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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-B
FOR REGISTRATION OF SECURITIES OF
CERTAIN SUCCESSOR ISSUERS
FILED PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
ORIENTAL FINANCIAL GROUP INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COMMONWEALTH OF PUERTO RICO APPLIED FOR
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
HATO REY TOWER, SUITE 503, 268 MUNOZ RIVERA AVENUE,
HATO REY, PUERTO RICO 00918
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
COMMON STOCK NEW YORK STOCK EXCHANGE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NOT APPLICABLE
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(TITLE OF CLASS)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. GENERAL INFORMATION.
(a) State the date on which the registrant was organized, its form of
organization, and the State or other jurisdiction under the laws of which it was
organized.
Oriental Financial Group Inc. ("Registrant") was organized as a
corporation under the General Corporation Law of the Commonwealth of Puerto Rico
on June 14, 1996.
(b) State the date on which the registrant's fiscal year ends.
Registrant's fiscal year ends on June 30 of each calendar year.
ITEM 2. TRANSACTION OF SUCCESSION.
(a) Name each predecessor which had securities registered pursuant to
Section 12(b) or (g) of the Act at the time of the succession.
Oriental Bank and Trust, a commercial bank chartered under the laws of
the Commonwealth of Puerto Rico, is the predecessor which has securities
registered with the Federal Deposit Insurance Corporation under Section 12(b) of
the Act and whose common stock is traded on the New York Stock Exchange.
Oriental Bank and Trust, formerly known as Oriental Federal Savings Bank,
converted its charter from a federal savings bank to a Puerto Rico commercial
bank as of the close of business on June 30, 1994.
(b) Describe briefly the transaction of succession and state the basis
upon which securities of the registrant have been or are to be issued in
exchange for or otherwise in respect of securities of any predecessor.
Registrant, Oriental Bank and Trust and Oriental Interim Bank entered
into an Agreement and Plan of Merger dated as of June 18, 1996 (the "Merger
Agreement") pursuant to which Oriental Interim Bank will be merged with and into
Oriental Bank and Trust. The merger is being carried out in order to accomplish
the reorganization of Oriental Bank and Trust into a bank holding company form
of ownership (the "Reorganization").
Registrant is a Puerto Rico corporation which was formed solely for
the purpose of effecting the Reorganization and becoming Oriental Bank and
Trust's holding company and, therefore, Registrant has no prior operating
history. Registrant organized and licensed Oriental Interim Bank as its
wholly-owned subsidiary. On the effective date of the Reorganization, each
share of common stock of Oriental Bank and Trust outstanding immediately prior
to the Reorganization (other than shares as to which dissenters rights are
perfected as provided under Section 15 of the Puerto Rico Banking Act) will
automatically by operation of law be converted into one obligation of Oriental
Bank and Trust ("Obligation"). Immediately thereafter, an exercise will take
place pursuant to which Registrant on behalf of Oriental Bank and Trust will
issue to each holder of an Obligation of Oriental Bank and Trust one share of
common stock of Registrant. Oriental Bank and Trust will then issue to
Registrant 7,906,275 shares of its common stock.
Shares of Registrant may not be exchanged directly for shares of
Oriental Bank and Trust because Section 15 of the Puerto Rico Banking Act
requires that shareholders of merging banks receive only securities or
obligations of the bank that survives the merger, and thus does not contemplate
a direct exchange of shares of Registrant for shares held by shareholders of
Oriental Bank and Trust. After the Reorganization, the former holders of the
outstanding common stock of Oriental Bank and Trust (who do not exercise their
dissenters' rights
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under Section 15 of the Puerto Rico Banking Act) will become the holders of
all of the outstanding common stock of Registrant.
ITEM 3. SECURITIES TO BE REGISTERED.
As to each class of securities to be registered, state the number of shares
or the amounts of bonds (1) presently authorized, (2) presently issued and
(3) presently issued which are held by or for the account of the registrant.
Registrant currently has 20,000,000 authorized shares of Common Stock, and
on the effective date of the Reorganization it will have 7,906,275 shares of
Common Stock issued and outstanding. None of these issued and outstanding
shares will be held by Registrant.
ITEM 4. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Furnish the information required by Item 202 of Regulation S-K (Section
229.202 of this chapter).
INSTRUCTION. If a description of the securities comparable to that required
here is contained in any other filing with the Commission, such description may
be incorporated by reference to such other filing in answer to this item. If
the securities are to be registered on a national securities exchange and the
description has not previously been filed with such exchange, copies of the
description shall be filed with copies of the application filed with the
exchange.
GENERAL. The securities of the Registrant being registered hereunder are
its shares of Common Stock, par value $1.00 per share. Each share of Common
Stock of the Registrant has the same relative rights as, and is identical in all
respects with, each other share of Common Stock. The shares of Common Stock of
the Registrant have no redemption, conversion or sinking fund rights or
privileges, and the holders thereof have no preemptive or subscription rights to
purchase any securities of the Registrant. Upon liquidation, dissolution or
winding up of the Registrant, the holders of Common Stock are entitled to
receive pro rata the assets of the Registrant which are legally available for
distribution, after payment of all debts and other liabilities of the
Registrant.
VOTING. The holders of Common Stock are entitled to one vote for each
share held of record on all matters held submitted to a vote of stockholders,
other than with respect to the election of directors on which holders of Common
Stock have cumulative voting rights. Cumulative voting entitles each holder of
Common Stock in an election in which more than one director is being elected to
a number of votes equal to the number of shares of Common Stock held by such
holder multiplied by the number of directors to be elected. A holder of Common
Stock is then able to cast all or any number of such votes for one nominee or
distribute them in any manner among the number of nominees up for election.
Under Puerto Rico law, the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock would be required to approve, among other
matters, an adverse change in the powers, preferences or rights of the Common
Stock. If the Registrant issues preferred stock in the future, holders of such
preferred stock may also possess voting rights.
DIVIDENDS. Subject to any dividend preferences which may be established
with respect to preferred stock, holders of shares of Common Stock of the
Registrant will be entitled to receive, pro rata, dividends when and if declared
by the Board of Directors of the Registrant out of funds legally available
therefor.
RESTRICTIONS ON ACQUISITION OF REGISTRANT. A number of provisions of the
Registrant's Certificate of Incorporation and By-laws deal with matters of
corporate governance and certain rights of holders of Common Stock. The
following discussion is a general summary of certain provisions of the
Registrant's Certificate of Incorporation and By-laws which might be deemed to
have a potential "anti-takeover" effect. Reference should be made in each case
to the Registrant's Certificate of Incorporation and By-laws, which are included
as Exhibits to this Registration Statement.
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CLASSIFIED BOARD OF DIRECTORS. Registrant's Certificate of Incorporation
contains provisions relating to the Board of Directors and provide, among other
things, that the Board of Directors shall be divided into three classes as
nearly equal in number as possible with the term of office in each class
expiring each year. In addition, as mentioned above, there is cumulative voting
for the election of directors. Such provision will provide a greater likelihood
of continuity, knowledge and experience on the Board of Directors because at any
one time, one third of the Board of Directors would be in its second year of
service and one third of the Board of Directors would be in its third year of
service. In addition, such a provision would cause any person who may be
attempting to take over Registrant to have to deal with the current Board of
Directors because such person, even if it owns a majority of the shares, would
be unable to change the majority of the Board of Directors in any one Annual
Meeting. Registrant's Certificate of Incorporation also provides that directors
may be removed only for cause by the shareholders.
VACANCIES ON THE BOARD OF DIRECTORS. Registrant's Certificate of
Incorporation provides that any vacancy occurring in the Board of Directors
(including an increase in the number of authorized directors) may be filled by
the affirmative vote of a majority of the directors then in office, though less
than a quorum of the Board of Directors, and a director elected to fill a
vacancy shall serve for the remainder of the term to which the director has been
elected and until such director's successor shall have been elected and
qualified.
APPROVAL OF BUSINESS COMBINATIONS. Registrant's Certificate of
Incorporation requires that a liquidation or a business combination, which
includes mergers, reorganizations, consolidations and sales of substantially all
of the assets of Registrant, must be approved by the affirmative vote of holders
of not less than seventy-five percent (75%) of the total number of outstanding
shares of Registrant to the extent such liquidation or business combination has
not been approved by at least eighty percent (80%) of Registrant's Board of
Directors then in office.
AMENDMENT OF CERTIFICATE OF INCORPORATION. Under Registrant's Certificate
of Incorporation, amendments to the Certificate of Incorporation require the
approval of not less than a majority of the total number of outstanding shares
of capital stock (both common and preferred voting in the aggregate) of
Registrant and, if such amendment concerns the article of the Certificate of
Incorporation which governs the approval of business combinations, the approval
of not less than seventy-five percent (75%) of the total number of outstanding
shares of capital stock of Registrant is required unless such amendment is
approved by the affirmative vote of eighty percent (80%) of Registrant's Board
of Directors then in office..
NEW BUSINESS AT ANNUAL MEETINGS. The by-laws of Registrant provide that
any new business to be taken up at the annual meeting proposed by a stockholder
has to be stated in writing and filed by the stockholder at the principal
offices of Registrant with the Secretary of Registrant not later than one
hundred twenty (120) days prior to the anniversary date of the mailing of proxy
materials by Registrant in connection with the immediately preceding annual
meeting or, in the case of the first annual meeting of stockholders of
Registrant, notice by the stockholder must be delivered no later than the close
of business on May 31, 1997.
ITEM 5. FINANCIAL STATEMENTS AND EXHIBITS.
List below all financial statements and exhibits, if any, required to be
filed as a part of the application or statement:
(a) Financial Statements.
The capital structure and balance sheet of the Registrant immediately
after the succession will be substantially the same as those of its predecessor,
and, therefore no financial statements are included.
(b) Exhibits.
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2. Agreement and Plan of Merger dated as of June 18, 1996 by and
between Oriental Bank and Trust, Oriental Interim Bank and
Registrant pursuant to which Oriental Bank and Trust will be
reorganized into the only subsidiary of Registrant-- E-1
3(a) Amended and Restated Certificate of Incorporation of
Registrant-- E-13
3(b) By-laws of Registrant-- E-17
10.1 Employment Agreement between Jose Enrique Fernandez and Oriental
Bank and Trust dated as of September 1, 1996-- E-28
10.2 Oriental Bank and Trust 1988 Stock Option Plan E-41
10.3 Oriental Bank and Trust 1996 Stock Option Plan E-55
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
ORIENTAL FINANCIAL GROUP INC.
/S/ Ricardo Ramos
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Name: Ricardo Ramos
Title: Senior Vice President
Date: January 9, 1997
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 18, 1996 among ORIENTAL BANK
AND TRUST, a bank organized under the laws of the Commonwealth of Puerto Rico
(the "BANK"), ORIENTAL INTERIM BANK, a bank organized under the laws of the
Commonwealth of Puerto Rico (the "COMMONWEALTH") for the sole purpose of
consummating the transactions provided for herein (the "INTERIM BANK") and
ORIENTAL FINANCIAL GROUP INC., a corporation organized under the laws of the
Commonwealth of Puerto Rico ("HOLDING").
WHEREAS, the Bank is a bank duly organized under the Banking Law of the
Commonwealth, Act No. 55 of May 12, 1933, as amended (the "BANKING LAW"), with
its principal office and place of business at Hato Rey Tower, 268 Munoz Rivera
Avenue, Suite 501, Hato Rey, Puerto Rico, with an authorized capital of
10,000,000 shares of common stock, par value $1.00 per share and 5,000,000
shares of preferred stock, par value $1.00 per share;
WHEREAS, the Interim Bank is a bank duly organized under the Banking Law,
with its principal office at the same address as that of Bank, with an
authorized capital of 500,000 shares of common stock, par value $1.00 per
share, with all of the shares of capital stock of the Interim Bank to be
issued prior to the consummation of the transactions described herein to be
held by Holding (except for any shares that may be required to be held by the
directors of the Interim Bank as directors' qualifying shares); and
WHEREAS, Holding is a general business corporation organized under the
laws of the Commonwealth, with its principal office at the same address as
that of Bank, and having an authorized capital of 20,000,000 shares of Common
Stock, par value $1.00 per share and 5,000,000 shares of Preferred Stock, par
value $1.00 per share, none of which have been issued or are currently
outstanding; and
WHEREAS, the Bank, the Interim Bank and Holding desire to establish a bank
holding company structure and in order to implement that desire, the Boards of
Directors of the Bank, the Interim Bank and Holding have each respectively
agreed unanimously to a merger of the Interim Bank into the Bank (the "MERGER")
and the issuance of shares of Holding common stock as consideration for value
received by Holding from the Merger;
NOW, THEREFORE, in consideration of the premises, the Bank, the Interim
Bank and Holding hereby make this Agreement and prescribe the terms and
conditions of the Merger and the mode of carrying it into effect, including the
rights and obligations of Holding in connection therewith, as follows:
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ARTICLE I
DEFINITIONS
Section 1.001 DEFINITIONS. The following terms, as used herein, have the
following respective meanings:
"BANK" means Oriental Bank and Trust prior to the Effective Date.
"BANK SHARES" means the shares of common stock of the Bank, par
value $1.00 per share.
"COMMISSIONER" means the Commissioner of Financial Institutions of the
Commonwealth.
"CONTINUING BANK" means Oriental Bank and Trust on and after the Effective
Date.
"DISSENTING SHARES" shall have the meaning set forth in Section 6.01.
"EFFECTIVE DATE" shall have the meaning set forth in Section 4.02.
"EXERCISE" shall have the meaning set forth in Section 2.03.
"FDIC" means the Federal Deposit Insurance Corporation.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System.
"HOLDING" means Oriental Financial Group Inc., a general business
corporation organized under the laws of the Commonwealth.
"HOLDING SHARES" means the shares of common stock of Holding, par value
$1.00 per share.
"INTERIM BANK" means Oriental Interim Bank, a bank organized under the
laws of the Commonwealth for the sole purpose of consummating the
transactions provided for herein.
"OBLIGATION" means the obligation of the Continuing Bank to cause Holding
to deliver to the holder of such Obligation upon the Exercise of one Holding
Share.
"OFFERING CIRCULAR" shall have the meaning set forth in Section 3.04(b).
"PROXY STATEMENT" shall have the meaning set forth in Section 3.04(a).
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"QUALIFYING SHARES" means the Bank Shares held by the directors of the
Bank or the Continuing Bank, as the case may be, as qualifying shares as
required by Section 24 of the Banking Law.
