FIRST BANCORP
1519 PONCE DE LEON AVENUE
SAN JUAN, PUERTO RICO 00908
(787) 729-8200
NOTICE OF MEETING AND PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 29, 2004
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 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 29, 2004, 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 elect one (1) director for a term of one year or until his successor
has been duly qualified.
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's independent accountants for fiscal year 2004.
4. 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 16, 2004, as the record date for the
determination of stockholders entitled to notice of, and to vote at, the
meeting.
San Juan, Puerto Rico
March 26, 2004
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.
[THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
FIRST BANCORP
1519 PONCE DE LEON AVENUE
SANTURCE, PUERTO RICO 00908
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 2004
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 29, 2004, 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
26, 2004.
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, 2003; 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 16, 2004, 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 40,143,535 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: Election of one director for a one
year term, and Proposal 3: Ratification of Appointment of Independent
Accountants, 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, 2004, 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.
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BENEFICIAL OWNERS OF 5% OR MORE:
Name NUMBER OF SHARES PERCENTAGE
------------------------------------- ---------------- ----------
FMR Corp
82 Devonshire Street
Boston, MA 02109 3,992,400 9.9697%
Angel Alvarez-Perez
Chairman, President and CEO
First BanCorp
1519 Ponce de Leon Avenue
Santurce, PR 00908 3,784,459(1,2) 8.9924%(3)
Garity & Co., Capital Management
1414 Banco Popular Center
Hato Rey, Puerto Rico 00918 2,725,368 6.8057%
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.
Information on the number of shares is provided by each executive officer
and director.
NAME NUMBER OF SHARES(2) PERCENTAGE(3)
--------------------------------------------------------------------------------
DIRECTORS
Angel Alvarez-Perez,
Chairman, President and CEO 3,784,459(1) 8.9924%
Juan Acosta-Reboyras 2,600 *
Jose Julian Alvarez-Bracero(4) 9,750 *
Annie Astor-Carbonell,
Senior Executive Vice President and CFO 901,386 2.1418%
Jorge L. Diaz 8,700(5) *
Jose L. Ferrer-Canals -0- *
Jose A. Menendez Cortada 4,853 *
Richard Reiss-Huyke -0- *
Jose Teixidor 65,370 *
Sharee Ann Umpierre 96,500(6) *
EXECUTIVE OFFICERS: -0-
Luis M. Beauchamp, Senior Executive VP 689,036 1.6372%
Aurelio Aleman, Executive VP 185,000 *
Fernando L. Batlle, Executive VP 207,945 *
Randolfo Rivera, Executive VP 134,000 *
Dacio Pasarell, Executive VP 10,000 *
Current Directors and Executive Officers
as a group 6,099,599 14.4935%
* Represents less than 1%
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(1) Includes 10,650 shares owned by the spouse of Mr. Alvarez.
(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, 1,056,000; Annie
Astor-Carbonell, 211,500; Luis Beauchamp, 236,000; Aurelio Aleman, 185,000;
Fernando L. Batlle, 207,000; Dacio Pasarell, 10,000; and Randolfo Rivera
134,000.
(3) The percentages are based on the shares issued, outstanding and in
circulation as of March 1, 2004, 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) Includes 92,000 shares held in trust in favor of the daughters of Ms.
Umpierre, for which she is the trustee, and 4,500 shares owned jointly with
her spouse. Excludes 1,041,785 shares owned by Ms. Umpierre's father and
former director Angel L. Umpierre, to which Ms. Umpierre disclaims
ownership.
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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 number of members of the Board of Directors is currently 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. In order to comply with the class number requirements
established by the Corporation's By Laws, the Nominating Committee is
recommending that, given the resignation of a director whose term was to expire
during 2005, three directors be elected for a three-year term and one director
be elected for a one-year term. This will result in having three classes of
directors of three directors each. 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 and 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 20, 2004,
the Corporate Governance and Nominating Committee approved the inclusion of the
nominees in the Corporation's 2004 proxy card. Ms. Sharee Ann Umpierre Catinchi
was recommended by a shareholder; Messrs. Angel Alvarez-Perez, Jose L. Ferrer,
and Jose Menendez Cortada were recommended by non-management directors.
