THE BOARD OF DIRECTORS
Attorney at Law. Appointed Vice President and General Counsel in October 2000.
Appointed Assistant Secretary of First Bancorp on February 26, 2002, and Senior
Vice President on March 1, 2002. Appointed Secretary of First BanCorp,
FirstBank, First Leasing & Rental Corporation, First Federal Finance Corporation
d/b/a Money Express, FirstBank Insurance Agency, Inc., First Insurance Agency,
Inc., First Trade, Inc., FirstMortgage, Inc., FirstExpress, Inc., and FirstBank
Overseas Corp. Prior to joining the Corporation, Assistant Vice President of the
Legal Division, Banco Popular de Puerto Rico, from 1997 to September 2000.
Private law practice and special projects analyst with law firm Fiddler Gonzalez
& Rodriguez from 1995 to 1997. Joined the Corporation in 2000.
LAURA VILLARINO-TUR, 46
SENIOR VICE PRESIDENT - COMPTROLLER
Certified Public Accountant. Appointed Senior Vice President - Comptroller of
FirstBank in 1987. Vice President, Assistant Comptroller from 1984 to 1987.
Prior to joining the Corporation, staff auditor with Peat Marwick Mitchell & Co.
Joined the Corporation in 1984.
BOARD OF DIRECTORS AND COMMITTEES
The Corporation's Board of Directors is composed of the same members as
the Bank's Board of Directors. During fiscal 2004, the Board of Directors of
First BanCorp held a total of 12 regular meetings and the Board of Directors of
the Bank held 12 regular meetings. Each of the incumbent directors attended in
excess of 75% of the aggregate of the total meetings of the Board of Directors,
and the Board's Committees on which they served.
The Corporation encourages all members of the Board to attend its Annual
Meeting of Stockholders. All of the Corporation's Directors attended the Annual
Meeting of Stockholders held on April 29, 2004.
6
INDEPENDENCE OF THE BOARD OF DIRECTORS
The Board of Directors conducted a self-assessment regarding the
independence of its members on April 2004. The criteria for determining
independence are as defined by the New York Stock Exchange, the Securities and
Exchange Act of 1934 and the Corporation's Independence Principles for
Directors, which are included as Exhibit I to this proxy statement, are
published on the Corporation's web page www.firstbancorppr.com under the
Corporate Governance section and available in print to any shareholder who
requests it through a written communication sent to Carmen Gabriella
Szendrey-Ramos, Esq., Secretary, First BanCorp, 1519 Ponce de Leon Avenue,
Santurce, Puerto Rico 00908. According to the Corporation's Corporate Governance
Standards adopted by the Board of Directors on December 2003 and amended on
December 2004, a substantial majority of the Board shall be composed of
directors who meet the requirements for independence established in the
Corporation's "Independence Principles" which shall incorporate, at a minimum,
those established by the New York Stock Exchange and the Securities and Exchange
Commission. The Board shall make a determination at least annually as to the
independence of each director, in accordance with standards that are disclosed
to the shareholders. The Corporation's Independence Principles for Directors and
Corporate Governance Standards are included as Exhibit II to this proxy
statement, are available on the Corporation's web page, www.firstbancorppr.com
and available in print to any shareholder who requests it through a written
communication sent to Carmen Gabriella Szendrey-Ramos, Esq., Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908. The Board
determined that Messrs. Jose Teixidor, Jose L. Ferrer-Canals, Jorge L. Diaz,
Jose Julian Alvarez-Bracero, Richard Reiss-Huyke, Jose Menendez-Cortada and Ms.
Sharee Ann Umpierre-Catinchi are independent under such criteria. Messrs. Angel
Alvarez-Perez and Ms. Annie Astor-Carbonell are not considered to be
independent. Mr. Angel Alvarez-Perez is not independent because he is the Chief
Executive Officer of the Corporation. Ms. Annie Astor-Carbonell is not
independent because she is the Chief Financial Officer of the Corporation.
Non-management directors met twice during 2004 with Mr. Jose Teixidor serving as
chairman during the meetings of the Board's executive session.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Any shareholder who desires to communicate with the Corporation's Board of
Directors may do so by writing to the Chairman of the Board or to the
non-management directors as a group in care of the Office of the Corporate
Secretary at the Corporation's headquarters, P.O. Box 9146, San Juan, PR,
00908-0146 or by email to directors@firstbancorppr.com or
thenetwork@firstbankpr.com. Communications may also be made by calling the
following toll-free Hotline telephone number 1-877-888-0002. Any concern related
to accounting, internal accounting controls or auditing matters will be referred
to the Chair of the Audit Committee, communications regarding other matters will
be directed to the General Counsel for their proper referral.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation has the following Committees:
Audit Committee, Corporate Governance and Nominating Committee and Compensation
and Benefits Committee.
COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee is composed of three outside
directors who meet the independence criteria established by the New York Stock
Exchange, the Securities and Exchange Act of 1934 and the Corporation's
Independence Principles for Directors of First BanCorp. The Committee is
responsible for the oversight and determination of the proper salary and
incentive compensation of the executive officers and key employees of the
Corporation.
The following are the responsibilities of the Compensation and Benefits
Committee under its charter:
1. Review and approve the annual goals and objectives relevant to
compensation of the CEO, including the balance of the components of
total compensation.
2. Evaluate the performance of the CEO in light of the agreed-upon
goals and objectives and set the compensation level of the CEO based
on such evaluation.
3. Establish and approve the salaries, annual incentive awards and
long-term incentives of the CEO, executive officers and selected
senior executives.
4. Evaluate and approve severance arrangements and employment contracts
for executive officers and selected senior executives.
5. Approve and administer the Corporation's cash- and equity-based
incentive plans for senior executives.
6. Prepare and publish an annual executive compensation report in the
company's proxy statement.
7. Periodically review the operation of the Corporation's overall
compensation program for key employees and evaluate its
effectiveness in promoting shareholder value and company objectives.
Currently, the Committee is composed of Messrs. Jorge L. Diaz, Jose
Teixidor and Jose L. Ferrer-Canals. The Compensation Committee met twice during
2004. A copy of the Committee's charter is available at the Corporation's web
page, www.firstbancorppr.com, and available in print to any shareholder who
requests it through a written communication sent to Carmen Gabriella
Szendrey-Ramos, Esq., Secretary, First BanCorp, 1519 Ponce de Leon Avenue,
Santurce, Puerto Rico 00908.
7
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
Article I, Section 14, of the Corporation Bylaws establishes a Nominating
Committee for selecting the nominees for election as directors at the next
succeeding Annual Meeting of Stockholders, and requires that the Nominating
Committee be composed of no less than three independent directors. All three
members are outside directors who meet the independence criteria established by
the New York Stock Exchange, the Securities and Exchange Act of 1934 and the
Corporation's Independence Principles for Directors of First BanCorp. Messrs.
Jose Teixidor, Jose L. Ferrer-Canals and Jose Julian Alvarez-Bracero are the
current members of the Committee.
The duties of the Corporate Governance and Nominating Committee are as
follows:
1. Develop a set of corporate governance principles applicable to the
Corporation for Board approval, and following such approval,
annually review the principles for continued compliance.
2. Establish the criteria for selecting new directors in accordance
with the requirements of the New York Stock Exchange.
3. Recommend the director nominees for approval by the Board.
4. Have the authority to retain and terminate outside consultants or
search firms to advise the Committee regarding the identification
and review of candidates, including sole authority to approve such
consultant's or search firm's fees, and other retention terms.
5. Review annually the Corporation's Insider Trading Policy to ensure
continued compliance with applicable legal standards and corporate
best practices. In connection with its annual review of the Insider
Trading Policy, the Committee shall also review the list of
executive officers subject to Section 16 of the Securities and
Exchange Act of 1934, as amended, and the list of persons subject to
the trading windows contained in the Policy.
6. Review annually and update, as necessary, this Charter's adequacy
and the performance of the Committee, and receive approval from the
Board of any proposed changes.
7. Consistent with the foregoing, take such actions as deemed necessary
to encourage continuous improvement of, and to foster adherence to,
the Company's corporate governance policies, procedures and
practices at all levels, and to perform other corporate governance
oversight functions as requested by the Board.
