<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
[FFCC LOGO]
NOTICE OF STOCKHOLDERS
1997 ANNUAL MEETING
AND PROXY STATEMENT
<PAGE> 3
FIRST FINANCIAL CARIBBEAN CORPORATION
March 17, 1997
Dear Stockholder:
You are cordially invited to attend the 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 16, 1997. The meeting will begin promptly at 11:00 a.m., local
time. We urge you to attend. First Financial Caribbean Corporation's management
considers the Annual Meeting an excellent opportunity to discuss your
corporation's progress.
During the business part of the meeting, we will address (i) the election
of directors, (ii) a proposal to approve the Corporation's 1997 Employee Stock
Option Plan, (iii) the ratification of auditors for 1997, and (iv) such other
business as may properly come before the meeting or any adjournment thereof.
I look forward to talking with you about the results of First Financial
Caribbean Corporation for 1996 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,
/s/ Salomon Levis
Salomon Levis
Chairman of the Board and
Chief Executive Officer
<PAGE> 4
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 16, 1997
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 16, 1997, at 11:00 a.m., local time, to consider and act upon
the following proposals:
1. The election of eight directors of the Corporation;
2. The approval of the Corporation's 1997 Employee Stock Option Plan;
3. The ratification of the selection of Price Waterhouse as the
Corporation's independent accountants for the fiscal year ending December 31,
1997; and
4. 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 7, 1997
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,
/s/ Richard F. Bonini
Richard F. Bonini
Senior Executive Vice President
and Secretary
Dated: March 17, 1997
<PAGE> 5
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 16, 1997 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
March 17, 1997.
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 7, 1997, 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 9,111,092 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 eight nominees for directors named in this Proxy Statement,
(ii) for the approval of the Corporation's 1997 Employee Stock Option Plan,
(iii) for the ratification of the selection of Price Waterhouse as the
independent accountants for the Corporation for the fiscal year ending December
31, 1997, and (iv) in the proxyholders' 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 another 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, if 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 at the Annual Meeting will be counted by
the persons appointed by the Corporation to act as inspectors of election for
the meeting. The inspectors of election will treat abstentions, including for
purposes of determining the presence of a quorum, as shares that are present and
entitled to vote at the Annual Meeting. Shares with respect to which a broker or
nominee has physically indicated on the proxy that it does not have
discretionary authority to vote on a particular matter ("broker non-votes"),
will not be considered as present and entitled to vote with respect to that
matter but will be considered as present and
<PAGE> 6
entitled to vote for purposes of determining the presence of a quorum.
Therefore, with respect to all matters to be voted on by the stockholders at the
Annual Meeting except for the election of directors, abstentions will have the
same effect as a vote against the matter. Abstentions will have no legal effect
on the election of directors. Broker non-votes will have no legal effect with
respect to any matters to be voted upon by the stockholders.
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
personally 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 March 3, 1997, certain information
with respect to the beneficial ownership of the Corporation's Common 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 PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
------------------------ -------------------------- --------
<S> <C> <C>
Management
Salomon Levis(2)(3)......................................... 284,342 3.12%
Luis Alvarado............................................... 22,500 (6)
Richard F. Bonini........................................... 110,710 1.22%
Ernesto Carattini........................................... 17,744 (6)
Mario S. Levis(2)........................................... 42,000 (6)
Zoila Levis(2).............................................. 85,736 1.00%
Ricardo Melendez............................................ -- --
Frederick C. Teed........................................... 200 (6)
Edison Velez................................................ -- --
Jose G. Vigoreaux........................................... -- --
Edgar M. Cullman, Jr.(4)(5)................................. 1,490,715 16.36%
Frederick M. Danziger(4)(5)................................. 1,490,715 16.36%
John L. Ernst(4)(5)......................................... 1,490,715 16.36%
A. Brean Murray............................................. -- --
Victor M. Pons, Jr.......................................... -- --
All directors, nominees and executive officers as a group,
consisting of 15 persons, including those named above..... 2,053,947 22.54%
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
------------------------ -------------------------- --------
<S> <C> <C>
Other Principal Holders
Edgar M. Cullman(5)(7)...................................... 1,490,715 16.36%
387 Park Avenue South
New York, N.Y. 10016
Louise B. Cullman(5)(7)..................................... 1,490,715 16.36%
387 Park Avenue South
New York, N.Y. 10016
Susan B. Cullman(5)(7)...................................... 1,490,715 16.36%
387 Park Avenue South
New York, N.Y. 10016
Lucy C. Danziger(5)(7)...................................... 1,490,715 16.36%
2 East 73rd Street
New York, N.Y. 10021
Cullman and Ernst Group(8).................................. 1,490,715 16.36%
387 Park Avenue South
New York, N.Y. 10016
David Levis(2).............................................. 206,906 2.27%
1159 F.D. Roosevelt Avenue
San Juan, PR 00920
Levis Family(2)............................................. 618,984 6.79%
1159 F.D. Roosevelt Avenue
San Juan, PR 00920
Wellington Management Company(9)............................ 807,200 8.86%
75 State Street
Boston, MA 02109
</TABLE>
- ---------------------
(1) The information contained in the table is based on share ownership as
of March 3, 1997. 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 except as noted below. Beneficial ownership and
percent of class shown is sole investment and voting power, except as reflected
in other footnotes hereto and except that (i) 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 referred to in the final sentence under footnote (8)
below and (ii) shares shown as owned by the Levis Family under "Other Principal
Holders" include all shares owned by Salomon Levis, Zoila Levis, David Levis,
and Mario S. Levis even though as stated in footnote (2) below each of such
persons disclaims any beneficial interest in the shares of Common Stock owned by
the others. 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) 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.
As of March 3, 1997, Salomon Levis, Zoila Levis, David Levis and Mario S. Levis
owned an aggregate of 618,984 shares of Common Stock or approximately 6.79% of
the outstanding Common Stock of the Corporation. On October 5 1995, Salomon
Levis, Zoila Levis, Mario S. Levis and David Levis filed a Schedule 13D with the
Commission stating that there is no agreement or understanding among the members
of the Levis family regarding the holding or voting of the shares of Common
Stock held by them other than an informal understanding to consult with each
other regarding the
3
<PAGE> 8
voting and disposition of the shares of Common Stock owned by each of them. The
Schedule 13D disclaims that the persons filing the Schedule 13D constitute a
group for purposes of the Securities Exchange Act of 1934 and states that each
such person has sole voting and investment power with respect to the respective
shares of Common Stock owned by them and each disclaims any beneficial interest
in the shares of Common Stock owned by the others.
(3) Includes 12,702 shares of Common Stock owned by Nancy Hernandez, the
wife of Salomon Levis.
(4) 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 620,196 shares in which he holds shared investment
and/or voting power and; included in the shares of Common Stock shown as
beneficially owned by Mr. Ernst are 100,583 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 812,499, 1,371,105 and 1,377,568
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 (8) 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.
(5) 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.
(6) Represents less than 1%.
(7) Included within the shares of Common Stock shown as beneficially owned
by Mr. Edgar M. Cullman, Mrs. Louise B. Cullman, Ms. Susan R. Cullman and Mrs.
Lucy C. Danziger are, respectively, 687,418, 547,022, 602,664, and 642,292
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
742,649, 870,283, 859,196 and 778,161 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 (8)
below. Each such person disclaims beneficial ownership of all shares not owned
by such person directly.
(8) As of March 3, 1997, 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, Mr. 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
1,490,715 shares of Common Stock or approximately 16.36% of the outstanding
Common Stock. Among others, Messrs. Cullman and Cullman, Jr. and their wives,
Mr. Ernst and to a lesser 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 Mr. 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.
(9) 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.
4
<PAGE> 9
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
1998 Annual Meeting or until their successors are duly elected and qualified.
The directors must be elected by a majority of the votes cast in person 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 of Directors will be
reduced.
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 March 3, 1997, 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; Chairman of the Board and
Chief Executive Officer of Doral Federal Savings Bank, a
wholly-owned subsidiary of the Corporation; Chairman of the
Board, Doral Mortgage Corporation and AAA Financial
Services Corporation, each a wholly owned subsidiary of the
Corporation; 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 54.
Richard F. Bonini Senior Executive Vice President of the Corporation since 1976
1988; Chief Financial Officer of Corporation since April
1996 and Secretary of the Corporation since December 1991;
Director and Secretary of Doral Federal Savings Bank;
Secretary of Doral Mortgage Corporation for more than the
past five years; Consultant to Culbro Corporation
(1989-1990); Senior Vice President, Culbro Corporation and
Vice President of the Corporation (1976-1988); Director,
Search Capital Group (automobile financing). Age 58.
Edgar M. Cullman, Jr.(2) Chief Executive Officer of Culbro Corporation since April 1988
1996 and President, Culbro Corporation since 1984,
Executive Vice President, Culbro Corporation (1983-1984);
President, General Cigar & Tobacco Co. (1980-1983);
Director, Culbro Corporation. Age 51.
</TABLE>
5
<PAGE> 10
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION SINCE
- ---- ------------------------------------------ -----
<S> <C> <C>
Frederick M. Danziger Of-Counsel, Latham & Watkins (attorneys) from December 1995 1988
to present; Member, Mudge Rose Guthrie Alexander & Ferdon
(attorneys) from July 1974 to September 30, 1995; Director,
Culbro Corporation, Monro Muffler/Brake, Inc., Ryan
Instruments, L.P. (general partner), Bloomingdale
Properties, Inc. (investments and real estate), and Centaur
Communications Ltd. Age 57.