PROPOSAL #1
ELECTION OF DIRECTORS
NOMINEES FOR A THREE-YEAR TERM EXPIRING 2007
ANGEL ALVAREZ-PEREZ, 56
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 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, First Bank Insurance Agency, Inc., FirstBank Insurance Agency VI,
Inc., FirstTrade, Inc., FirstMortgage, Inc., First Express, Inc. and FirstBank
Overseas Corp.(7) Director since 1989.
JOSE LUIS FERRER-CANALS, 44
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
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.
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(7) First Federal Finance Corporation d/b/a Money Express, First Leasing and
Rental Corporation, FirstBank Insurance Agency VI, Inc., FirstTrade, 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.
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NOMINEE FOR A ONE-YEAR TERM EXPIRING 2005
JOSE MENENDEZ CORTADA, 56
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 since 2002. Director of the Luis A. Ferre
Foundation, Inc., 2002.
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.
MEMBERS OF THE BOARD CONTINUING IN OFFICE
DIRECTORS WHOSE TERMS EXPIRE IN 2005
ANNIE ASTOR-CARBONELL, 46
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 since 2003. 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,
First Bank Insurance Agency, Inc., FirstBank Insurance Agency VI, Inc.,
FirstMortgage, Inc., First Express, Inc., FirstTrade, Inc. and FirstBank
Overseas Corp. Joined the Corporation in 1983. Director since 1995.
JORGE L. DIAZ, 50
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.
DIRECTORS WHOSE TERMS EXPIRE IN 2006
JOSE JULIAN ALVAREZ-BRACERO, 70
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, 50
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, 56
Director of Banco Santander Puerto Rico from February 1979 to February 2003, and
Director of Santander BanCorp from May 2000 to February 2003. Financial and
management consultant specializing in crisis intervention, financial planning,
negotiations, valuations and litigation support since 1979. 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.
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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, 61
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., FirstBank Insurance Agency VI, Inc., First
Express, Inc., FirstMortgage, Inc. and FirstBank Overseas Corp. Joined the
Corporation in 1990.
AURELIO ALEMAN, 45
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 & Rental
Corporation, First Federal Finance Corporation d/b/a Money Express, and of
FirstBank Insurance Agency, Inc., Director of FirstBank Insurance Agency VI,
Inc., FirstMortgage and First Express. Joined the Corporation in 1998.
FERNANDO L. BATLLE, 37
EXECUTIVE VICE PRESIDENT AND RETAIL AND MORTGAGE BANKING EXECUTIVE
Executive Vice President, sales and distribution, Mortgage Banking Group and
FirstBank's 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 FirstMortgage, First Express, First Trade, Inc.,
and FirstBank Insurance Agency VI, Inc. Director of First Leasing & 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, 50
EXECUTIVE VICE PRESIDENT AND 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, 55
EXECUTIVE VICE PRESIDENT AND OPERATIONS AND TECHNOLOGY 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, 43
FIRST SENIOR VICE PRESIDENT - EASTERN CARIBBEAN REGION EXECUTIVE
First Senior Vice President, Eastern Caribbean Region Executive. Director of
FirstExpress, Inc., First Trade, Inc., and FirstBank Insurance Agency VI, 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.
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LUIS CABRERA-MARIN, 34
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, 52
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, 53
SENIOR VICE PRESIDENT - CREDIT RISK MANAGEMENT
Senior Vice President and Credit Risk Management for the Corporation since June
2002. 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.
NAYDA RIVERA-BATISTA, 30
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.
JOSIANNE ROSSELLO, 49
SENIOR VICE PRESIDENT - MARKETING AND PUBLIC RELATIONS
Appointed Senior Vice President in January 1997. Vice President, Marketing
Director, Banco Santander de Puerto Rico from November 1994 to January 1997.
Marketing Manager, Sprint United Telephone, Orlando, Florida from October 1993
to October 1994. President, Citicorp Card Services Puerto Rico, from 1985 to
1990. Joined the Corporation in January 1997.
CARMEN GABRIELLA SZENDREY-RAMOS, 36
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., FirstBank Insurance
Agency VI, Inc., FirstTrade, 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, 45
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 2003, the Board of Directors of First
BanCorp held a total of ten regular meetings and two special meetings and the
Board of Directors of the Bank held 12 regular meetings and one extraordinary
meeting. 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, 2003.