The criteria for selecting new directors as well as the desired
qualifications of the members of the Board of Directors are included in the
Corporation's Corporate Governance Standards adopted by the Board of Directors
in December 2003 and reviewed in December 2004. According to the standards, all
directors should be persons of the highest integrity, who abide by exemplary
standards of business and professional conduct. They should possess the skills
and judgment and the commitment to devote the time and attention necessary to
fulfill their duties and responsibilities. Based on these requirements, the
Corporate Governance and Nominating Committee evaluates potential nominees who
are recommended by shareholders, non-management directors, the chief executive
officer or other executive officers. There are no differences in the manner in
which the Committee evaluates nominees for directors based on whether the
nominee is recommended by shareholders.
On November 25, 2003, the Corporation adopted a Code of Conduct for Senior
Financial Officers ("Code"). The Code states the principles to which senior
financial officers must adhere in order to act in a manner consistent with the
highest moral and ethical standards. The Code imposes a duty to avoid conflicts
of interest, comply with the laws and regulations that apply to the Corporation
and its subsidiaries specifically making reference to those regarding
transactions in the Corporation's securities. Neither the Audit Committee nor
the General Counsel received any requests for waivers under the Code. The Code
is included as an exhibit on the Corporation's Annual Report on Form 10-K, is
available at the Corporation's website, www.firstbancorppr.com and is also
available in print to any shareholder who requests it through a written
communication sent to Carmen Gabriella Szendrey-Ramos, Esq., Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908.
The Corporation has also adopted a Code of Ethics that is applicable to
all employees of the Corporation and all of its subsidiaries which purports to
strengthen the ethical culture that prevails in the Corporation. The Code of
Ethics addresses among other matters conflicts of interest, operational norms
and confidentiality of the Corporation's and its customer's information. The
Code of Ethics is included as an exhibit on the Corporation's Annual Report on
Form 10-K, is available at the Corporation's website, www.firstbancorppr.com and
is also available in print to any shareholder who requests it through a written
communication sent to Carmen Gabriella Szendrey-Ramos, Esq., Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908.
No nominations for directors, except those made by the Nominating
Committee, shall be voted upon at the Annual Meeting, unless other nominations
by stockholders are made in writing and delivered to the Secretary of the
Corporation, PO Box 9146, San Juan, PR 00908-0146, at least thirty (30) days
prior to the date of the Annual Meeting. The Corporate Governance and Nominating
Committee has not received recommendations from shareholders for the 2005 Annual
Meeting. Ballots bearing the names of the persons nominated by the Nominating
Committee and by stockholders, if any, will be provided for use at the Annual
Meeting. The Committee met a total of two times during fiscal year 2004. A copy
of the Committee's charter is available at the Corporation's web page,
www.firstbancorppr.com and available in print to any shareholder who requests it
through a written communication sent to Carmen Gabriella Szendrey-Ramos, Esq.,
Secretary, First BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico
00908.
8
AUDIT COMMITTEE
The Audit Committee is composed of three outside directors who meet the
independence criteria established by the New York Stock Exchange, the Securities
and Exchange Act of 1934 and the Corporation's Independence Principles for
Directors of First BanCorp. Each member of our Audit Committee is financially
literate, knowledgeable and qualified to review financial statements. The "audit
committee financial expert" designated by our Board is Mr. Jose Julian
Alvarez-Bracero. For a brief description of Mr. Alvarez-Bracero's qualifying
experience, please refer to the Board of Directors and Committees section of
this proxy. According to a self-assessment performed by the Audit Committee, and
which was presented to the Board during 2005, Mr. Richard Reiss-Huyke also
qualifies as a financial expert. Please refer to the Board of Directors and
Committees section of this proxy for a description of the qualifying experience.
Under the terms of its charter, which was last reviewed and approved by
the Board on February 22, 2005, the Audit Committee represents and assists the
Board in fulfilling its oversight responsibility relating to the integrity of
the Corporation's financial statements and the financial reporting process, the
systems of internal accounting and financial controls, the internal audit
function, the annual independent audit of the Company's financial statements,
the Company's compliance with legal and regulatory requirements and its ethics
program, the independent auditors' qualifications and independence, the
performance of the Company's internal audit function and the performance of its
independent auditors. The Committee also monitors the quality of the
Corporation's assets in order to provide for early identification of possible
problem assets. The Audit Committee Charter is included as Exhibit III to this
proxy statement, is published at the corporation's web page,
www.firstbancorppr.com and available in print to any shareholder who requests it
through a written communication sent to Carmen Gabriella Szendrey-Ramos, Esq.,
Secretary, First BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico
00908. During fiscal 2004, the Audit Committee met a total of 12 times.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
As stated above, the Audit Committee reviews the Corporation's financial
reporting process on behalf of the Board of Directors. Management has the
primary responsibility for the financial statements and the reporting process,
including the systems of internal controls. In this context, the Committee has
met and held discussions with management and the Independent Registered Public
Accounting Firm. Management represented to the Committee that the Company's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles. The Committee has reviewed and discussed the
consolidated financial statements with management and with the Independent
Registered Public Accounting Firm.
In addition, the Committee discussed with the Independent Registered
Public Accounting Firm, PricewaterhouseCoopers LLP, their independence from the
Corporation, the Bank and management. To the extent necessary, the Committee
also reviewed all relationships and services that might bear on the auditors'
objectivity as Independent Registered Public Accounting Firm. The Committee has
received written affirmation from the Independent Registered Public Accounting
Firm as required by the Independence Standards Board Standard No. 1,
Independence Standards with Audit Committees, assuring their independence.
In reliance with the reviews and discussions referred to above, the
Committee has recommended to the Board of Directors that the audited financial
statements be included in the Corporation's Annual Report on Form 10-K for
fiscal year 2004 to be submitted to the Securities Exchange Commission. The
Committee and the Board of Directors have also recommended, subject to
stockholder approval, the reappointment of PricewaterhouseCoopers LLP as the
Independent Registered Public Accounting Firm for the Corporation for fiscal
year 2005.
By the Audit Committee of the Board of Directors:
Jose Julian Alvarez-Bracero
Jose L. Ferrer-Canals
Richard Reiss-Huyke
COMPENSATION OF DIRECTORS
Outside directors of the Corporation do not receive compensation for
service to the Board of Directors of the Corporation; however, they receive
compensation for their service to the Board of Directors of the Bank and its
committees. Outside directors received $1,300 for each meeting of the Board of
the Bank attended during fiscal year 2004. Outside directors also received $950
for attendance at the meetings of the Audit Committee and $550 for attendance at
the meetings of the Credit Committee, Compensation and Benefits Committee and
Corporate Governance and Nominating Committee during fiscal year 2004.
Officers of the Corporation, the Bank or the subsidiaries do not receive
fees or other compensation for service on the boards of directors of the
Corporation, the Bank, the subsidiaries or any of their committees.
The following table sets forth fees paid to outside directors for their
attendance at meetings of the Board of Directors of the Bank and committees
during fiscal 2004.
9
BOARD & COMMITTEE MEETINGS IN 2004
BOARD OF AUDIT CREDIT COMPENSATION NOMINATING TOTAL
NAME DIRECTORS COMMITTEE COMMITTEE COMMITTEE COMMITTEE FEES
------------------------------------------------------------------------------------------------------------------------------------
JUAN ACOSTA REBOYRAS* $ 3,900 N/A $ 1,650 N/A N/A $ 5,550
JOSE JULIAN ALVAREZ-BRACERO $ 14,300 $ 11,400 N/A N/A $ 550 $ 26,250
JORGE L. DIAZ $ 15,600 N/A $ 5,500 $ 1,100 $ 1,100 $ 23,300
JOSE L. FERRER-CANALS $ 15,600 $ 11,400 N/A $ 1,100 $ 550 $ 28,650
JOSE MENENDEZ-CORTADA $ 11,700 N/A $ 3,850 N/A N/A $ 15,550
RICHARD REISS-HUYKE $ 13,000 $ 10,450 N/A N/A N/A $ 23,450
JOSE TEIXIDOR $ 14,300 N/A $ 4,400 $ 1,100 $ 1,100 $ 20,900
SHAREE ANN UMPIERRE-CATINCHI $ 14,300 N/A $ 4,400 N/A N/A $ 18,700
TOTAL $102,700 $ 33,250 $ 20,350 $ 3,300 $ 3,300 $162,900
* Director Juan Acosta Reboyras served on the Board and on the Credit
Committee until April 2004.