John L. Ernst(2) Chairman of the Board and President of Bloomingdale 1989
Properties, Inc., since September 1984; Director, Culbro
Corporation. Age 56.
Zoila Levis(1) President of the Corporation since August 12, 1991; 1991
Director of Doral Federal Savings Bank and AAA Financial
Services Corporation; 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 49.
A. Brean Murray Chairman of the Board and Chief Executive Officer of Brean 1994
Murray & Co., Inc., an investment banking firm for more
than the past five years; Director, American Asset
Management (money management), BMI Capital Corp. (asset
management), Blyth Holdings Inc. (money management) and
Search Capital Group (automobile financing). Age 59.
Victor M. Pons, Jr. Attorney in private practice since 1992; Chief Justice of 1994
the Supreme Court, Commonwealth of Puerto Rico (1985-1992).
Age 61.
</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.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Board of Directors held seven meetings during the year ended December
31, 1996. Each director 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 a fee of $10,000 per year plus $800 for each Board of
Directors and committee meeting attended. No separate fees are paid for
committee meetings attended on the same day as a Board meeting. The Corporation
has obtained directors and officers liability insurance for its directors and
officers. The Corporation's Certificate of Incorporation contains a provision
that exempts directors from personal liability for monetary damages to the
Corporation or its shareholders for violations of the duty of care, to the
fullest extent permitted by the Puerto Rico General Corporation Law. The
Corporation has also agreed to indemnify its directors and officers for certain
liabilities to the fullest extent permitted by Puerto Rico law.
The Board of Directors has standing Audit and Compensation Committees. The
Audit Committee and the Compensation Committee held one meeting each during
1996. 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
6
<PAGE> 11
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, and Cullman, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Danziger, Ernst and
Murray, neither of whom is or was during 1996 an executive officer of the
Corporation. Since January 1, 1996, 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. Murray, a nominee for director of the Corporation, is the Chairman of
the Board and Chief Executive Officer of Brean Murray & Co., Inc., an investment
banking firm which in the past has rendered investment banking services to the
Corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, Aidiliza Levis, the daughter of David Levis, the former
Chairman of the Board and a director emeritus of the Corporation, sister of
Mario S. Levis, an Executive Vice President and Treasurer of the Corporation,
and the niece of Salomon Levis and Zoila Levis, the Chairman of the Board and
President, respectively, of the Corporation, was employed as the President of
Centro Hipotecario, Inc., a wholly-owned subsidiary of the Corporation and
received compensation of $199,275 (including contributions to the Corporation's
Target Benefit Pension Plan).
See also "Compensation Committee Interlocks and Insider Participation" for
certain relationships involving A. Brean Murray, a nominee for director of the
Corporation.
Sana Investment, Inc. ("Sana"), a mortgage brokerage firm wholly-owned by
Nancy Hernandez, the wife of Salomon Levis and the former President of Doral
Mortgage Corporation, refers mortgage loans to the Corporation. Brokerage fees
payable to Sana in connection with mortgage loans originated through Sana and
closed by the Corporation are payable by the customer and not by the
Corporation. Sana also owns a 40% interest in Hector Lavergne, Inc., a realty
firm whose clients, from time to time, obtain financing from the Corporation.
During 1996, Doral Federal Savings Bank ("Doral Federal"), a wholly-owned
subsidiary of the Company paid brokerage fees of $5,360 to Hector Lavergne,
Inc., in connection with the leasing of branch facilities by Doral Federal. The
Corporation believes that all loans originated through Sana or made to clients
of Hector Lavergne, Inc. were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing for comparable transactions originated directly by the Corporation,
or, in the case of Sana, referred to the Corporation by other unrelated mortgage
brokerage firms. Under the community property laws of Puerto Rico, Salomon Levis
is deemed to have a 50% interest in all property owned by the conjugal
partnership composed of Salomon Levis and Nancy Hernandez, including her stock
ownership in Sana.
From time to time, the Corporation makes mortgage loans to persons who
purchase homes in residential housing projects developed by Lema Development,
S.E. or other entities controlled by Arturo Madero, the spouse of Zoila Levis,
the President of the Corporation. All such loans have been made in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable transactions for
persons purchasing homes in projects developed by unaffiliated persons and
management believes that such loans do not involve more than the normal risk of
collectibility or present other unfavorable features.
7
<PAGE> 12
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. 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 an Executive Vice
President and Treasurer of the Corporation, invested as limited partners. In
December 1991, Salomon Levis and Zoila Levis sold their interests in the
Partnership to unrelated third parties at cost. 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
financial statements. 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. 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. The sale of the Notes was with
recourse to the Corporation.
As of December 31, 1996, the principal balance of the Notes held by the
Corporation was approximately $1.8 million. At December 31, 1996, the
Partnership also owed the Corporation approximately $541,000, in past due
interest and approximately $1.1 million for advances made by the Corporation on
behalf of the Partnership. The Corporation has reserved approximately $1.7
million during the past four years for possible losses from amounts due from the
Partnership. Accordingly, at December 31, 1996, the Corporation's balance sheet
only reflected the principal balance of the Notes due from the Partnership of
approximately $1.8 million. At December 31, 1996, the Partnership had a net
capital deficiency of approximately $2.1 million.
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.
Doral Federal and AAA Financial Services Corporation ("AAA Financial"),
each a wholly-owned subsidiary of the Corporation has had, and expects to have
in the future, banking or securities transactions in the ordinary course of
business with directors and executive officers of the Corporation. All
extensions of credit to any of such persons by Doral Federal or AAA Financial
have been made in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and in the opinion of management
of such entities, do not involve more than the normal risk of collectibility or
present other unfavorable features.
The following table sets forth certain information with respect to mortgage
loans made by the Corporation or other wholly-owned mortgage banking
subsidiaries of the Corporation, to executive officers of the Corporation
8
<PAGE> 13
and to certain related interests of directors and executive officers of the
Corporation, including the Partnership. The table does not include loans made
prior to January 1, 1996 that have been sold to investors and are, therefore, no
longer owned by the Corporation. 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 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 1996 AS OF 12/31/96 RATE
----------------- ---- ------------------ -------------- --------
<S> <C> <C> <C> <C>
Puerto Rico Island Rental 1990 $1,800,000(1) $1,800,000 9.00%
Limited Dividend
Partnership, S.E.(2)
Aidiliza Levis(3) 1996 $ 420,000(1) $ 420,000 7.5%
Arturo Madero(4) 1996 $ 121,520(1) $ 121,090 8.5%
Ricardo Melendez(5) 1996 $ 178,196(1) $ 177,884 8.125%
Edison Velez(6) 1995 $ 24,653(7) $ 16,385 9.75%
</TABLE>
- ---------------------
(1) First mortgage.
(2) Refer to information set forth above for information regarding this
transaction.
(3) Aidiliza Levis is the niece of Salomon Levis and Zoila Levis and the
sister of Mario S. Levis. She is also the President of Centro
Hipotecario, Inc., a wholly-owned subsidiary of the Company.
(4) Arturo Madero is the husband of Zoila Levis.
(5) Ricardo Melendez is a Vice President and Controller of the Corporation.
(6) Edison Velez is the President of Doral Mortgage Corporation.
(7) Second Mortgage.
9
<PAGE> 14
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, except for their employment
agreements entered into with the Corporation and described under "Employment
Agreements and Other Compensation Arrangements" 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.
<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; 48
Director of Doral Federal Savings Bank; Chief Financial
Officer of the Corporation from 1985 to April 1996;
President of Doral Federal Savings Bank, a wholly-owned
subsidiary of the Corporation from September 1993 until
April 1996; Senior Vice President and Controller of the
Corporation (1980-1985).
Ernesto Carattini President of HF Mortgage Bankers Division since September 49
1995; Executive Vice President of Doral Mortgage
Corporation for more than five years prior thereto.
Mario S. Levis Executive Vice President of the Corporation since 33
September 1995; Treasurer of the Corporation since
December 1991; Director of AAA Financial Services
Corporation; Executive Vice President of Doral Mortgage
Corporation; Senior Executive Trader of the Corporation
from 1988 to December 1991. Trader, Merrill Lynch Pierce
Fenner & Smith Incorporated (1987-1988).
Ricardo Melendez Vice President and Controller of the Corporation since 38
October 1995; Chief Financial Officer of Doral Federal
Savings Bank, a wholly-owned subsidiary of the
Corporation from September 1993 to July 1995; Senior
Assistant to CEO and CFO of the Corporation from May 1991
to September 1993; Audit Manager and Senior Auditor,
Price Waterhouse from July 1986 to May 1991.
Frederick C. Teed Executive Vice President -- Banking Operations since 39
March 1, 1996; Federal Thrift Regulator, Office of Thrift
Supervision, Department of the Treasury, for more than
five years prior thereto.
Edison Velez President of Doral Mortgage Corporation since September 35
1995, Senior Vice President of Doral Mortgage Corporation
for more than five years prior thereto.
Jose G. Vigoreaux President of Doral Federal Savings Bank, a wholly owned 45
subsidiary of the Corporation since April 1996; Director
of Doral Federal Savings Bank, Vice President and Chief
Financial Officer, Doral Federal Savings Bank, July 1995
to March 1996, Vice President-Operations September 1993
to June 1995, President, Caribbean Federal Savings Bank
from August 1990 to August 1993.
