<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
First Financial Caribbean Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
FIRST FINANCIAL CARIBBEAN CORPORATION
March 31, 1995
Dear Stockholder:
You are cordially invited to attend the sixth Annual Meeting of
Stockholders of First Financial Caribbean Corporation. The meeting will be held
at the Fifth Floor of The Doral Building, 650 Munoz Rivera Avenue, San Juan,
Puerto Rico on Wednesday, April 26, 1995. The meeting will begin promptly at
2:00 p.m., local time. We urge you to attend, if at all possible. We in First
Financial Caribbean Corporation's management consider the Annual Meeting an
excellent opportunity for us to discuss your corporation's progress with you in
person.
During the business part of the meeting, we will address the election of
directors and the ratification of auditors for 1995.
I look forward to talking with you about the results of First Financial
Caribbean Corporation for 1994 and our plans for the future. As a stockholder,
you will have the opportunity to ask questions during the meeting.
We urge you to review the Proxy Statement and complete, sign and return
your proxy card in the envelope provided, even if you plan to attend the
meeting. Your vote is important, and the prompt return of your proxy card will
ensure that your vote is counted. The participation of the owners of the
business in its affairs is an essential ingredient of First Financial Caribbean
Corporation's vitality. Please note that sending us your proxy will not prevent
you from voting in person at the meeting should you so desire.
We appreciate your interest and investment in First Financial Caribbean
Corporation, and hope to see you at the Annual Meeting.
Sincerely,
Salomon Levis
-------------------------
Salomon Levis
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
FIRST FINANCIAL CARIBBEAN CORPORATION
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico 00920
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Wednesday, April 26, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of First
Financial Caribbean Corporation (the "Corporation") will be held at the Fifth
Floor of The Doral Building, 650 Munoz Rivera Avenue, San Juan, Puerto Rico on
Wednesday, April 26, 1995, at 2:00 p.m., local time, to consider and act upon
the following proposals:
1. The election of eight directors of the Corporation;
2. The ratification of the selection of Price Waterhouse as the
Corporation's independent accountants for the fiscal year ending December 31,
1995; and
3. Such other business as may properly come before the meeting or any
adjournment thereof.
Only stockholders of record as of the close of business on March 10, 1995
are entitled to notice of, and to vote at, the Annual Meeting and any and all
adjournments thereof. A list of these stockholders will be available for
inspection for a period of 10 days prior to the Annual Meeting at the office of
the Corporation at 1159 F.D. Roosevelt Avenue, San Juan, Puerto Rico, and will
also be available for inspection at the meeting itself.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED STAMPED
ENVELOPE.
By order of the Board of Directors,
Richard F. Bonini
-------------------------------
Richard F. Bonini
Senior Executive Vice President
and Secretary
Dated: March 31, 1995
<PAGE> 4
FIRST FINANCIAL CARIBBEAN CORPORATION
1159 F.D. ROOSEVELT AVENUE
SAN JUAN, PUERTO RICO 00920
-------------------------
PROXY STATEMENT
This Proxy Statement is furnished to the holders of the Common Stock, $1.00
par value (the "Common Stock") of First Financial Caribbean Corporation, a
Puerto Rico corporation (the "Corporation") in connection with the solicitation
by and on behalf of the Board of Directors of proxies for the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Wednesday, April 26, 1995 and
at any adjournment thereof, for the purposes set forth in the accompanying
notice of meeting. It is anticipated that this Proxy Statement and the
accompanying form of proxy will be mailed to stockholders commencing on or about
April 5, 1995.
GENERAL
Each holder of a share of Common Stock of the Corporation will be entitled
to one vote for each share held of record by such person as of the close of
business on March 10, 1995, which is the record date fixed by the Board of
Directors for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournment thereof. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of Common
Stock of the Corporation is necessary to constitute a quorum at the meeting. On
the record date, the Corporation had 7,202,284 shares of Common Stock
outstanding and eligible to vote. The shares represented by each properly
executed proxy in the accompanying form received by the Board of Directors will
be voted at the Annual Meeting or any adjournment thereof in accordance with the
instructions specified therein. If no instructions are made, such shares will,
except as otherwise provided in the next succeeding paragraph, be voted (i) for
the election of the nominees for directors named in this Proxy Statement, (ii)
for the ratification of the selection of Price Waterhouse as the independent
accountants for the Corporation for the fiscal year ending December 31, 1995,
and (iii) in their discretion on any other matters that may properly come before
the Annual Meeting. Each of the above proposals is an independent proposal and
is not contingent on the adoption of the other proposal. The Board of Directors
knows of no additional matters that will be presented for consideration at the
Annual Meeting except for procedural matters incident to the conduct of the
meeting. Execution of a proxy, however, confers on the designated proxyholder
discretionary authority to vote the shares in accordance with his or her best
judgment on such other business, if any, that may properly come before the
Annual Meeting or any adjournment thereof. Any proxy received in the
accompanying form may be revoked by the person executing it at any time before
the authority thereby granted is exercised by giving written notice of
revocation to the Secretary of the Corporation, by giving a later-dated proxy at
any time before the voting or by voting by ballot in person at the Annual
Meeting. However, it you are a stockholder whose shares are not registered in
your own name, you will need appropriate documentation from your record holder
to vote personally at the Annual Meeting.
Votes cast by proxy or in person by ballot at the Annual Meeting will be
counted by the persons appointed by the Corporation to act as inspectors of
election for the meeting. For purposes of determining the presence of a quorum,
the inspectors of election will treat abstentions and shares represented by
proxies that reflect "broker non-votes" as shares that are present and entitled
to vote. A "broker non-vote" results when a broker or nominee
<PAGE> 5
2
has physically indicated on the proxy that it does not have discretionary
authority to vote on a particular matter (even though those shares are entitled
to vote for quorum purposes and may be entitled to vote on other matters).
The cost of soliciting proxies for the Annual Meeting will be borne by the
Corporation. In addition to the use of the mails, proxies may be solicited in
person or by telephone, by officers and employees of the Corporation who will
not receive any additional compensation for their services. Proxies and proxy
material will also be distributed at the expense of the Corporation by brokers,
nominees, custodians and other similar parties.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth as of February 15, 1995, certain information
with respect to the beneficial ownership of the Corporation's Common Stock and
10 1/2% Cumulative Convertible Preferred Stock, Series A (the "Series A
Preferred Stock") for each director, nominee for director, executive officer and
5% shareholder of the Corporation, for all directors and executive officers of
the Corporation as a group and for certain other investors. See "Certain
Relationships and Related Transactions."