COMPENSATION OF EXECUTIVE OFFICERS
The summary compensation table set forth below discloses compensation for
the Chief Executive Officer and the most highly paid executive officers of the
Corporation, the Bank or its subsidiaries who worked with the Corporation, the
Bank or such subsidiaries during any period of such fiscal year and whose total
cash compensation for fiscal 2004 exceeded $100,000 ("Named Executives"). The
table includes bonus payments granted during a meeting of the Compensation and
Benefits Committee held in February 2005 and the regular meeting of the Board of
Directors held in March 2005, which were meant as compensation for performance
of the Named Executives during fiscal 2004.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------------
LONG- TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------------------------------------------------------------------------------------
STOCK
OPTIONS
NAME AND POSITION YEAR SALARY ($) BONUS ($) OTHER ($)(8) GRANTED
---------------------------------------------------------------------------------------------------------------------------------
Angel Alvarez-Perez 2004 1,189,904 1,000,000 11,880 180,000
Chairman, President and 2003 882,909 800,000 10,480 150,000
Chief Executive Officer 2002 825,000 700,000 5,440 225,000
---------------------------------------------------------------------------------------------------------------------------------
Annie Astor-Carbonell 2004 507,230 360,000 11,613 36,000
Senior Executive Vice President and 2003 428,077 300,000 9,994 30,000
Chief Financial Officer 2002 400,000 250,000 5,198 45,000
---------------------------------------------------------------------------------------------------------------------------------
Luis M. Beauchamp
Senior Executive Vice President 2004 571,497 410,000 11,880 38,400
Wholesale Banking Executive and Chief 2003 481,594 350,000 9,745 32,000
Lending Officer 2002 450,000 300,000 5,623 48,000
---------------------------------------------------------------------------------------------------------------------------------
Aurelio Aleman 2004 444,343 400,000 11,663 36,000
Executive Vice President & 2003 374,575 300,000 9,849 30,000
Consumer Banking Executive 2002 350,000 250,000 4,197 45,000
---------------------------------------------------------------------------------------------------------------------------------
Fernando L. Batlle 2004 444,343 400,000 11,808 36,000
Executive Vice President 2003 374,575 300,000 10,597 30,000
Retail & Mortgage Banking Executive 2002 350,000 250,000 5,375 45,000
---------------------------------------------------------------------------------------------------------------------------------
Dacio Pasarell 2004 350,000 150,000 5,880 12,000
Executive Vice President & 2003 313,462 100,000 4,150 0(9)
Operations & Technology Executive 2002 84,231** 50,000* - 0- 10,000
---------------------------------------------------------------------------------------------------------------------------------
Randolfo Rivera 2004 444,343 300,000 11,880 30,000
Executive Vice President 2003 374,575 250,000 10,378 25,000
Commercial Banking Executive 2002 350,000 200,000 5,560 30,000
---------------------------------------------------------------------------------------------------------------------------------
* Bonuses corresponding to 2004 performance were granted in February 2005.
** Represents compensation from September 16, 2002 to December 31, 2002.
(8) Represents the Corporation's pro rata contribution to the executive's
participation in the Defined Contribution Retirement Plan and the
contribution to the executive's life insurance policy premium in excess of
the contribution applicable to all other employees.
(9) Mr. Pasarell was granted 10,000 options upon joining the Corporation in
September 2002.
10
STOCK OPTION PLAN
The Stock Option Plan is intended to encourage optionees to remain in the
employ of the Corporation, the Bank or its subsidiaries and to assist the Board
of Directors and Management in its efforts to attract and to recruit qualified
officers to serve the Corporation, the Bank or its subsidiaries. The stock
subject to such stock options shall be authorized but unissued shares of the
Corporation's $1.00 par value common stock.
The Plan is administered by the Compensation and Benefits Committee (the
"Committee"). Please see the Compensation and Benefits Committee section for
detailed description of its functions and responsibilities. The Committee has
discretion to select which eligible persons will be granted stock options, the
number of shares of common stock that may be subject to such options, whether
stock appreciation rights will be granted for such options and, generally, to
determine the terms and conditions in accordance with the Plan. The Plan also
provides for proportionate adjustments in the event of changes in capitalization
resulting from, among other things, merger, consolidation, reorganization,
recapitalization, reclassification, and stock dividends or splits. All options
must be granted within ten years of the effective dates of the Plan. All options
granted expire on the date specified in each individual option agreement, which
date will not be later than the tenth anniversary of the date the option was
granted. An eligible person may hold more than one option at a time. The
purchase price of options granted shall not be less than the fair market value
of the Corporation's common stock at the date of the grant.
The Plan may be amended at any time by the Board of Directors, subject to
any applicable regulatory limitation or regulatory approval requirement.
However, shareholder approval is required if an amendment increases the number
of shares of common stock that may be subject to options, materially changes the
eligibility criteria, changes the minimum purchase price or increases the
maximum term of the options.
The Plan also provides that no person shall be eligible for a stock option
grant if at the date of such grant such person beneficially owns more than ten
percent (10%) of the outstanding common stock of the Corporation. In addition,
pursuant to the change of control provisions contained in Section 12 of the
Banking Law of Puerto Rico, as amended (7 L.P.R.A. 39), to the extent that by
the exercise of an option a person would acquire the beneficial ownership of
five percent (5%) or more of the issued and outstanding common stock of the
Corporation, such person must obtain the approval of the Commissioner of
Financial Institutions of Puerto Rico prior to the exercise of such option.
Options granted under the Plan are not transferable other than by will or the
laws of descent and distribution. During the life of the optionee, the options
may be exercised only by such optionee. In the event of the death or disability
of an optionee, options may be exercised whether or not exercisable at the time
of such death or disability within one year after the date of such death or
disability, but not later than the date the option would otherwise have expired.
If the employment of an employee is terminated by retirement in accordance
with the Corporation's normal retirement policies or is voluntarily or
involuntarily terminated within one year after the date of a change in control,
the option may be exercised within three months of such occurrence whether or
not the option is exercisable at such time, but not later than the date that the
option would otherwise have expired.
Options may be exercised by payment of the fair market price per share
established in the Option Agreement, as adjusted for any changes in
capitalization, if applicable. Payment may be in cash or at the election of the
optionee, common stock of the Corporation having an aggregate fair market value
equal to or less than the total option price (i.e. purchase price multiplied by
the number of shares bought), plus cash. At the discretion of the Committee, the
optionee could be granted stock appreciation rights with respect to an option.
In April 1987, the Stockholders ratified the Corporation's first Stock
Option Plan (the "1987 Plan"), which expired on January 21, 1997. As of such
expiration date, no new options have been granted under the expired 1987 Plan.
On April 19, 1997, the Stockholders ratified a new Stock Option Plan (the "1997
Plan"), for which 2,898,704 shares were set aside. As of December 31, 2004,
there were a total of 2,394,030 shares subject to unexercised options granted
under the 1997 Plan. Except to the extent limited by the Puerto Rico Internal
Revenue Code of 1994, as amended, all outstanding options are now exercisable.
11
OPTION/GRANTS IN LAST FISCAL YEAR
The table set forth below discloses the information regarding the stock
options granted to the Corporation's Chief Executive Officer and the most highly
paid executives during 2004.
SHARES
UNDERLYING VALUE
OPTIONS/SAR % GRANTED IN EXERCISE EXPIRATION GRANT DATE
NAME GRANTED 2004 FISCAL 2004 BASE PRICE ($) DATE PRESENTVALUE*
----------------------------------------------------------------------------------------------------------------------------------
Angel Alvarez-Perez 180,000 38.64% $ 42.90 02/20/14 $ 1,640,700
Annie Astor-Carbonell 36,000 7.73% $ 42.90 02/20/14 $ 328,140
Luis M. Beauchamp 38,400 8.24% $ 42.90 02/20/14 $ 350,016
Aurelio Aleman 36,000 7.73% $ 42.90 02/20/14 $ 328,140
Fernando L. Batlle 36,000 7.73% $ 42.90 02/20/14 $ 328,140
Dacio Pasarell 12,000 2.58% $ 42.90 02/20/14 $ 109,380
Randolfo Rivera 30,000 6.43% $ 42.90 02/20/14 $ 273,450
*As permitted by SEC rules he Black/Scholes pricing model was used to
value these stock options. It should be noted that this model is only one method
of valuing options and First BanCorp's use of the model is not an endorsement of
its accuracy. The actual value of the options may be significantly different,
and the value actually realized, if any, will depend upon the excess of the
market value of the common stock over the option exercise price and the time of
exercise. Options granted on February 20, 2004, were granted at $42.90. All
options were granted at the market price of First BanCorp's common stock on the
day of the grant. All options were granted for a term of ten years and, except
to the extent limited by law, are exercisable at any time during the term of the
option. In calculating the value of such option, the following assumptions were
made:
o Estimated time until exercise of 3.28 years for all options granted
during fiscal 2004.
o The risk-free rate, which was obtained from U.S. Federal Government
obligations maturing close to the estimated time until exercise of
the option is 2.362% for options granted on February 20, 2004.
o Volatility assumption is the historical price volatility of the
corporation's closing stock price as measured by standard deviation
of day-to-day logarithmic price changes. The volatility for the
options granted on 02/20/04 is 28.556%.
o Based on the above assumptions, the theoretical value of the stock
options granted on 2/20/04 is $9.115. These valuations do not take
into account the non-transferability provisions of the Stock Option
Plan.