INDEPENDENCE OF THE BOARD OF DIRECTORS
The Board of Directors conducted a self-assessment regarding the
independence of its members on November 2003. 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. According to the Corporation's Corporate Governance Standards adopted
by the Board of Directors on December 2003, 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 available on the
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Corporation's web page, www.firstbancorppr.com. The Board determined that
Messrs. Jose Teixidor, Jose L. Ferrer, Jorge L. Diaz, Jose Julian Alvarez,
Richard Reiss and Ms. Sharee Ann Umpierre are independent under such criteria.
Messrs. Angel Alvarez-Perez, Juan Acosta 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. Mr. Juan Acosta is not independent because he regularly acts as a
consultant and advisor in matters that concern or impact corporate strategic
decisions, structure or planning related to the operation of the Corporation's
business, and acting in such capacity impedes a determination of independence
according to the Corporation's Independence Principles for its directors.
Non-management directors will meet at regularly scheduled meetings. Mr. Jose
Teixidor has been elected by the Board to serve 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. The Compensation Committee met once during 2003. A copy of
the Committee's charter is available at the Corporation's web page,
www.firstbancorppr.com.
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, Jorge L. Diaz and Jose Julian Alvarez are the current members of
the Committee.
7
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. 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.
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 did not receive recommendations from shareholders for the 2004 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 2003. A copy
of the Committee's charter is available at the Corporation's web page,
www.firstbancorppr.com.
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 will be presented to the Board during 2004, 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 December 16, 2003, 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 I to this
proxy statement and published at the corporation's web page,
www.firstbancorppr.com. During fiscal 2003, the Audit Committee met a total of
eight times.
8
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 accountants.
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 accountants.
In addition, the Committee discussed with the independent accountants,
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 accountants. The Committee has received written affirmation from the
independent accountants 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 10K for fiscal
year 2003 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
accountants for the Corporation for fiscal year 2004.
By the Audit Committee of the Board of Directors:
Jose Julian Alvarez
Jose Luis 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 $1,200 for each meeting of the Board of the Bank
attended during fiscal year 2003. Outside directors also received $900 for
attendance at the meetings of the Audit Committee and $500 for attendance at the
meetings of the Credit Committee, Compensation Committee and Nominating
Committee during fiscal year 2003.
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 2003.
BOARD & COMMITTEE MEETINGS IN 2003
BOARD OF AUDIT CREDIT COMPENSATION NOMINATING TOTAL
NAME DIRECTORS COMMITTEE COMMITTEE COMMITTEE COMMITTEE FEES
Juan Acosta Reboyras* $14,400.00 $2,700.00 $1,500.00 N/A N/A $18,600.00
Jose Julian Alvarez $14,900.00 $7,200.00 0 0 0 $22,100.00
Rafael Bouet** $9,600.00 0 $4,000.00 $500.00 $500.00 $14,600.00
Jorge Diaz $13,200.00 0 $3,500.00 0 $1,000.00 $17,700.00
Jose L. Ferrer-Canals $14,900.00 $7,200.00 0 0 $500.00 $22,600.00
Hector M. Nevares*** $3,600.00 0 $1,000.00 $500.00 $500.00 $5,600.00
Richard Reiss-Huyke $8,900.00 $4,500.00 0 0 0 $13,400.00
Jose Teixidor $13,200.00 0 $3,000.00 $500.00 $500.00 $17,200.00
Sharree Ann Umpierre $3,600.00 0 0 0 0 $3,600.00
TOTAL $96,300.00 $21,600.00 $13,000.00 $1500.00 $3,000.00 $135,400.00
* Director Juan Acosta Reboyras served on the Audit Committee until April
2003.
** Director Rafael Bouet served until September 2003.
*** Director Hector M. Nevares served until April 2003.
9
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 2003 exceeded $100,000 ("Named Executives"). The
table includes Bonus payments granted in February 2004 that were meant as
compensation for performance of the Named Executives during fiscal 2003.