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
--------------------------------------------------------
SERIES A
PREFERRED PERCENT COMMON PERCENT
NAME OF BENEFICIAL OWNER STOCK(2) OF CLASS STOCK OF CLASS
- ----------------------------------------- --------- -------- ---------- --------
<S> <C> <C> <C> <C>
Management
Salomon Levis(3)(4)...................... 50,000 25.73% 533,186 7.32%
1159 F.D. Roosevelt Avenue
San Juan, Puerto Rico 00920
Richard F. Bonini........................ -- -- 98,486 1.37%
Edgar M. Cullman, Jr.(5)(6).............. 55,061 28.33% 1,520,990 20.84%
387 Park Avenue South
New York, N.Y. 10016
Frederick M. Danziger(5)(6).............. 55,061 28.33% 1,520,990 20.84%
180 Maiden Lane
New York, N.Y. 10038
John L. Ernst(5)(6)...................... 55,061 28.33% 1,520,990 20.84%
641 Lexington Avenue
New York, N.Y. 10022
Zoila Levis(3)........................... 10,000 5.15% 68,100 (7)
A. Brean Murray.......................... -- -- -- --
Victor M. Pons, Jr....................... -- -- -- --
Mario S. Levis(3)........................ 10,000 5.15% 32,000 (7)
Luis A. Alvarado......................... -- -- 27,900 (7)
Alfredo Zamora........................... -- -- 25,400 (7)
All directors, nominees and executive
officers as a group, consisting of 11
persons, including those named above... 125,061 64.36% 2,306,062 31.0%
</TABLE>
<PAGE> 6
3
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
--------------------------------------------------------
SERIES A
PREFERRED PERCENT COMMON PERCENT
NAME OF BENEFICIAL OWNER STOCK(2) OF CLASS STOCK OF CLASS
- ----------------------------------------- --------- -------- ---------- --------
<S> <C> <C> <C> <C>
Other Principal Holders
Edgar M. Cullman(6)(8)................... 55,061 28.33% 1,520,990 20.84%
387 Park Avenue South
New York, N.Y. 10016
Louise B. Cullman(6)(8).................. 55,061 28.33% 1,520,990 20.84%
387 Park Avenue South
New York, N.Y. 10016
Susan R. Cullman(6)(8)................... 55,061 28.33% 1,520,990 20.84%
387 Park Avenue South
New York, N.Y. 10016
Lucy C. Danziger(6)(8)................... 55,061 28.33% 1,520,990 20.84%
2 East 73rd Street
New York, N.Y. 10021
Cullman and Ernst Group(9)............... 55,061 -- 1,520,990 20.84%
387 Park Avenue South
New York, N.Y. 10016
David Levis(3)........................... -- -- 196,906 2.74%
1159 F.D. Roosevelt Avenue
San Juan, PR 00920
McCullough, Andrews & Cappiello,
Inc.(10)............................... -- -- 378,100 5.26%
101 California Street, Suite 4250
San Francisco, CA 94111
Wellington Management Company(11)........ -- -- 655,300 9.12%
75 State Street
Boston, MA 02109
First Financial Fund(12)................. -- -- 358,000 4.98%
One Seaport Plaza - 25th Floor
New York, NY 10292
</TABLE>
- ---------------------
(1) The information contained in the table is based on share ownership as
of February 15, 1995, plus in the case of information with respect to Common
Stock, the respective number of shares of Common Stock, which the person has the
right to acquire upon conversion of the shares of the Corporation's Series A
Preferred Stock held by such person, as indicated in this table. This
information has been obtained from filings made with the Securities and Exchange
Commission (the "Commission") and information provided by the persons named
above and reflects the definition of beneficial ownership adopted by the
Commission. The Percent of Class of Common Stock held by each person includes
the number of shares of Common Stock which such person has the right to acquire
upon conversion of shares of Series A Preferred Stock held by such person, but
does not include shares of Common Stock issuable upon conversion of shares of
Series A Preferred Stock held by any other person. Beneficial ownership and
percent of class shown is sole investment and voting power, except as reflected
in other footnotes hereto and except that shares shown for Messrs. Cullman, Jr.,
Danziger and Ernst under "Management" and for Edgar M. Cullman, Louise B.
Cullman, Susan R. Cullman and Lucy C. Danziger under "Other Principal Holders"
include all shares owned by the Cullman and Ernst Group, including shares with
respect to which the named person has no investment or voting power other than
the informal understanding
<PAGE> 7
4
referred to in the final sentence under footnote (9) below. Where more than one
person shares investment and voting power in the same shares or if such shares
are owned by any member of the Cullman and Ernst Group such shares are shown
more than once. Such shares are reflected only once, however, in the total for
all directors and officers as a group.
(2) Each share of Series A Preferred Stock is currently convertible into
two shares of Common Stock at a conversion price of $5.00 per share.
(3) Salomon Levis, the current Chairman of the Board and Chief Executive
Officer of the Corporation, Zoila Levis, the President of the Corporation and
David Levis, a director emeritus of the Corporation and the former Chairman of
the Board and Chief Executive Officer of the Corporation, are siblings. Mario S.
Levis is the son of David Levis and the nephew of Salomon Levis and Zoila Levis.
Salomon Levis, Zoila Levis, Mario S. Levis and David Levis each has sole voting
and investment power with respect to their respective shares of Common Stock and
each disclaims any beneficial interest in the shares of Common Stock owned by
the others.
(4) Includes 12,702 shares of Common Stock owned by Nancy Hernandez, the
wife of Salomon Levis.
(5) Included in the shares of Common Stock shown as beneficially owned by
Mr. Danziger are 103,068 shares in which he holds shared investment and/or
voting power, included in the shares of Common Stock shown as beneficially owned
by Mr. Cullman, Jr. are 630,724 shares in which he holds shared investment
and/or voting power. Included in the shares of Common Stock shown as
beneficially owned by Mr. Ernst are 99,543 shares in which he holds shared
investment and/or voting power. Also included in the case of Messrs. Cullman,
Jr., Danziger and Ernst, respectively, are 823,672, 1,401,380 and 1,408,883
shares of Common Stock held by the Cullman and Ernst Group with respect to which
such person holds no investment or voting power other than the informal
understanding referred to in the final sentence under footnote (9) below. Voting
and investment power over certain of such shares is held by more than one such
person. Messrs. Ernst, Danziger and Cullman, Jr. disclaim beneficial ownership
of all shares over which there is shared investment and/or voting power and
Cullman and Ernst Group shares not owned by such person directly.
(6) Member of the Cullman and Ernst Group. Edgar M. Cullman is the father
of Edgar M. Cullman, Jr., Susan R. Cullman and Lucy C. Danziger, the husband of
Louise B. Cullman, and the uncle of John L. Ernst. Lucy C. Danziger is the wife
of Frederick M. Danziger.
(7) Represents less than 1%.
(8) Included within the shares of Common Stock shown as beneficially owned
by Edgar M. Cullman, Louise B. Cullman, Susan R. Cullman and Lucy C. Danziger
are respectively, 697,790, 550,218, 306,116, and 653,860 shares in which such
person holds shared voting and/or investment power. Also included in the shares
of Common Stock as to each such person, respectively, are 714,552, 867,362,
1,157,744 and 776,868 shares held by the Cullman and Ernst Group with respect to
which such person holds no investment or voting power other than the informal
understanding referred to in the final sentence under footnote (9) below. Each
such person disclaims beneficial ownership of all shares not owned by such
person directly.
(9) As of February 15, 1995, a group consisting of Edgar M. Cullman, his
son Edgar M. Cullman, Jr., a director of the Corporation, direct members of
their families and trusts for their benefit, John L. Ernst, also a director of
the Corporation, his sister and direct members of their families and trusts for
their benefit and partnerships in which members of the Cullman and Ernst
families hold substantial direct and indirect interests own an aggregate of
1,520,990 shares of Common Stock (including 110,122 shares issuable upon
conversion of shares of Series A Preferred Stock held by members of the group)
or approximately 20.84% of the outstanding Common Stock. Among others, Messrs.
Cullman and Cullman, Jr. and their wives, Mr. Ernst and to a lesser
<PAGE> 8
5
extent Mr. Danziger (who is a member of the Cullman and Ernst Group and a
director of the Corporation), hold investment and voting power or shared
investment and voting power over such shares. Mr. Danziger is the brother-in-law
of Edgar M. Cullman, Jr. A Schedule 13D filed with the Commission on behalf of
the Cullman and Ernst Group states that there is no formal agreement governing
the group's holding and voting of such shares, but that there is an informal
understanding that the persons and entities included in the group will hold and
vote together the shares owned by each of them in each case subject to any
applicable fiduciary responsibilities.