ARTICLE II
THE MERGER
Section 2.001. MERGER. On the Effective Date, the Interim Bank shall be
merged into the Bank and the Bank (hereinafter referred to as the "BANK" prior
to the Effective Date and as the "CONTINUING BANK" on or after the Effective
Date) shall receive into itself the Interim Bank, pursuant to the provisions of
and with the effects provided in Section 15 of the Banking Law.
Section 2.002. CONVERSION. Upon the Effective Date:
(a) Each Bank Share issued and outstanding immediately prior to
the Effective Date shall, without any further action on the part of
the Bank, the Interim Bank, Holding, or any other person, constitute
and be converted into and there shall be allocated to the recordholder
thereof an Obligation of the Continuing Bank. In no event shall the
Bank become the holder of an Obligation. Each Obligation shall
entitle the holder thereof to cause the Continuing Bank to require
Holding to issue to such holder one Holding Share.
(i) Such conversion and allocation shall not in any way
preclude or prevent any such holder from exercising his or her
statutory right to dissent from the Merger and to receive from
the Continuing Bank payment of the value of his or her Bank
Shares and such other rights and benefits as are provided by law.
(ii) On the Effective Date, each outstanding certificate
which theretofore had represented Bank Shares, shall henceforward
be deemed for all corporate purposes as evidence of the ownership
of an equal number of Obligations of the Continuing Bank into
which the Bank Shares have been so converted.
(b) Each share of common stock of the Interim Bank issued on the
Effective Date shall without any further action on the part of the
Bank, the Interim Bank, Holding, or any other person constitute and be
converted into the right to receive $1.00 from the Continuing Bank and
such sums shall be delivered to the recordholder thereof.
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(c) On the Effective Date, the Continuing Bank shall issue to
Holding the same number of shares of its common stock as are issued
and outstanding as of the Effective Date, and shall issue and sell to
the directors of the Continuing Bank any Qualifying Shares that may be
required by, and in accordance with, the Banking Law.
Section 2.003 EXERCISE OF THE OBLIGATIONS. Immediately after the
conversion and allocation provided in Section 2.02(a), Holding shall, on
behalf of the Continuing Bank and as consideration for the benefits received
by Holding hereunder, issue to each recordholder of the Obligations of the
Continuing Bank a number of Holding Shares, equal to the number of
Obligations held by such recordholder (such event hereinafter referred to as
the "EXERCISE"):
(a) Upon the Exercise, each outstanding certificate that
prior to the Exercise had represented Obligations of the
Continuing Bank (as provided in Section 2.02(a)(ii)) shall
henceforward be deemed for all corporate purposes as evidence of
the ownership of the number of Holding Shares into which the
Obligations of the Continuing Bank have been so converted.
(b) At any time after the Exercise, any holder of one or
more of the certificates that prior to the Effective Date had
represented Bank Shares may surrender such certificate or
certificates in proper form to Holding or to its transfer agent
and receive in exchange therefor a certificate or certificates
(as the holder requests) bearing the name and representing an
identical number of Holding Shares.
Section 2.004 STOCK OPTIONS. At the Effective Date, each outstanding
option to purchase shares of the Bank under the Bank's 1988 Stock Option Plan
will be assumed by Holding. Each such option will be exercisable in
accordance with its existing terms for the same number of shares of Holding
as the number of shares of the Bank subject to such option.
Section 2.005. EFFECTS OF THE MERGER. Upon the Effective Date:
(a) The name of the Continuing Bank shall be Oriental Bank
and Trust. The main office, principal place of business, officers and
other personnel of the Continuing Bank shall be the same as the main
office, principal place of business, officers and other personnel of the
Bank immediately prior to the Effective Date;
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(b) The articles of incorporation of the Continuing Bank shall be
the articles of incorporation of the Bank, and the by-laws of the
Continuing Bank shall be the by-laws of the Bank;
(c) The Bank and the Interim Bank shall be considered as one sole
corporate entity under the name of the Continuing Bank, and the Continuing
Bank shall thenceforth enjoy all the rights, privileges and franchises and
shall be subject to all the restrictions, obligations and duties of the
Bank and the Interim Bank, except for the alterations provided herein;
(d) Each and all the property, shares, rights, franchises, powers
and privileges of the Bank and the Interim Bank shall become the
property of the Continuing Bank, and the Continuing Bank shall have, as
regards such property, shares, rights, franchises, powers and
privileges, the same rights as the Interim Bank and the Bank each
possessed;
(e) The Continuing Bank shall assume each and every obligation of
the Bank and the Interim Bank and shall have all the obligations and
shall be liable for all debts and the fulfillment of all contracts and
obligations of the Bank and the Interim Bank, just as they were prior to
the Effective Date. Any reference to the Bank or the Interim Bank in
any contract, will or document, whether executed or taking effect before
or after the Merger, shall be considered a reference to the Continuing
Bank if not inconsistent with the other provisions of the contract, will
or document. The stockholders of the Bank and the Interim Bank shall
continue to be subject to the same obligations, claims and demands as
existed against them, if any, on or before the Effective Date;
(f) All suits, actions or other proceedings pending in any court on
the Effective Date shall continue to their termination just as if no
merger had taken place; provided, however, that the Continuing Bank may
be substituted in place of either the Bank or the Interim Bank by order
of the court taking cognizance of the proceedings;
(g) The directors of the Continuing Bank shall consist of the
directors of the Bank on and as of the Effective Date (the names and
addresses of the current directors of the Bank as of the date hereof are
listed in Appendix I attached hereto), which directors shall hold office
in the Continuing Bank, unless sooner removed or disqualified, until
their successors are elected at the next annual meeting of the
stockholders of the Continuing Bank or are appointed in
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accordance with the by-laws of the Continuing Bank and have qualified;
and
(h) All deposit accounts of the Bank shall be and will become
deposits in the Continuing Bank without change in their respective terms,
interest rates, maturities, minimum required balances or withdrawal rates.
After the Effective Date, the Continuing Bank will continue to issue
deposit accounts on the same basis as the Bank immediately prior to the
Effective Date.
ARTICLE III
UNDERTAKINGS
Section 3.001. BANK STOCKHOLDER APPROVAL. The Bank undertakes to submit
this Agreement for consideration to its shareholders at a meeting called for
this purpose pursuant to Section 15(b) of the Banking Law, or in any other
manner permitted by law. Without limiting the preceding sentence, the Bank
agrees (unless such action is not required by law):
(a) To send to the post-office address of each of the holders of
issued and outstanding Bank Shares written notice of such meeting not less
than thirty days prior to the date fixed for the meeting. The notice shall
specify the place and purpose of the meeting at which this Agreement will
be considered;
(b) To hold a vote of the shareholders at said meeting, in which
each Bank Share shall entitle each holder thereof to one vote to be cast
by the stockholder himself or by proxy;
(c) To cause its secretary to certify under seal of the Bank that
(i) this Agreement has been approved by the vote of the directors of the
Bank, and (ii) this Agreement has been approved by the votes of at least
three-fourths of the Bank Shares; and
(d) To submit the Agreement as certified pursuant to subsection (c)
of this Section 3.01 to the Commissioner for his approval or disapproval.
Section 3.002. INTERIM BANK STOCKHOLDER APPROVAL. Holding will vote all
of its shares of common stock of the Interim Bank in favor of the approval of
this Agreement.
Section 3.003 REGULATORY APPROVALS. Each of Holding, the Bank and the
Interim Bank shall (i) proceed expeditiously and cooperate fully in
determining which filings are required to be made prior to the Effective Date
with, and which consents, approvals, permits or authorizations are required
to be obtained
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prior to the Effective Date from, governmental or regulatory authorities of
the Commonwealth and the United States (collectively, the "REGULATORY
APPROVALS") in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (ii) timely
make all such filings and timely seek all Regulatory Approvals; and take all
other action and do all things necessary, proper or appropriate to consummate
and make effective all transactions contemplated by this Agreement as soon as
possible.
Section 3.004 SECURITIES MATTERS.
(a) The Bank undertakes to prepare and file promptly a proxy
statement (the "PROXY STATEMENT") which complies with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder by the FDIC, and which complies with all applicable federal, state
and Puerto Rico law requirements for the purpose of submitting this Agreement
to its shareholders for approval, ratification and confirmation;
(b) Holding undertakes to prepare an offering circular (the
"OFFERING CIRCULAR") related to the Holding Shares, which shall be
distributed to the shareholders of the Bank; and
(c) Holding and the Bank shall each provide promptly to the other
such information concerning its business and financial condition and affairs
as may be required or appropriate for inclusion in the Offering Circular or
the Proxy Statement and shall cause its counsel and auditors to cooperate in
the preparation of the Offering Circular and the Proxy Statement, and the
Bank shall distribute the Proxy Statement and the Offering Circular to the
Bank's shareholders in accordance with applicable federal and state law
requirements.
Section 3.005 OTHER UNDERTAKINGS. If at any time (whether before or
after the Effective Date) the Bank or the Continuing Bank considers that any
further assignment, conveyances or assurances in law are necessary or
desirable to vest, perfect or confirm of record in the Continuing Bank the
title to any property or rights of the Bank or the Interim Bank, or otherwise
to carry out the provisions hereof, the Bank and the Interim Bank hereby
undertake through their proper officers and directors to execute and deliver
immediately any and all proper deeds, assignments and assurances in law, and
to do all things necessary or proper to vest, perfect or confirm title to
such property or rights in the Continuing Bank and otherwise to carry out the
provisions hereof.
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ARTICLE IV
CONDITIONS PRECEDENT
Section 4.001. CONDITIONS PRECEDENT TO THE MERGER. The consummation of
the Merger contemplated by this Agreement is subject to the satisfaction of the
following conditions:
(a) The votes of at least three-fourths (3/4) of the issued and
outstanding Bank Shares shall have been cast (whether cast by holders of
such shares in person or by proxy) in favor of this Agreement at a meeting
of the Bank's stockholders called pursuant to Section 3.01;
(b) All Regulatory Approvals (or waiver or exemption therefrom) and
satisfaction of all other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated by this
Agreement shall have been obtained and all statutory waiting periods shall
have expired, without the imposition of any condition or requirements that
would materially and adversely affect the operations or business prospects
of Holding or the Continuing Bank following the Effective Date so as to
render inadvisable the consummation of such transaction.
(c) The Bank shall have received a ruling or rulings from the
appropriate tax authorities and/or an opinion letter from McConnell
Valdes, counsel to the Bank, satisfactory to the Bank in form and
substance, with respect to the Puerto Rico and United States income tax
consequences of the Merger; and
(d) The Holding Shares shall have been approved for listing by the
New York Stock Exchange.
Section 4.002. EFFECTIVE DATE. The Merger provided for herein shall
become effective on the date (the "EFFECTIVE DATE") as soon as practicable
after each condition precedent listed in Section 4.01 shall have been
satisfied. The Merger shall become effective at the time this Agreement is
properly perfected and filed in accordance with the Banking Law.
ARTICLE V
TERMINATION AND DEFERRAL
Section 5.001 TERMINATION OF THE MERGER. Prior to the Effective Date,
this Agreement may be terminated at any time by written notice by either the
Bank or the Interim Bank to the other that its Board of Directors is of the
opinion that:
(a) The number of Bank Shares that voted against approval of this
Agreement, the number of Bank Shares with respect to which the holders
thereof recorded their
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opposition to the Merger or the number with respect
to which demand for payment of shares has been made is such that the
consummation of the Merger is, in the sole opinion of such Board of
Directors, inadvisable;
(b) Any action, suit, proceeding, or claim is commenced or
threatened or any claim is made that could make consummation of the
Merger, in the sole opinion of such Board of Directors, inadvisable;
(c) It is likely that a Regulatory Approval, in the sole opinion of
such Board of Directors, will not be obtained, or if obtained, will
contain or impose any condition or requirement that would materially and
adversely affect the operations or business prospects of Holding or the
Continuing Bank following the Effective Date so as to render inadvisable
the consummation of the Merger; or
(d) Any other reason exists that makes consummation of the Merger in
the sole opinion of such Board of Directors, inadvisable.
Upon such determination, this Agreement shall be void and there shall be
no liability hereunder or on account of such termination on the part of the
Bank, the Interim Bank, Holding, or the directors, officers, employees,
agents or stockholders or any of them, except that in such event the Bank
will pay fees and expenses incurred by itself, the Interim Bank and Holding
in connection with the proposed reorganization.
Section 5.002 DEFERRAL OF EFFECTIVE DATE. Consummation of the Merger
herein provided may be deferred by the Board of Directors of the Bank for a
reasonable period of time if the Board of Directors determines, in its sole
discretion, that such deferral would be in the best interests of the Bank and
the shareholders of the Bank.
ARTICLE VI
APPRAISAL RIGHTS
Section 6.001 DISSENTERS' RIGHTS. Any stockholder of the Bank who
complies with all applicable provisions of law, including without limitation
Section 15(d) of the Banking Law, shall be entitled to receive the value of
the Bank Shares held by such stockholder as provided by Section 15(d) of the
Banking Law, provided that:
(a) Any Bank Shares held by a holder who has demanded appraisal
of his Bank Shares and as of the Effective Date has neither
effectively withdrawn nor lost his right to such appraisal (the
"DISSENTING SHARES") shall not be converted in the manner set forth
<PAGE>
-10-
in Section 2.02, but the holder thereof shall only be entitled to such
rights as are granted by the Banking Law.
(b) Notwithstanding the provisions of paragraph (i) of this
Section 6.01, if any holder of Dissenting Shares shall effectively
withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, then as of the Effective Date or the occurrence of such
event, whichever later occurs, such Dissenting Shares shall
automatically be converted as provided in Section 2.02.
ARTICLE VII
MISCELLANEOUS
Section 7.001 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth.
Section 7.002 AMENDMENT. This Agreement and the Exhibits hereto may be
amended by the parties hereto, by action taken by or on behalf of their
respective Board of Directors at any time before or after approval by the
stockholders of the parties; provided, however, that after such approval, no
amendment, modification or waiver shall affect the consideration to be received
by any party or their respective shareholders. Any such amendment, modification
or waiver must be by an instrument in writing and signed on behalf of each of
the parties.
IN WITNESS WHEREOF, the Bank, the Interim Bank and Holding have caused
this Agreement to be executed in multiple copies, by their duly authorized
officers, and have caused their corporate seals to be hereunto affixed, as of
the date first above written.