12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The table set forth below discloses the aggregated options/SAR exercises
and value realized and the number of unexercised options and the value thereof
with regards to the Named Executives as of December 31, 2004, under the Plan.
All presently unexercised options are exercisable at this time, except to the
extent limited by the Puerto Rico Internal Revenue Code of 1994, as amended.
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS OPTIONS AT
NAME ON EXERCISE REALIZED AT 12/31/04 12/31/04*
----------------------------------------------------------------------------------------------------------------------------------
Angel Alvarez-Perez 0 0 1,236,000 $53,193,730.50
Annie Astor-Carbonell 48,000 $1,474,224.00 199,500 $ 8,599,756.80
Luis M. Beauchamp 84,000 $2,906,751.90 158,400 $ 7,590,616.40
Aurelio Aleman 45,000 $1,103,990.50 176,000 $ 7,531,190.10
Fernando L. Batlle 96,000 $3,256,365.60 198,000 $ 5,646,418.50
Dacio Pasarell 10,000 $ 366,700.00 12,000 $ 247,320.00
Randolfo Rivera 11,220 $ 292,000.50 152,780 $ 6,015,354.30
* The value of unexercised in-the-money options in the table above represents
the difference between the grant price of the option and the market price as of
December 31, 2004, multiplied by the number of in-the-money options outstanding
as of that date. At the close of business on December 31, 2004, the closing
price of First BanCorp's common stock was $63.51. The average price at which the
Named Executives could have exercised their outstanding options as of such date
was $10.417 for options granted on 11/25/97; $18.0625 for options granted on
5/26/98; $17.7083 for options granted on 6/23/1998; $17.333 for options granted
on 11/17/98; $13.0833 for options granted on 11/23/99; $14.8750 for options
granted on 12/13/00; $18.6867 for options granted on 2/26/02; $25.990 for
options granted on 10/29/02; $29.55 for options granted on 2/25/03 and $42.90
for options granted on 02/20/04. As of 12/31/04, the Named Executives held
unexercised options to purchase shares as follows: Angel Alvarez-Perez: 156,000
granted on 11/25/97, 150,000 granted on 11/17/98, 150,000 granted on 11/23/99,
225,000 granted on 12/13/00; 225,000 granted on 02/26/02, 150,000 granted on
2/25/03 and 180,000 granted on 2/20/04. Annie Astor-Carbonell: 24,000 granted on
11/17/98, 24,000 granted on 11/23/99 and 40,500 granted on 12/13/00, 45,000
granted on 02/26/02, 30,000 granted on 2/25/03 and 36,000 granted on 2/20/04.
Luis M. Beauchamp: 27,000 granted on 11/17/98, 45,000 granted on 12/13/00,
48,000 granted on 02/26/02, 32,000 granted on 2/25/03 and 38,400 granted on
2/20/04. Aurelio Aleman: 18,000 granted on 11/17/98, 18,000 granted on 11/23/99,
39,000 granted on 12/13/00, 45,000 granted on 02/26/02, 30,000 granted on
2/25/03 and 36,000 granted on 2/20/05. Fernando L. Batlle: 36,000 granted on
12/13/00, 45,000 granted on 02/26/02, 30,000 granted on 2/25/03 and 36,000
granted on 2/20/04. Randolfo Rivera: 60,000 granted on 5/26/98, 7,780 granted on
12/13/00; 30,000 granted on 02/26/02, 25,000 granted on 2/25/03 and 30,000
granted on 02/20/04. Dacio Pasarell: 12,000 granted on 02/20/04. All options
were granted at an exercise price equal to the market price of First BanCorp's
common stock on the date of grant. The Stock Option Plan provides for automatic
adjustments in the number and price of options due to changes in capitalization
resulting from stock dividends or splits.
EMPLOYMENT AGREEMENTS
The following table discloses information regarding the employment
agreements of the Named Executives.
EFFECTIVE CURRENT TERM OF
NAME DATE BASE SALARY YEARS
-------------------------------------------------------------------------------
Angel Alvarez-Perez 05-14-98 $1,500,000 4
Annie Astor-Carbonell 04-14-98 $531,300 4
Luis M. Beauchamp 05-14-98 $598,400 4
Aurelio Aleman 02-24-98 $465,300 4
Fernando L. Batlle 05-14-98 $465,300 4
Randolfo Rivera 05-26-98 $465,300 3
The agreements provide that on each anniversary of the date of commencement of
each agreement the term of such agreement shall be automatically extended for an
additional one (1) year period beyond the then-effective expiration date, unless
either party receives written notice that the agreement shall not be further
extended. Notwithstanding such contract, the Board of Directors may terminate
the contracting officer at any time; however, unless such termination is for
cause, the contracting officer will continue to be entitled to the compensation
provided in the contract for the remaining term thereof. "Cause" is defined to
include personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease and desist order or any material breach of any
provision of the Employment Agreement.
In the event of a "change in control" of the Corporation during the term
of the employment agreements, the executive shall be entitled to receive a lump
sum severance payment equal to his or her then current base annual salary plus
the highest cash performance bonus received by the executive in any of the four
(4) fiscal years prior to the date of the change in control, multiplied by the
term of years
13
for which such contracting officer's employment agreement was to be effective on
the date into which it was entered. The severance payment that each of the
contracting officers would have received if his or her agreement had been
terminated as of December 31, 2004, pursuant to a change in control was: Angel
Alvarez-Perez, $8,759,616; Annie Astor-Carbonell, $3,452,924; Luis M. Beauchamp,
$3,925,984; Aurelio Aleman, $3,377,372; Fernando L. Batlle, $3,177,372, Randolfo
Rivera, $2,977,372.
Pursuant to the employment agreements, a "change in control" shall be
deemed to have taken place if a third person, including a group as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial
owner of shares of the Corporation having 25% or more of the total number of
votes which may be cast for the election of directors of the Corporation, or
which, by cumulative voting, if permitted by the Corporation's Charter or
Bylaws, would enable such third person to elect 25% or more of the directors of
the Corporation; or if, as a result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sales of assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Corporation before such transactions shall
cease to constitute a majority of the Board of the Corporation or any successor
institution.
DEFINED CONTRIBUTION RETIREMENT PLAN
The Corporation has a Defined Contribution Retirement Plan under Section
165(e) of Puerto Rico's Internal Revenue Act (10) that provides participating
employees with retirement, death, disability and termination of employment
benefits in accordance with their participation. The Plan complies with the
"Employee Retirement Income Security Act of 1974 (ERISA)" and the "Retirement
Equity Act of 1984 (REA)." The Corporation's employees are eligible to
participate in the Plan after completing one year of service, and there is no
age requirement. An individual account is maintained for each participant and
benefits are paid based solely on the amount of each participant's account.
Participating employees may defer from 1% to 10% of their annual salary,
up to a maximum of $8,000, into the Plan on a pre-tax basis as employee salary
savings contributions. Each year the Corporation will make a contribution equal
to 25% of each participating employee's salary savings contribution; however, no
match is provided for salary savings contributions in excess of 4% of
compensation. At the end of the fiscal year, the Corporation may, but is not
obligated to make, additional contributions in an amount determined by the Board
of Directors; however, the maximum of any additional contribution in any year
may not exceed 15% of the total compensation of all eligible employees
participating in the Plan and no basic monthly or additional annual matches need
be made on years during which the Corporation incurs a loss.