(10) According to a Schedule 13G filed with the Commission on behalf of
McCullough, Andrews & Cappiello, Inc., a California corporation and registered
investment adviser ("MACI") and Robert F. McCullough, David H. Andrews and Frank
A. Cappiello, Jr., the shareholders of MACI (the "Shareholders"), the beneficial
ownership of MACI of the shares of Common Stock reported is direct as a result
of MACI's discretionary authority to buy, sell and vote such shares of Common
Stock for its investment advisory clients. The Schedule 13G further states that
the beneficial ownership of the shares of Common Stock by the Shareholders is
indirect as a result of the Shareholders' stock ownership in MACI. MACI and the
Shareholders share with each other sole power to vote and dispose all 378,100
shares of Common Stock reported.
(11) According to a Schedule 13G filed with the Commission on behalf of
Wellington Management Company ("WMC"), WMC, in its capacity as investment
adviser, may be deemed the beneficial owner of the shares reported, which are
owned by investment advisory clients of WMC. According to the Schedule 13G, no
such client was known to beneficially own more than 5% of the outstanding shares
of the Corporation's Common Stock except for First Financial Fund.
(12) According to a Schedule 13G filed with the Commission by First
Financial Fund ("FFF"), FFF disclosed that it may be considered the beneficial
owner of 358,000 shares of Common Stock in its capacity as an investment
company. The Corporation's stock records reflect that such interest represented
slightly less than 5% of the outstanding shares of Common Stock as of February
15, 1995.
ELECTION OF DIRECTORS AND RELATED MATTERS
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors comprising the entire Board of
Directors of the Corporation are to be elected. The Board of Directors has
proposed the nominees listed below for election as directors to serve until the
1996 Annual Meeting or until their successors are duly elected and qualified.
All nominees except John L. Ernst, Zoila Levis, A. Brean Murray and Victor M.
Pons, Jr. have served as directors since the Corporation became an independent
public corporation in December, 1988. Mr. Ernst was elected to the Board of
Directors on September 12, 1989 to fill the vacancy created by the retirement of
Edgar M. Cullman. Mrs. Levis was elected to the Board of Directors on August 12,
1991 to fill the vacancy created by the resignation of David Levis. Messrs.
Murray and Pons were elected on May 26, 1994 to fill the two new Board positions
created in 1994.
The directors must be elected by a majority of the votes cast in person by
ballot at the meeting or by proxy by stockholders entitled to vote at the Annual
Meeting. Therefore, abstentions and broker non-votes will not have an effect on
the election of directors of the Corporation. Unless otherwise specified in the
accompanying form of proxy, proxies solicited hereby (other than proxies which
reflect broker non-votes) will be voted for the election of the nominees listed
below, unless for any reason not now known by the Corporation, any of such
nominees should not be able to serve, in which case the proxies shall be voted
for a substitute nominee or nominees who will be designated by the Board of
Directors. If no substitute nominees are available, the size of the Board will
be reduced.
<PAGE> 9
6
Other than Mr. Bonini's employment agreement, which requires the Board of
Directors of the Corporation to nominate him for election as a director, there
are no arrangements or understandings between the Corporation and any person
pursuant to which such person has been elected a director.
The following table sets forth as of February 15, 1995, certain information
with respect to each nominee for director:
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- ------------------------- ----------------------------------------------------------- -----
<S> <C> <C>
Salomon Levis(1) Chairman of the Board and Chief Executive Officer of the 1988
Corporation since February 1990; President and Chief
Executive Officer of the Corporation (1989-1991); Chairman
of the Board, Doral Mortgage Corporation, a wholly-owned
subsidiary of the Corporation (1988-1990); President and
Chief Operating Officer, Doral Mortgage Corporation
(1985-1988); President of RSC Corp., a wholly-owned
subsidiary of the Corporation (1979-1988). Age 52.
Richard F. Bonini Senior Executive Vice President of the Corporation since 1976
1988 and Secretary of the Corporation since December 1991;
Consultant to Culbro Corporation (1989-1990); Senior Vice
President, Culbro Corporation and Vice President of the
Corporation (1976-1988). Age 56.
Edgar M. Cullman, Jr.(2) President, Culbro Corporation since 1984; Executive Vice 1988
President, Culbro Corporation (1983-1984); President,
General Cigar & Tobacco Co. (1980-1983); Director, Culbro
Corporation. Age 49.
Frederick M. Danziger(2) Member, Mudge Rose Guthrie Alexander & Ferdon (attorneys) 1988
for more than the past five years; Director, Culbro
Corporation, Monro Muffler/Brake, Inc., Ryan Instruments,
L.P. (general partner), Bloomingdale Properties, Inc.
(investments and real estate), IBAH, Inc. and Centaur
Communications Ltd. Age 55.
John L. Ernst(2) Chairman of the Board and President of Bloomingdale 1989
Properties, Inc.; Director, Culbro Corporation. Age 54.
Zoila Levis(1) President of the Corporation since August 12, 1991; 1991
Executive Vice President of the Corporation from January 1,
1990 to August 11, 1991; President of Z. Levis Assoc. (real
estate development) from January 1, 1985 to December 31,
1989. Age 47.
A. Brean Murray Chairman of the Board and Chief Executive Officer of Brean 1994
Murray, Foster Securities Inc., an investment banking firm
for more than the past five years; Director, American Asset
Management (money management), BMI Capital Corp. (money
management), and Search Capital Group (used car financing).
Age 57.
Victor M. Pons, Jr. Attorney in private practice since 1992; Chief Justice of 1994
the Supreme Court, Commonwealth of Puerto Rico (1985-1992).
Age 59.
</TABLE>
- ---------------------
(1) Zoila Levis is the sister of Salomon Levis.
(2) Edgar M. Cullman, Jr. and John L. Ernst are cousins. Frederick M.
Danziger is the brother-in-law of Edgar M. Cullman, Jr.
<PAGE> 10
7
DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Board of Directors held six meetings during the year ended December 31,
1994. Each director, other than Salomon Levis and Zoila Levis, attended at least
75% of the aggregate number of Board meetings and meetings held by all
committees on which he or she served during such period. Members of the Board of
Directors who are not employees of the Corporation receive an annual fee of
$10,000 plus $800 for each Board of Directors and committee meeting attended. No
separate fees are paid for attending committee meetings held on the same day as
a Board meeting. The Corporation has obtained directors and officers liability
insurance for its directors and officers. The Corporation has agreed to
indemnify its directors and officers for certain liabilities to the fullest
extent permitted by Puerto Rico law. There are no special provisions in the
Puerto Rico Corporation Law which limit the liability of directors and officers
other than the normal provisions stating that a director is fully protected in
relying in good faith on corporate books of account or reports of officers,
independent public accountants and duly appointed appraisers.
The Board of Directors has standing Audit and Compensation Committees. The
Audit Committee met three times and the Compensation Committee met once during
1994. The Board does not have a standing nominating committee or other committee
performing a similar function.