Summary Compensation Table
--------------------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------------------------------------------------------------------------------------------
STOCK
OPTIONS
NAME AND POSITION YEAR SALARY ($) BONUS ($) OTHER ($)(8) GRANTED
--------------------------------------------------------------------------------------------------------------------------------
Angel Alvarez-Perez 2003 882,909 800,000 10,480 150,000
Chairman, President and 2002 825,000 700,000 5,440 225,000
Chief Executive Officer 2001 825,000 600,000 5,120 0
--------------------------------------------------------------------------------------------------------------------------------
Annie Astor-Carbonell 2003 428,077 300,000 9,994 30,000
Senior Executive Vice President and 2002 400,000 250,000 5,198 45,000
Chief Financial Officer 2001 400,000 200,000 4,773 0
--------------------------------------------------------------------------------------------------------------------------------
Luis M. Beauchamp 2003 481,594 350,000 9,745 32,000
Senior Executive Vice President 2002 450,000 300,000 5,623 48,000
Wholesale Banking Executive and 2001 450,000 250,000 5,135 0
Chief Lending Officer
--------------------------------------------------------------------------------------------------------------------------------
Aurelio Aleman 2003 374,575 300,000 9,849 30,000
Executive Vice President & 2002 350,000 250,000 4,197 45,000
Consumer Banking Executive 2001 350,000 250,000 4,817 0
--------------------------------------------------------------------------------------------------------------------------------
Fernando Batlle 2003 374,575 300,000 10,597 30,000
Executive Vice President 2002 350,000 250,000 5,375 45,000
Retail & Mortgage Banking Executive 2001 350,000 200,000 5,100 0
--------------------------------------------------------------------------------------------------------------------------------
Dacio Pasarell 2003 313,462 100,000* 4,150 0
Executive Vice President & 2002 84,231** 50,000 -0- 10,000
Operations & Technology Executive 2001 N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------------
Randolfo Rivera 2003 374,575 250,000 10,378 25,000
Executive Vice President 2002 350,000 200,000 5,560 30,000
Commercial Banking Executive 2001 350,000 150,000 5,095 0
--------------------------------------------------------------------------------------------------------------------------------
* Bonuses corresponding to 2003 performance were granted in February 2004.
** Represents compensation from September 16, 2002 to December 31, 2002.
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.
----------
(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'.
10
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 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, 2003,
there were a total of 2,291,500 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.
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 2003.
SHARES VALUE
UNDERLYING GRANT DATE
OPTIONS/SAR % GRANTED IN EXERCISE EXPIRATION PRESENT
NAME GRANTED 2003 FISCAL 2003 BASE PRICE ($) DATE VALUE*
-----------------------------------------------------------------------------------------------------------------
Angel Alvarez-Perez 150,000 41.67% $25.63 02/25/13 $1,191,150
Annie Astor-Carbonell 30,000 8.33% $25.63 02/25/13 $238,230
Luis M. Beauchamp 32,000 8.89% $25.63 02/25/13 $254,112
Aurelio Aleman 30,000 8.33% $25.63 02/25/13 $238,230
Fernando Batlle 30,000 8.33% $25.63 02/25/13 $238,230
Dacio Pasarell 0(9) 0 $25.63 02/25/13 0
Randolfo Rivera 25,000 6.94% $25.63 02/25/13 $198,525
*As permitted by SEC rules, the 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 25, 2003, were granted at $25.63. 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 3.288 years for all options
granted during fiscal 2003.
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 2.092% for options granted on February 25, 2003.
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 02/25/03 is 46.048%.
o Based on the above assumptions, the theoretical value of the stock
options granted on 2/25/03 is 7.941. These valuations do not take
into account the non-transferability provisions of the Stock Option
Plan.
----------
(9) Mr. Pasarell was granted 10,000 options upon joining the Corporation in
September 2002.