In fiscal 2004, the total contribution to the Plan by the Corporation
amounted to $501,273 which funds were distributed on a pro rata basis among all
participating employees. The table below sets forth the total of the
Corporation's contribution during fiscal 2004 to the Named Executives of the
Corporation who participate in the Plan.
Angel Alvarez-Perez $ 6,000
Annie Astor-Carbonell $ 5,733
Luis M. Beauchamp $ 6,000
Aurelio Aleman $ 5,783
Fernando L. Batlle $ 5,928
Randolfo Rivera $ 6,000
DEFERRED COMPENSATION PLAN
The Corporation has a Deferred Compensation Plan available to Executive
Officers whereby the executives may defer a portion of their salary. These
deferred amounts, if any, are included in the amounts disclosed in the summary
compensation table. The Corporation does not match any of the deferred amounts.
The deferred amounts are deposited in a Trust that is administered by the Bank.
The Corporation does not guarantee a return on the investment of these funds.
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
The Executive Compensation Program is administered by the Compensation and
Benefits Committee (the "Committee"), which is composed of three (3) independent
directors selected by the Board of Directors. For further description of the
Committees' duties and responsibilities please refer to the Compensation and
Benefits Committee Section of this Proxy Statement. During the meeting held on
fiscal 2004 the Committee was composed of Messrs. Jose Teixidor, Jorge L. Diaz
and Jose L. Ferrer-Canals.
-------------------
(10) Section 165 of Puerto Rico's Internal Revenue Act is similar to Section
401(k) of the Federal Internal Revenue Code.
14
EXECUTIVE COMPENSATION POLICY
The Corporation operates in a highly competitive industry where the
quality, creativity and professionalism of its executives are of utmost
importance to the success, profitability and growth of the institution. The
underlying philosophy of any effective compensation program must be to retain
and recruit top executives who will make significant contributions to the
promotion and achievement of the institutional goals, which will ultimately
result in enhanced shareholder value. Accordingly, the Corporation has put in
place a compensation policy that is designed to recruit, retain and reward key
executives who demonstrate the capacity to lead the Corporation in achieving its
business objectives.
OBJECTIVES
o Stimulate behavior that will lead to the attainment of the
Corporation's goals.
o Provide additional short-term and long-term variable compensation to
enable implementation of a pay-for-performance package.
In making their determinations for fiscal 2004, the Compensation Committee
in accordance with its charter reviewed the Corporation's performance as a whole
and the performance of the Named Executives in relation to the performance goals
that have been set forth. The Committee also took into consideration the
performance of the Corporation in comparison with the performance of other
Corporations in the community as well as the performance of the Corporation in
relation to other institutions of similar size and complexity of loan portfolio
and other assets. On the basis of their review, the Committee took the following
actions with regard to the Named Executives:
PERFORMANCE BONUS
The Executive Compensation Program provides for a performance bonus plan
whose purpose is to maximize the efficiency and effectiveness of the operation
of the Corporation. The Committee has designated the CEO and the Executive Vice
Presidents of the Corporation as plan participants. The performance bonus is
linked to the performance of the Corporation as a whole as well as the
achievement of individual goals by each of the Named Executives. Based on the
Corporation's performance and the performance of each of the Named Executives in
fiscal 2004, the Committee recommended, and on February 20, 2005, the Board
granted, the following performance bonuses to the following Named Executives:
Luis M. Beauchamp, Senior Executive Vice President, $410,000; Annie
Astor-Carbonell, Senior Executive Vice President, $360,000; Aurelio Aleman,
Executive Vice President, $400,000; Fernando L. Batlle, Executive Vice
President, $400,000; Randolfo Rivera, Executive Vice President, $300,000 and
Dacio Pasarell, Executive Vice President, $150,000.
LONG-TERM COMPENSATION
The Executive Compensation Plan also contemplates long-term incentive
compensation in the form of stock options under the Corporation's Employee Stock
Option Plan (the "SOP"). The Compensation Committee has discretion to select
which of the eligible persons will be granted stock options, whether stock
appreciation rights will be granted with such options, and generally to
determine the terms and conditions of such options in accordance with the
provisions of the SOP. During fiscal 2004 the following 10-year options were
granted to the Named Executives: Luis M. Beauchamp, Senior Executive Vice
President, 38,400; Annie Astor-Carbonell, Senior Executive Vice President,
36,000; Aurelio Aleman, Executive Vice President, 36,000; Fernando L. Batlle,
Executive Vice President, 36,000; Randolfo Rivera, Executive Vice President
30,000; Dacio Pasarell, Executive Vice President 12,000.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Angel Alvarez-Perez has served as President and Chief Executive
Officer of FirstBank since September 1990 and as Chairman, President and CEO of
First Bancorp since November 1998. During fiscal 2004, the annual salary of Mr.
Angel Alvarez-Perez was $1,100,000. On February 20, 2005, the Committee granted
the President a cash bonus of $1,000,000 corresponding to performance in fiscal
2004. During fiscal 2004, the President received 180,000 stock options. The
compensation granted was determined in accordance with the Corporation's
compensation policy described above. In making such determination, the Committee
took into consideration the Corporation's performance during 2004, including the
continued significant increase in First BanCorp's earnings, continued control of
operating expenses, and the achievement of goals that are geared to ensure the
Corporation's continued trend of earnings growth that has produced excellent
value for First BanCorp's stockholders.
15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has served as an officer
or employee of the Corporation, the Bank or of a subsidiary of the Corporation
or of the Bank.
[Graph showing performance of common stock
from December 31, 1998, to December 31, 2004]
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
First BanCorp $ 100 $ 70 $ 82 $ 100 $ 121 $ 216 $ 350
S&P 500 $ 100 $ 121 $ 111 $ 98 $ 76 $ 98 $ 109
S&P Supercom
Bank Index $ 100 $ 84 $ 97 $ 96 $ 96 $ 123 $ 141
PERFORMANCE OF FIRST BANCORP COMMON STOCK
The stock performance graph set forth above compares the cumulative total
shareholder return of the Corporation's common stock from December 31, 1998, to
December 31, 2004, with cumulative total return of the S&P 500 Market Index. The
S&P 500 Market Index is a broad index that includes a wide variety of issuers
and industries representative of a cross section of the market. The S&P
Supercomposite Banks Index is a capitalization-weighted index that is composed
of 96 members.
OTHER EMPLOYMENT BENEFITS
The Corporation's executive officers are provided hospitalization and
medical insurance under group plans on generally the same basis as other
full-time employees of the Corporation. The Corporation offers to all executive
officers a life insurance policy of $1,000,000. In addition, the Corporation
offers all of its employees a contributory medical and hospitalization plan and
non-contributory long-term disability coverage, which will pay 60% at such
employees' salaries up to a maximum of $6,000 per month until age 65. The plans
are provided through Servicios de Seguros de Salud, Inc. (SSS) a Blue Cross and
Blue Shield Association of Puerto Rico.
BUSINESS TRANSACTIONS BETWEEN FIRSTBANK OR ITS SUBSIDIARIES
AND EXECUTIVE OFFICERS OR DIRECTORS
During fiscal 2004, directors and officers and persons or entities related
to such directors and officers were customers of and had transactions with the
Corporation and/or its subsidiaries. All such transactions were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time they were made for
comparable transactions with other persons who are not insiders, and did not
either involve more than the normal risk of uncollectibility or present other
unfavorable features.
SECTION 16(A) COMPLIANCE
Based on reports filed with the Securities Exchange Commission and
information obtained from officers and directors of the Corporation, the
Corporation is not aware of any failure by its executive officers or directors
to file on a timely basis any reports required to be filed by Section 16(a) of
Securities Exchange Act of 1934 with respect to beneficial ownership of shares
of the Corporation except for the following instances: Director Sharee Ann
Umpierre-Catinchi filed two late Form 4s which corresponded to additional
acquisitions of shares. Both transactions have been notified in their
corresponding Forms 4 and 5. Director Jose Teixidor filed one late Form 4
corresponding to the disposition of shares and Mr. Randolfo Rivera filed one
late Form 4 corresponding to the disposition of shares.
AUDIT FEES
Total fees paid to the external auditors for the years ended December 31,
2003 and 2004, were $342,500 and $851,850, respectively, distributed as follows:
16
o Audit fees for the audit of financial statements and internal
control over financial reporting: $307,500 in 2003 and $828,650 in
2004.
o Audit-related fees: $33,500 in 2003 and $21,500 in 2004
audit-related fees, which consisted mainly of the audits of employee
benefit plans.
o Other fees: $1,500 in 2003 and $1,700 in 2004 related to fees paid
for access to an accounting and auditing electronic library.
o Tax fees: none in 2003 and 2004.