</TABLE>
10
<PAGE> 15
EXECUTIVE COMPENSATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 except for Mr. Frederick C. Teed, who
filed late the initial report required to be filed in connection with becoming
an executive officer.
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
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 or the
productivity of their particular divisions or subsidiaries.
11
<PAGE> 16
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 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
became effective on January 1, 1992 and 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. This
Employment Agreement expired on December 31, 1994 and Mr. Levis entered into a
new two-year agreement that became effective January 1, 1995 and expired on
December 31, 1996 (the "1995 Employment Agreement"). Under the 1995 Employment
Agreement, incentives for volume of originations were eliminated because the
Committee felt that these incentives were less appropriate for a larger and more
mature company such as the Corporation. The 1995 Employment Agreement provided
for a basic incentive bonus ($1 million) if a minimum level of profitability
were attained (Adjusted Net Income of at least $10 million). Increasing
incentives were payable for achieving higher levels of profitability but only to
the extent such profitability exceeded a minimum (15%) of return on
stockholders' equity after taxes. In addition, the 1995 Employment Agreement
provided for a maximum amount of salary and incentive compensation payable to
Mr. Levis in any given year ($4.5 million) regardless of results to avoid
possible distortions in compensation as a result of unforeseen market trends.
See "Employment Agreements and Other Compensation Arrangements" for information
regarding the 1995 Employment Agreement. The Corporation is in the process of
negotiating a new employment agreement for Mr. Levis.
Section 162(m) of the Internal Revenue Code. The Committee has considered
the impact of the provisions of Section 162(m) of the Internal Revenue Code of
1986 (the "Code") that provides that compensation paid to a corporation's chief
executive officer or its four other most highly compensated executive officers
may not be deducted for federal income tax purposes unless, in general, such
compensation is performance based, is established by an independent committee of
directors, is objective and the plan or agreement providing for such performance
based compensation has been approved in advance by stockholders. Because the
Corporation presently does not pay federal income taxes (except for the
operations of Doral Federal Savings Bank and Doral Mortgage Corporation's
limited Florida operations), Section 162(m) should not limit the tax deductions
available to the Corporation for executive compensation in the near future.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
A. Brean Murray
Frederick M. Danziger
John L. Ernst
12
<PAGE> 17
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
The Corporation entered into an employment agreement with Salomon Levis,
which became effective as of January 1, 1995 and expired on December 31, 1996.
Under the terms of the Agreement, Mr. Levis was entitled to receive annually a
base salary of $700,000 plus incentive compensation equal to the sum of the
following: (i) $1.0 million if the Company earns at least $10 million of
Adjusted Net Income (as hereinafter defined); (ii) 10% of the Company's annual
consolidated net income after taxes and after adding back incentive compensation
payable to executives of the Corporation ("Adjusted Net Income"), in excess of
$10 million and up to $20 million to the extent such Adjusted Net Income exceeds
an amount equal to a 15% return on stockholders' equity; and (iii) 15% of
Adjusted Net Income in excess of $20 million to the extent such Adjusted Net
Income exceeds an amount equal to a 15% return an stockholders' equity. At the
discretion of the Board of Directors, up to 50% of the incentive compensation
could be paid in Common Stock of the Corporation. Mr. Levis' annual salary and
incentive compensation is subject to a maximum of $4.5 million per year. The
Corporation and Mr. Levis are in the process of negotiating a new employment
agreement. See "Board Compensation Committee Report on Executive
Compensation -- Policies."
The Corporation entered into an employment agreement with Zoila Levis which
became effective as of January 1, 1995 and expired on December 31, 1996. Under
the terms of the agreement, Zoila Levis was entitled to receive annually a base
salary of $300,000 plus incentive compensation equal to the sum of the
following: (i) $300,000 if the Company earns at least $10.0 million of Adjusted
Net Income; (ii) 3% of the Company's Adjusted Net Income, in excess of $10
million and up to $20 million; and (iii) 5% of Adjusted Net Income in excess of
$20 million to the extent such Adjusted Net Income exceeds an amount equal to a
15% return on stockholders' equity. At the discretion of the Board of Directors,
up to 50% of the incentive compensation could be paid in Common Stock of the
Corporation. Ms. Levis' annual salary and incentive compensation is subject to a
maximum of $1.5 million per year. The Corporation and Ms. Levis are in the
process of negotiating a new employment agreement.
The Employment Agreements with Salomon Levis and Zoila Levis provided that
if such agreements were terminated following a change of control of the
Corporation, the named executive officer would be entitled to receive all
compensation due under the agreement for the calendar year in which such
termination occurs.
The Corporation has entered into an employment agreement with Richard F.
Bonini which became effective January 1, 1995 and expires on June 30, 1997.
Pursuant to the terms of the agreement, Mr. Bonini is entitled to receive
annually a base salary of $240,000 plus incentive compensation equal to the sum
of the following: (i) $150,000 if the Company earns at least $10 million of
Adjusted Net Income; (ii) 3% of the Company's Adjusted Net Income, in excess of
$10 million and up to $20 million to the extent such Adjusted Net Income exceeds
an amount equal to a 15% return on stockholders' equity; and (iii) 5% of
Adjusted Net Income in excess of $20 million to the extent such Adjusted Net
Income exceeds an amount equal to a 15% return on stockholders' equity. At the
discretion of the Board of Directors, up to 50% of the incentive compensation
may be payable in the Common Stock of the Corporation. Mr. Bonini's annual
salary and incentive compensation is subject to a maximum of $1.2 million per
year.
13
<PAGE> 18
The Corporation has entered into an Employment Agreement with Mario S.
Levis, Executive Vice President and Treasurer of the Corporation, which became
effective as of January 1, 1996 and expires on December 31, 1997. Pursuant to
the terms of the Agreement, Mr. Levis is entitled to base salary of $275,000
plus incentive compensations equal to the sum of the following: (i) $275,000 if
the Company earns at least $10 million of Adjusted Net Income; (ii) 2.5% of the
Company's Adjusted Net Income in excess of $10 million and up to $20.0 million
to the extent such Adjusted Net Income exceeds an amount equal to a 15% return
on stockholders equity and (iii) 4% of the Company's Adjusted Net Income in
excess of $20 million to the extent such Adjusted Net Income exceeds on amount
equal to a 15% return on stockholders' equity. At the discretion of the Board of
Directors, up to 50% of the incentive compensation may be payable in Common
Stock of the Corporation. Mr. Levis' annual salary and incentive compensation is
subject to a maximum of $1.2 million per year. The Agreement provides that if it
is terminated following a change of control of the Corporation, Mr. Levis will
be entitled to receive all compensation due under the Agreement for the calendar
year in which such termination occurs.
Although the Corporation's employment agreements with various executive
officers permit the Corporation to pay up to 50% of incentive compensation in
Common Stock of the Corporation, existing rules of the National Association of
Securities Dealers applicable to corporations whose shares trade on the NASDAQ
National Market System limit the ability of the Corporation to issue shares of
its Common Stock to executive officers without prior shareholder approval and
such approval has not been requested by the Corporation.
The Corporation has entered into an employment agreement with Luis A.
Alvarado, Executive Vice President of the Corporation, dated December 1, 1996,
which became effective retroactive to January 1, 1996 and expires on December
31, 1997. Pursuant to the terms of the agreement, Mr. Alvarado is entitled to
receive annually (i) a base salary of $150,000; and (ii) an incentive bonus
equal to the greater of $25,000 or 2% of the Corporation's Adjusted Net Income
to the extent such net income exceeds an amount equal to a 15% return on
stockholders' equity. Mr. Alvarado's annual salary and incentive compensation is
subject to a maximum of $300,000 per year. The Agreement provides that if it is
terminated following a change of control of the Corporation, Mr. Alvarado will
be entitled to receive all compensation due under the Agreement for the calendar
year in which such termination occurs.
The Corporation has entered into an employment agreement with Frederick C.
Teed, Executive Vice President -- Banking Operations of the Corporation, which
became effective February 20, 1996 and expires on December 31, 1997. Pursuant to
the terms of the agreement, Mr. Teed is entitled to receive annually (i) a base
salary of $100,000 and (ii) an incentive bonus equal to the lesser of (x)
$100,000 and (y) 1.5% of the Corporation's Adjusted Net Income to the extent
such net income exceeds an amount equal to a 15% return on stockholder's equity;
provided that the incentive bonus computed under (y) for 1996 is equal to 5/6 of
the otherwise applicable amount and further provided, that under the Agreement
one-half of the incentive bonus for 1996 is not payable until payment of the
1997 incentive bonus. The Corporation waived this latter provision and paid Mr.
Teed the entire incentive bonus payable with respect to 1996. The Agreement
provides that Mr. Teed may terminate the Agreement following certain events
constituting a "change of control" of the Corporation, in which case Mr. Teed
will be entitled to a lump sum payment equal to the amount payable to him as
annual salary through the original term of the Agreement plus any incentive
bonus earned to the date of such change of control but not yet paid.