The Audit Committee reviews audit reports and the scope of the audit by
both the Corporation's staff and its independent accountants and related matters
pertaining to the preparation and examination of the Corporation's financial
statements. The committee also makes recommendations to the Board of Directors
with respect to the foregoing matters as well as with respect to the appointment
of the Corporation's independent accountants. The members of the Audit Committee
are Messrs. Pons, Jr. and Ernst.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Cullman, Jr. and
Murray, neither of whom is or was during 1994 an executive officer of the
Corporation. Since January 1, 1994, none of the executive officers of the
Corporation has served as a director, executive officer or compensation
committee member of another entity which had an executive officer who served as
a compensation committee member or director of the Corporation.
Mr. A. Brean Murray, a nominee for director of the Corporation, is the
Chairman of the Board and Chief Executive Officer of Brean Murray, Foster
Securities Inc., an investment banking firm which rendered advisory services to
the Corporation during 1994. During 1994, such firm received approximately
$50,000 in fees for services rendered to the Corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994, Nancy Hernandez, the wife of Salomon Levis, was employed as
the President of Doral Mortgage Corporation, a wholly-owned subsidiary of the
Corporation, and received compensation of $195,565. This amount includes
deferred compensation as provided by contract. See "Deferred Incentive
Compensation Agreements."
During 1994, Aidiliza Levis, the daughter of David Levis, the former
Chairman of the Board and Chief Executive Officer and a director emeritus of the
Corporation, sister of Mario S. Levis, and the niece of Salomon
<PAGE> 11
8
Levis and Zoila Levis, was employed as a Vice President by Doral Mortgage
Corporation, and received compensation of $158,190.
See also "Compensation Committee Interlocks and Insider Participation" for
certain relationships involving A. Brean Murray, a nominee for director of the
Corporation.
In February 1995, Salomon Levis, the Chairman of the Board and Chief
Executive Officer of the Corporation, purchased from the Corporation, a 40%
interest in a $1.5 million loan originated by the Corporation and secured by a
second mortgage on various parcels of land to be developed. The other 60%
interest in the loan was sold to an unrelated entity. The loan was sold at par,
without recourse to the Corporation, on the same day originated and the
Corporation retained fees in the amount of 4% of the principal amount of the
loan. The proceeds of the loan were used to finance the acquisition of the real
property on which a single family residential project will be developed. The
Corporation issued a commitment to the developer of the project to provide the
permanent financing for prospective purchases of homes in the project. The
Corporation believes that granting of the loan will facilitate the Corporation's
origination of permanent first mortgage loans on residences located in the
project and thereby increase the Corporation's servicing portfolio. The loan,
which involves more risk than the Corporation normally is willing to retain as
part of its lending activity, was originated pursuant to a commitment from Mr.
Levis and the other investor to purchase the loan upon origination. The loan is
being serviced by the Corporation which receives a servicing fee from the
partnership of 0.25% of the principal balance of the loan.
On December 8, 1994, the Corporation entered into an agreement (the "Swap
Agreement") with David Levis, the brother of Salomon Levis and Zoila Levis, a
director emeritus of the Corporation and the former Chairman of the Board and
Chief Executive Officer of the Corporation. Pursuant to the Swap Agreement, Mr.
Levis agreed to deliver approximately $4.75 million principal amount of GNMA
mortgage-backed securities (the "GNMA Securities") with a weighted-average
interest rate of approximately 7.32% to the Corporation for use as collateral in
a repurchase agreement with another financial institution. In exchange for the
GNMA Securities, the Corporation delivered to Mr. Levis approximately $4.7
million principal amount of subordinated collateralized mortgage obligations
(the "Subordinated Certificates") held by the Corporation which had stated
interest rates ranging from 5.80% to 7.40% and which were discounted to yield
between 9% and 10%. Under the terms of the Swap Agreement, Mr. Levis is entitled
to receive the interest on the GNMA Securities and the Subordinated Certificates
in return for agreeing to reimburse the Corporation for amounts required to be
paid by it under the repurchase agreement up to 6.0% per annum. At December 31,
1994 and March 1, 1995, the applicable interest rate on the repurchase agreement
was 5.9% and 6.0%, respectively. Pursuant to the Swap Agreement, the Corporation
pledged additional Subordinated Certificates with a market value of
approximately $1.5 million to protect Mr. Levis from possible market
fluctuations in the value of the Subordinated Certificates. Under the Swap
Agreement, the Corporation retained the option to require that Mr. Levis return
the Subordinated Certificates in exchange for the GNMA Securities upon ten days'
prior notice. Mr. Levis retained the right, exercisable after one year, to
require the return of the GNMA Securities in exchange for the Subordinated
Certificates. The Corporation believes that this transaction represented an
attractive mechanism to finance mortgage-related assets such as the Subordinated
Certificates that are difficult to finance with conventional methods under
current market conditions.
In December 1990, the Corporation sold real estate owned as a result of
foreclosure ("REO") consisting of 89 residential properties containing 104
housing units with a cost of approximately $4.7 million including previously
incurred rehabilitation costs and construction interest to Puerto Rico Island
Rental Limited Dividend Partnership, S.E., a Puerto Rico partnership (the
"Partnership") formed under a private syndication. The general partner of the
Partnership was a corporation that was unrelated to the Corporation or its
officers or directors.
<PAGE> 12
9
Several members of senior management of the Corporation, including Salomon
Levis, Chairman of the Board of the Corporation, Zoila Levis, the current
President of the Corporation, Luis Alvarado, an Executive Vice President of the
Corporation and Mario S. Levis, currently a Vice President and Treasurer of the
Corporation, invested as limited partners. The Corporation also invested
approximately $135,000 in the Partnership, and owns a 15% interest in the
Partnership which is included at cost in "Other Assets" in the Corporation's
Balance Sheet. The REO was sold to the Partnership for $4.7 million which was
based on an estimate of the market value of the REO as reflected in an
independent appraisal report. The appraisal took into consideration the cost of
the improvements to be made which were reflected in the sales price to the
Partnership. The Corporation believes that the sales price of the REO was
comparable to that which the Corporation could have obtained in arm's length
transactions with unaffiliated parties. Approximately $600,000 of the purchase
price was paid in cash at the closing of the sale of the REO and the remainder
was evidenced by promissory notes (the "Notes") of the Partnership issued to the
Corporation in the amount of approximately $4.1 million. In December 1991,
Salomon Levis and Zoila Levis sold their interests in the Partnership to
unrelated third parties at cost.
The Notes bear interest payable on the first day of each month commencing
on March 1, 1991, at the prime rate of Citibank, N.A. (with a maximum and
minimum rate of 13.5% and 9%, respectively) and mature on April 1, 2006. During
December 1990, February 1991 and March 1992, the Corporation sold a total of
$2.8 million principal amount of the Notes to a Puerto Rico financial
institution. Such sale was with recourse to the Corporation.
On July 31, 1992, pursuant to a mutual agreement between the Corporation
and the general partner, due to what the Corporation believed was unsatisfactory
performance, the general partner withdrew from the Partnership and a new
non-profit corporation became the general partner. The Board of Directors of the
new non-profit corporation is composed of three members of the Corporation's
senior management. In connection with such withdrawal, the Corporation agreed to
indemnify the original general partner from certain liabilities incurred during
the period it acted as general partner. The Partnership intends to sell or lease
the REO and believes that the matters set forth above will not result in any
material adverse affect on the financial condition of the Corporation.