ORIENTAL BANK AND TRUST
By: \s\ JOSE E. FERNANDEZ
________________________________
Title: Chairman of the Board
ORIENTAL INTERIM BANK
By: \s\ JOSE E. FERNANDEZ
________________________________
Title: President
<PAGE>
-11-
ORIENTAL FINANCIAL GROUP INC.
By: \s\ JOSE E. FERNANDEZ
________________________________
Title: President
<PAGE>
APPENDIX I
NAMES AND RESIDENCES OF CURRENT DIRECTORS OF THE BANK
NAME OF DIRECTOR ADDRESS
Pablo Altieri San Juan, Puerto Rico
Efrain Archilla San Juan, Puerto Rico
Jose E. Fernandez San Juan, Puerto Rico
Julian Inclan San Juan, Puerto Rico
Diego Perdomo San Juan, Puerto Rico
Alberto Richa Angelini San Juan, Puerto Rico
Emilio Rodriguez San Juan, Puerto Rico
<PAGE>
EXHIBIT 3(a)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF ORIENTAL FINANCIAL GROUP INC.
FIRST: The name of the corporation (hereinafter called the Corporation)
is "Oriental Financial Group Inc.".
SECOND: The principal office of the Corporation in the Commonwealth of
Puerto Rico is located at Hato Rey Tower, 268 Munoz Rivera Avenue, Suite 501,
Hato Rey, Puerto Rico in the Municipality of San Juan, Puerto Rico. The name of
the resident agent of the Corporation is CT Corporation System and its address
is 361 San Francisco Street, 4th Floor, San Juan, Puerto Rico 00901.
THIRD: The purpose of the Corporation is to engage, for profit, in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the Commonwealth of Puerto Rico.
FOURTH: The authorized capital of the Corporation shall be TWENTY FIVE
MILLION DOLLARS ($25,000,000) represented by TWENTY MILLION (20,000,000) shares
of common stock, $1.00 par value per share, and FIVE MILLION (5,000,000) shares
of preferred stock, $1.00 par value per share. The shares may be issued by the
Corporation from time to time as authorized by the Board of Directors without
the further approval of shareholders, except to the extent that such approval is
required by governing law, rule or regulation.
The Board of Directors is expressly authorized to provide, when it deems
necessary, for the issuance of shares of preferred stock in one or more series,
with such voting powers, full or limited, but not to exceed one vote per share,
or without voting powers; and with such designations, preferences, rights,
qualifications, limitations or restrictions thereof, as shall be expressed in
the resolution or resolutions of the Board of Directors, authorizing such
issuance, including (but without limiting the generality of the foregoing) the
following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof if different from the par
value thereof;
(b) the dividend rate of such series, the conditions and dates upon
which the dividends shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any other class or classes of
capital stock of the Corporation, and whether such dividends shall be cumulative
or non-cumulative;
(c) whether the shares of such series shall be subject to redemption
by Corporation, and if made subject to such redemption, the terms and conditions
of such redemption;
(d) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(e) whether the shares of such series shall be convertible and if
provision be made for conversion, the terms of such conversion;
<PAGE>
2
(f) the extent, if any, to which the holders of such shares shall be
entitled to vote; provided, however, that in no event, shall any holder of any
series of preferred stock be entitled to more than one vote for each such share;
(g) the restrictions and conditions, if any, upon the issue or
re-issue of any additional preferred stock ranking on a parity with or prior to
such shares as to dividends or upon dissolution;
(h) the rights of the holders of such shares upon dissolution of, or
upon distribution of assets of the Corporation, which rights may be different in
the case of a voluntary dissolution; and
(i) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions thereof.
The powers, preferences and relative, participating, optional and other
special rights, of each series of preferred stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
preferred stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall accrue and/or be
cumulative.
FIFTH: No holder of the capital stock of the Corporation shall be entitled
as such, as a matter of right, to subscribe for or purchase any part of any new
or additional issue of stock of any class whatsoever of the Corporation, or of
securities convertible into stock of any class whatsoever, whether now or
hereafter authorized, or whether issued for cash or other consideration or by
way of a dividend.
SIXTH: The name, place of residence and postal address of the sole
incorporator are as follows:
NAME PLACE OF RESIDENCE AND POSTAL ADDRESS
Pedro Maldonado Carretera 971
Kilometro 12.2
Barrio Sonadora
Naguabo, Puerto Rico
P.O. Box 364225
San Juan, Puerto Rico 00936-4225
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further creation, definition, limitation and
regulation of the powers of the Corporation and of its directors and
stockholders, it is further provided:
<PAGE>
3
1. DIRECTORS AND NUMBER OF DIRECTORS. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of
Directors. The number of directors of the Corporation shall be fixed by, or
in the manner provided in, the by-laws. The directors of the Corporation
need not be stockholders.
2. CLASSIFICATION AND TERM. The Board of Directors, other than those who
may be elected by the holders of any class or series of stock having preference
over the Common Stock as to dividends or upon liquidation, shall be divided into
three classes as nearly equal in number as possible, with one class to be
elected annually. The term of office of the initial directors shall be as
follows: the term of directors of the first class shall expire at the first
annual meeting of stockholders after the effective date of this Certificate of
Incorporation; the term of office of the directors of the second class shall
expire at the second annual meeting of stockholders after the effective date of
this Certificate of Incorporation; and the term of office of the third class
shall expire at the third annual meeting of stockholders after the effective
date of this Certificate of Incorporation; and, as to directors of each class,
when their respective successors are elected and qualified. At each annual
meeting of stockholders, directors elected to succeed those whose terms are
expiring shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders and when their respective successors are elected
and qualified.
3. CUMULATIVE VOTING. At each annual meeting of stockholders in which
more than one director is being elected, every stockholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by the stockholder for as many persons as there are directors to be
elected and for whose election the stockholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of his shares shall equal, or
by distributing such votes on the same principle among any number of candidates.
4. VACANCIES. Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors, any vacancy occurring in the Board of
Directors, including any vacancy created by reason of an increase in the number
of directors, may be filled by a majority vote of the directors then in office,
whether or not a quorum is present, or by a sole remaining director, and any
director so chosen shall hold office for the remainder of the term to which the
director has been selected and until such director's successor shall have been
elected and qualified. When the number of directors is changed, the Board of
Directors shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided that no decrease in
the number of directors shall shorten the term of any incumbent director.
5. REMOVAL. Subject to the rights of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation to elect
directors, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office only with cause
by an affirmative vote of not less than a majority of the votes eligible to be
cast by stockholders at a duly constituted meeting of stockholders called
expressly for such purpose.
6. BY-LAWS. The Board of Directors is expressly authorized and empowered
to make, alter and repeal the by-laws of the Corporation, subject to the power
of the stockholders to alter or repeal the by-laws made by the Board of
Directors. Such action by the Board of Directors shall require the affirmative
vote of a majority of the directors then in office at any regular or special
meeting of the Board of Directors. Such action by the stockholders shall
require the affirmative vote of the holders of a majority
<PAGE>
4
of the shares of the Corporation entitled to vote generally in an election of
directors, voting together as a single class, as well as such additional vote
of the preferred stock as may be required by the provisions of any series
thereof.
NINTH: The personal liability of the directors and officers of the
Corporation for monetary damages shall be eliminated to the fullest extent
permitted by the General Corporation Law of the Commonwealth of Puerto Rico as
it exists on the effective date of this Certificate of Incorporation or as such
law may be thereafter in effect. No amendment, modification or repeal of this
Article NINTH shall adversely affect the rights provided hereby with respect to
any claim, issue or matter in any proceeding that is based in any respect on any
alleged action or failure to act prior to such amendment, modification or
repeal.
TENTH: The affirmative vote of the holders of not less than seventy-five
percent (75%) of the total number of outstanding shares of the Corporation shall
be required (i) to amend this Article TENTH to the extent that such amendment is
not approved by eighty percent (80%) of the Corporation's Board of Directors
then in office; (ii) to approve any Business Combination for which stockholder
approval is required by applicable law to the extent that such Business
Combination is not approved by eighty percent (80%) of the Corporation's Board
of Directors then in office; or (iii) to approve the voluntary dissolution of
the Corporation to the extent that such dissolution is not approved by eighty
percent (80%) of the Corporation's Board of Directors then in office,
notwithstanding that applicable law would otherwise permit any of the above with
the approval of fewer shares or without the approval of any shares.
For purposes of this Article TENTH, the term "Business Combination" shall
mean:
(a) a merger, reorganization, or consolidation in which the Corporation is
a constituent corporation; or
(b) the sale, lease, or hypothecation of substantially all the assets of
the Corporation.
<PAGE>
EXHIBIT 3(b)
BY-LAWS OF
ORIENTAL FINANCIAL GROUP INC.
ARTICLE I.
STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
stockholders shall be held at the principal office of the Corporation or at such
other place as the Board of Directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the stockholders of the
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually within 120 days after the end
of the Corporation's fiscal year at such date and time within such 120-day
period as the Board of Directors may determine.
SECTION 3. SPECIAL MEETING. Special meetings of the stockholders, for any
purpose or purposes, may be called at any time by the President or by the Board
of Directors, and shall be called by the Chairman of the Board, the President or
the Secretary upon the written request of the holders of not less than twenty
percent (20%) of the paid-in capital of the Corporation entitled to vote at the
meeting. The written request specified above shall state the purpose or
purposes of the meeting and shall be delivered at the principal office of the
Corporation addressed to the Chairman of the Board, the President or the
Secretary.
SECTION 4. CONDUCT OF MEETINGS. The Board of Directors shall designate,
when present, either the Chairman of the Board or President to preside at
stockholders meetings.
SECTION 5. NOTICE OF MEETINGS. Notice of all meetings of stockholders
shall be mailed to each stockholder of the Corporation at least ten (10) days,
but not more than sixty (60) days, prior to the date for each such meeting.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than sixty (60) days nor less than ten (10) days prior to the date on
which the particular action, requiring such determination of stockholders, is to
be taken. When a determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this Section 6, such determination
shall apply to any adjournment thereof.
SECTION 7. VOTING LISTS. At least ten (10) days before each meeting of
the stockholders, the officer or agent having charge of the stock transfer books
for shares of the Corporation shall make a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
This list of stockholders shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any
<PAGE>
2
stockholder at any time during usual business hours for a period of ten (10)
days prior to such meeting. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of
any stockholder during the entire time of the meeting. The original stock
transfer book shall constitute prima facie evidence of the stockholders
entitled to examine such list or transfer books or to vote at any meeting of
stockholders.
SECTION 8. QUORUM; MANNER OF ACTING. (a) A majority of the outstanding
shares of the Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less than a majority
of the outstanding shares is represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice;
provided that the date of the adjourned meeting shall not be more than thirty
(30) days after the date for which the first meeting was called. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been at the meeting as originally
notified. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
(b) Except as otherwise provided in the Corporation's Certificate of
Incorporation or under applicable law, in all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. Directors shall be elected by a plurality
of the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors (which number shall
take into account the cumulation as votes as provided in the Corporation's
Certificate of Incorporation and Article I, Section 11 of these By-Laws). If,
at any meeting of the stockholders, due to a vacancy or vacancies or otherwise,
directors of more than one class of the Board of Directors are to be elected,
each class of directors to be elected at the meeting shall be elected in a
separate election by a plurality vote.
SECTION 9. PROXIES. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the stockholder or, in the absence of such direction, as
determined by a majority of the Board of Directors. Proxies must be filed with
the Secretary of the Corporation.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by any officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name if authority to do so is contained in an appropriate order of the court
or other public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
<PAGE>
3
SECTION 11. CUMULATIVE VOTING. At each annual meeting of stockholders in
which more than one director is being elected, every stockholder entitled to
vote at such election shall have the right to vote, in person or by proxy, the
number of shares owned by the stockholder for as many persons as there are
directors to be elected and for whose election the stockholder has a right to
vote, or to cumulate the votes by giving one candidate as many votes as the
number of such directors to be elected multiplied by the number of his shares
shall equal, or by distributing such votes on the same principle among any
number of candidates.
SECTION 12. INSPECTOR OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint any person or persons other
than nominees for office as inspectors of election to act at such meeting or any
adjournment thereof. Any such appointment shall not be altered at the meeting.
If inspectors of election are not so appointed, the Chairman of the Board or the
President may, and at the request of not fewer than ten percent (10%) of the
votes represented at the meeting shall, make such appointment at the meeting.
In case any person appointed as inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment by the Board of Directors in
advance of the meeting or at the meeting by the Chairman of the Board or the
President.
The duties of such inspectors shall include: determining the number
of shares of stock and the voting power of each share, the shares of stock
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders.
SECTION 13. NOMINATING COMMITTEE. The Board of Directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the Secretary at least twenty (20) days prior to
the date of the annual meeting. No nominations for directors except those made
by the nominating committee shall be voted upon at the annual meeting unless
other nominations by stockholders are made in writing and delivered to the
Secretary of the Corporation at least five (5) days prior to the date of the
annual meeting. Ballots bearing the names of all the persons nominated by the
nominating committee and by stockholders shall be provided for use at the annual
meeting. However, if the nominating committee shall fail or refuse to act at
least twenty (20) days prior to the annual meeting, nominations for directors
may be made at the annual meeting by any stockholder entitled to vote and shall
be voted upon.
SECTION 14. PROPOSALS. At an annual meeting of the stockholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, or (b) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than one hundred twenty
days prior to the anniversary date of the mailing of proxy materials by the
Corporation in connection with the immediately preceding annual meeting of
stockholders of the Corporation or, in the case of the first annual meeting of
stockholders of the Corporation, notice by the stockholder must be so delivered
or received no later than the close of business
<PAGE>
4
on May 31, 1997, notwithstanding a determination by the Corporation to
schedule such annual meeting at a date later than October 31, 1997. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting,
(ii) the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in
accordance with the provisions of this Article I, Section 14, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted. This
provision is not a limitation on any other applicable laws and regulations.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be under the direction of the Board of Directors. The Board of Directors
shall annually elect a Chairman of the Board and a President from among its
members and shall designate, when present, either the Chairman of the Board or
the President to preside at its meetings.
SECTION 2. CLASSIFICATION AND TERM. The Board of Directors shall be
divided into three classes as nearly equal in number as possible. The term of
office of the initial directors shall be as follows: the term of directors of
the first class shall expire at the first annual meeting of stockholders after
the effective date of the Corporation's Certificate of Incorporation; the term
of office of the directors of the second class shall expire at the second annual
meeting of stockholders after the effective date of the Corporation's
Certificate of Incorporation; and the term of office of the third class shall
expire at the third annual meeting of stockholders after the effective date of
the Corporation's Certificate of Incorporation; and as to directors of each
class, when their respective successors are elected and qualified. At each
annual meeting of stockholders, directors elected to succeed those whose terms
are expiring shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders and when their respective successors
are elected and qualified.