Doral Mortgage Corporation ("Doral Mortgage") has entered into an
employment agreement with Edison Velez, the President of Doral Mortgage, dated
as of December 31, 1996, which became effective on January 1, 1997 and expires
on December 31, 1998. Pursuant to the terms of the agreement, Mr. Velez is
entitled to receive
14
<PAGE> 19
annually (i) a base salary equal to $240,000 and (ii) and an incentive bonus
equal to the lesser of (x) 200,000 and (y) 3% of the net income of Doral
Mortgage over and above $3 million derived from mortgage banking activities.
One-half of the incentive compensation is subject to a deferral arrangement
whereby Mr. Velez is not entitled to collect the deferred portion of the
incentive compensation until five years after the incentive compensation was
earned. Doral Mortgage's obligation to make the payment at the end of the
deferral period is unfunded. The deferred portion of the incentive compensation
earns interest at 1% below the prime rate of the Chase Manhattan Bank. The
Agreement provides that if it is terminated following a change of control of the
Corporation, Mr. Velez will be entitled to receive all compensation due under
the Agreement for the calendar year in which such termination occurs. While Mr.
Velez' employment agreement was not in effect for 1996, his salary and incentive
compensation for 1996 were determined on the same basis as set forth in his
employment agreement except that the incentive bonus for 1996 was payable in
full and not subject to deferral.
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, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL 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>
Salomon Levis 1996 $700,000 $2,989,826 $--0-- $ --0-- $18,691(5)
Chairman of the Board and 1995 700,000 1,521,361 --0-- --0-- 18,430(6)
Chief Executive Officer 1994 880,969 1,419,820 --0-- --0-- 20,572(7)
Zoila Levis 1996 $300,000 $1,200,200 $--0-- $ --0-- $28,953(5)
President 1995 300,000 586,438 --0-- --0-- 38,269(6)
1994 280,583 296,246 --0-- --0-- 37,326(7)
Richard F. Bonini 1996 $240,000 $ 810,263 $--0-- $ --0-- $30,000(5)
Senior Executive Vice 1995 240,000 323,183 --0-- --0-- 30,000(6)
President and Secretary 1994 232,000 160,221 --0-- --0-- 30,000(7)
Mario S. Levis 1996 $275,000 $ 804,058 $--0-- $ --0-- $ 8,042(5)
Executive Vice President 1995 45,514 421,651 --0-- --0-- 7,949(6)
and Treasurer 1994 43,124 591,973 --0-- --0-- 8,089(7)
Edison Velez 1996 $245,192 $ 171,708 $--0-- $ --0-- $ 6,667(5)
President, 1995 114,128 7,000 --0-- --0-- 4,664(6)
Doral Mortgage Corporation 1994 91,108 4,000 --0-- --0-- 4,205(7)
</TABLE>
- ---------------------
(1) The 1994 bonus for Zoila Levis includes a bonus of $55,915 in addition
to the incentive bonus payable under her employment agreement. During 1994,
Salomon Levis voluntarily took a $1,626,821 reduction in the amount of incentive
compensation 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 Bonini for 1994 amounted to $119,031, $19,417 and $8,000,
respectively. See "Employment Agreements and Other Compensation Arrangements."
15
<PAGE> 20
(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) As of December 31, 1996, restrictions on 19,050 shares of restricted
stock previously granted to Zoila Levis lapsed during 1996. Restrictions on all
other restricted stock awards previously granted to the named individuals have
lapsed.
(5) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Edison Velez, include the Corporation's contribution to the Corporation's Target
Benefit Pension Plan, a defined contribution pension plan, in the amounts of
$18,691, $16,380, $8,042 and $6,667, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 in lieu of Mr.
Bonini's participation in the Corporation's Target Benefit Pension Plan. The
amount shown for Zoila Levis includes $12,573 representing dividends received on
restricted stock during 1996. Dividends are paid on shares of restricted stock
to the same extent dividends are declared and paid on the Corporation's Common
Stock.
(6) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Edison Velez, include the Corporation's contribution to the Corporation's Target
Benefit Pension Plan, a defined contribution pension plan, in the amounts of
$18,430, $16,171, $7,949 and $4,664, respectively. The amount shown for Mr.
Bonini includes a lump sum payment in the amount of $30,000 in lieu of Mr.
Bonini's participation in the Corporation's Target Benefit Pension Plan. The
amounts shown for Zoila Levis includes $22,098 representing dividends received
on restricted stock during 1995.
(7) The amounts shown for Salomon Levis, Zoila Levis, Mario S. Levis and
Edison Velez, 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 $4,205, 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 $19,812 representing dividends received on
restricted stock during 1994.
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
"1988 Option Plan"). The 1988 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 1988
Option Plan, and the terms and conditions to be included in such option
agreements. Under the 1988 Option Plan, an aggregate of 300,000 shares of Common
Stock have been authorized for issuance upon exercise of options. Options may be
granted under the 1988 Option Plan at prices equal to 100% of the fair market
value of Common Stock on the date of grant.
16
<PAGE> 21
Options granted under the 1988 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 1988 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 1988 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.
The 1988 Option Plan permits the granting of stock appreciation rights in
tandem with the granting of stock options. Such stock appreciation rights
entitles 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.
At the Annual Meeting, shareholders are being asked to approve the
Corporation's 1997 Employee Stock Option Plan. If the 1997 Employee Stock Option
Plan is approved by the Corporation's shareholders the 1988 Option Plan will be
terminated. See "Approval of 1997 Employee Stock Option Plan" herein. No options
have been granted under the 1988 Option Plan. The 1988 Option Plan is scheduled
to terminate on October 26, 1998.
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. As of March 3, 1997, 72,194, shares were available for
issuance under the Restricted Stock Plan. 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. The Corporation maintains a Target Benefit Pension Plan
(the "Retirement Plan") for the benefit of all eligible employees. 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,
1996 amounted to approximately $724,689.
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 1996 base salaries, for Salomon Levis, Zoila Levis,
Mario S. Levis and Edison Velez were $6,705, $6,204, $8,881 and $5,633,
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
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<PAGE> 22
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 $231,972 as deferred
compensation for 1996.
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 (the "Exchange Act"), 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. The Performance
Graph assumes that $100 was invested on December 31, 1991 in each of the
Corporation's Common Stock, the CRSP NASDAQ Stock Market Index (U.S. Companies)
and the CRSP Index for NASDAQ Financial Stocks.
18
<PAGE> 23
<TABLE>
<CAPTION>
First Financial Nasdaq Stock Market
Caribbean Corporation (US Companies) Nasdaq Financial Stocks
<S> <C> <C> <C>
12/31/91 100.0 100.0 100.0
12/31/92 200.2 116.4 143.0
12/31/93 311.5 133.6 166.2
12/30/94 222.0 130.6 166.6
12/29/95 377.7 184.7 242.6
12/31/96 576.0 227.2 311.1
</TABLE>
19
<PAGE> 24
PROPOSAL TO APPROVE THE 1997 EMPLOYEE STOCK OPTION PLAN
INTRODUCTION
On March 7, 1997, the Board of Directors adopted, subject to shareholder
approval, the 1997 Employee Stock Option Plan (the "1997 Option Plan"). If the
1997 Option Plan is approved, the 1997 Option Plan will replace the 1988 Option
Plan, which otherwise would terminate automatically on October 26, 1998, the
tenth anniversary of its effective date. No options have been granted under the
1988 Option Plan to date.
The principal features of the 1997 Option Plan are summarized below. The
summary is qualified by the complete text of the 1997 Option Plan, a copy of
which is attached as Exhibit A to this Proxy Statement.
PURPOSE
The 1997 Option Plan is intended to provide the Corporation and its
subsidiaries with an effective means to attract and retain highly qualified
personnel as well as to provide additional incentive to employees who provide
services to the Company and its subsidiaries.
ADMINISTRATION OF PLAN
The 1997 Option Plan provides that it will be administered by a committee
(the "Committee") consisting of at least two directors appointed by the Board,
each of whom is a "Non-Employee Director" within the meaning of Rule 16b-3
promulgated under the Exchange Act. The Committee has general authority to
administer the plan, including the authority to determine the form of the option
agreements to be used under the plan, and the terms and conditions to be
included in such option agreements, subject to the ratification of the Board of
Directors if such limitation is imposed by the Board of Directors.
NUMBER OF AUTHORIZED SHARES
Under the 1997 Option Plan, 500,000 shares of Common Stock, subject to
adjustment for stock splits, recapitalizations and similar events, will be
available for use. The shares are to be made available from authorized but
unissued shares of Common Stock or treasury stock. Based upon the closing sale
price of the Corporation's Common Stock on March 3, 1997 of $27 1/4 per share,
the aggregate market value of the 500,000 shares to be reserved under the 1997
Option Plan is $13.63 million.
ELIGIBILITY
Any employee of the Corporation (including officers and directors who are
also employees), or of any of its subsidiaries, is eligible to participate in
the 1997 Option Plan. The selection of individuals eligible to participate is
within the discretion of the Committee. The approximate number of employees of
the Corporation and its subsidiaries that are eligible to participate in the
1997 Option Plan is 823. Since the selection of participants and awards granted
will be within the discretion of the Committee, it is not possible to state the
number of officers and other employees that will participate in the 1997 Option
Plan or the amount and value of awards to be granted to such persons under the
1997 Option Plan.
AWARDS UNDER PLAN
The 1997 Option Plan provides for the grant of stock options that are
intended to qualify as "qualified stock options" ("QSOs") under Section 1046 of
the Puerto Rico Internal Revenue Code of 1994, as amended (the
20
<PAGE> 25
"Puerto Rico Code"), as "incentive stock options" under Section 422 of the Code
("ISOs") or "non-statutory stock options" ("NSOs").