As of December 31, 1994, the principal balance of the Notes held by the
Corporation was approximately $450,000. At December 31, 1994, the Partnership
owed the Corporation $410,906 in past due interest and approximately $1.1
million for advances made by the Corporation on behalf of the Partnership. The
Corporation reserved approximately $600,000 during 1994 and 1993 for possible
losses from amounts due from the Partnership. Accordingly, at December 31, 1994,
the Corporation's balance sheet only reflected receivables due from the
Partnership of approximately $897,000. The Corporation holds $54,865 of the
Partnership's funds as security. At December 31, 1994, the Partnership had a net
capital deficiency of approximately $1.6 million.
The following table sets forth certain information with respect to mortgage
loans made by the Corporation or Doral Mortgage Corporation, a wholly-owned
subsidiary of the Corporation, to executive officers of the Corporation and to
certain related interests of directors and executive officers of the
Corporation, including the Partnership. Except for the loan to the Partnership,
these loans were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for
<PAGE> 13
10
comparable transactions with unaffiliated persons. Except for the loan to the
Partnership, management believes that such loans do not involve more than the
normal risk of collectibility or present other unfavorable features.
<TABLE>
<CAPTION>
YEAR LOAN HIGHEST PRINCIPAL PRINCIPAL BALANCE INTEREST
NAME AND POSITION MADE AMOUNT DURING 1994 AS OF 12/31/94 RATE
- ------------------------ --------- ------------------- ----------------- --------
<S> <C> <C> <C> <C>
Zoila Levis 1993 $ 190,468(1) $ 176,768(7) 6.500%
President
Mario S. Levis 1993 201,195(1) $ 193,733(7) 6.875%
Vice President and
Treasurer
Victor M. Pons, Jr. 1993 $ 90,848(1) $ 86,896(7) 6.000%
Director
Maria Leonor Ventura(3) 1993 $ 99,285(1) $ 97,511 9.625%
Carolina S. Pons Rexach 1994 $ 107,500(1) $ 106,651 9.125%
and Jose M. Vivo(4) 1994 26,375(2) 26,307 9.125
Alfredo Zamora 1993 $ 97,650(1) $ 96,749(7) 7.376%
President, Centro 1993 98,159(1) 94,601(2) 7.500
Hipotecario de Puerto 1993 203,150(1) 201,793(7) 6.735
Rico, Inc.
Puerto Rico Island 1990 $ 450,000 $ 450,000 9.000%
Rental Limited
Dividend Partnership,
S.E.(6)
</TABLE>
- ---------------------
(1) First mortgages.
(2) Second mortgages.
(3) Daughter-in-law of Victor M. Pons, Jr., a director of the Corporation.
(4) Daughter and son-in-law, respectively, of Victor M. Pons, Jr., a
director of the Corporation.
(5) First mortgage on commercial property located in San Juan, Puerto Rico.
(6) Refer to information set forth above for information regarding this
transaction.
(7) Sold to investors.
<PAGE> 14
11
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is supplied with respect to the executive
officers of the Corporation who do not serve on the Corporation's Board of
Directors. There are no arrangements or understandings pursuant to which any of
such executive officers was selected as an officer, and none of such executive
officers is related to any other director or executive officer of the
Corporation by blood, marriage or adoption, except that Mario S. Levis is the
nephew of Salomon Levis and Zoila Levis and Nancy Hernandez is the wife of
Salomon Levis, and the sister-in-law and aunt of Zoila Levis and Mario S. Levis,
respectively.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE
- ----------------- -------------------------------------------------------- ---
<S> <C> <C>
Luis A. Alvarado Executive Vice President of the Corporation since 1985; 46
President of Doral Federal Savings Bank, a wholly-owned
subsidiary of the Corporation since September 1993;
Senior Vice President and Controller of the Corporation
(1980-1985).
Mario S. Levis Vice President and Treasurer of the Corporation since 31
December 1991; Senior Executive Trader of the
Corporation since 1988. Trader, Merrill Lynch Pierce
Fenner & Smith Incorporated (1987-1988).
Alfredo Zamora President of Centro Hipotecario de Puerto Rico, Inc.(a 54
wholly-owned subsidiary of the Corporation) since
January 1995, President of H.F. Mortgage Banker's
Division, a division of the Corporation, from January
1994 to December 1994; Chairman of the Board of Doral
Mortgage Corporation(1990-1993); President of Doral
Mortgage Corporation (1988-1990).
Nancy Hernandez President of Doral Mortgage Corporation since 1990; 43
First Vice President of Doral Mortgage Corporation
(1988-1990).
</TABLE>
EXECUTIVE COMPENSATION
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based on reports filed with the Securities and Exchange Commission and
information obtained from the officers and directors of the Corporation, the
Corporation is not aware of any failure by the executive officers or directors
of the Corporation to file on a timely basis any reports required to be filed by
Section 16(a) of the Securities Exchange Act of 1934 with respect to beneficial
ownership of shares of the Corporation.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Policies. The compensation policy of the Corporation is to provide its
executive officers and management with a level of pay and benefits that will
assure the Corporation's competitiveness and continued growth, and allow the
Corporation to retain key executives critical to its long-term success and
attract and retain qualified personnel. As it operates in a financial services
business, the Corporation competes for talented executives in a market segment
where successful entrepreneurial executives are highly compensated. It also
competes for executives with a background in Puerto Rican financial services. As
a result, to obtain and retain highly qualified and motivated executives, the
Compensation Committee has deemed it desirable to structure employment
<PAGE> 15
12
arrangements which compensate highly for high profitability and performance and
to enter into written employment agreements with its senior executive officers.
The Compensation Committee's responsibilities include overseeing the
Corporation's compensation policies, supervising compensation for management and
employee benefits and administering the Corporation's pension, stock option,
restricted stock, incentive compensation and other employee benefit plans.
The Compensation Committee also develops and negotiates employment
agreements with key executive officers. These employment agreements have
normally included base salaries and incentive compensation arrangements designed
to reward management for achieving certain production or performance levels. The
Compensation Committee is also responsible for developing or reviewing incentive
compensation arrangements which the Corporation enters into with executive
officers and key individuals, other than those senior executives that have
written employment agreements. See "Executive Compensation Summary of
Compensation Plans Deferred Incentive Compensation Agreements." The deferred
incentive compensation agreements are designed to reward executive officers and
key employees for assisting the Corporation in achieving various income targets.
Based on the Compensation Committee's recommendations, the Corporation has also
made grants of restricted stock to senior executives as an important long-term
retention device. See "Executive Compensation Summary of Compensation Plans 1988
Restricted Stock Plan." Such awards were made as an incentive for continued
employment and future performance as well as a reward for past performance.
In order to determine appropriate levels of executive compensation, the
Compensation Committee reviews various factors, including individual
performance, and evaluates the progress of the Corporation towards attaining its
long-term goals. Generally, as a person's level of responsibility increases,
greater portions of total compensation are based on performance (as opposed to
base salaries and benefits). Compensation packages for senior executive officers
have been structured to attempt to compensate them to a substantial extent on a
combination of the profitability of the Corporation as a whole and the
productivity of their individual departments.
For 1995 and succeeding years, the Compensation Committee is recommending
the replacement of individual incentive agreements or bonuses that provide
individual executives with a specified bonus if target income levels are met
with a bonus pool concept. Under this bonus pool system, the Committee would
establish a percentage of net income before payment of income taxes and
incentive compensation that would be made available for distribution as bonuses
to the Corporation's senior executive officers, including the Chief Executive
Officer, and other key employees. The percentage of net income contributed to
the bonus pool would increase to the extent that certain targets involving
return on equity were exceeded. The aggregate amount available for bonuses would
be subject to a maximum amount. The Compensation Committee is recommending a cap
of $5.0 million for 1995. The Chief Executive Officer would make recommendations
regarding how the moneys available in the bonus pool be distributed among the
key executive officers and other key employees. The Compensation Committee would
review these recommendations and make final recommendations for bonus payments,
including the bonus payable to the Chief Executive Officer. These
recommendations would then be submitted to the Board of Directors for final
approval. At the election of the Corporation, up to 50% of the amount of bonuses
payable would be made in newly-issued shares of Common Stock (valued at market
prices) of the Corporation.