The Audit Committee has established controls and procedures that require
the pre-approval of all audit, audit-related and permissible non-audit services
provided by the independent auditor in order to ensure that the rendering of
such services does not impair the auditor's independence. The Audit Committee
may delegate to one or more of its members the authority to pre-approve any
audit, audit-related or permissible non-audit services, and the member to whom
such delegation was made must report any pre-approval decisions at the next
scheduled meeting of the Audit Committee. Under the pre-approval policy, audit
services for the Corporation are negotiated annually. In the event that any
additional audit services not included in the annual negotiation, audit-related
or permissible non-audit services are required by the Corporation, an amendment
to the existing engagement letter or an additional proposed engagement letter
should be obtained from the auditor and evaluated by the Audit Committee or the
member(s) of the Audit Committee with authority to pre-approve auditor services.
During 2004 all auditors' fees were pre-approved by the Audit Committee.
PROPOSAL #3
RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The firm of PricewaterhouseCoopers LLP has been selected as the
Independent Registered Public Accounting Firm of the Corporation for the fiscal
year ending December 31, 2005. The firm will be represented at the Annual
Meeting and representatives will have the opportunity to make a statement, if
they so desire, and also will be available to respond to appropriate questions.
The affirmative vote of a majority of the total votes eligible to be cast at the
Annual Meeting is required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICE-WATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM OF THE CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005.
THE VOTE OF THE HOLDERS OF THE MAJORITY OF THE TOTAL VOTES ELIGIBLE TO BE CAST
AT THE ANNUAL MEETING IS REQUIRED FOR THE APPROVAL OF THIS PROPOSAL.
STOCKHOLDER PROPOSAL
Any proposal that a stockholder wishes to have presented at the next
Annual Meeting of the Corporation must be received at the main offices of First
BanCorp not later than December 20, 2005. If such proposal is in compliance with
all of the requirements of Rule 14a-8 of the Securities Exchange Act of 1934
(the "Act"), it will be included in the Proxy Statement and set forth in the
form of proxy issued for the next Annual Meeting of Stockholders. All such
proposals should be sent by certified mail, return receipt requested, to the
attention of the Secretary.
OTHER MATTERS
Management of the Corporation does not know of any business to be brought
before the Annual Meeting other than that specified herein. However, if any
other matters are properly brought before the Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the person voting the proxies.
The cost of solicitation of proxies will be borne by the Corporation.
First BanCorp has retained the services of Morrow & Co., a professional proxy
solicitation firm, to assist in the solicitation of proxies. The fee arranged
with Morrow & Co. is in the amount of $3,500 plus reimbursement for
out-of-pocket expenses. The Corporation will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy materials to the beneficial owners of First BanCorp's common
stock. In addition to solicitation by mail, directors, officers and employees of
the Corporation may solicit proxies personally or by telephone without
additional compensation.
ANNUAL REPORT
Stockholders have been sent a copy of the Corporation's Annual Report to
Stockholders for the fiscal year ended December 31, 2004, along with the Proxy
Statement. Such Annual Report is not part of the proxy solicitation material.
Upon receipt of a written request, the Corporation will furnish to any
stockholder, without charge, a copy of the Corporation's Annual Report on Form
10-K under Section 13 of the Securities Exchange Act of 1934 and the list of
exhibits thereto required to be filed with the Securities Exchange Commission
under applicable law. Such written request must set forth a good faith
representation that the person making the request is, as of March 14, 2005, the
owner of record of shares of common stock entitled to vote at the Annual Meeting
and should be directed to Carmen Gabriella Szendrey-Ramos, Secretary, First
BanCorp, 1519 Ponce de Leon Avenue, Santurce, Puerto Rico 00908.
BY ORDER of the Board of Directors
March 22, 2005.
17
EXHIBIT I
INDEPENDENCE PRINCIPLES FOR DIRECTORS OF
FIRST BANCORP
A majority of the directors will be independent directors under the New
York Stock Exchange (NYSE) rules. The board has determined that seven of First
BanCorp's nine directors are independent.
First BanCorp will seek to have a minimum of six independent directors at
all times.
To be considered independent and as directed by the NYSE rules, the board
must determine that a director does not have any direct or indirect material
relationship with First BanCorp. The board has established the following
guidelines to assist it in determining director independence in accordance with
the rule:
A director is not independent if:
a. He or she is an employee.
b. His or her immediate family member(1) is or has been within the last
three years, an executive officer of the Corporation.
c. He or she receives, or whose immediate family member receives or has
received during any twelve-month period within the last three years,
more that $100,000 per year in direct compensation from the
Corporation, excluding director and committee fees and pension,
provided such compensation is not contingent in any way on continued
service.
d. He or she has not been deemed independent by the full board of
directors.
e. He or she or an immediate family member is a current partner of a
firm who serves as an internal or external auditor of the
Corporation.
f. He or she is an employee of a firm who serves as an internal or
external auditor of the Corporation.
g. He or she is has an immediate family member who is an employee of a
firm who serves as an internal or external auditor of the
Corporation and who participates in the Corporation's audit,
assurance or tax compliance (excluding tax planning).
h. He or she or an immediate family member is currently or has been
within the past three years (but no longer is) a partner in the firm
who serves as an internal or external auditor of the Corporation and
personally worked on the Corporation's audit during that time.
i. He or she is employed or has been employed within the last three
years, or whose immediate family member is employed or has been
employed within the last three years as an executive officer of
another company where any of the Corporation's present executives
serve or served within the same period of time on that company's
compensation committee.
j. He or she is an executive officer or an employee or has been within
the last three years, or whose immediate family member is an
executive officer or has been within the last three years, of a
company that makes payments to, or receives payments from, the
listed company for property or services in an amount which, in any
single fiscal year, exceeds the greater of $1 million, or 2% of such
other company's consolidates gross revenues. Except that donations
to tax exempt organizations will not be considered "payments" for
purposes of this provision.
k. He or she regularly acts as a consultant, advisor or in a similar
capacity in matters that concern or impact corporate strategic
decisions, structure or planning.
l. He or she regularly acts as management's consultant, advisor or in a
similar capacity regarding matters related to the operation of the
corporation's business.
A director of the Corporation will not fail to be independent under these
Principles solely as a result of lending relationships, deposit or other banking
relationships between the Corporation and its subsidiaries, on the one hand, and
a company with which the director is affiliated by reason of being a director,
officer or a significant shareholder, on the other provided that:
a. such relationships are in the ordinary course of business of the
Corporation and are on substantially the same terms as those
prevailing at the time for comparable transactions with
non-affiliated person; and
b. with respect to such extensions of credit by the Corporation or its
subsidiaries to such company or its subsidiaries:
1. Such extensions of credit have been made in compliance with
applicable law, including Regulation O of the Board of
Governors of the Federal Reserve and the provisions of the
Puerto Rico Banking Law applicable to loans to directors and
officers.
2. No event of default has occurred under the extension of
credit.
-------------------
1 The amended regulations define Immediate Family Member as a person's
spouse, parents, children, siblings, mothers and fathers-in-law, sons and
daughters-in-law, and anyone (other that domestic employees) who shares
such person's home.
18
EXHIBIT II
FIRST BANCORP
CORPORATE GOVERNANCE STANDARDS
December 21, 2004
COMPOSITION OF THE BOARD AND QUALIFICATIONS OF DIRECTORS
1 Pursuant to the Corporation's By-Laws, the Board has fixed the
number of directors to nine. A substantial majority of the Board
shall be composed of directors who meet the requirements for
independence established in the Corporation's "Independence
Principles" which shall incorporate, at a minimum, those established
by the New York Stock Exchange and the Securities and Exchange
Commission. The Board shall make a determination at least annually
as to the independence of each director, in accordance with
standards that are disclosed to the shareholders.
2. All directors should be persons of the highest integrity, who abide
by exemplary standards of business and professional conduct.
Directors should possess the skills and judgment, and the commitment
to devote the time and attention, necessary to fulfill their duties
and responsibilities.
3. Directors are elected by the shareholders at the Annual Meeting of
Shareholders for a three-year term. In the event of vacancies on the
Board, the Board may elect directors to serve until the next Annual
Meeting.