SECTION 3. NUMBER OF DIRECTORS. The Board of Directors shall consist of
such number of directors as established from time to time by a vote of a
majority of the Board of Directors, provided that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director.
SECTION 4. MEETINGS. All meetings of the Board of Directors may be held
within and without Puerto Rico.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the President
or one-third of the directors, and at such place as the person calling the
meeting shall designate.
<PAGE>
5
SECTION 6. NOTICE. Written notice of any special meeting shall be given
to each director at least two (2) days previous thereto if delivered personally
or by telegram or at least five (5) days previous thereto if delivered by mail
at the address at which the director is most likely to be reached. Such notice
shall be deemed to be delivered when deposited in the U.S. mail so addressed,
with postage thereon prepaid if mailed or when delivered to the telegraph
company if sent by telegram. Any director may waive notice of any meeting by a
writing filed with the Secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the directors shall constitute a quorum
for the transaction of business at any meeting of the Board of Directors, but if
less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time. Notice of any adjourned
meeting shall be given in the same manner as prescribed by Section 6 of this
Article II.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless a greater number is prescribed by applicable laws or
regulations or by these By-laws.
SECTION 9. RESIGNATION. Any director may resign at any time by sending a
written notice of such resignation to the principal office of the Corporation
addressed to the Chairman of the Board or the President. Unless otherwise
specified therein, such resignation shall take effect upon receipt thereof by
the Chairman of the Board or the President.
SECTION 10. VACANCIES. All vacancies in the Board of Directors shall be
filled in the manner provided in the Corporation's Certificate of Incorporation.
SECTION 11. REMOVAL OF DIRECTORS. Directors may be removed in the manner
provided in the Corporation's Certificate of Incorporation.
SECTION 12. ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
which may be taken at a meeting of the directors, or of a committee thereof, may
be taken without a meeting if a consent in writing, setting forth the action so
taken or to be taken, shall be signed by all of the directors, or all of the
members of the committee, as the case may be, and such consents are filed with
the minutes of proceedings of the Board of Directors or committee, as the case
may be. Such consent shall have the same effect as a unanimous vote.
SECTION 13. ACTION BY DIRECTORS BY COMMUNICATIONS EQUIPMENT. Any action
required or which may be taken at a meeting of directors, or of a committee
thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time.
SECTION 14. COMPENSATION. The Board of Directors may fix, from time to
time, a reasonable fee to be paid to each director for his or her services in
attending meetings of the Board of Directors or of any authorized committee.
The Board of Directors may also provide that such compensation as it deems
<PAGE>
6
reasonable shall be paid to any or all of its members for services rendered to
the Corporation other than attendance at meetings of the Board of Directors or
its committees.
ARTICLE III.
EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The Board of Directors, by resolution adopted by
a majority of the full Board, may, from time to time appoint, any number of
committees, composed of one (1) or more directors and such other administrative
and executive officers as the Board may determine.
SECTION 2. AUTHORITY. These committees shall and may exercise those
powers that the Board of Directors may so delegate and shall have the name or
names that from time to time the Board of Directors may determine by resolution.
SECTION 3. MINUTES, REPORTS. Minutes shall be kept of all meetings of the
committees. The minutes of each meeting, together with such reports in writing
as may be required to fully explain any business or transactions, shall be
submitted to the Board of Directors at the next regular session after each
meeting. The Board of Directors shall approve or disapprove the minutes and/or
reports and record such action in the minutes of the meeting.
SECTION 4. APPOINTMENT, TERM OF OFFICE. Members of the committees shall
be appointed by the Board for such term as the Board may determine, and all
members of the committees shall serve at the pleasure of the Board.
SECTION 5. QUORUM. A majority of the members of any committee shall
constitute a quorum. A majority of the votes cast shall decide every question
or matter submitted to a committee.
ARTICLE IV.
OFFICERS
SECTION 1. POSITIONS. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. The Board of Directors may
also designate the Chairman of the Board as an officer. The Board of Directors
may designate one or more Vice Presidents as Executive Vice President or Senior
Vice President. The Board of Directors may also elect or authorize the
appointment of such other officers as the business of the Corporation may
require. The officers shall have such authority and perform such duties as the
Board of Directors may from time to time authorize or determine. In the absence
of action by the Board of Directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually at the first meeting of the Board of Directors held
after the annual meeting of the stockholders.
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7
If the election of officers is not held at such meeting, such election shall
be held as soon thereafter as possible. Each officer shall hold office until
a successor has been duly elected and qualified or until the officer's death,
resignation or removal in the manner hereinafter provided. Election or
appointment of an officer, employee or agent shall not of itself create
contractual rights. The Board of Directors may authorize the Corporation to
enter into an employment contract with any officer in accordance with
regulations of the Board; but no such contract shall impair the right of the
Board of Directors to remove any officer at any time in accordance with
Section 3 of this Article IV.
SECTION 3. REMOVAL. Any officer may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be fixed
from time to time by the Board of Directors.
ARTICLE V.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by applicable laws and
regulations, and except as otherwise prescribed by these By-laws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee or agent of the Corporation to enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued unless authorized by
the Board of Directors. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS, DRAFTS. All checks, drafts or other orders for the
payment of money, notes and other evidences of indebtedness issued in the name
of the Corporation shall be signed by one or more officers, employees or agents
of the Corporation in such manner as shall from time to time be determined by
the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in any one
of its authorized depositories as the Board of Directors select.
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8
ARTICLE VI.
STOCK AND STOCK CERTIFICATES
SECTION 1. TRANSFER. Shares of stock shall be transferable on the books
of the Corporation, and a transfer book shall be kept in which all transfer of
stock shall be recorded. Every person becoming a stockholder by such transfer
shall, in proportion to his or her shares, succeed to all rights and liabilities
of the prior holder of such shares.
SECTION 2. STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the Chairman, the President or any Vice President (which may be
engraved, printed or impressed), and shall be signed manually or by facsimile
process by the Secretary or an Assistant Secretary, or any other officer
appointed by the Board of Directors for that purpose, to be known as an
Authorized Officer, and the seal of the Corporation shall be engraved thereon.
SECTION 3. OWNER OF RECORD, ATTACHMENT, PLEDGE. Shares of stock are
transferable by all means recognized by law, if there is no attachment levied
against them under competent authority, but as long as the transfer is not
signed and recorded in the transfer books the Corporation shall be entitled to
consider as owner thereof the party who appears as such in said books.
SECTION 4. LOST OR DESTROYED STOCK CERTIFICATES. In the event any
certificate of stock shall be lost or destroyed the Board may order a new
certificate to be issued in its place upon receiving such proof of loss and such
bond of indemnity therefore as may be satisfactory to the Board of Directors.
New certificates may be issued without requiring any bond when in the judgment
of the Board it is proper to do so.
SECTION 5. TRANSFER AGENT. The Board of Directors may designate any
person, whether or not an officer of the Corporation, as stock transfer agent or
registrar of the Corporation with respect to Stock Certificates or other
securities issued by the Corporation.
ARTICLE VII.
INDEMNIFICATION, ETC. OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 1. INDEMNIFICATION.
(a) The Corporation shall indemnify, to the fullest extent authorized by
the General Corporation Law of the Commonwealth of Puerto Rico, any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the written request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees),
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9
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a matter he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, provided that the Corporation shall not be liable for any
amounts which may be due to any person in connection with a settlement of any
action, suit or proceeding effected without its prior written consent or any
action, suit or proceeding initiated by any person seeking indemnification
hereunder without its prior written consent. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the written request of the Corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expense which such court
shall deem proper.
(c) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1(a) or Section 1(b) of this
Article VII, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under Section 1(a) or Section 1(b) of this
Article VII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth therein. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
(e) The Corporation shall not be liable for any amounts which may be due
to any person in connection with a settlement of any action, suit or proceeding
initiated by any person seeking indemnification under this Article VII without
its prior written consent.
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10
SECTION 2. ADVANCEMENT OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred in defending a civil or criminal action, suit or
proceeding described in Section 1 of this Article VII may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article VII.
SECTION 3. OTHER RIGHTS AND REMEDIES. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article VII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to actions
in their official capacity and as to actions in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 4. INSURANCE. By action of its Board of Directors,
notwithstanding any interest of the directors in the action, the Corporation may
purchase and maintain insurance, in such amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the written request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power or would
be required to indemnify him against such liability under the provisions of this
Article VII or of the General Corporation Law of the Commonwealth of Puerto
Rico, or of the laws of any other State or political dependency of the United
States or foreign country as may be applicable.
SECTION 5. MODIFICATION. The duties of the Corporation to indemnify and
to advance expenses to a director, officer, employee or agent provided in this
Article VII shall be in the nature of a contract between the Corporation and
each such person, and no amendment or repeal of any provision of this
Article VII shall alter, to the detriment of such person, the right of such
person to the advance of expenses or indemnification related to a claim based on
an act or failure to act which took place prior to such amendment or repeal.
ARTICLE VIII.
CORPORATE SEAL
The corporate seal of the Corporation shall be in such form and bear such
inscription as may be adopted by resolution of the Board of Directors, or by
usage of the officers on behalf of the Corporation.
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11
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be from
July 1 of each year to June 30 of the following year.
SECTION 2. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay dividends in cash or in shares of the
capital stock of the Corporation, in the manner and upon the terms and
conditions provided by applicable laws and regulations.
SECTION 3. CONFLICT WITH NEW LAWS. The provisions of these By-laws in
conflict with any and all new statutes shall become revoked without affecting
the validity of the remaining provisions hereof.
SECTION 4. BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of account and shall keep minutes and proceedings of
its stockholders and Board of Directors (including committees thereof). Any
books, records and minutes may be in written form or any other form capable of
being converted to written form within a reasonable time.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
BETWEEN
ORIENTAL BANK AND TRUST
AND
MR. JOSE ENRIQUE FERNANDEZ
AGREEMENT made as of the 1st day of September 1996, by and between ORIENTAL
BANK AND TRUST, a Puerto Rico chartered commercial bank which has its principal
office in San Juan, Puerto Rico (sometimes hereinafter referred to as the
"Bank") and MR. JOSE ENRIQUE FERNANDEZ (sometimes hereinafter referred to as the
"Chief Executive Officer").
WITNESSETH:
WHEREAS, Mr. Jose Enrique Fernandez has been the President and Chief
Executive Officer of the Bank since October, 1988 and the retention of his
services for and on behalf of the Bank is of material importance to the
preservation and enhancement of the value of the Bank's business;
WHEREAS, the Bank and the Chief Executive Officer desire to enter into
this Agreement and intend that this Agreement shall supersede and replace the
Employment Agreement, dated as of September 1, 1993, between the Chief Executive
Officer and the Bank;
NOW THEREFORE, in consideration of the mutual covenants set forth, the Bank
and the Chief Executive Officer do hereby agree as follows:
1. TERM OF EMPLOYMENT
1.1 The Bank hereby employs Mr. Jose Enrique Fernandez as President and
Chief Executive Officer as hereinafter provided, and the Chief Executive Officer
hereby accepts said employment and agrees to render such services to the Bank on
the terms and conditions set forth in this Agreement for a term of three (3)
years commencing September 1, 1996 (the "Effective Date") and terminating August
31, 1999, unless further extended or sooner terminated in accordance with the
terms and conditions hereinafter set forth.
On each anniversary of the Effective Date, one additional year shall be
added to the remaining term of this Agreement,
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unless, not less than one hundred twenty (120) days in advance of the
anniversary date on which this Agreement would otherwise be extended, either
party delivers written notice to the other party that such extension will not
occur. Any such written notice shall not affect any prior extensions of the
term of employment hereunder.
1.2 During the term of this Agreement, the Chief Executive Officer shall
devote his best efforts to performing such services for the Bank as may be
consistent with his title of President and Chief Executive Officer and those
which from time to time may be assigned to him by the Bank's Board of Directors.
1.3 The services of the Chief Executive Officer to the Bank shall be
rendered principally in the Commonwealth of Puerto Rico, but he shall do such
traveling on behalf of the Bank as may be reasonably required by his duties.
1.4 The Chief Executive Officer shall have sole, full and complete
authority to make all determinations concerning hiring, dismissal and
compensation for all classes of employees of the Bank, which determinations
shall be in accordance with the policies for such hiring, dismissal and
compensation established by the Board of Directors from time to time and in
accordance with applicable laws and the rules and regulations of the Federal
Deposit Insurance Corporation (the "FDIC").
1.5 The Chief Executive Officer shall continue to occupy his position as a
Director and Chairman of the Board of Directors of the Bank. Furthermore,
during the term of this Agreement or extension thereof and for any elections of
Directors in which his term as Director will expire, the Board of Directors
shall nominate and recommend to the stockholders the election of the Chief
Executive Officer as a Director and, if elected, the Board shall name the Chief
Executive Officer to the position of Chairman of the Board of Directors.
2. COMPETITIVE ACTIVITIES:
2.1 The Chief Executive Officer agrees that during the term of this
Agreement, except with the express written consent of the Board of Directors, he
will not, directly or indirectly, engage or participate in, become a director
of, or render advisory or other services for, or in connection with, or become
interested in, or make financial investment in any firm, corporation, business
entity or business enterprise competitive with or to any business of the Bank;
provided, however, that the Chief Executive Officer shall not thereby be
precluded or prohibited from owning passive investments including investments in
the securities of other financial institutions, so long as such ownership does
not require him to devote substantial time to management or control of the
business or activities in which he has invested.
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2.2 The Chief Executive Officer agrees and acknowledges that during the
time that he is employed by the Bank, he will maintain an intimate knowledge of
the activities and affairs of the Bank including trade secrets and other
confidential matters. As a result, and also because of the special, unique, and
extraordinary services that the Chief Executive Officer is capable of performing
for the Bank or one of its competitors, the Chief Executive Officer recognizes
that the services to be rendered by him hereunder are of a character giving them
a peculiar value, the loss of which cannot be adequately or reasonably
compensated for by damages. Therefore, if during the time he is employed by the
Bank, the Chief Executive Officer renders services to a competitor of the Bank
other than as authorized pursuant to Section 2.1 hereof, the Bank shall be
entitled to immediate injunctive or other equitable relief to restrain the Chief
Executive Officer from rendering his services to the competitor of the Bank, in
addition to any other remedies to which the Bank may be entitled under law;
provided, however, that the right to such injunctive or other equitable relief
shall not survive the termination of the Chief Executive Officer's employment
with the Bank.