Chief Executive Officer's Compensation. In 1991, the Corporation retained
Personnel Corporation of America ("PCA"), an independent compensation consulting
firm, to advise the Compensation Committee in connection with their evaluation
of Salomon Levis' compensation package. PCA provided data and information that
compared the Corporation with a peer group of companies based upon a number of
parameters, including
<PAGE> 16
13
executive compensation, and provided advice for establishing the Corporation's
performance targets and for evaluating annual performance.
The Compensation Committee reviewed compensation arrangements for senior
executives in companies highly successful in the mortgage banking business and
for investment banking executives to formulate a level of base compensation and
the returns on which Mr. Levis' incentive compensation might be based. Among
other things, the Compensation Committee deemed the emphasis on volume and
return on equity as being of material importance to the overall long-term growth
and profitability of the Corporation. The Compensation Committee then sought to
structure an employment agreement which set high return standards as a base
level (15% return on equity after taxes) for the payment of incentive
compensation on earnings and a high level of originations as a basis for
incentive compensation based on the level of mortgage originations. The
Compensation Committee's evaluation resulted in an employment agreement which
entitled Mr. Levis to the same percentage of mortgage originations and
consolidated net income as his prior contract but only to the extent mortgage
originations and consolidated net income exceeded the base levels established by
the Compensation Committee. Mr. Levis' employment agreement expired on December
31, 1994 and the Corporation is currently negotiating the terms of a new
employment agreement with Mr. Levis.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Edgar M. Cullman, Jr.
A. Brean Murray
The Board Compensation Committee Report on Executive Compensation shall not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that the
Corporation specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
Pursuant to the terms of his prior employment agreement which expired on
December 31, 1994, Salomon Levis was entitled to receive annual compensation
equal to the sum of (i) $1,000,000; (ii) of 1% of the face value of mortgage
loans on housing units other than new project housing units in excess of $200
million closed by the Corporation and its subsidiaries during the calendar year
preceding the payment; (iii) 3/16 of 1% of the face value of mortgage loans on
new project housing units in excess of $90 million closed by the Corporation and
its subsidiaries during the calendar year preceding the payment; and (iv) 25% of
the Corporation's annual consolidated net income after taxes, but before
dividends on preferred stock, to the extent such net income exceeds an amount
equal to a 15% return on equity.
Pursuant to the terms of her prior agreement which expired on December 31,
1994, Zoila Levis was entitled to receive annual compensation equal to the sum
of (i) $300,000; and (ii) and the greater of $50,000 or 3% of the Corporation's
annual consolidated net income after taxes, but before dividends on preferred
stock, to the extent such net income exceeds an amount equal to a 15% return on
equity.
As of the date of this Proxy Statement, the Corporation was in the process
of negotiating new employment agreements for Salomon Levis and Zoila Levis.
While the terms of the new agreements have not been agreed
<PAGE> 17
14
upon, the Corporation anticipates that the incentive compensation provided for
under the prior employment agreements will be replaced with participation in the
incentive bonus pool arrangement referred to in the last paragraph of "Board
Compensation Committee Report on Executive Compensation -- Policies."
The Corporation entered into an employment agreement with Richard F. Bonini
which became effective July 1, 1992 and expires on June 30, 1995. Pursuant to
the terms of the agreement, Mr. Bonini is entitled to receive annual
compensation equal to the sum of (i) $240,000; (ii) the greater of $35,000 or 2%
of the Corporation's annual consolidated net income after taxes, but before
dividends on preferred stock, to the extent such net income exceeds an amount
equal to a 15% return on equity; and (iii) an amount sufficient to establish an
annuity contract in the amount of $30,000 per year in lieu of retirement
benefits. Under Mr. Bonini's prior employment agreement, which expired on June
30, 1992, Mr. Bonini was entitled to receive (i) an annual payment of $180,000,
(ii) 1% of the Corporation's net income per year, and (iii) a lump sum payment
of $30,000 per year in lieu of retirement benefits.
The Corporation entered into an employment agreement with Luis A. Alvarado,
Executive Vice President of the Corporation, which became effective on January
1, 1993 and expires on December 31, 1995. Pursuant to the terms of the agreement
Mr. Alvarado is entitled to receive annual compensation equal to the sum of (i)
$150,000; and (ii) the greater of $25,000 or 2% of the Corporation's annual
consolidated net income after taxes, but before dividends on preferred stock, to
the extent such net income exceeds an amount equal to a 15% return on equity;
provided, however, that Mr. Alvarado's annual compensation may not exceed
$375,000. For the fiscal years ended December 31, 1991 and 1992, Mr. Alvarado
received annual incentive compensation equal to 2% of the Corporation's net
income arising from mortgage banking activities as part of an incentive
compensation arrangement.
Mario Samuel Levis, Vice President and the Treasurer of the Corporation,
receives a base annual salary of $43,124 plus the sum of (i) commissions of 1/8
of 1% of the principal amount of mortgage-backed securities sold by the
Corporation to investors during such year and (ii) 25% of any net trading
profits realized as a result of trading activities other than sales of the
Corporation's current production in the ordinary course of business. When
amounts are paid under clause (ii) in connection with a transaction no
additional amounts are payable under clause (i) in connection with such
transaction.
The Corporation is presently negotiating new employment agreements with
Messrs. Bonini and Alvarado. It is expected that the new agreements will replace
the existing incentive compensation payable under such agreements with
participation in the new incentive bonus pool system being developed for senior
executive officers. See "Board Compensation Committee Report on Executive
Compensation -- Policies." The Corporation also expects to negotiate and enter
into an employment agreement with Mario Samuel Levis.
<PAGE> 18
15
SUMMARY COMPENSATION TABLE
The following table includes information concerning the compensation of the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Corporation, for services rendered in all capacities
during the fiscal years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------
AWARDS(3)
--------------------------------------------------------------
OTHER RESTRICTED
NAME AND ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) AWARD(S)(4) COMPENSATION(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Salomon Levis 1994 $ 880,969 $1,482,542 $ --0-- $ --0-- $20,572(6)
Chairman of the Board 1993 1,000,000 6,892,930 --0-- --0-- 18,159(7)
and Chief Executive 1992 1,000,000 4,116,762 --0-- --0-- 69,926(8)
Officer
Zoila Levis 1994 $ 280,583 $ 240,331 $ --0-- $ --0-- $27,420(6)
President 1993 300,000 481,458 --0-- --0-- 30,533(7)
1992 300,000 310,179 --0-- 419,100(5) 17,084(8)
Richard F. Bonini 1994 $ 232,000 $ 160,221 $ --0-- $ --0-- $30,000(6)
Senior Executive Vice 1993 240,000 320,837 --0-- --0-- 50,320(7)
President and 1992 210,000 174,293 --0-- --0-- 37,620(8)
Secretary
Mario S. Levis 1994 $ 43,124 $ 591,973 $ --0-- $ --0-- $ 8,089(6)
Vice President and 1993 35,900 961,909 --0-- --0-- 7,075(7)
Treasurer 1992 38,400 489,679 --0-- --0-- 1,112(8)
Luis Alvarado 1994 $ 150,000 $ 97,498 $ --0-- $ --0-- $14,542(6)
Executive Vice 1993 150,000 225,000 --0-- --0-- 26,599(7)
President, President 1992 60,000 319,536 --0-- --0-- 14,481(8)
Doral Federal Savings
Bank
</TABLE>
- ---------------------
(1) Salomon Levis voluntarily took a $1,626,821 reduction in the amount of
incentive compensations that he was entitled to receive under his employment
agreement with respect to net income earned during 1994. Mr. Levis also agreed
to a 30% voluntary reduction in salary for the last four months of the year.