The exercise price with respect to options to be granted under the 1997
Option Plan will be determined by the Committee at the time of grant. Under the
1997 Option Plan, the option exercise price may not be less than 100% of the
fair market value of the Common Stock on the date of grant. Fair market value is
defined as the closing price of the Common Stock on the date of grant as
reported on the NASDAQ NMS or, if no price is reported on such day, then on the
next preceding day on which such price was reported. Payments for shares upon
exercise of stock options may be made either in cash or, with the consent of the
Committee, by exchanging shares of Common Stock at their fair market value, or a
combination of both.
No person may receive an ISO if, at the time of grant, such person (a "10%
Holder") owns directly or indirectly more than 10% of the total combined voting
power of all classes of stock of the Corporation unless the option price is at
least 110% of the fair market value of the Common Stock and such option is not
exercisable more than five years after its date of grant. There is also a
$100,000 limit on the value of stock determined at the time of grant of a QSO or
an ISO that may become exercisable for the first time in any calendar year.
The maximum option term is ten years from the date of grant, except for 10%
Holders in the case of ISOs, in which case the maximum term is five years.
Unless an option agreement provides otherwise, all options granted are 50%
exercisable after one year and 100% exercisable after two years. No option may
be granted more than 10 years after the effective date of the 1997 Option Plan,
which is March 7, 1997.
The 1997 Option Plan permits the granting of stock appreciation rights
("SARs") in tandem with the granting of stock options. Such SARs entitle the
holder to receive in cash upon exercise the difference between the option
exercise price and the fair market value of the Common Stock in lieu of
exercising the related option.
If an employee's employment with the Corporation or a subsidiary terminates
by reason of death or disability, his or her stock options and SARs, whether or
not then exercisable, may be exercised by the employee or by the estate, heir or
legatee of the employee within one year after such termination of employment
(but not later than the date the options or SARs would otherwise expire). If the
optionee's employment terminates for any reason other than disability or death,
stock options and SARs held by such optionee terminate three months after the
date of such termination (but not later than the date the option would otherwise
expire).
Option and SARs are not transferrable, except by will or applicable laws of
descent and distribution.
CHANGE IN CONTROL
Under the 1997 Option Plan, upon the occurrence of certain "change of
control" transactions involving the Corporation, all options then outstanding
under the 1997 Option Plan become immediately exercisable.
AMENDMENTS AND TERMINATION
The Corporation's Board of Directors may suspend, amend, modify or
terminate the 1997 Option Plan, without shareholder approval except to the
extent required by the Puerto Rico Code or the Code to permit the granting of
QSOs or ISOs under the 1997 Option Plan or by the rules of any securities
exchanges or automated quotation system on which the shares of Common Stock of
the Corporation trade. If the Board of Directors voluntarily submits a proposed
amendment, supplement, modification or termination for stockholder approval,
such submission will not require any further amendments, supplements or
terminations (whether or not relating to the same provision or subject matter)
to be similarly submitted for stockholder approval.
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<PAGE> 26
Unless previously terminated, the 1997 Option Plan will terminate on March
7, 2007, the tenth anniversary of the effective date of the 1997 Option Plan.
Options may not be granted under the 1997 Option Plan after such date. Awards
granted prior to termination of the 1997 Option Plan shall continue in
accordance with their terms following such termination. No amendment,
suspension, modification or termination of the 1997 Option Plan shall adversely
affect the rights of an employee in awards previously granted without such
employee's consent.
TAX WITHHOLDING AND TAX OFFSET PAYMENTS
The Committee may require payment, or withhold payments made by the 1997
Option Plan, in order to satisfy applicable withholding tax requirements. The
Committee may make tax offset payments to assist employees in paying income
taxes incurred as a result of their participation in the 1997 Option Plan. The
amount of the tax offset payments shall be determined by multiplying a
percentage (established by the Committee) by all or a portion of the taxable
income recognized by an employee upon: (i) the exercise of an NSO or an SAR; or
(ii) the disposition of shares received upon exercise of a QSO or an ISO.
TAX CONSEQUENCES
Puerto Rico Code. A recipient of a QSO does not recognize income at the
time of the grant of an option. In addition, no income is recognized at the time
a QSO is exercised. On a subsequent sale or exchange of the shares acquired
pursuant to the exercise of a QSO, the optionee may have taxable long-term or
short-term capital gain or loss, depending on whether the shares were held for
more than six months, measured by the difference between the amount realized on
the disposition of such shares and his or her tax basis in such shares. Tax
basis will, in general, be the amount paid for the shares. The Corporation will
not be entitled to a business expense deduction in respect of the grant of the
option, the exercise thereof or the disposition of the shares.
With respect to a NSO, a recipient of a NSO does not recognize income at
the time of grant of the NSO. The difference between the fair market value of
the shares of stock on the date of exercise and the stock option exercise price
generally will be treated as compensation income upon exercise, and the
Corporation will be entitled to a deduction in the amount of income so
recognized by the optionee. Upon a subsequent disposition of the shares, the
difference between the amount received by the optionee and the fair market value
of the shares of stock on the option exercise date will be treated as long or
short-term capital gain or loss, depending on whether the shares were held for
more than six months.
SARs will not result in taxable income to the recipient or a tax deduction
for the Corporation at time of grant. The exercise of SARs will generally result
in compensation in the amount of the cash payment taxable as ordinary income to
the employee. The Corporation may generally claim a tax deduction in the amount
of any cash paid.
Federal Tax Consequences. The Corporation is organized under the laws of
the Commonwealth of Puerto Rico and, at the present time, it is not engaged in
any trade or business in the United States. Accordingly, it is subject generally
to a flat 30% federal income tax on its fixed or determinable, annual or
periodic income, if any, from sources within the United States. The Corporation
would only be entitled to claim deductions in computing its U.S. income tax
liability to the extent such deductions were directly related to any income
effectively connected with the conduct of a trade or business in the United
States. Although at the present time the Corporation does not have any
operations in the United States, its wholly-owned subsidiary, Doral Mortgage
Corporation, operates two branches in the State of Florida. Accordingly, the
limitations imposed by Section 162(m) of the Code for compensation to certain
highly paid executives should not limit the tax deductions available to the
Corporation in connection with the 1997 Option Plan. For purposes of the
discussion below, some
22
<PAGE> 27
of the QSOs granted under the 1997 Option Plan may also be treated as ISOs for
purposes of Sections 421 and 422 of the Code.
Residents of Puerto Rico. Recipients of stock options or SARs who are
residents of Puerto Rico during the entire taxable year and perform services for
the Corporation or its subsidiaries in Puerto Rico, will not have any gross
income for federal income tax purposes either in respect of (i) the grant or the
exercise of stock options or (ii) the grant of, or the receipt of cash payments
upon exercise of, SARs.
Non-Residents of Puerto Rico and Residents of Puerto Rico who Perform
Services Outside of Puerto Rico. In general, an optionee, who is a non-resident
of Puerto Rico or a resident of Puerto Rico who performs services outside Puerto
Rico, will not recognize taxable income upon grant or exercise of an ISO and the
Corporation and its subsidiaries will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value on the date of exercise
of the shares received over the exercise price of the shares will be treated as
an adjustment to alternative minimum taxable income. In order for the exercise
of an ISO to qualify for the foregoing tax treatment, the optionee generally
must be an employee of the Corporation or its subsidiaries (within the meaning
of Section 422 of the Code) from the date the ISO is granted through the date
three months before the date of exercise.
If the optionee has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the date
of exercise, upon disposition of the shares by the optionee, the difference, if
any, between the sales price of the shares and the exercise price of the option
will be treated as long-term capital gain or loss. If the optionee does not
satisfy these holding period requirements, the optionee will recognize ordinary
income at the time of the disposition of the shares, generally in an amount
equal to excess of the fair market value of the shares at the time the option
was exercised over the exercise price of the option. The balance of the gain
realized, if any, will be long-term or short-term capital gain, depending upon
whether or not the shares were sold more than one year after the option was
exercised. If the optionee sells the shares prior to the satisfaction of the
holding period requirements but at a price below the fair market value of the
shares at the time the option was exercised, the amount of ordinary income will
be limited to the amount realized on the sale over the exercise price of the
option. Subject to any limitations imposed by Section 162(m) of the Code for
federal income tax purposes, the employee including such compensation in income
and certain reporting requirements, the Corporation and its subsidiaries will be
allowed a business expense deduction to the extent the optionee recognized
ordinary income. Upon any subsequent sale of the shares, the optionee will have
taxable gain or loss, measured by the difference between the amount realized on
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
In general, an optionee, who is a non-resident of Puerto Rico or a resident
of Puerto Rico who performs services outside of Puerto Rico, to whom an NSO is
granted will recognize no income at the time of the grant of the option. Upon
exercise of an NSO, an optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option (or, if the optionee is subject
to restrictions imposed by Section 16(b) of the Exchange Act, upon the lapse of
those restrictions, unless the optionee makes a special election within 30 days
after exercise to have income determined without regard to the restrictions).