3. COMPENSATION AND REIMBURSEMENT OF EXPENSES:
3.1 COMPENSATION. The Bank will compensate and pay for the Chief
Executive Officer's services during the term of this Agreement a minimum base
salary of two hundred ninety thousand dollars ($290,000.00) during fiscal year
1997, three hundred ten thousand dollars ($310,000.00) during fiscal year 1998
and three hundred twenty five thousands dollars ($325,000.00) for fiscal year
1999. The Chief Executive Officer's minimum salary for the remainder of the
term of this Agreement of any extension thereof shall be mutually agreed by the
Bank and the Chief Executive Officer, provided, however, that at no time shall
such base salary be reduced below the minimum amount set forth above for fiscal
year 1999.
3.2 CAR ALLOWANCE. The Bank shall provide the Chief Executive Officer an
annual car allowance in the sum of thirty four thousand dollars ($34,000.00)
from which the Chief Executive Officer shall pay all his car related expenses,
such as car lease payments, insurance, repairs, maintenance, gasoline,
chauffeur, and the like.
3.3 MINIMUM BASE SALARY INCREASES. The Bank and the Chief Executive
Officer may agree to increases in the annual minimum base rate of salary from
time to time, which increases thereafter shall constitute part of the Chief
Executive Officer's base salary for purposes of this Agreement; provided,
however, that any bonuses awarded by the Bank to the Chief Executive Officer
from time to time, shall not constitute part of the base salary for purposes of
this Agreement.
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3.4 MEMBERSHIPS. The Bank shall provide and maintain at its expense
membership in such social and business clubs which in the judgement of the Chief
Executive Officer are reasonably appropriate to the performance of his duties
pursuant to this Agreement for the Bank. Such membership shall be maintained in
the name of the Chief Executive Officer and he shall be reimbursed for all
reasonable expenses and charges incurred by him at such clubs in performing his
bank-related duties hereunder.
3.5 REIMBURSEMENT OF EXPENSES. Not less frequently than monthly, the Bank
shall pay for or reimburse the Chief Executive Officer for all reasonable travel
and other expenses incurred by the Chief Executive Officer in the performance of
his duties under this Agreement, including, without limiting the generality of
the foregoing, the allowance and reimbursable expenses provided for in Section
3.2 and 3.4 hereinabove.
3.6 OFFICE. The Bank shall furnish the Chief Executive Officer with a
private office, a private secretary and such other assistance and accommodations
as shall be suitable to the character of the Chief Executive Officer's position
with the Bank and adequate for the performance of his duties hereunder.
3.7 LIFE INSURANCE. The Bank and the Chief Executive Officer have agreed
to continue the insurance policy in effect at the present time, which is a ten
(10) year term life insurance policy in the sum of one million dollars
($1,000,000.00) covering the life of the Chief Executive Officer and having as
its beneficiary the Estate of Jose Enrique Fernandez. All premiums and other
costs associated with such term life insurance policy shall be for the account
of the Bank.
4. DISABILITY
4.1 If the Chief Executive Officer shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, and so long as
such disability continues, the Chief Executive Officer shall, subject to the
provisions of Section 6.2 and 6.3 hereof, continue to receive his full
compensation for a period not to exceed the remaining term of this Agreement.
4.2 There shall be deducted from the amounts paid to the Chief Executive
Officer hereunder during any period of disability or incapacitation, as
described in Section 4.1 hereof, any amounts actually paid to the Chief
Executive Officer pursuant to any disability insurance or other similar such
programs which the Bank has instituted or may institute on behalf of its
employees for the purpose of providing compensation in the event of disability.
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5. ADDITIONAL COMPENSATION AND BENEFITS
5.1 During the term of this Agreement, the Chief Executive Officer will be
entitled to participate in, and receive the benefits of, any stock option plan,
profit sharing plan or other plans, benefits and privileges given to employees
and executives of the Bank or its subsidiaries and affiliates which may now
exist or come into existence hereinafter, to the extent commensurate with his
then duties and responsibilities, as fixed by the Bank's Board of Directors,
and, to the extent that the Chief Executive Officer is otherwise eligible and
qualifies, to so participate in, and receive such benefits or privileges. The
Bank shall not make any changes in such plans, benefits or privileges which
would adversely affect the Chief Executive Officer's rights or benefits
thereunder, unless such change or changes are made pursuant to a program
applicable to all executives of the Bank and does not result in a
proportionately greater adverse change in the rights of or benefits to the Chief
Executive Officer as compared to any executive officer of the Bank. Nothing
paid to the Chief Executive Officer under any plan or arrangement presently in
effect or made available in the future shall be deemed in lieu of the salary
payable to the Chief Executive Officer pursuant to Section 3.1 hereof.
5.2 Subject to the conditions described in section 5.3 below, the Board of
Directors of the Bank, in contemplation of the execution of this Agreement,
granted the Chief Executive Officer the option to purchase 30,000 shares of the
common stock of the Bank (the "Options") under the terms and conditions approved
by the Bank's Board of Directors on April 22, 1996, as supplemented hereunder.
The options may be exercised by the Chief Executive Officer during a period
commencing on the first and ending on the tenth anniversary of his employment,
provided that the options may be exercised on an earlier date in the event of a
change of control of the Bank as such term is defined in section 6.8(b)
hereunder or if the Chief Executive Officer becomes disabled, dies or retired
from employment with the Bank.
5.3 The Options shall survive one (1) year after termination of this
Agreement, unless said termination is pursuant to Sections 6.1, 6.5 or 6.6
hereto. The number of shares that the Chief Executive Officer has a right to
acquire pursuant to the Options shall be adjusted proportionately to avoid any
form of dilution, including but not limited to increases in the number of shares
of stock of the Bank issued and outstanding due to stock splits, stock
dividends, cash dividends or additional authorizations of issuance of stock.
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6. TERMINATION
6.1 The Board of Directors shall have the right, at any time upon prior
written Notice of Termination satisfying the requirements of Section 6.8(c)
hereunder, to terminate the Chief Executive Officer's employment hereunder,
including termination for just cause. For the purpose of this Agreement,
"termination for just cause" shall mean termination for the willful and
continued failure of the Chief Executive Officer to perform his duties under
this Agreement or the willful engaging by the Chief Executive Officer in illegal
conduct or gross misconduct materially injurious to the Bank, as determined by a
court of competent jurisdiction or a federal or state regulatory agency having
jurisdiction over the Bank. For purposes of this paragraph, no act, or failure
to act, on the Chief Executive Officer's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Bank; provided that any act or omission to act on the Chief Executive Officer's
behalf in reliance upon an opinion of counsel to the Bank or counsel to the
Chief Executive Officer shall not be deemed to be willful.
6.2 In the event employment is terminated for just cause pursuant to
Section 6.1 hereof, the Chief Executive Officer shall have no right to
compensation or other benefits for any period after such date of termination.
If the Chief Executive Officer is terminated by the Bank other than for just
cause pursuant to Section 6.1 hereof and other than in connection with a change
of control of the Bank, as defined herein, the Chief Executive Officer's right
to compensation and other benefits under this Agreement shall be as set forth in
Sections 6.8(e) and (f) hereof. In the event that (i) there occurs a change in
control of the Bank, as defined herein, or (ii) the Chief Executive Officer is
terminated by the Bank other than for just cause pursuant to Section 6.1 hereof
in contemplation of a change of control of the Bank, as defined herein, the
Chief Executive Officer's right to compensation and other benefits under this
Agreement shall be as set forth in Sections 6.8(d) and (f) hereof.
6.3 The Chief Executive Officer shall have the right, upon prior written
Notice of Termination of not less than thirty (30) days satisfying the
requirements of Section 6.8(c) hereof, to terminate his employment hereunder,
but in such event, the Chief Executive Officer, except as otherwise provided
herein, shall have no right after the date of termination to compensation or
other benefits as provided in this Agreement, unless such termination is for
good reason, as defined, pursuant to Section 6.8(a) hereof. If the Chief
Executive Officer provides a Notice of Termination for good reason, as defined,
the date of
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Termination shall be the date on which a Notice of Termination is given.
6.4 If the Chief Executive Officer is suspended from office and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
pursuant to a notice served under Section 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(3) and (g)(1)), the Bank's
obligations under this Agreement shall be suspended as of the date of service
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank shall: (i) pay the Chief Executive Officer all the
compensation withheld while contract obligations were suspended, and,
(ii) reinstate (in whole or in part) any of its obligations which were
suspended.
6.5 If the Chief Executive Officer is removed from office and/or
permanently prohibited from participating in the conduct of the Bank's affairs
by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, all obligations
of the Bank under this Agreement shall terminate, as of the effective date of
the order, but rights of the Chief Executive Officer to compensation earned as
of the date of termination shall not be affected.
6.6 If the Bank is in default, as defined to mean an adjudication or other
official determination of a court of competent jurisdiction or other public
authority pursuant to which a conservator, receiver or other legal custodian is
appointed for the Bank for the purpose of liquidation, all obligations under
this Agreement shall terminate as of the date of default, but rights of the
Chief Executive Officer to compensation earned as of the date of termination
shall not be affected.
6.7 In the event that the Chief Executive Officer is terminated in a
manner which violates the provisions of Section 6.1, as determined by a court of
competent jurisdiction, the Chief Executive Officer shall be entitled to
reimbursement for all reasonable costs, including attorneys' fees in challenging
such termination. Such reimbursement shall be in addition to all rights to
which the Chief Executive Officer is otherwise entitled under this Agreement.
6.8 (a) The Chief Executive Officer may terminate his employment
hereunder for good reason. For purposes of this Agreement, "good reason" shall
mean (i) a failure by the Bank to comply with any material provision of this
Agreement, which failure has not been cured within ten (10) days after a notice
of such noncompliance has been given by the Chief Executive Officer to the Bank,
or (ii) any purported termination of the Chief Executive Officer's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph
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(c) hereof (and for purposes of this Agreement no such purported termination
shall be effective).
(b) For purposes of this Agreement, a "change in control of the Bank"
shall mean a change in control: (i) as defined in 12 U.S.C. Section 1817(j) and
12 C.F.R. Section 303.4, or (ii) that would be required to be reported in
response to Item 6(e) of Schedule 14A or Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act
in effect on the date first written above), other than the Bank or any "person"
who on the date hereof is a director or officer of the Bank, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Bank representing 25% or more of the
combined voting power of the Bank's then outstanding securities, or (B) in the
event that the Bank completes a reorganization into the bank holding company
form of ownership, after such reorganization is completed any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act in effect on the
date first written above), other than the holding company or any "person" who on
the date hereof is a director or officer of the holding company, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the holding company representing 25% or
more of the combined voting power of the holding company's then outstanding
securities, or (C) during any period of two consecutive years during the term of
this Agreement, individuals who at the beginning of such period constitute the
Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period. Notwithstanding the provisions of this Section or the
Exchange Act, a change in control of the Bank shall not be deemed to have
occurred in the event the Bank undertakes a reorganization to form a bank
holding company.
(c) Any termination of the Chief Executive Officer's employment by
the Bank or by the Chief Executive Officer shall be communicated by a written
Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a dated notice which shall (i)
indicate the specific termination provision in the Agreement relied upon; (ii)
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Chief Executive Officer's employment under the
provision so indicated; (iii) specify a date of termination, which shall be not
less than thirty (30) nor more than ninety (90) days after such Notice of
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Termination is given, except in the case of the Bank's termination of the Chief
Executive Officer's employment for just cause pursuant to Section 6.1 hereof, in
which case the Notice of Termination may specify a date of termination as of the
date such Notice of Termination is given; and (iv) be given in the manner
specified in Section 9.1 hereof.
(d) In the event that: (i) there occurs a change in control of the
Bank, as defined herein, or (ii) the Chief Executive Officer is terminated by
the Bank other than for just cause pursuant to Section 6.1 hereof in
contemplation of a change of control of the Bank, as defined herein, then in
lieu of any further salary payments to the Chief Executive Officer for periods
subsequent to the date of change of control of the Bank or termination of
employment, as the case may be, the Bank shall, subject to the receipt of
written approval, to the extent necessary, from the FDIC and any other
applicable regulatory agency, pay to the Chief Executive Officer an amount equal
to (A) the aggregate annual compensation paid to or payable by the Bank and any
of its subsidiaries to the Chief Executive Officer, which amount shall include
the Chief Executive Officer's base salary, bonus (equal to the highest cash
bonus paid to the Chief Executive Officer in any of the three fiscal years prior
to the date of the change of control of the Bank or termination of employment,
as the case may be), car allowance and the value of any other benefits provided
to the Chief Executive Officer, during the year in which the change of control
of the Bank or the termination of the Chief Executive Officer occurs, as the
case may be, multiplied by (B) 3.00, such payment to be made in a lump sum on or
before the fifth day following the date on which the change of control of the
Bank occurs or the termination of the Chief Executive Officer occurs, as the
case may be. In the event that any of the items that would be included in
aggregate annual compensation has not yet been paid during the year in which the
change of control of the Bank or the termination of the Chief Executive Officer
occurs, then the amount of such item to be included for purposes of this
calculation shall be the amount paid during the preceding year.
(e) In the event that: (i) the Chief Executive Officer shall
terminate his employment for good reason as defined in Subpart (i) or (ii) of
Section 6.8(a) hereof, or (ii) if the Chief Executive Officer is terminated by
the Bank for other than just cause pursuant to Section 6.1 hereof and other than
in connection with a change in control of the Bank, as defined herein, then in
lieu of any further salary payments to the Chief Executive Officer for periods
subsequent to the date of termination, the Bank shall pay as severance to the
Chief Executive Officer an amount equal to the product of (A) the aggregate
annual compensation paid to or payable by the Bank and any of its subsidiaries
to the Chief Executive Officer, which amount shall include the Chief Executive
Officer's base salary,
<PAGE>
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bonus (equal to the highest cash bonus paid to the Chief Executive Officer in
any of the three fiscal years prior to the date of the change of control of
the Bank or termination of employment, as the case may be), car allowance and
the value of any other benefits provided to the Chief Executive Officer,
during the year in which the change of control of the Bank or the termination
of the Chief Executive Officer occurs, as the case may be, multiplied by (B)
2.00, such payment to be made in a lump sum on or before the fifth day
following the date of termination.