Richard F. Bonini and Zoila Levis also agreed to a 10% salary reduction for the
last four months of 1994. The voluntary reductions in salary for Salomon Levis,
Zoila Levis and Richard F. Bonini for 1994 amounted to $119,031, $19,417 and
$8,000, respectively. See "Employment Agreements and Other Compensation
Arrangements."
(2) Amounts shown do not include amounts expended by the Corporation
pursuant to plans (including group life and health) that do not discriminate in
scope, term or operation in favor of executive officers or directors of the
Corporation and that are generally available to all salaried employees. Amounts
shown also do not include amounts expended by the Corporation which may have a
value as a personal benefit to the named individual. The value of perquisites
and such other personal benefits did not exceed the lesser of either $50,000 or
10% of the total annual salary and bonus reported for any individual named.
(3) The Corporation has not granted any options or stock appreciation
rights under the Corporation's 1988 Stock Option Plan for Key Employees.
(4) The number of shares and value, respectively, of the restricted stock
holdings of Zoila Levis on December 31, 1994 were 38,100 shares and $438,150.
Restrictions on all other restricted stock awards previously granted to the
named individuals lapsed during 1993. For purposes of the year-end calculation,
the value of the restricted stock has been calculated by multiplying the last
sales price of the Corporation's Common Stock on the NASDAQ NMS on December 31,
1994 ($11 1/2) by the number of shares held by Ms. Levis on such date.
<PAGE> 19
16
Dividends are paid on the restricted stock reported above to the extent
dividends are declared on the Corporation's Common Stock.
(5) The value stated has been calculated by multiplying the number of
shares awarded, 38,100, by the last sales price of the Corporation's Common
Stock on the NASDAQ NMS on December 31, 1992, the date of the grant. The
restrictions on one half of the shares granted will lapse on the third
anniversary of their grant and the other half on the fifth anniversary of their
grant.
(6) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Luis A. Alvarado, include the Corporation's contribution to the Corporation's
Target Benefit Pension Plan, a defined contribution pension plan, in the amounts
of $20,572, $17,514, $8,089 and $14,542, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 per year in lieu of
Mr. Bonini's participation in the Corporation's Target Benefit Pension Plan. The
amounts shown for Zoila Levis include $9,906 representing dividends received on
restricted stock in 1994.
(7) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Luis A. Alvarado, include the Corporation's contribution to the Corporation's
Target Benefit Pension Plan, a defined contribution pension plan, in the amounts
of $18,159, $15,293, $7,075 and $13,971, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 per year in lieu of
Mr. Bonini's participation in the Corporation's Target Benefit Pension Plan and
$20,320 representing dividends earned on restricted stock in 1993. The amount
shown for Zoila Levis include $15,240 representing dividends received on
restricted stock in 1993. The amounts shown for Mr. Alvarado also includes
$2,468, representing interest accrued during 1993 on deferred incentive
compensation and $10,160, representing dividends earned on restricted stock in
1993.
(8) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Luis A. Alvarado include the Corporation's contribution to the Corporation's
Target Benefit Pension Plan, a defined contribution pension plan, in the amounts
of $69,926, $17,084, $1,112 and $3,489, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 per year in lieu of
Mr. Bonini's participation in the Corporation's Target Benefit Pension Plan and
$7,620 representing dividends earned on restricted stock in 1992. The amount
shown for Mr. Alvarado also includes $7,182, representing interest accrued
during 1992 on deferred incentive compensation and $3,810, representing
dividends earned on restricted stock in 1992.
SUMMARY OF COMPENSATION PLANS
1988 Stock Option Plan. On October 26, 1988, the Corporation approved the
adoption of the Corporation's 1988 Stock Option Plan for Key Employees (the
"Option Plan"). The Option Plan is administered by the Compensation Committee
(the "Committee"), none of whose members may hold options. The Committee
determines the form of the option agreements to be used under the Option Plan,
and the terms and conditions to be included in such option agreements. Under the
Option Plan an aggregate of 300,000 shares of Common Stock have been authorized
for issuance upon exercise of options. Options will be granted under the Option
Plan at prices equal to 100% of the fair market value of Common Stock on the
date of grant.
Options granted under the Option Plan may be qualified stock options or
non-statutory options. Unless an option agreement provides otherwise, all
options granted are 50% exercisable after one year and 100% exercisable after
two years, with all such options terminating five years from the date of grant.
The Option Plan permits the delivery, with the consent of the Committee, of
previously-owned Common Stock in payment of shares purchased upon exercise of
the option. The Option Plan also contains a limitation on the dollar amount of
options which may be granted to any employee and restrictions pertaining to any
grant to a 10% shareholder.
<PAGE> 20
17
The Option Plan permits the granting of stock appreciation rights in tandem
with the granting of stock options. Such stock appreciation rights entitle the
holder to receive in cash upon exercise the difference between the option
exercise price and the market value of Common Stock in lieu of exercising the
related option. No options or stock appreciation rights have been granted to
date under the Option Plan.
1988 Restricted Stock Plan. The Corporation has in effect the Restricted
Stock Plan of First Financial Caribbean Corporation (the "Restricted Stock
Plan"). The Restricted Stock Plan is administered by the Compensation Committee,
none of whose members is eligible to be awarded Restricted Stock. The Restricted
Stock Plan permits the Compensation Committee to award up to a total of 250,000
shares of Common Stock to key employees, including officers of the Corporation
and its subsidiaries. The Restricted Stock Award (the "Award") is awarded at
such times and in such number of shares as the Compensation Committee
determines. The Corporation may grant a portion of the shares awarded in
installments over a period of one to five years. No monetary consideration is
paid by an employee for the Award or for the grant of the shares thereunder.
Under the Restricted Stock Plan, the shares issued are subject to restrictions
on sale and must be returned if the recipient leaves the Corporation's employ
prior to the expiration of a stated period of time. Such restrictions generally
lapse within five years from the date of the Award or earlier termination of
employment by reason of death or disability.
Retirement Plan. Prior to becoming an independent public corporation,
retirement benefits were payable to eligible employees of the Corporation under
Culbro Corporation's Employees' Retirement Plan (the "Culbro Retirement Plan")
for officers and other salaried employees of Culbro Corporation and its
participating subsidiaries. Upon the Corporation becoming an independent public
corporation in December 1988, assets and related accumulated benefits for
Corporation employees amounting to $346,000 were transferred from the Culbro
Retirement Plan to the Corporation's newly established Target Benefit Pension
Plan (the "Retirement Plan"). The Retirement Plan covers all full time employees
of the Corporation who have completed one year of service and have attained age
21. Under the Retirement Plan, the Corporation contributes annually the funding
amount which is projected to be necessary to fund the target benefit. The target
benefit is based on years of service and the employees' compensation, as defined
in the Retirement Plan. The Corporation has the right to terminate the
Retirement Plan at any time. Upon termination, all amounts credited to the
participant's accounts will become 100% vested. Contributions to the Retirement
Plan during the year ended December 31, 1994 amounted to approximately $570,050.