4. A director shall notify the Chair of the Governance Committee prior
to accepting an invitation to serve on the board of another company
or a not-for-profit organization. The Governance Committee shall
evaluate and advise the Board whether, by reason of conflicts in
regular meeting schedules or business or competitive considerations,
simultaneous service on the other board may impede the director's
ability to fulfill his or her responsibilities to the Corporation.
5. The Board believes that the judgment as to the tenure of an
individual director should rest on an assessment by the Governance
Committee of his or her performance and contributions to the Board.
Accordingly, there is no predetermined limit on the number of
three-year terms to which a director may be re-elected prior to his
or her 70th birthday. As established in the Corporation's by-laws,
no person may stand for election to the Board after age 70.
RESPONSIBILITIES OF DIRECTORS
6. The Board believes that the primary responsibilities of directors
are to exercise their business judgment in good faith, to act in
what they reasonably believe to be in the best interest of all
shareholders, and to ensure that the business of the Corporation is
conducted so as to further the long-term interests of its
shareholders.
7. Directors shall receive and review appropriate materials in advance
of meetings relating to matters to be considered or acted upon by
the Board and its committees. Directors are expected to prepare for,
attend and participate actively and constructively in all meetings
of the Board and of the committees on which they serve.
8. Directors are expected to become and remain well informed about the
business, performance, operations and management of the Corporation;
general business and economic trends affecting the Corporation; and
principles and practices of sound corporate governance.
9. In consultation with the Governance Committee, management shall
provide programs for director orientation and information about
programs for continuing director education in areas of importance to
the Corporation.
10. A director shall not participate in the discussion of or decision on
any matter in which he or she has a personal, business or
professional interest other than his or her interest as a
shareholder of the Corporation. Directors shall promptly inform the
Chairman of the Board regarding any actual or potential conflict of
interest.
COMPOSITION OF BOARD COMMITTEES
11. The Board shall establish such standing committees as it deems
appropriate and in the best interests of the Corporation. The
current standing committees of the Board are the Audit Committee,
the Compensation and Benefits Committee and the Corporate Governance
and Nominating Committee.
19
12 The Governance Committee shall recommend and the Board shall
appoint, annually and as vacancies or new positions occur, the
members of the standing committees and the committee chairs. The
Governance Committee shall annually review the membership of the
committees, taking account of both the desirability of periodic
rotation of committee members and the benefits of continuity and
experience in committee service.
13. All members of the Audit, Corporate Governance and Nominating and
Compensation Committees shall meet the Corporation's Independence
Principles and the independence requirements set forth in the of the
New York Stock Exchange.
BOARD OPERATIONS
14 The Board shall hold at least 6 regular meetings per year, and shall
meet more frequently as circumstances may require.
15. The Governance Committee shall recommend and the Board shall
appoint, annually and as vacancies occur, a Chairman of the Board.
16. The Board will conduct an executive session of non-management
directors (as defined by the New York Stock Exchange) at regular
intervals.
17. Directors shall have unfettered access to management and employees
of the Corporation and to its inside and outside counsel and
auditors. Executive officers and other senior management are
expected to be present at Board meetings at the invitation of the
Board.
18. Directors who are deemed independent by the board shall meet at
regularly scheduled sessions without management at leas twice a
year. The chairman of the independent director's Committee shall be
elected by the full board.
19. The Board shall establish methods by which interested parties may
communicate directly with them or with the non-management directors
as a group, and shall cause such methods to be disclosed in the
proxy statement.
20. The Board and each standing committee will conduct an annual self
evaluation in order to assess the adequacy and effectiveness of the
Board and each committee on which they serve.
COMMITTEE OPERATIONS
21. Each standing committee of the Board will have a charter that is
approved by the Board and sets forth the purposes, duties and
responsibilities of the committee. At least annually, the members of
each committee will evaluate the adequacy of the committee's
charter, and will conduct an evaluation of its performance and
effectiveness in fulfilling the duties and responsibilities set
forth in the charter.
22. The chair of each committee shall report to the Board following each
meeting of the committee on the principal matters reviewed or
approved by the committee and its recommendations as to actions to
be taken by the Board. All directors will receive copies of all
minutes of standing committee meetings.
OVERSIGHT OF THE BUSINESS AND MANAGEMENT
23. The Board shall approve a Code of Business Conduct and Ethics
applicable to directors, officers and employees of the Corporation,
which prohibits retaliation in any form against anyone who reports
suspected violations. Any amendments to the Code or waivers of its
provisions for directors or executive officers shall be approved by
the Audit Committee and promptly disclosed to shareowners.
EXECUTIVE COMPENSATION
24. With input from the full Board, the Compensation and Benefits
Committee shall annually approve the corporate goals and objectives
relevant to the compensation of the Chief Executive Officer. The CEO
will report to the Board on progress in achieving these goals. The
Compensation and Organization Committee shall determine the CEO's
compensation based on an evaluation of his or her performance in
light of these goals and objectives.
25. All equity-based compensation plans shall be approved by the
shareholders.
26. Incentive compensation plans will be based on principles and
policies for executive compensation recommended by the Compensation
and Benefits Committee and approved by the Board.
20
BOARD COMPENSATION
27. Board Compensation - Directors who are Company employees shall not
be compensated for their services as Directors. The Board of
Directors shall determine the form and amount of compensation for
non-management Directors. The Board shall be sensitive to questions
of independence that may be raised where Director fees and expenses
exceed customary levels for companies of comparable scope and size.
SUCCESSION PLANNING
28. As part of the annual officer evaluation process, the Compensation
and Benefits Committee works with the CEO to plan for CEO
succession, as well as to develop plans for interim succession for
the CEO in the event of an unexpected occurrence. Succession
planning may be reviewed more frequently by the Board as it deems
warranted.
SHAREHOLDERS
29. All shareholders have equal voting rights.
30. The Board will develop, approve and annually review Corporate
Governance Standards that are disclosed each year to shareowners in
the proxy statement.
COMMUNICATING CONCERNS TO THE BOARD OF DIRECTORS
Any person who has a concern about First BanCorp's governance, corporate
conduct, business ethics or financial practices may communicate that concern to
the Board of Directors. Concerns may be submitted in writing to the Chairman of
the Board or to the non-management directors as a group in care of the Office of
the Corporate Secretary at the Corporation's headquarters, or by email to
directors@firstbancorppr.com or thenetwork@firstbankpr.com. Concerns may also be
communicated to the Board by calling the following toll-free Hotline telephone
number 1-877-888-0002 Any concern relating to accounting, internal accounting
controls or auditing matters will be referred to the Chair of the Audit
Committee.
First BanCorp policy prohibits the Corporation and any of its employees
from retaliating in any manner, or taking any adverse action, against anyone who
raises a concern or helps to investigate or resolve it. However, anyone who
prefers to raise a concern in a confidential, anonymous manner may do so by
calling the Hotline.
Concerns communicated to the Board will be addressed through the
Corporation's Third Party Complaint Procedures. Depending upon the nature of the
concern, it may be referred to the Corporation's Internal Audit Department, the
Legal or Finance Department, or other appropriate departments. As they deem
necessary or appropriate, the Chairman of the Board or the Chair of the Audit
Committee may direct that certain concerns communicated to them be presented to
the Audit Committee or the full Board, or that they receive special treatment,
including the retention of outside counsel or other outside advisors.
The status of concerns communicated to the Board will be reported
periodically to the Chairman and/or the Chair of the Audit Committee, as
appropriate.
21
EXHIBIT III
FIRST BANCORP
AUDIT COMMITTEE CHARTER
I. PURPOSE
The Audit Committee is appointed by the Board of Directors (the "Board")
to assist in monitoring (1) the integrity of the financial statements of the
Corporation, (2) the compliance by the Corporation with legal and regulatory
requirements, (3) the objectivity and performance of the Corporation's internal
and external auditors, and (4) the Independent Registered Public Accounting
Firm's qualifications and independence.