(f) Unless the Chief Executive Officer is terminated for just cause
pursuant to Section 6.1 hereof, pursuant to Section 6.5 hereof, or pursuant to a
termination of employment by the Chief Executive Officer for other than good
reason, the Bank shall maintain in full force and effect, for the continued
benefit of the Chief Executive Officer for the term of years (including partial
years) as determined in paragraph (d) of this Section 6.8, all employee benefit
plans and programs in which the Chief Executive Officer was entitled to
participate immediately prior to the date of termination, provided that the
Chief Executive Officer's continued participation is possible under the general
terms and provisions of such plans and programs.
(g) The Chief Executive Officer shall not be required to mitigate the
amount of any payment provided for in paragraphs (d) and (e) of this Section 6.8
by seeking other employment or otherwise.
6.9 Any payments made to the Chief Executive Officer pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder. The
Bank shall in good faith seek to obtain any necessary consents or approvals from
the FDIC or any other applicable regulatory agency and any successors thereto
with respect to any payments to be made or any benefits to be provided to the
Chief Executive Officer pursuant to the terms of this Agreement.
7. INDEMNIFICATION
7.1(a) The Bank shall indemnify, to the fullest extent authorized by
applicable federal and Commonwealth of Puerto Rico laws and regulations, the
Chief Executive Officer with respect to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Bank) that the
Chief Executive Officer is a party or is threatened to made a party by reason of
the fact that he is or was the President and Chief Executive Officer of the
Bank, or is or was serving at the written request of the Bank as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against costs and expenses (including
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attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a matter he reasonably believed
to be in or not opposed to the best interests of the Bank, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, provided that the Bank shall not be liable for any
amounts which may be due to the Chief Executive Officer in connection with a
settlement of any action, suit or proceeding effected without its prior
written consent or any action, suit or proceeding initiated by the Chief
Executive Officer seeking indemnification hereunder without its prior written
consent.
8. SUCCESSORS OF THE PARTIES
8.1 This Agreement shall inure to the benefit of and be binding upon the
Chief Executive Officer, and, to the extent applicable, his assigns, executors,
and personal representatives and the Bank, its successors, and assigns,
including, without limitation, any person, partnership, or corporation which may
acquire all or substantially all of the Bank's assets and business, or with or
into which the Bank may be consolidated or merged, and this provision shall
apply in the event of any subsequent merger, consolidation, or transfer unless
such merger or consolidation or subsequent merger or consolidation is a
transaction of the type which would result in termination under Section 6.8.
8.2 This Agreement is personal to each of the parties hereto and neither
party may assign or delegate any of his or its rights or obligations hereunder
without first obtaining the written consent of the other party.
9. NOTICES
9.1 All notices required by this Agreement to be given by one party to the
other shall be in writing and shall be deemed to have been delivered either:
(a) When personally delivered to the office of the Secretary of the
Bank at his regular corporate office, or the Chief Executive Officer in person;
or
(b) Five days after depositing such notice in the United States
mails, certified mail with return receipt requested and postage prepaid to:
(i) Jose E. Fernandez
Calle Lila #1717
Urbanizacion San Francisco
San Juan, Puerto Rico 00927
(ii) Oriental Bank and Trust Co.
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P0 Box 1429
Hato Rey, Puerto Rico 00919
or such other address as either party may designate to the other by notice in
writing in accordance with the terms hereof.
10. AMENDMENTS OR ADDITIONS
10.1 No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties. The prior approval by a two-thirds
affirmative vote of the full Board of Directors of the Bank shall be required in
order for the Bank to authorize any amendments or additions to this Agreement,
to give any consent or waivers of provisions of this Agreement, or to take any
other action under this Agreement including any termination of the employment of
the Chief Executive Officer with or without just cause under Section 6.1 hereof.
11. MISCELLANEOUS
11.1 No course of conduct between the Bank and Chief Executive Officer to
exercise any right or power given under this Agreement shall: (i) impair the
subsequent exercise of any right or power, or (ii) be construed to be a waiver
of any default or any acquiescence in or consent to the curing of any default
while any other default shall continue to exist, or be construed to be a waiver
of such continuing default or of any other right or power that shall theretofore
have arisen; and, every power and remedy granted by law and by this Agreement to
any party hereto may be exercised from time to time, and as often as may be
deemed expedient. All such rights and powers shall be cumulative to the fullest
extent permitted by law.
11.2 The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
11.3 This Agreement shall be governed in all respects and be interpreted
by and under the laws of the Commonwealth of Puerto Rico, except to the extent
that such law may be preempted by applicable Federal law, including regulations,
opinions or orders duly issued by the FDIC ("Federal Law"), in which event this
Agreement shall be governed and be interpreted by and under Federal Law. Venue
for the litigation of any and all matters arising under or in connection with
this Agreement shall be laid in the United States District Court for the
District of Puerto Rico, at San Juan, in the case of federal jurisdiction, and
in the Superior Court of the Commonwealth of Puerto Rico in San Juan, in the
case of state court jurisdiction.
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11.4 Notwithstanding anything to the contrary herein contained, the
payment or obligation to pay any monies or granting of any rights or privileges
to the Chief Executive Officer as provided in this Agreement shall not be in
lieu or derogation of the rights and privileges that the Chief Executive Officer
now has under any plan or benefit presently outstanding.
11.5 This Agreement shall replace and supersede the Employment Agreement,
dated as of September 1, 1993, between the Chief Executive Officer and the Bank.
At San Juan, Puerto Rico this 1st day of September, 1996.
ORIENTAL BANK AND TRUST
/s/ Jose Enrique Fernandez By: /s/ Julian Inclan
- -------------------------- ---------------------------------
JOSE ENRIQUE FERNANDEZ Julian Inclan
Director
/s/ Alberto Richa
---------------------------------
Alberto Richa
Director
/s/ Emilio Rodriguez Jr.
---------------------------------
Emilio Rodriguez, Jr.
Director
<PAGE>
EXHIBIT 10.2
ORIENTAL FEDERAL SAVINGS BANK
1988 STOCK OPTION PLAN
1. PURPOSE. This Oriental Federal Savings Bank 1988 Stock Option Plan
("1988 Plan") is intended to secure for Oriental Federal Savings Bank ("Bank")
and its members and stockholders the benefits arising from ownership of the
Bank's common stock, par value $1.00 per share ("Common Stock"), by those
selected directors, officers and other key employees of the Bank who will be
responsible for its future growth. The 1988 Plan is designed to help attract
and retain superior personnel for positions of substantial responsibility with
the Bank, and to provide key employees with an additional incentive to
contribute to the success of the Bank.
2. ELEMENTS OF THE 1988 PLAN. In order to maintain flexibility in the
award of stock benefits, the 1988 Plan is comprised of two parts. The first
part is the Qualified Stock Option Plan ("Qualified Plan") and the second part
is the Compensatory Stock Option Plan ("Compensatory Plan"). Copies of the
Qualified Plan and Compensatory Plan are attached hereto as Part I and Part II,
respectively, and are collectively referred to herein as the "Plans". The grant
of an option under one of the Plans shall not be construed to prohibit the grant
of an option under the other Plan.
3. APPLICABILITY OF GENERAL PROVISIONS. Unless any Plan
specifically indicates to the contrary, all Plans shall be subject to the
General Provisions of the 1988 Plan set forth below.
4. ADMINISTRATION OF THE PLANS. The Plans shall be administered,
construed, governed and amended in accordance with their respective terms.
GENERAL PROVISIONS OF THE 1988 PLAN
Article 1. ADMINISTRATION. The 1988 Plan shall be administered by a
committee appointed by the Board of Directors of the Bank, none of whom is a
full-time officer or employee at the Bank. The committee, when acting to
administer the 1988 Plan, is referred to as the "Plan Administrators." Any
action of the Plan Administrators shall be taken by majority vote or the
unanimous written consent of the Plan Administrators. The Board of Directors
with the Plan Administrators not acting shall administer the 1988 Plan with
respect to options granted to a Plan Administrator in accordance with the
provisions of the 1988 Plan. No Plan Administrator or member of the Board of
Directors of the Bank, its parent or subsidiaries, shall be liable for any
action
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or determination made in good faith with respect to the 1988 Plan or to any
option granted thereunder.
Article 2. AUTHORITY OF PLAN ADMINISTRATORS. Subject to the other
provisions of this 1988 Plan, and with a view to effecting its purpose, the Plan
Administrators shall have sole authority in their absolute discretion: (a) to
construe and interpret the 1988 Plan; (b) to define the terms used herein;
(c) to prescribe, amend, and rescind rules and regulations relating to the
1988 Plan; (d) to determine the employees to whom options shall be granted under
the 1988 Plan; (e) to determine the time or times at which options shall be
granted under the 1988 Plan; (f) to determine the number of shares subject to
any option under the 1988 Plan as well as the option price, and the duration of
each option, and any other terms and conditions of options; (g) to terminate the
1988 Plan; and (h) to make any other determinations necessary or advisable for
the administration of the 1988 Plan and to do everything necessary or
appropriate to administer the 1988 Plan. All decisions, determinations, and
interpretations made by the Plan Administrators shall be binding and conclusive
on all participants in the 1988 Plan and on their legal representatives, heirs
and beneficiaries.
Article 3. MAXIMUM NUMBER OF SHARES SUBJECT TO THE 1988 PLAN. The maximum
aggregate number of shares of Common Stock available pursuant to the Plans,
subject to adjustment as provided in Article 6 hereof, shall be 270,000 shares.
If any of the options granted under this 1988 Plan expire or terminate for any
reason before they have been exercised in full, the unpurchased shares subject
to those expired or terminated options shall again be available for the purposes
of the 1988 Plan.
Article 4. ELIGIBILITY AND PARTICIPATION. Regular full-time employees of
the Bank, including officers whether or not directors of the Bank, or of any
parent or any subsidiary and directors who are not full-time salaried employees
of the Bank, or of any parent or subsidiary, shall be eligible for selection by
the Plan Administrators to participate in the 1988 Plan.
Article 5. EFFECTIVE DATE AND TERM OF 1988 PLAN. The 1988 Plan shall
become effective upon its adoption by the Board of Directors of the Bank,
subject to the subsequent approval of the 1988 Plan by a majority of the total
votes eligible to be cast at a meeting of stockholders, which vote shall be
taken within 12 months of adoption of the 1988 Plan by the Bank's Board of
Directors; provided, however, that options may be granted under this 1988 Plan
prior to obtaining stockholder approval of the 1988 Plan, but any such options
shall be contingent upon such stockholder approval being obtained and may not be
exercised prior to such approval. The 1988 Plan shall continue in effect
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for a term of 10 years unless sooner terminated under Article 2 of the
General Provisions.
Article 6. ADJUSTMENTS. If the shares of Common Stock of the Bank as a
whole are increased, decreased, changed into or exchanged for a different number
or kind of shares or securities through merger, consolidation, combination,
exchange of shares, other reorganization, recapitalization, reclassification,
stock dividend, stock split or reverse stock split, an appropriate and
proportionate adjustment shall be made in the maximum number and kind of shares
as to which options may be granted under this 1988 Plan. A corresponding
adjustment changing the number or kind of shares allocated to unexercised
options or portions thereof, which shall have been granted prior to any such
change, shall likewise be made. Any such adjustment in outstanding options
shall be made without change in the aggregate purchase price applicable to the
unexercised portion of the option, but with a corresponding adjustment in the
price for each share or other unit of any security covered by the option. In
making any adjustment pursuant to this Article 6, any fractional shares shall be
disregarded.
Article 7. TERMINATION AND AMENDMENT OF 1988 PLAN. The 1988 Plan shall
terminate no later than 10 years from the date such 1988 Plan is adopted by the
Board of Directors, or the date such 1988 Plan is approved by the stockholders,
whichever is earlier. No options shall be granted under the 1988 Plan after
that date. Subject to the limitation contained in Article 8 of the General
Provisions, the Plan Administrators may at any time amend or revise the terms of
the 1988 Plan, including the form and substance of the option agreements to be
used hereunder; provided that no amendment or revision shall (a) increase the
maximum aggregate number of shares that may be sold pursuant to options granted
under this 1988 Plan, except as permitted under Article 6 of the General
Provisions; (b) change the minimum purchase price for shares under Section 4 of
the Plans; (c) increase the maximum term established under the Plans for any
option; or (d) permit the granting of an option to anyone other than as provided
in Article 4 of the General Provisions.
Article 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension or
termination of the 1988 Plan shall, without the consent of the employee who has
received an option, alter or impair any of that employee's rights or obligations
under any option granted under the 1988 Plan prior to such amendment, suspension
or termination.
Article 9. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of
any options granted pursuant to the terms of this 1988 Plan, no employee shall
have any of the rights or privileges of a stockholder of the Bank in respect of
any shares of stock issuable upon the exercise of his or her options until
certif-
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icates representing the shares have been issued and delivered. No shares
shall be required to be issued and delivered upon exercise of any option
unless and until all of the requirements of law and of all regulatory
agencies having jurisdiction over the issuance and delivery of the securities
shall have been fully complied with. No adjustment shall be made for
dividends or any other distributions for which the record date is prior to
the date on which such stock certificate is issued.
Article 10. RESERVATION OF SHARES OF COMMON STOCK. The Bank, during the
term of this 1988 Plan, will at all times reserve and keep available such number
of shares of its Common Stock as shall be sufficient to satisfy the requirements
of the 1988 Plan. In addition, the Bank will from time to time, as is necessary
to accomplish the purposes of this 1988 Plan, seek to obtain from any regulatory
agency having jurisdiction any requisite authority in order to issue and sell
shares of Common Stock hereunder. The inability of the Bank to obtain from any
regulatory agency having jurisdiction the authority deemed by the Bank's counsel
to be necessary to the lawful issuance and sale of any shares of its stock
hereunder shall relieve the Bank of any liability in respect of the non-issuance
or sale of the stock as to which the requisite authority shall not have been
obtained.
Article 11. TAX WITHHOLDING. The exercise of any option granted under the
1988 Plan is subject to the condition that if at any time the Bank shall
determine, in its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any state, federal or Puerto Rico law is necessary
or desirable as a condition of, or in any connection with, such exercise or the
delivery or purchase of shares pursuant thereto, then in such event, the
exercise of the option shall not be effective unless such withholding tax or
other withholding liabilities shall have been satisfied in a manner acceptable
to the Bank.