11
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, 2003, 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 12/31/03 12/31/03*
----------------------------------------------------------------------------------------------------
Angel Alvarez-Perez 0 0 1,056,000 $ 24,182,620.50
Annie Astor-Carbonell 0 0 211,500 $ 4,922,800.80
Luis M. Beauchamp 0 0 236,000 $ 5,532,535.30
Aurelio Aleman 10,000 $255,942 185,000 $ 4,131,770.60
Fernando Batlle 0 0 207,000 $ 4,729,944.10
Dacio Pasarell 0 0 10,000 $ 135,600.00
Randolfo Rivera 20,000 $281,300 134,000 $ 2,732,099.00
*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, 2003, multiplied by the number of in-the-money options
outstanding as of that date. At the close of business on December 31, 2003, the
closing price of First BanCorp's common stock was $39.55. 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; $12.7917 for options
granted on 2/24/98; $18.0625 for options granted on 5/26/98; $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 and $29.55 for options granted on 2/25/03. As of
12/31/03, 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 and 150,000 granted on 2/25/03. Annie Astor-Carbonell,
48,000 granted on 11/25/97, 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 and 30,000
granted on 2/25/03. Luis M. Beauchamp, 57,000 granted on 11/25/97, 27,000
granted on 11/17/98, 27,000 granted on 11/23/99, 45,000 granted on 12/13/00,
48,000 granted on 02/26/02 and 32,000 granted on 2/25/03. Aurelio Aleman, 35,000
granted on 2/24/98, 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 and 30,000 granted on
2/25/03. Fernando Batlle 30,000 granted on 11/25/97, 30,000 granted on 2/24/98,
18,000 granted on 11/17/98; 18,000 granted on 11/23/99, 36,000 granted on
12/13/00, 45,000 granted on 02/26/02 and 30,000 granted on 2/25/03. Randolfo
Rivera, 60,000 granted on 5/26/98, 19,000 granted on 12/13/00; 30,000 granted on
02/26/02 and 25,000 granted on 2/25/03. Dacio Pasarell, 10,000 granted on
10/29/02. 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.
CURRENT
NAME EFFECTIVE DATE BASE SALARY TERM OF YEARS
-----------------------------------------------------------------------------------
Angel Alvarez-Perez 05-14-98 $1,100,000 4
Annie Astor-Carbonell 04-14-98 $483,000 4
Luis M. Beauchamp 05-14-98 $544,000 4
Aurelio Aleman 02-24-98 $423,000 4
Fernando Batlle 05-14-98 $423,000 4
Randolfo Rivera 05-26-98 $423,000 4
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
12
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 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, 2003, pursuant to a change in control was: Angel
Alvarez-Perez, $6,728,000; Annie Astor-Carbonell, $2,912,308; Luis M. Beauchamp,
$3,326,376; Aurelio Aleman, $2,698,300; Fernando Batlle, $2,698,300, Randolfo
Rivera, $2,498,300.
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 2003, the total contribution to the Plan by the Corporation
amounted to $786,215 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 2003 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 $6,183
Aurelio Aleman $5,782
Fernando Batlle $5,928
Randolfo Rivera $6,132
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 2003 the Committee was composed of Messrs. Hector M. Nevares, Rafael
Bouet and Jose Teixidor.
----------
(10) Section 165 of Puerto Rico's Internal Revenue Act is similar to Section
401(k) of the Federal Internal Revenue Code.
13
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 2003, 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 2003, the Committee recommended, and on February 26, 2004, the Board
granted, the following performance bonuses to the following Named Executives:
Luis M. Beauchamp, Senior Executive Vice President, $350,000; Annie
Astor-Carbonell, Senior Executive Vice President, $300,000; Aurelio Aleman,
Executive Vice President, $300,000; Fernando Batlle, Executive Vice President,
$300,000; Randolfo Rivera, Executive Vice President, $250,000 and Dacio
Pasarell, Executive Vice President, $100,000.
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 2003 the following 10-year options were
granted to the Named Executives: Luis M. Beauchamp, Senior Executive Vice
President, 32,000; Annie Astor-Carbonell, Senior Executive Vice President,
30,000; Aurelio Aleman, Executive Vice President, 30,000; Fernando Batlle,
Executive Vice President, 30,000; Randolfo Rivera, Executive Vice President
25,000.
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 2003, the annual salary of Mr. Angel
Alvarez-Perez was $882,909. On February 26, 2004, the Committee granted the
President a cash bonus of $800,000 corresponding to performance in fiscal 2003.
During fiscal 2003, the President received 150,000 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 2003, including a
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.
14
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.
[The following table represents a line chart in the printed piece.]