The estimated annual benefits payable under the Retirement Plan as a life
annuity on retirement at normal retirement age, which assumes service will
continue until age 65 at 1994 base salaries, for Salomon Levis, Zoila Levis,
Mario S. Levis, Luis A. Alvarado and Alfredo Zamora were $103,164, $96,828,
$145,044, $90,744 and $48,084, respectively. Mr. Bonini does not participate in
the Retirement Plan.
Deferred Incentive Compensation Agreements. The Corporation has entered
into deferred incentive compensation arrangements with certain key employees of
the Corporation and its subsidiaries. Such employees are eligible to defer the
receipt of incentive compensation. The amount of incentive compensation is
credited annually based on a specified percentage of the net income of the
Corporation, its subsidiaries or divisions. The Corporation's obligation to make
the payments at the end of the deferral period is unfunded, and all such
payments are to be made out of the general assets of the Corporation. The
Corporation is not required to establish any special or separate fund or to make
any other segregation of assets to assure the payment of any deferral amount.
The Corporation accrued $106,395 as deferred compensation for 1994.
<PAGE> 21
18
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Corporation specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The Performance Graph compares the yearly percentage change in the
Corporation's cumulative total stockholder return on its Common Stock to that of
the Center for Research in Securities Prices ("CRSP") NASDAQ Stock Market Index
(U.S. Companies) and the CRSP Index for NASDAQ Financial Stocks (U.S. &
Foreign). The Performance Graph assumes that $100 was invested on December 29,
1989 in each of the Company Common Stock, the CRSP Nasdaq Stock Market Index
(U.S. Companies) and the CRSP Index for NASDAQ Financial Stocks (U.S. &
Foreign).
<PAGE> 22
19
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN AMONG THE CORPORATION,
CRSP NASDAQ STOCK MARKET INDEX (U.S. COMPANIES) AND CRSP INDEX FOR NASDAQ
FINANCIAL STOCKS
[CRC]
[GRAPH]
LEGEND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
- ------ ------------------------------------- -------- -------- -------- -------- -------- --------
_____ / / First Financial Caribbean Corporation 100.0 73.1 187.7 375.7 584.5 416.6
..__. * Nasdaq Stock Market (US Companies) 100.0 84.9 136.3 158.6 180.9 176.9
- ----- - Nasdaq Financial Stocks 100.0 76.6 118.6 169.5 197.0 197.6
SIC 6000-6799 US & Foreign
NOTES:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/29/89.
</TABLE>
<PAGE> 23
20
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of Price Waterhouse as
independent accountants to audit the financial statements of the Corporation for
the fiscal year ending December 31, 1995. This selection was recommended by the
Audit Committee of the Board of Directors. Price Waterhouse has served as the
Corporation's independent public accountants since 1977. During the year ended
December 31, 1994, Price Waterhouse received fees of approximately $504,114 for
all services rendered to the Corporation.
The submission of this proposal to a vote of shareholders is not legally
required. If selection of Price Waterhouse is not approved, the Board of
Directors will reconsider its selection. The affirmative vote of a majority of
the votes cast in person by ballot or by proxy by stockholders entitled to vote
at the Annual Meeting is required to adopt this proposal. Abstentions and broker
non-votes will not have an effect on the proposal.
A representative of Price Waterhouse is expected to be present at the
Annual Meeting and will be given an opportunity to make a statement if so
desired and to respond to appropriate questions.
VOTE RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE AS THE CORPORATION'S INDEPENDENT
ACCOUNTANTS.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders to be held in April, 1996 must be received by the
Corporation at its principal executive office by the close of business on
December 2, 1995. Proposals should be directed to the attention of the
Secretary.
ANNUAL REPORT
A copy of the Corporation's Annual Report to Shareholders containing the
consolidated financial statements of the Corporation for the fiscal year ended
December 31, 1994 accompanies this Proxy Statement. Such Annual Report is not
part of the proxy solicitation materials.
Upon receipt of a written or oral request, the Corporation will furnish to
any stockholder without charge, a copy of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1994, without the accompanying
exhibits. A list of exhibits is included in the Form 10-K and exhibits are
available from the Corporation upon the payment to the Corporation of the costs
of furnishing them. Such written or oral request should be directed to:
Secretary, First Financial Caribbean Corporation, 1159 F.D. Roosevelt Avenue,
San Juan, Puerto Rico 00920, telephone number (809) 749-7100.
<PAGE> 24
21
OTHER MATTERS
Management knows of no matters which might be brought before the Annual
Meeting or any adjournment thereof other than those described in the
accompanying notice of meeting and routine matters incidental to the conduct of
the meeting. If any other matter not described herein should come before the
Annual Meeting or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy or their substitutes to vote the proxies
in accordance with their judgment on such matters.
The above Notice of Meeting and Proxy Statement are sent by order of First
Financial Caribbean Corporation Board of Directors.
Richard F. Bonini
-------------------------------
Richard F. Bonini
Senior Executive Vice President
and Secretary
Dated: March 31, 1995
<PAGE> 25
APPENDIX A
<TABLE>
<S> <C>
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2. /X/ Please mark
your vote
as this
----------------
COMMON
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
NO.1 - Election Directors: FOR WITHHELD
Nominees are R.F. Bonini, E.M. Cullman, Jr., ALL LISTED AS TO ALL
F.M. Danziger, J.L. Ernst, Salomon Levis, NOMINEES NOMINEES
Zoila Levis, A. Brean Murray and
Victor M. Pons, Jr. / / / /
(To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- ----------------------------------------------------------
NO. 2 - Appointment of Price Waterhouse as Independent Accountants.
FOR AGAINST ABSTAIN
/ / / / / /
To vote in accordance with the Board of Director's recommendation,
just sign below. No boxes need to be checked.
Dated: 1995
------------------------------,
Signature:
--------------------------------
Signature:
--------------------------------
Please mark date and sign as your name appears to the left
and return in the enclosed envelope. If acting as executor,
administrator, trustee, guardian, etc., you should so indicate
when signing. If the signer is a corporation, please sign the
full corporate name by a duly authorized officer. If shares
are held jointly, each shareholder named should sign.
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST FINANCIAL CARIBBEAN CORPORATION
1159 F.D. ROOSEVELT AVE.
SAN JUAN, PUERTO RICO 00920
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned holder of Common Stock of First Financial Caribbean Corporation (the "Corporation") hereby authorizes and
appoints Salomon Levis, Zoila Levis and Richard F. Bonini, or any one or more of them, as proxies with full power of substitution in
each, to represent the undersigned at the Annual Meeting of Shareholdres of the Corporation to be held at the offices of First
Financial Caribbean Corporation, in The Doral Building, 650 Munoz Rivera Avenue, Hato Rey, Puerto Rico at 2:00 p.m., local time, on
Wednesday, April 26, 1995 and any adjournment or adjournments of said meeting and thereat to vote and act with respect to all the
shares of Common Stock of the Corporation that the undersigned would be entitled to vote if then personally present in accordance
with the instructions listed on the reverse hereof.
Such proxies may vote in their discretion upon such other business as may properly be brought before the meeting or any
adjournment thereof.
Receipt of the Notice of Meeting and the related Proxy Statement is hereby acknowledged.
(Continues and to be signed on other side)
</TABLE>