Article 12. EMPLOYMENT. Nothing in the 1988 Plan or in any option shall
confer upon any eligible employee any right to continued employment by the Bank,
or by its parent or subsidiary corporations, or limit in any way the right of
the Bank or its parent or subsidiary corporation at any time to terminate or
alter the terms of that employment.
<PAGE>
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PART I
QUALIFIED STOCK OPTION PLAN
Section 1. PURPOSE. The purpose of this Qualified Plan is to promote the
growth and general prosperity of the Bank by permitting the Bank to grant
options to purchase shares of its Common Stock to selected directors, executive
officers and full-time, key employees of the Bank. This Qualified Plan is
designed to help attract and retain superior personnel for positions of
responsibility with the Bank and its subsidiaries, and to provide key employees
with an additional incentive to contribute to the success of the Bank. Options
granted pursuant to this Qualified Plan are intended to qualify as "qualified
stock options" pursuant to Section 44A of the Puerto Rico Income Tax Act of
1954, as amended (the "ITA"). In addition, options granted pursuant to this
Qualified Plan may constitute "incentive stock options" within the meaning of
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), if
clearly and specifically designated as being "incentive stock options." This
Qualified Plan is Part I of the Bank's 1988 Plan. Unless any provision herein
indicates to the contrary, this Qualified Plan shall be subject to the General
Provisions of the 1988 Plan.
Section 2. OPTION TERMS AND CONDITIONS. The terms and conditions of
options granted under the Qualified Plan may differ from one another as the Plan
Administrators shall, in their discretion, determine, as long as all options
granted under the Qualified Plan satisfy the requirements of the Qualified Plan.
Section 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of the Qualified Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option granted
under the Qualified Plan expire later than 10 years from the date on which the
option is granted, except that any employee who owns more than 10% of the
combined voting power of all classes of stock of the Bank, or of its parent or
subsidiary, must exercise any options within five years from the date of grant.
In addition, each option shall be subject to early termination as provided in
the Qualified Plan.
Section 4. PURCHASE PRICE. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any option shall not be
less than the fair market value of the shares at the time of the grant of the
option; except that for any employee who owns more than 10% of the combined
voting power of all classes of stock of the Bank, or of its parent or
subsidiary, the purchase price shall not be less than 110% of fair market
value. Fair market value shall be determined by the Plan Administrators on
the basis of such factors as they deem appropriate; provided, however, that
fair market value shall be
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determined without regard to any restriction other than a restriction which,
by its terms, will never lapse, and further provided, however, that if at
the time the determination of fair market value is made, those shares are
admitted to trading on a national securities exchange for which sale prices
are regularly reported, the fair market value of those shares shall not be
less than the mean of the high and low asked or closing sales prices reported
for the Common Stock on that exchange on the day or most recent trading day
preceding the date on which the option is granted; provided, further, that if
at the time the determination of fair market value is made, those shares are
not admitted to trading on a national securities exchange, the value of such
shares may not be determined to be less than their book value per share,
calculated pursuant to the financial statements for the immediately
proceeding year of the Bank or any parent or subsidiary corporation which
authorized such options. For purposes of this Section 4, the term "national
securities exchange" shall include the National Association of Securities
Dealers Automated Quotation System and the over-the-counter market.
Section 5. MAXIMUM AMOUNT OF EXERCISABLE OPTIONS IN ANY CALENDAR
YEAR. The aggregate fair market value (determined as of the time the option is
granted) of the Common Stock with respect to which stock options may be
exercisable for the first time by any employee of the Bank during any calendar
year (under the terms of this Qualified Plan and other qualified stock option
plans of the Bank and any parent or subsidiary corporation that meet the
requirements of Section 44A of the ITA and/or Section 422A of the Code) shall
not exceed $100,000.
Section 6. EXERCISE OF OPTIONS. Each option shall be exercisable in one
or more installments during its term, and the right to exercise may be
cumulative as determined by the Plan Administrators. No option may be exercised
for a fraction of a share of Common Stock. The purchase price of any shares
purchased shall be paid in full in cash or by certified or cashier's check
payable to the order of the Bank or by shares of Common Stock, if permitted by
the Plan Administrators, or by a combination of cash, check or shares of Common
Stock, at the time of exercise of the option; provided that the form(s) of
payment allowed the employee shall be established when the option is granted.
If any portion of the purchase price is paid in shares of Common Stock, those
shares shall be tendered at their then fair market value as determined by the
Plan Administrators in accordance with Section 4 of this Qualified Plan.
Section 7. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS.
Notwithstanding the first sentence of Section 6 of this Qualified Plan, in
the event the Bank or its stockholders enter into an agreement to dispose of
all or substantially all of the assets or stock of the Bank by means of a
sale, merger or other
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reorganization, liquidation, or otherwise, any option granted pursuant to the
terms of the Qualified Plan shall become immediately exercisable with respect
to the full number of shares subject to that option during the period
commencing as of the date of the agreement to dispose of all or substantially
all of the assets or stock of the Bank and ending when the disposition of
assets or stock contemplated by that agreement is consummated or the option
is otherwise terminated in accordance with its provisions or the provisions
of this Qualified Plan, whichever occurs first; provided, however, that no
option shall be immediately exercisable under this Section 7 on account of
any agreement to dispose of all or substantially all of the assets or stock
of the Bank by means of a sale, merger or other reorganization, liquidation,
or otherwise where the stockholders of the Bank immediately before the
consummation of the transaction will own at least 50% of the total combined
voting power of all classes of stock entitled to vote of the surviving
entity, whether the Bank or some other entity, immediately after the
consummation of the transaction. In the event the transaction contemplated
by the agreement referred to in this Section 7 is not consummated, but
rather is terminated, cancelled or expires, the options granted pursuant to
the Qualified Plan shall thereafter be treated as if that agreement had never
been entered into.
Notwithstanding the first sentence of Section 6 of this Qualified Plan, in
the event of a change in control of the Bank or a threatened change in control
of the Bank as determined by a vote of not less than a majority of the Board of
Directors of the Bank, all options granted prior to such change in control or
threatened change of control shall become immediately exercisable. The term
"control" for purposes of this Section 7 shall refer to the acquisition of 10%
or more of the voting securities of the Bank by any person or by persons acting
as a group within the meaning of Section 13(d) of the Securities Exchange Act of
1934; provided, however, that for purposes of this Qualified Plan, no change in
control or threatened change in control shall be deemed to have occurred if
prior to the acquisition of, or offer to acquire, 10% or more of the voting
securities of the Bank, the full Board of Directors of the Bank shall have
adopted by not less than a two-thirds vote a resolution specifically approving
such acquisition or offer. The term "person" for purposes of this Section 7
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.
Section 8. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of the Qualified Plan shall be exercised when written notice of that
exercise has been given to the Bank at its principal office by the person
entitled to exercise the
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option and full payment for the shares with respect to which the option is
exercised has been received by the Bank.
Section 9. COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock shall
not be issued with respect to any option granted under the Qualified Plan unless
the exercise of that option and the issuance and delivery of those shares
pursuant to that exercise shall comply with all relevant provisions of state and
federal law including, without limitation, the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, the requirements of
any stock exchange upon which the shares may then be listed, the Puerto Rico
Uniform Securities Act of 1963, as amended, and the rules and regulations
promulgated thereunder, and shall be further subject to the approval of counsel
for the Bank with respect to such compliance. The Plan Administrators may also
require an employee to whom an option has been granted under the Qualified Plan
("Optionee") to furnish evidence satisfactory to the Bank, including a written
and signed representation letter and consent to be bound by any transfer
restriction imposed by law, legend, condition or otherwise, that the shares are
being purchased only for investment and without any present intention to sell or
distribute the shares in violation of any state, federal or Puerto Rico law,
rule or regulation. Further, each Optionee shall consent to the imposition of a
legend on the shares of Common Stock subject to his or her option restricting
their transferability as may be required by law or by this Section 9.
Section 10. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the
Plan Administrators when the option is granted, must agree in writing as a
condition of receiving his or her option, that he or she will remain in the
employ of, or as a director of, the Bank, or any parent or subsidiary
corporation of the Bank (or a corporation or a parent or subsidiary of such
corporation issuing or assuming a stock option in a transaction to which Section
425(a) of the Code applies), as the case may be, following the date of the
granting of that option for a period specified by the Plan Administrators, which
period shall in no event exceed three years. Nothing in the Plan or in any
option granted hereunder shall confer upon any Optionee any right to continued
employment by the Bank, or its subsidiary corporations, or limit in any way the
right of the Bank or any of its subsidiary corporations at any time to terminate
or alter the terms of that employment.
Section 11. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If an Optionee
ceases as a director of, or to be employed by, the Bank, or any parent or
subsidiary corporation (or a corporation or a parent or subsidiary of such
corporation issuing or assuming a stock option in a transaction to which
Section 425(a) of the Code applies), for any reason other than death or
disability, his or her option shall immediately terminate; provided, however,
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that the Plan Administrators may, at the time an option is granted, in their
discretion, allow such option to be exercised (to the extent exercisable on
the date of termination of employment) at any time within three months after
the date of termination of employment, unless either the option or the
Qualified Plan otherwise provides for earlier termination.
Section 12. OPTION RIGHTS UPON DISABILITY. If an Optionee becomes
disabled within the meaning of Section 22(e)(3) of the Code while employed by
the Bank, or any parent or subsidiary corporation (or a corporation or a parent
or subsidiary of such corporation issuing or assuming a stock option in a
transaction to which Section 425(a) of the Code applies), the option may be
exercised, to the extent exercisable on the date of termination of employment,
at any time within one year after the date of termination of employment due to
disability, unless either the option or the Qualified Plan otherwise provides
for earlier termination.
Section 13. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Plan Administrators at the time of the grant of an option, if an
Optionee dies while acting as a director or employed by the Bank, or any parent
or subsidiary corporation (or a corporation or a parent or subsidiary of such
corporation issuing or assuming a stock option in a transaction to which Section
425(a) of the Code applies), or within three months after ceasing to be an
employee or director thereof, his or her option shall expire one year after the
date of death unless by its term it expires sooner. During this one year or
shorter period, the option may be exercised, to the extent that it remains
unexercised on the date of death, by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the laws of descent
and distribution, but only to the extent that the Optionee is entitled to
exercise the option at the date of death.
Section 14. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the
terms of the Qualified Plan may not be sold, pledged, assigned or transferred in
any manner otherwise than by will or the laws of descent or distribution and may
be exercised during the lifetime of an Optionee only by that Optionee.
Section 15. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All options granted pursuant to the terms of this Qualified Plan shall
be adjusted in the manner prescribed by Article 6 of the General Provisions of
the 1988 Plan.
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PART II
COMPENSATORY STOCK OPTION PLAN
Section 1. PURPOSE. The purpose of this Compensatory Plan is to permit
the Bank to grant options to purchase shares of its Common Stock to selected
directors, executive officers and full-time, key employees of the Bank. The
Compensatory Plan is designed to help attract and retain superior personnel for
positions of substantial responsibility with the Bank and its subsidiaries, and
to provide key employees with an additional incentive to contribute to the
success of the Bank. Options granted pursuant to this Compensatory Plan shall
be clearly and specifically designated as not being a qualified stock option, as
defined in Section 44A of the ITA, or an incentive stock option, as defined in
Section 422A(b) of the Code. This Compensatory Plan is Part II of the Bank's
1988 Plan. Unless any provision herein indicates to the contrary, this
Compensatory Plan shall be subject to the General Provisions of the 1988 Plan.
Section 2. OPTION TERMS AND CONDITIONS. The terms and conditions of
options granted under this Compensatory Plan may differ from one another as the
Plan Administrators shall, in their discretion, determine as long as all options
granted under the Compensatory Plan satisfy the requirements of the Compensatory
Plan.
Section 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of this Compensatory Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option granted
under the Compensatory Plan expire later than 1.0 years from the date on which
the option is granted. In addition, each option shall be subject to early
termination as provided in the Compensatory Plan.
Section 4. PURCHASE PRICE. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any option shall be equal to
or less than the fair market value of the shares at the time of the grant of the
option, as determined by the Plan Administrators at the time of grant on the
basis of such factors as they deem appropriate; provided, however, that fair
market value shall be determined without regard to any restriction other than a
restriction which, by its terms, shall never lapse. If at the time the
determination is made, the shares of the Bank are admitted to trading on a
national securities exchange for which sales prices are regularly reported, the
fair market value of those shares shall not be less than the mean of the high
and low asked or closing sales prices reported for the Common Stock on that
exchange on the day or most
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recent trading day preceding the date on which the option is granted;
provided, further, that if at the time the determination of fair market value
is made, those shares are not admitted to trading on a national securities
exchange, the value of such shares may not be determined to be less than
their book value per share, calculated pursuant to the financial statements
for the immediately preceding year of the Bank or any parent or subsidiary
corporation which authorized such options. For purposes of this Section 4,
the term national securities exchange" shall include the National Association
of Securities Dealers Automated Quotation System and the over-the-counter
market.
Section 5. EXERCISE OF OPTIONS. Each option shall be exercisable in one
or more installments during its term and the right to exercise may be
cumulative as determined by the Plan Administrators. No options may be
exercised for a fraction of a share of Common Stock. The purchase price of any
shares purchased shall be paid in full in cash or by certified or cashier's
check payable to the order of the Bank or by shares of Common Stock, if
permitted by the Plan Administrators, or by a combination of cash, check or
shares of Common Stock, at the time of exercise of the option. If any portion
of the purchase price is paid in shares of Common Stock, those shares shall be
tendered at their then fair market value as determined by the Plan
Administrators in accordance with Section 4 of this Compensatory Plan.
Section 6. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS.
Notwithstanding the first sentence of Section 6 of this Compensatory Plan, if
the Bank or its stockholders enter into an agreement to dispose of all or
substantially all of the assets or stock of the Bank by means of a sale, merger
or other reorganization, liquidation, or otherwise, any option granted pursuant
to the terms of this Compensatory Plan shall become immediately exercisable with
respect to the full number of shares subject to that option during the period
commencing as of the date of the agreement to dispose of all or substantially
all of the assets or stock of the Bank and ending when the disposition of assets
or stock contemplated by that agreement is consummated, or the option is
otherwise terminated in accordance with its provisions or the provisions of this
Compensatory Plan, whichever occurs first; provided, however, that no option
shall be immediately exercisable under this Section 6 on account of any
agreement to dispose of all or substantially all of the assets or stock of the
Bank by means of a sale, merger or other reorganization, liquidation, or
otherwise where the stockholders of the Bank immediately before the
consummation of the transaction will own at least 50% of the total combined
voting power of all classes of stock entitled to vote of the surviving entity,
whether the Bank or some other entity, immediately after the consummation of the
transaction. In the event the transaction contemplated by the agreement
referred to in this Section 6 is not consummated, but
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rather is terminated, cancelled or expires, the options granted pursuant to
this Compensatory Plan shall thereafter be treated as if that agreement had
never been entered into.