Subject to any limitations imposed Section 162(m) of the Code for federal income
tax purpose, the employee including such compensation in income and certain
reporting requirements, the Corporation will be entitled to a tax deduction in
the same amount. Upon a subsequent sale of the shares, the optionee will have
taxable gain or loss, measured by the difference between the amount realized on
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
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<PAGE> 28
Upon exercise of a SAR, an optionee who is a non-resident of Puerto Rico or
a resident of Puerto Rico who performs services outside Puerto Rico will
recognize ordinary income in an amount equal to the cash received on the
exercise date. If it complies with applicable withholding requirements, the
Corporation and its subsidiaries will be entitled to a business expense
deduction in the same amount and at the same time as the optionee recognizes
ordinary income.
Under the 1997 Option Plan, upon the occurrence of certain "change in
control" transactions involving the Corporation, all options then outstanding
under the 1997 Option Plan become immediately exercisable. Under certain
circumstances, compensation payments attributable to such options may be treated
as "parachute payments" under the Code, in which case a portion of such payments
may be nondeductible to the Corporation for federal income tax purposes and the
recipient may be subject to a 20% excise tax under the Code.
VOTE REQUIRED AND RECOMMENDATION
The affirmative vote of the majority of the votes present in person or by
proxy by stockholders entitled to vote at the Annual Meeting is required to
approve the 1997 Option Plan. Therefore, abstentions shall have the effect of a
vote against the proposal. Broker-non-votes will have no effect on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL
OF THE 1997 OPTION PLAN.
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, 1997. 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, 1996, Price Waterhouse received fees of approximately $393,425 for
all services rendered to the Corporation.
The submission of this proposal to a vote of shareholders is not legally
required. If the selection of Price Waterhouse is not approved, the Board of
Directors will reconsider its selection. The affirmative vote of a majority of
the shares of Common Stock represented, in person or by proxy, at the Annual
Meeting is required to adopt this proposal. Abstentions will have the effect of
a vote against the proposal. Broker non-votes will have no legal 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 1998 must be received by the
Corporation at its principal executive office by the close of business on
November 17, 1997. Proposals should be directed to the attention of the
Secretary.
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<PAGE> 29
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, 1996 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, 1996, 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 (787) 749-7100.
OTHER MATTERS
Management knows of no matters which may 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 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 the
Board of Directors of First Financial Caribbean Corporation.
(SIG) Richard F. Bonini
Richard F. Bonini
Senior Executive Vice President
and Secretary
Dated: March 17, 1997
25
<PAGE> 30
EXHIBIT A
FIRST FINANCIAL CARIBBEAN CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
EFFECTIVE MARCH 7, 1997
SECTION 1. Introduction
1.1 Purpose.
The purposes of the First Financial Caribbean Corporation 1997 Employee
Stock Option Plan (the "Plan") is to provide First Financial Caribbean
Corporation (the "Corporation") and its subsidiaries with an effective means to
attract and retain highly qualified personnel as well as to provide additional
incentive to employees who provide services to the Corporation and its
subsidiaries. The Plan is expected to contribute to the attainment of these
objectives by offering selected employees the opportunity to acquire stock
ownership interests in the Corporation.
1.2 Consideration to Corporation for Issuance of Options and Stock
Appreciation Rights: Employment Agreements by Employees.
Each Employee by signing and accepting an Option Contract will, if the
Committee so requires, agree to remain employed by the Corporation or a
Subsidiary for a specified period of time, and the consideration to the
Corporation for the issuance of Options or Stock Appreciation Rights will be any
such employment agreements as well as the benefits to the Corporation from the
added incentive to the Employee of increased proprietorship in the Corporation.
Nothing in the Plan or in any Option Contract shall confer on any individual any
right to continue employed by the Corporation or any of its Subsidiaries or
limit the right of the Corporation or any of its Subsidiaries to terminate
Employment of an Employee at any time, with or without cause.
1.3 Plan Subject to Ratification by Shareholders.
The Plan shall become effective upon adoption by the Board of Directors,
provided that the Plan is approved, within one year following its adoption by
the Board of Directors, by a vote of the holders of a majority of the shares of
Common Stock entitled to vote and present in person or by proxy at a duly held
shareholders' meeting. No Option or Stock Appreciation Right under the Plan may
be granted more than 10 years after the earlier of the date the Plan is adopted
or the date the Plan is approved by the shareholders of the Corporation, without
further approval by the shareholders of the Corporation.
1.4 Limitations on Number of Shares Issuable Under the Plan.
Subject to the following provisions of this Section 1.4, the aggregate
number of shares of Common Stock which may be issued under the Plan shall be
limited to 500,000. The shares of Common Stock for which Options and Stock
Appreciation Rights may be granted may consist of either authorized but unissued
shares of Common Stock or shares of Common Stock which have been issued and
which shall have been heretofore or hereafter reacquired by the Corporation. The
total number of shares subject to Options and Stock Appreciation Rights
authorized under the Plan shall be subject to increase or decrease in order to
give effect to the adjustment provisions of Section 3.2 hereof or any amendment
adopted as provided in Section 4.2 hereof. If any Option or Stock Appreciation
Right granted under the Plan shall expire, terminate or be cancelled for any
reason without having been exercised in full, the corresponding number of
unpurchased shares shall again be available for purposes of the Plan. The number
of shares of Common Stock for which Options and Stock Appreciation Rights
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<PAGE> 31
may be granted under this Plan shall be reduced by the number of shares subject
to an Option for which an Employee has exercised a related Stock Appreciation
Right in accordance with Section 2.4, Subsection (d), hereof.
1.5 Definitions.
The following terms shall have the meanings set forth below:
(a) Appreciation Date. The date designated by a grantee of a Stock
Appreciation Right for measurement of the appreciation in the value of the
Common Stock subject to the Stock Appreciation Right, which date shall not
be earlier than the date notice of such designation is received by the
Secretary of the Corporation.
(b) Board or Board of Directors. The Board of Directors of the
Corporation.
(c) Committee. The Compensation Committee or such other committee or
committees as shall be appointed by the Board of Directors to administer
the Plan pursuant to the provisions of Section 4.1 hereof.
(d) Common Stock. The Corporation's presently authorized common
stock, par value $1.00 per share, except as this definition may be modified
pursuant to the provisions of Section 3.2 hereof.
(e) Disability. Complete and permanent inability by reason of illness
or accident to perform the duties of the occupation in which an Employee
was employed when such disability commenced.
(f) Employee. Any salaried officer or common law employee of the
Corporation or any Subsidiary, or both, including any salaried officer or
employee who is a member of the Board of Directors of the Corporation.
(g) Employment. The rendering of services by an Employee for the
Corporation, or for any Subsidiary, or both. Whether military, government
or public service shall constitute termination of employment for purposes
of this Plan or any Option or Stock Appreciation Right granted hereunder
shall be determined in each case by the Committee in its sole discretion.
(h) Fair Market Value. The closing price of the Common Stock reported
on the NASDAQ National Market System on the date as of which such value is
being determined or, if no price is reported on such day, then on the next
preceding day on which such price was reported, or, if at any time the
Common Stock shall not be reported on the NASDAQ National Market System,
the Committee shall determine the fair market value on the basis of
available prices for such Common Stock or in such manner as may be
authorized by applicable regulations under the PRC and the IRC.
(i) Incentive Stock Option. An option to purchase Common Stock
granted by the Corporation to an Employee under the Plan which satisfies
the requirements of Section 422 of the IRC.
(j) IRC. The Internal Revenue Code of 1986, as amended.
(k) Qualified Stock Option. An option to purchase Common Stock
granted by the Corporation to an Employee under the Plan which satisfies
the requirements of Section 1046 of the PRC.
(l) Nonstatutory Stock Option. An option to purchase Common Stock
granted by the Corporation to an Employee under the Plan which does not
satisfy the requirements of Section 1046 of the PRC or Section 422 of the
IRC.
(m) Option. A Qualified Stock Option, an Incentive Stock Option or a
Nonstatutory Stock Option.
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<PAGE> 32
(n) Option Expiration Date. The date on which an Option becomes
unexercisable by reason of the lapse of time or when a Nonstatutory Stock
Option otherwise becomes unexercisable.
(o) PRC. The Puerto Rico Internal Revenue Code of 1994, as amended.
(p) Stock Appreciation Right. An Employee's right to earn additional
compensation for the performance of future services, based on appreciation
in the Fair Market Value of the Common Stock pursuant to the formula set
forth in Section 2.4, Subsection (c), hereof.
(q) Stock Appreciation Right Expiration Date. The date on which a
Stock Appreciation Right becomes unexercisable by reason of the lapse of
time or, except in the case of a Stock Appreciation Right attached to a
Qualified Stock Option or Incentive Stock Option, otherwise becomes
unexercisable.
(r) Subsidiary. Any corporation in an unbroken chain of corporations
beginning with the Corporation if, at the time an Option is granted, each
of the corporations other than the Corporation owns stock possessing 50% or
more of the total combined voting power of all classes of stock of one of
the other corporations in such chain.
(s) The use of the singular shall also include within its meaning the
plural or vice versa.
SECTION 2. Stock Options
2.1 Grant and Exercise of Options.
(a) Grant. The Committee on behalf of the Corporation may grant Options to
purchase Common Stock to Employees selected by it in its discretion.
(b) Option Contracts. Options and any Stock Appreciation Rights attached
thereto shall be evidenced by agreements ("Option Contracts") in such form as
the Committee shall approve containing such terms and conditions, including the
period of their exercise, whether in installments or otherwise, as shall be
contained therein, which need not be the same for all Options.