12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
FIRST BANK $ 100 $ 179 $ 125 $ 146 $ 180 $ 218 $ 387
S&P 500 $ 100 $ 129 $ 156 $ 143 $ 126 $ 98 $ 126
S&P SUPERCOM
BANKS INDEX $ 100 $ 103 $ 86 $ 100 $ 99 $ 99 $ 126
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, 1997, to
December 31, 2003, 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 2003, 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 filed one late initial report corresponding to her holdings in the
Corporation's shares, which was later informed in a Form 5, former Director
Rafael Bouet filed three late Form 4s corresponding to the disposition of shares
and Mr. Dacio Pasarell filed two late reports corresponding to the acquisition
of preferred shares.
15
AUDIT FEES
Total fees paid to the external auditors for the years ended December 31,
2002 and 2003, were $355,400 and $342,500, respectively, distributed as follows:
o Audit fees for the audit of financial statements: $271,300 in 2002 and
$307,500 in 2003
o Audit-related fees: $84,100 in 2002, which include $75,600 of work
performed in conjunction with the acquisition of JP Morgan Chase Virgin
Islands operations and $8,500 for audit of the employee benefit plan.
During 2003 audit-related fees, which consisted mainly of the audits of
employee benefit, plans were $33,500.
o Other fees: none in 2002, and $1,500 in 2003 related to fees paid for
access to an accounting and auditing electronic library
o Tax fees: none in 2002, nor in 2003
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 2003 all auditors' fees were pre-approved by the Audit Committee.
PROPOSAL #3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has been selected as the independent
Certified Public Accountants of the Corporation for the fiscal year ending
December 31, 2004. 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 PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS OF THE
CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004. 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, 2004. 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.
16
ANNUAL REPORT
Stockholders have been sent a copy of the Corporation's Annual Report to
Stockholders for the fiscal year ended December 31, 2003, prior to 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 16, 2004, 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 26, 2004
17
EXHIBIT 1
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 auditor'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 serve simultaneously 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 Board shall evaluate the
qualifications and independence of the Audit Committee members annually.
The Audit Committee shall have the authority 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 auditor 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 auditor 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. Discuss with management and the independent auditor 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.
3. Review and discuss with management and the independent auditor 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. Discuss with management and the independent auditor, as appropriate,
the Corporation's earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies.
5. 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.
6. 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.
7. Recommend to the Board the appointment of the independent auditor,
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
independent auditor. 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
auditor.
18
8. Obtain and review a report from the independent auditor at least
annually regarding:
a) The independent auditor'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 auditor and the
Corporation.
9. Review and discuss quarterly reports from the independent auditors 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 auditor.
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
auditor 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.
10. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
11. Obtain from the independent auditor assurance that Section 10A(b) of
the Security and Exchange Act of 1934 has not been implicated.
12. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
13. Review with the independent auditor 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.
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.
14. Recommend to the Board the appointment and replacement of the senior
internal auditing executive.
15. Review the significant reports to management prepared by the internal
auditing department and management's responses.
16. Prepare the report required by the rules of the Commission to be
included in the Corporation's annual proxy statement.
17. 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.
18. Obtain reports from management, the Corporation's senior internal
auditing executive and the independent auditor that the Corporation's
subsidiary and foreign affiliates, if any, are in conformity with
applicable legal requirements and the Corporation's Code of Conduct.
19. Review with the Corporation's General Counsel legal matters that may
have a material impact on the financial statements, the Corporation's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies.
20. 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.
21. Recommend to the Board policies for the Corporation's hiring of
employees or former employees of the independent auditor.
19
22. Meet periodically with the chief financial officer, the senior internal
auditing executive and the independent auditor in separate executive
sessions.
23. The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly.
24. The Audit Committee shall make regular reports to the Board.
25. The Audit Committee shall conduct and present to the Board an annual
performance evaluation of the Committee.
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. This is the responsibility of management and the independent
auditor.
20
[inside back cover and back outside cover are blank]
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, Jorge L. Diaz 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 16,
2004 at the Annual Meeting of Stockholders to be held on April 29, 2004 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, 3 AND 4.
(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 \/
------------------------------------------------------------------------------------------------------------------------------------
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
Angel Alvarez Perez, Jose Luis Ferrer-Canals and Sharee Ann Umpierre 3. 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 2004.
nominees listed above
4. 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. | |
2. To elect the following director for a term of one year.
Jose Menendez Cortada
To include any comments, please mark this box. | |
FOR the nominee | | WITHHOLD AUTHORITY | |
listed above to vote for the
nominee listed above
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