II. COMPOSITION
The Audit Committee shall be composed of a minimum of three Directors, as
determined by the Board. The members of the Audit Committee shall meet the
requirements of the Corporation's Independence Principles for Directors and the
independence and experience requirements of the Securities and Exchange
Commission (the "Commission") and the New York Stock Exchange. At least one
member of the Audit Committee shall be a financial expert as defined by the
Commission. Audit Committee members shall not simultaneously serve on the audit
committees of more than two other public companies. The members of the Audit
Committee shall be appointed by the full Board. The qualifications and
independence of the Audit Committee members shall be evaluated annually by the
Board.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Corporation shall provide for appropriate funding, as determined
by the Audit Committee, for payment of compensation to the Independent
Registered Public Accounting Firm for purpose of rendering or issuing an audit
report and to any advisors employed by the Audit Committee. The Audit Committee
may request any officer or employee of the Corporation or the Corporation's
outside counsel or Independent Registered Public Accounting Firm to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
III. RESPONSIBILITIES
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review and discuss with management and the Independent Registered
Public Accounting Firm significant financial reporting issues and
judgment made in connection with the preparation of the
Corporation's financial statements, including any significant
changes in the Corporation's selection or application of accounting
principles, any significant deficiencies as to the adequacy of the
Corporation's internal controls and any special steps adopted in
light of material control deficiencies and the adequacy of
disclosures about changes in internal control over financial
reporting.
3. Meet to review and discuss with management and the Independent
Registered Public Accounting Firm the annual audited financial
statements and quarterly financial statements, including disclosures
made in management's discussion and analysis, and recommend to the
Board whether the audited financial statements should be included in
the Corporation's Form 10-K.
4. Review and discuss with management (including senior internal audit
executive) and the Independent Registered Public Accounting Firm the
Corporation's internal controls report and the Independent
Registered Public Accounting Firm's attestation of the report prior
to the filing of the Corporation's Form 10-K.
5. Review and discuss with management and the Independent Registered
Public Accounting Firm the Corporation's quarterly financial
statements prior to the filing of the Form 10-Q, including the
results of the Independent Registered Public Accounting Firm's
review of the quarterly financial statements.
6. Discuss with management and the Independent Registered Public
Accounting Firm the Corporation's, as appropriate, earnings press
releases, as well as financial information and earnings guidance
provided to analysts and rating agencies.
7. Review disclosures made to the Audit Committee by the Corporation's
CEO and CFO during their certification process for the Form 10-K and
Form 10-Q about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and
any fraud involving management or other employees who have a
significant role in the Corporation's internal controls.
22
8. Meet periodically with management to review the Corporation's major
financial risk exposures and the steps management has taken to
monitor and control such exposures.
9. Recommend to the Board the appointment of the Independent Registered
Public Accounting Firm, which firm is ultimately accountable to the
Audit Committee and the Board. The Audit Committee shall have the
sole authority and responsibility to select, evaluate and if
necessary replace the The Independent Registered Public Accounting
Firm. The Audit Committee shall pre-approve all audit engagement and
all permitted non-audit services (including fees and terms thereof)
to be performed for the Corporation by its Independent Registered
Public Accounting Firm.
10. Obtain and review a report from the Independent Registered Public
Accounting Firm at least annually regarding:
(a) The Independent Registered Public Accounting Firm's internal
quality-control procedures.
(b) Any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one
or more independent audits carried out by the firm, and any
steps taken to deal with any such issues.
(c) All relationships between the Independent Registered Public
Accounting Firm and the Corporation.
11. Evaluate the qualifications, performance and independence of the
Independent Registered Public Accounting Firm, including considering
whether the auditor's quality controls are adequate and the
provision of permitted non-audit services is compatible with
maintaining the auditor's independence, taking into account the
opinions of management and internal auditors. The Audit Committee
should present its conclusions with respect to the Independent
Registered Public Accounting Firm to the Board.
12. Ensure the rotation of the audit partners as required by law.
13. Review and discuss quarterly reports from the Independent Registered
Public Accounting Firm on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the Independent Registered Public Accounting
Firm.
(c) The effect of regulatory and accounting initiatives, as well
as off-balance sheet structures, on the financial statements
of the Corporation.
(d) Other material written communication between the Independent
Registered Public Accounting Firm and management, such as any
management letter issued, or proposed to by issued, by the
audit firm and the Corporation's response to that letter.
(e) Any schedule of unadjusted differences.
14. Meet with the Independent Registered Public Accounting Firm prior to
the audit to review the planning and staffing of the audit.
15. Obtain from the Independent Registered Public Accounting Firm
assurance that Section 10A(b) of the Security and Exchange Act of
1934 has not been implicated.
16. Discuss with the Independent Registered Public Accounting Firm the
matters required to be discussed by Statement on Auditing Standards
No. 61 relating to the conduct of the audit.
17. Review with the Independent Registered Public Accounting Firm any
problems or difficulties they may have encountered. Such review
should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to required information.
(b) Any changes required in the planned scope of the internal
audit.
23
(c) Any communications between the audit team and the audit firm's
national office respecting auditing or accounting issues
presented by the engagement team.
(d) Review the internal audit department responsibilities, budget
and staffing.
18. Recommend to the Board the appointment and replacement of the senior
internal auditing executive.
19. Review the significant reports to management prepared by the
internal auditing department and management's responses.
20. Prepare the report required by the rules of the Commission to be
included in the Corporation's annual proxy statement.
21. Obtain reports from management, the Corporation's senior internal
auditing executive and the Independent Registered Public Accounting
Firm that the Corporation's subsidiary and foreign affiliates, if
any, are in conformity with applicable legal requirements and the
Corporation's Code of Conduct. Review reports and disclosures of
insider and affiliated party transactions. Advise the Board with
respect to the Corporation's policies and procedures regarding
compliance with applicable laws and regulations and with the
Corporation's Code of Conduct.
22. Review with the Corporation's General Counsel legal matters that may
have a material impact on the financial statements or the
Corporation's compliance policies and internal controls.
23. Discuss with management and the Independent Registered Public
Accounting Firm any correspondence with regulators or governmental
agencies and any published reports that raise material issues
regarding the Company's financial statements or accounting policies.
24. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
25. Recommend to the Board policies for the Corporation's hiring of
employees or former employees of the Independent Registered Public
Accounting Firm.
26. Meet periodically with the chief financial officer, the senior
internal auditing executive and the Independent Registered Public
Accounting Firm in separate executive sessions, and have such other
direct and independent interaction with such persons from time to
time as the members of the Audit Committee deem appropriate.
27. The Audit Committee shall meet as often as it determines, but not
less frequently than quarterly.
28. The Audit Committee shall make regular reports to the Board.
29. The Audit Committee shall conduct and present to the Board an annual
performance evaluation of the Committee.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. These are the responsibilities of management and the Independent
Registered Public Accounting Firm.
24
REVOCABLE PROXY
FIRST BANCORP
1519 Ponce De Leon Avenue
San Juan, Puerto Rico
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
The undersigned hereby appoints Jose Julian Alvarez, Angel Alvarez Perez and
Jose Teixidor-Mendez as Proxies, each with the power to appoint a substitute,
and hereby authorizes them to vote as designated on the reverse, all shares of
common stock of First BanCorp held of record by the undersigned on March 14,
2005 at the Annual Meeting of Stockholders to be held on April 28, 2005 or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSALS 1, 2, AND 3.
(Continued, and to be dated and signed on the reverse side)
FIRST BANCORP
P.O. BOX 11089
NEW YORK, N.Y. 10203-0089
| |
|__| \/ DETACH PROXY CARD HERE \/
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MARK. SIGN. DATE AND RETURN
THE PROXY CARD PROMPTLY |X|
USING THE ENCLOSED ENVELOPE. VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK
1. To elect the following directors for a term of three years: FOR AGAINST ABSTAIN
Annie Astor-Carbonell, Jorge L. Diaz, Jose Menendez Cortada 2. To ratify the appointment |_| |_| |_|
of PricewaterhouseCoopers
LLP as the Corporations
FOR ALL NOMINEES |_| WITHHOLD AUTHORITY |_| *EXCEPTIONS |_| Independent accountants for
listed above to vote for all fiscal year 2005.
nominees listed above
3. To consider any other |_| |_| |_|
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, matters that may be
MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE properly brought up for
PROVIDED BELOW). consideration at the Annual
Meeting
*Exceptions
--------------------------------------------------------------
To change your address, please mark this box. |_|
To include any comments, please mark this box. |_|
__________________________________________________
| |
S C A N L I N E |
|__________________________________________________|
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please sign in full corporate name
by President or other authorized officer. If a partnership, please ------------------------------ -----------------------
sign in partnership name by authorized person. Date Share Owner sign here Co-Owner sign here