(c) Option Price. The purchase price per share of Common Stock under each
Option shall be not less than 100 percent of the Fair Market Value per share of
such Common Stock on the date the Option is granted, as determined by the
Committee. The purchase price may be subject to adjustment in accordance with
the provisions of Section 3.2 hereof.
(d) Term of Option. The term during which each Option granted under the
Plan may be exercised shall not exceed a period of ten years from the date of
its grant.
(e) Exercise of Options. Unless an Option Contract provides otherwise,
each Option granted to an Employee shall become exercisable, on a cumulative
basis, with respect to 50% of the shares of Common Stock covered thereby on the
first anniversary of the date of its grant and with respect to 100% of the
shares of Common Stock covered thereby on the second anniversary of the date of
its grant. Any part of an Option that has become exercisable shall remain
exercisable until it has been exercised in full or it terminates or expires
pursuant to the terms of the Plan or the applicable Option Contract.
(f) Options Nontransferable. Options granted under the Plan shall by their
terms be nontransferable by the Employee otherwise than by will or the laws of
descent and distribution, and, during the lifetime of the Employee, shall be
exercisable only by the Employee. No transfer of an Option by an Employee by
will or by the laws of descent and distribution shall be effective to bind the
Corporation unless the Corporation shall have been furnished with written notice
thereof and a copy of the will and/or such other evidence as the Committee may
determine necessary to establish the validity of the transfer.
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(g) Payment. Each Option shall be exercised by delivery of a written
notice to the Corporation stating the number of whole shares of Common Stock as
to which the Option is being exercised and accompanied by payment therefor. No
shares shall be issued on the exercise of an Option unless paid for in full at
the time of purchase. Payment for shares purchased upon the exercise of an
Option shall be made in cash or, with the approval of the Committee, in Common
Stock valued at the then Fair Market Value thereof as determined by the
Committee, or by a combination of cash and Common Stock. Neither the Corporation
nor any Subsidiary may directly or indirectly lend money to any individual for
the purpose of assisting such individual to acquire or to carry shares issued
upon the exercise of Options granted under the Plan. No Employee shall have any
rights as a shareholder with respect to any share of Common Stock covered by an
Option unless and until such individual shall have become the holder of record
of such share, and except as otherwise permitted by Section 3.2 hereof, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property or distributions or other rights) in respect
of such share for which the record date is prior to the date on which such
individual shall have become the holder of record thereof.
(h) Investment Purpose. At the time of any exercise of any Option, the
Corporation may, if it shall deem it necessary or desirable for any reason,
require the holder of the Option to represent in writing to the Corporation that
it is the intention of such holder to acquire the shares of Common Stock being
acquired for investment only and not with a view to the distribution thereof. In
such event no shares of Common Stock shall be issued to such holder unless and
until the Corporation is satisfied with the correctness of such representation.
2.2 Qualified Stock Options and Incentive Stock Options.
In addition to meeting the requirements of Section 2.1, each Qualified
Stock Option shall be subject to the requirements of (a) and each Incentive
Stock Option shall be subject to the requirements of (a), (b) and (c) of this
Section 2.2.
(a) Annual Limitation of Options Which May Be Considered Qualified Stock
Options and/or Incentive Stock Options. Anything else in the Plan
notwithstanding, if and to the extent that the provisions of Section 1046 of the
PRC and/or Section 422 of the IRC shall so require, the aggregate Fair Market
Value (determined as of the time the Option is granted) of the shares with
respect to which Qualified Stock Options and/or Incentive Stock Options are
exercisable for the first time by any Employee during any calendar year (under
the Plan and any other plans of the Corporation and its Subsidiaries) shall not
exceed $100,000.
(b) Incentive Stock Options Granted to Ten Percent
Shareholders. Notwithstanding anything to the contrary contained in this Plan,
an Incentive Stock Option may not be granted to an Employee who owns, directly
or indirectly, stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Corporation or any Subsidiary
unless, at the time such Incentive Stock Option is granted, the exercise price
of such Incentive Stock Option is at least 110 percent of the Fair Market Value
of the Common Stock subject to the Incentive Stock Option, and such Incentive
Stock Option, by its terms, is not exercisable after the expiration of five (5)
years from the date of grant of such Incentive Stock Option.
(c) Notice. An Employee shall give prompt notice to the Corporation of any
disposition of shares acquired upon exercise of an Incentive Stock Option if
such disposition occurs within either two years after grant or one year after
the receipt of such shares by the Employee.
2.3 Voluntary Surrender and Cancellation of Nonstatutory Stock Options.
The Committee may grant to one or more holders of Nonstatutory Stock
Options, in exchange for the voluntary surrender and cancellation of such
Nonstatutory Stock Options and any corresponding Stock Appreciation Rights, new
Options having different Option prices than the Nonstatutory Stock Option prices
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provided in the Nonstatutory Stock Options so surrendered and cancelled and
containing such other terms and conditions as the Committee may deem
appropriate.
2.4 Stock Appreciation Rights Attached to Options.
(a) Grant. The Committee may grant a Stock Appreciation Right with respect
to any shares of Common Stock covered by any Option granted under the Plan and
such Stock Appreciation Right shall be granted only at the time of grant of the
related Option.
(b) Terms and Conditions. Each Stock Appreciation Right shall be subject
to the same terms and conditions as the related Option with respect to date of
expiration, exercisability, transferability, and eligibility to exercise. When a
Stock Appreciation Right is granted with respect to shares of Common Stock
covered by a Qualified Stock Option, such Stock Appreciation Right may be
exercised only when the Fair Market Value of the shares of Common Stock subject
to the Option exceeds the exercise price of such Option. Any amount payable upon
the exercise of a Stock Appreciation Right shall be payable in the form of cash
only.
(c) Amount of Compensation. The amount of compensation which shall be
payable to an Employee pursuant to the exercise of a Stock Appreciation Right
accompanying an Option is equal to the excess of the Fair Market Value of one
share of Common Stock on the Appreciation Date over the Fair Market Value of
such share on the date the Stock Appreciation Right was granted multiplied by
the number of Option shares with respect to which the Stock Appreciation Right
is exercised (the "spread"). The amount of compensation which shall be payable
pursuant to the exercise of a Stock Appreciation Right shall not exceed 100
percent of the spread. The cash paid upon exercise of Stock Appreciation Right
shall be reduced by such amount as the Corporation is required to withhold for
tax purposes.
(d) Termination of Options. Upon the exercise of a Stock Appreciation
Right, the related Option shall cease to be exercisable as to the shares with
respect to which such Stock Appreciation Right was exercised, and the related
Option shall be considered to have been exercised to that extent. Upon the
exercise in full of the related Option, the Stock Appreciation Right granted
with respect thereto shall terminate.
(e) Automatic Exercise Upon Expiration. Upon the Option Expiration Date of
an Option, an attached Stock Appreciation Right shall automatically be deemed to
be exercised in full by the Employee and cash shall be paid to such Employee for
100% of the spread. There shall be no automatic exercise of an attached Stock
Appreciation Right if the exercise price exceeds the Fair Market Value of the
Corporation's Common Stock on the Option Expiration Date.
SECTION 3. Provisions Relating to Plan Participation
3.1 Termination of Employment and Death.
(a) Options and Stock Appreciation Rights Exercisable within Three Months
Following Termination of Employment, Discharge or Retirement. Unless earlier
terminated in accordance with its terms, an Option or Stock Appreciation Right
shall terminate ninety days after any of the following:
(i) voluntary termination of Employment by the Employee, with or
without the consent of the Corporation, or
(ii) termination of Employment by the Corporation or any of its
Subsidiaries, with or without cause, or
(iii) termination of Employment because of retirement, or because the
employing subsidiary ceased to be a Subsidiary of the Corporation and the
Employee does not, prior thereto or contemporaneously therewith, become an
Employee of the Corporation or of another Subsidiary;
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provided, that with regard to terminations of Employment pursuant to clause
(ii), the Option or Stock Appreciation Right shall terminate as of the date of
such discharge if prior to such termination the Committee in its discretion
shall determine that it is not in the best interests of the Corporation that the
Option or Stock Appreciation Right should continue for said ninety-day period.
(b) Options and Stock Appreciations Rights Exercisable within One Year
After Death or Disability. If the holder of an Option or Stock Appreciation
Right shall die or terminate his employment due to Disability during the term of
an Option or Stock Appreciation Right, the holder or the legal representatives
shall be entitled to exercise the Option or Stock Appreciation Right in whole or
in part, to the extent then unexercised, at any time within one year following
the death of the Employee, but in no event after the Option Expiration Date or
the Stock Appreciation Right Expiration Date, and only to the extent that the
Employee was entitled to exercise the Option or Stock Appreciation Right on the
date of his death.
3.2 Adjustments Upon Changes in Capitalization; Change of Control;
Dissolution.
(a) Subject to any required action by the shareholders of the Corporation,
each of (i) the number of shares of Common Stock covered by each outstanding
Option, (ii) the number of shares Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, (iii) the price per share of Common Stock covered by each such
outstanding Option, and (iv) the maximum number of shares with respect to which
Options may be granted to any Employee, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend with respect to
the Common Stock or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Corporation;
provided, however, that (a) each such adjustment with respect to an Incentive
Stock Option or Qualified Stock Option shall comply with the rules of Section
424(a) of the IRC (or any successor provision) and an applicable provision of
the PRC and (b) in no event shall any adjustment be made which would render any
Qualified Stock Option granted hereunder other than a "qualified option" under
Section 1046 of the PRC or any Incentive Stock Options other than an "incentive
stock option" as defined in Section 422 of the IRC; and provided further,
however, that conversion of any convertible securities of the Corporation shall
not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) If: (1) Any person (as defined for purposes of Section 13(d) and 14(d)
of the Exchange Act, but excluding the Corporation and any of its wholly-owned
subsidiaries) acquires direct or indirect ownership of 50% or more of the
combined voting power of the then outstanding securities of the Corporation as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise; or (2) the shareholders of the Corporation
approve (A) any consolidation or merger of the Corporation in which the
Corporation is not the surviving corporation (other than a merger of the
Corporation in which the holders of Common Stock immediately prior to the merger
have the same or substantially the same proportionate ownership of the surviving
corporation immediately after the merger), or (B) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Corporation to an entity which is not
a wholly-owned subsidiary of the Corporation, then the exercisability of each
Option outstanding under the Plan shall be automatically accelerated so that
each Option shall, immediately prior to the specified effective date of any of
the foregoing transactions, become fully exercisable with respect to the total
number of shares subject to
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such Option and may be exercisable for all or any portion of such Shares. Upon
the consummation of any of such transactions, all outstanding Options under the
Plan shall, to the extent not previously exercised, terminate and cease to be
outstanding.
(c) In the event of the proposed dissolution or liquidation of the
Corporation, all outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee.
SECTION 4. Administration
4.1 Independent Committee to Administer the Plan.
(a) Composition and Functions of Committee. A Committee consisting of at
least two directors (who shall be "Non-Employee Directors" as defined in Rule
16b-3 of the Securities and Exchange Commission) shall be appointed by the Board
of Directors and will have, subject to the express provisions of the Plan,
general authority to administer the Plan, to grant Options and Stock
Appreciation Rights thereunder, subject to the ratification of the Board of
Directors if such limitation is imposed by the Board of Directors, and to
perform such other functions as may be assigned to it by the Board of Directors
in connection with the Plan, including, among other things, determining the form
of Option Contracts to be issued under the Plan and the terms and conditions to
be included in such Option Contracts and adopting from time to time such rules
and regulations as it may deem appropriate for the proper administration of the
Plan. The Committee may also make such determinations under, and such
interpretations of, and take such steps in connection with, the Plan, the rules
and regulations or Options and Stock Appreciation Rights granted thereunder as
it may deem necessary or advisable. The Committee may, in its discretion or in
accordance with a direction from the Board of Directors, waive any provisions of
any Option Contract, provided such waiver is not inconsistent with the terms of
the Plan as then in effect.
(b) Authorization of Actions Taken by the Committee and Board of
Directors. Vacancies in the Committee shall be filled by the Board of
Directors. The Committee may act by a majority of its members either at a
meeting or in writing without a meeting. All questions arising under the Plan or
under the rules and regulations or under the Option Contracts, whether such
questions involve interpretation thereof or otherwise, shall be determined by
the Committee and its determination, unless disapproved by the Board of
Directors, shall be conclusive and binding in all cases. To the extent that any
such action would not adversely affect the status of Qualified Stock Options and
Incentive Stock Options under the PRC and IRC, respectively, all matters
provided in the Plan, in the Option Contracts, or in such rules and regulations
to be determined or performed by the Committee may be determined or performed by
the entire Board of Directors. No member of the Board of Directors or of the
Committee shall be liable for any action taken or any determination made in good
faith with respect to the Plan or any Option Contract.
(c) Findings of the Board of Directors and Committee Are Conclusive. Each
determination, interpretation, or other action made or taken pursuant to the
provisions of this Plan by the Board of Directors or the Committee shall be
final and shall be binding and conclusive for all purposes and upon all persons,
including, without limitation thereto, the Corporation, the shareholders, the
Committee and each of the members thereof, and the Employees of the Corporation,
and their respective successors in interest.
4.2 Amendment and Discontinuance of the Plan.
The Board of Directors may at any time amend, modify, suspend or terminate
the Plan, without shareholder approval, except to the extent such approval is
required by the PRC or the IRC to permit the granting of Qualified Stock Options
or Incentive Stock Options, or by the rules of any securities exchange or
automated
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quotation system on which the shares of Common Stock of the Corporation trade at
such time; provided, that no change shall be made which will have a material
adverse effect upon any Option or Stock Appreciation Right previously granted
unless the consent of the affected Employee is obtained.
4.3 Compliance with Law and Other Conditions.
(a) Options and Stock Appreciation Rights. Any exercise by an Employee of
an Option or Stock Appreciation Right shall be made only in compliance with any
applicable rule or regulation of the Securities and Exchange Commission
exempting such exercise from the operation of Section 16(b) of the Securities
Exchange Act of 1934 and any other applicable law, rule, regulation or other
provision that may hereafter relate to the exercise and cash settlement rights
of Stock Appreciation Rights under the Federal securities laws.
(b) Generally. No shares of Common Stock shall be issued pursuant to the
exercise of any Option or Stock Appreciation Right granted under the Plan prior
to the compliance by the Corporation to the satisfaction of its counsel with any
applicable laws and with any applicable regulations of any securities exchange
on which such shares are listed.
4.4 Withholding Taxes.
Whenever shares of Common Stock are to be issued pursuant to the Plan, the
Corporation shall have the right to require that there be remitted to the
Corporation an amount sufficient to satisfy all applicable federal, state,
commonwealth and local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. The Corporation reserves the right
to satisfy the applicable federal, state, commonwealth and local withholding tax
requirements through the retention of shares of Common Stock otherwise
transferable upon exercise of an Option. Such withheld amounts shall meet the
Federal securities laws requirements set forth in Section 4.3, Subsection (a),
hereof. Whenever payments are to be made in cash, such payments shall be net of
an amount sufficient to satisfy federal, state and local withholding tax
requirements and authorized deductions.
4.5 Tax Offset Payments.
The Committee shall have the authority at the time of any award under this
Plan or anytime thereafter to make Tax Offset Payments to assist Employees in
paying income taxes incurred as a result of their participation in this Plan.
The Tax Offset Payments shall be determined by multiplying a percentage
established by the Committee by all or a portion (as the Committee shall
determine) of the taxable income recognized by an Employee upon (i) the exercise
of a Nonstatutory Stock Option or a Stock Appreciation Right, or (ii) the
disposition of shares received upon exercise of a Qualified Stock Option or
Incentive Stock Option. The percentage shall be established, from time to time,
by the Committee at that rate which the Committee, in its sole discretion,
determines to be appropriate and in the best interests of the Corporation to
assist Employees in paying income taxes incurred as a result of the events
described in the preceding sentence. Tax Offset Payments shall be subject to the
restrictions on transferability applicable to Options set forth in Section
2.1(f).
4.6 Use of Proceeds and Funding.
(a) Use of Proceeds. The proceeds from the sale of Common Stock pursuant
to Options granted under the Plan shall constitute general funds of the
Corporation and may be used for its corporate purposes as the Corporation may
determine.
(b) Funding. No provision of the Plan shall require or permit the
Corporation, for the purpose of satisfying any obligations under the Plan, to
purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Corporation maintain separate bank
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accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Employees shall
have no rights under the Plan other than as unsecured general creditors of the
Corporation, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law. This Subsection shall not prevent
the Corporation from purchasing its Common Stock for the purpose of meeting its
requirements to issue Common Stock pursuant to the Plan.
4.7 Other.
To the extent applicable, this Plan is intended to permit the issuance of
Qualified Stock Options in accordance with the provisions of Section 1046 of the
PRC and Incentive Stock Options in accordance with Section 422 of the IRC. This
Plan may be modified or amended at any time, both prospectively and
retroactively, and in such manner as to affect Qualified Stock Options or
Incentive Stock Options previously granted, if such amendment or modification is
necessary for this Plan and the Qualified Stock Options or Incentive Stock
Options granted hereunder to qualify under said provisions of the PRC and the
IRC.
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[FFCC LOGO]
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APPENDIX
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 Shareholders of the Corporation to be held at The Doral Building,
Fifth Floor, 650 Munoz Rivera Avenue, San Juan, Puerto Rico at 11:00 a.m.,
local time, on Wednesday, April 16, 1997 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 in hereby
acknowledged.
(Continues and to be signed on other side)
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<PAGE> 41
<TABLE>
<S> <C>
If no direction is given, this proxy will be voted FOR items 1,2 and 3. Please mark [X]
your votes as
indicated in
this example
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
No. 1 - Election Directors: FOR WITHHELD
Nominees are Richard F. Bonini, Edgar M. Cullman, Jr., Fredrick M. Danziger, John L. Ernst, all listed as to all
Salomon Levis, Zoila Levis, A. Brean Murray and Victor M. Pons, Jr. nominees nominees
(To withhold authority to vote for any individual nominee, write that nominee's name in the space [ ] [ ]
provided below.
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No. 2 - Approval of the Corporation's 1997 No. 3 - Appointment of Price Waterhouse
Employee Stock Option Plan as independent Accountants
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ] To vote in accordance with the
Board of Director's recommendation,
just sign below. No boxes need to
be checked.
Dated: ,1997
----------------------
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.
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- FOLD AND DETACH HERE -
</TABLE>