Notwithstanding the first sentence of Section 5 of this Compensatory Plan,
in the event of a change in control of the Bank, or a threatened change in
control of the Bank as determined by a vote of not less than a majority of the
Board of Directors of the Bank, all options granted prior to such change in
control or threatened change in control shall become immediately exercisable.
The term "control" for purposes of this Section 7 shall refer to the acquisition
of 10% or more of the voting securities of the Bank by any person or by persons
acting as a group within the meaning of Section 13(d) of the Securities Exchange
Act of 1934; provided, however, that for purposes of this Compensatory Plan, no
change in control or threatened change in control shall be deemed to have
occurred if prior to the acquisition of, or offer to acquire, 10% or more of the
voting securities of the Bank, the full Board of Directors of the Bank shall
have adopted by not less than a two-thirds vote a resolution specifically
approving such acquisition or offer. The term "person" for purposes of this
Section 6 refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.
Section 7. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of this Compensatory Plan shall be exercised when written notice of that
exercise has been given to the Bank at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Bank.
Section 8. COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock shall
not be issued with respect to any option granted under the Compensatory Plan
unless the exercise of that option and the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of state, federal and
Puerto Rico law, including, without limitation, the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, the Puerto Rico
Uniform Securities Act of 1963, as amended, the rules and regulations
promulgated thereunder and the requirements of any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Bank with respect to such compliance. The Plan Administrators
may also require an employee to whom an option has been granted ("Optionee") to
furnish evidence satisfactory to the Bank, including a written and signed
representation letter and consent to be bound by any transfer restrictions
imposed by law, legend, condition or otherwise, that the shares are being
purchased only for investment purposes and without any present intention to sell
or distribute the shares in violation
<PAGE>
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of any state or federal law, rule or regulation. Further, each Optionee
shall consent to the imposition of a legend on the shares of Common Stock
subject to his or her option restricting their transferability as may be
required by law or by this Section 8.
Section 9. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the
Plan Administrators, must agree in writing as a condition of the granting of his
or her option, to remain in the employment of the Bank or its parent or any of
its subsidiaries (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Section 425(a) of
the Code applies), following the date of the granting of that option for a
period specified by the Plan Administrators, which period shall in no event
exceed three years. Nothing in this Compensatory Plan or in any option granted
hereunder shall confer upon any Optionee any right to continued employment by
the Bank or any of its subsidiaries, or limit any way the right of the Bank or
any subsidiary at any time to terminate or alter the terms of that employment.
Section 10. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If any Optionee
under this Compensatory Plan ceases to be a director of, or employed by, the
Bank, its parent, or any of its subsidiaries (or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in a
transaction to which Section 425(a) of the Code applies), for any reason other
than disability or death, his or her option shall immediately terminate;
provided, however, that the Plan Administrators may, in their discretion, allow
the option to be exercised, to the extent exercisable on the date of termination
of appointment as a director or employment, at any time within three months
after the date of termination of appointment as a director or employment, unless
either the option or this Compensatory Plan otherwise provides for earlier
termination.
Section 11. OPTION RIGHTS UPON DISABILITY. If an Optionee becomes
disabled within the meaning of Section 22(e)(3) of the Code while a director of,
or employed by, the Bank, or any parent or subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Section 425(a) of the Code applies), the
Plan Administrators, in their discretion, may allow the option to be exercised,
to the extent exercisable on the date of termination of employment, at any time
within one year after the date of termination of employment due to disability,
unless either the option or this Compensatory Plan otherwise provides for
earlier termination.
Section 12. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Plan Administrators at the time of the grant of an option, if an
Optionee dies while a director of,
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or employed by, the Bank, its parent, or any of its subsidiaries (or a
corporation or a parent or subsidiary of such corporation issuing or assuming
a stock option in a transaction to which Section 425(a) of the Code applies),
his or her option shall expire one year after the date of death unless by its
terms it expires sooner. During this one year or shorter period, the option
may be exercised, to the extent that it remains unexercised on the date of
death, by the person or persons to whom the Optionee's rights under the
option shall pass by will or by the laws of descent and distribution, but
only to the extent that the Optionee is entitled to exercise the option at
the date of death.
Section 13. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the
terms of this Compensatory Plan may not be sold, pledged, assigned or
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an Optionee only by
that Optionee.
Section 14. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All options granted pursuant to the terms of this Compensatory Plan
shall be adjusted in the manner prescribed by Article 6 of the General
Provisions of the 1988 Plan.
<PAGE>
EXHIBIT 10.3
ORIENTAL BANK AND TRUST
1996 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The Oriental Bank and Trust 1996 Incentive Stock Option Plan
(the "1996 Plan") is intended to secure for Oriental Bank and Trust (the
"Bank"), its affiliates and its stockholders, the benefits arising from
ownership of the Bank's common stock, par value $1.00 per share (the "Common
Stock"), by those selected officers and other key employees of the Bank and its
affiliates who will be responsible for its future growth. The 1996 Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility with the Bank, and to provide key employees with an
additional incentive to contribute to the success of the Bank.
2. ELEMENTS OF THE 1996 PLAN. In order to maintain flexibility in the
award of stock benefits, the 1996 Plan is comprised of two parts. The first
part is the Qualified Incentive Stock Option Plan (the "Qualified Plan") and the
second part is the Compensatory Incentive Stock Option Plan (the "Compensatory
Plan"). Copies of the Qualified Plan and Compensatory Plan are attached hereto
and form part hereof as Part I and Part II, respectively, and are collectively
referred to herein as the "Plans". The grant of an option under one of the
Plans shall not be construed to prohibit the grant of an option under the other
Plan.
3. APPLICABILITY OF GENERAL PROVISIONS. Unless any Plan specifically
indicates to the contrary, both Plans shall be subject to the General Provisions
of the 1996 Plan set forth below.
4. ADMINISTRATION OF THE PLANS. The Plans shall be administered,
construed, governed and amended in accordance with their respective terms.
GENERAL PROVISIONS OF THE 1996 PLAN
ARTICLE 1. ADMINISTRATION. The 1996 Plan shall be administered by a
committee appointed by the Board of Directors of the Bank, none of the members
of which shall be a full-time officer or employee of the Bank. The committee,
when acting to administer the 1996 Plan, is referred to as the "Plan
Administrators". Any action of the Plan Administrator shall be taken by
majority vote or the unanimous written consent of the Plan Administrators. No
Plan Administrators or member of the Board of Directors of the Bank, its parent
or subsidiaries, shall be liable for any action or determination made in good
faith with respect to the 1996 Plan or to any option granted thereunder.
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ARTICLE 2. AUTHORITY OF PLAN ADMINISTRATORS. Subject to the other
provisions of this 1996 Plan, and with a view to effecting its purpose, the Plan
Administrators shall have sole authority in their absolute discretion: (a) to
construe and interpret the 1996 Plan; (b) to define the terms used herein; (c)
to prescribe, amend, and rescind rules and regulations relating to the 1996
Plan; (d) to determine the employees to whom options shall be granted under the
1996 Plan; (e) to determine the time or times at which options shall be granted
under the 1996 Plan; (f) to determine and establish in each case the conditions
and restrictions, if any, to which the grant and/or exercise of the options
shall be subject; (g) to determine the number of shares subject to any option
under the 1996 Plan, as well as the exercise price and the duration of each
option, and any other terms and conditions of options; (h) to amend or terminate
the 1996 Plan; and (i) to make any other determinations necessary or advisable
for the administration of the 1996 Plan and do everything necessary or
appropriate to administer the 1996 Plan. All decisions, determinations, and
interpretations made by the Plan Administrators shall be binding and conclusive
on all participants in the 1996 Plan and on their legal representatives, heirs
and beneficiaries.
ARTICLE 3. MAXIMUM NUMBER OF SHARES SUBJECT TO THE 1996 PLAN. The
maximum aggregate number of shares of Common Stock available pursuant to the
Plans, subject to adjustment as provided in Article 6 hereof, shall be
350,000 shares. If any of the options granted under this 1996 Plan expire or
terminate for any reason before they have been exercised in full, the
unpurchased shares subject to those expired or terminated options shall again
be available for the purposes of the 1996 Plan.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION. Regular full-time employees
of the Bank or of any parent or any subsidiary thereof, including officers,
whether or not directors and directors of any of such corporations, shall be
eligible for selection by the Plan Administrators to participate in the 1996
Plan.
ARTICLE 5. EFFECTIVE DATE AND TERM OF 1996 PLAN. The 1996 Plan shall
become effective upon its adoption by the Board of Directors of the Bank, and
shall be subsequently submitted to the stockholders of the Bank for approval by
a majority of the total votes eligible to be cast at a meeting of stockholders,
which vote shall be taken within 12 months of adoption of the 1996 Plan by the
Bank's Board of Directors; provided, however, that options may be granted under
this 1996 Plan prior to obtaining stockholder approval thereof, but any such
options shall be contingent upon such stockholder approval being obtained and
may not be exercised prior to such approval. The 1996 Plan shall continue in
effect for a term of 10 years unless sooner terminated in accordance with the
provisions hereof.
<PAGE>
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ARTICLE 6. ADJUSTMENTS. If the shares of Common Stock of the Bank as a
whole are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number
and kind of shares as to which options may be granted under this 1996 Plan.
A corresponding adjustment changing the number or kind of shares allocated to
unexercised options or portions thereof, which shall have been granted prior
to any such change, shall likewise be made. Any such adjustment in
outstanding options shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the option, but with a
corresponding adjustment in the price for each share or other unit of any
security covered by the option. In making any adjustment pursuant to this
Article 6, any fractional shares shall be disregarded.
ARTICLE 7. TERMINATION AND AMENDMENT OF 1996 PLAN. The 1996 Plan shall
terminate no later than 10 years from the date of its adoption by the Board of
Directors, or the date such 1996 Plan is approved by the stockholders, whichever
is earlier. No options shall be granted under the 1996 Plan after the date of
termination. Subject to the limitation contained in Article 8 of the General
Provisions, the Plan Administrators may at any time amend or revise the terms of
the 1996 Plan, including the form and substance of the option agreements to be
used hereunder; provided that no amendment or revision shall (a) increase the
maximum aggregate number of shares that may be sold pursuant to options granted
under this 1996 Plan, except as permitted under Article 6 of the General
Provisions; (b) change the minimum purchase price for shares under Section 4 of
the Plans; (c) increase the maximum term established under the Plan for any
option; or (d) permit the granting of an option to anyone other than as provided
in Article 4 of the General Provisions.
ARTICLE 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension or
termination of the 1996 Plan shall, without the consent of the employee who has
received an option, alter or impair any of said employee's rights or obligations
under any option granted under the 1996 Plan prior to such amendment, suspension
or termination.
ARTICLE 9. REORGANIZATIONS AND OTHER TRANSFERS. In the event of an
acquisition of all or substantially all of the assets or stock of the Bank
pursuant to a merger, consolidation, separation, reorganization, liquidation, or
other transaction, where persons that were stockholders of the Bank immediately
before the transaction own fifty percent or more of the total combined voting
power of all classes of stock entitled to vote of the acquiring or surviving
entity immediately after the consummation
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of such transaction, and such acquiring or surviving entity assumes the
Bank's obligations under options granted pursuant to the 1996 Plan, then all
references in the 1996 Plan to the Bank, or to shares of common stock of the
Bank, shall apply to such acquiring or surviving entity and to shares of
common stock of such acquiring or surviving entity.
ARTICLE 10. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the
exercise of any options granted pursuant to the terms of this 1996 Plan, no
employee shall have any of the rights or privileges of a stockholder of the
Bank in respect of any shares of stock issuable upon the exercise of his or
her options until certificates representing the shares have been issued and
delivered. No shares shall be required to be issued and delivered upon
exercise of any option unless and until all of the requirements of law and of
all regulatory agencies having jurisdiction over the issuance and delivery of
the securities shall have been fully complied with. No adjustment shall be
made for dividends or any other distributions for which the record date is
prior to the date on which such stock certificate is issued.
ARTICLE 11. RESERVATION OF SHARES OF COMMON STOCK. The Bank, during
the term of this 1996 Plan, will at all times reserve and keep available such
number of shares of its Common Stock as shall be sufficient to satisfy the
requirements of the 1996 Plan. In addition, the Bank will from time to time,
as is necessary to accomplish the purposes of this 1996 Plan, seek to obtain
from any regulatory agency having jurisdiction any requisite authority in
order to issue and sell shares of Common Stock hereunder. The inability of
the Bank to obtain from any regulatory agency having jurisdiction the
authority deemed by the Bank's counsel to be necessary to the lawful issuance
and sale of any shares of its stock hereunder shall relieve the Bank of any
liability in respect of the non-issuance or sale of the stock as to which the
requisite authority shall not have been obtained.
ARTICLE 12. TAX WITHHOLDING. The exercise of any option granted under
the 1996 Plan is subject to the condition that if at any time the Bank shall
determine, in its discretion, that the satisfaction of withholding tax or
other withholding liabilities under any state, federal or Puerto Rico law is
necessary or desirable as a condition of, or in any connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in such
event, the exercise of the option shall not be effective unless such
withholding tax or other withholding liabilities shall have been satisfied in
a manner acceptable to the Bank.
ARTICLE 13. EMPLOYMENT. Nothing in the 1996 Plan or in any option
shall confer upon any eligible employee any right to continued employment by
the Bank, or by its parent or subsidiary corporations, or limit in any way
the right of the Bank or its
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parent or subsidiary corporation at any time to terminate or alter the terms
of that employment.
PART I
QUALIFIED INCENTIVE STOCK OPTION PLAN
SECTION 1. PURPOSE. The purpose of this Qualified Plan is to promote
the growth and general prosperity of the Bank by permitting the Bank to grant
options to purchase shares of its Common Stock to selected directors,
officers and other full-time, key employees of the Bank or of any parent or
subsidiary thereof. This Qualified Plan is designed to help attract and
retain superior personnel for positions of responsibility with the Bank and
its subsidiaries or parent company, if any, and to provide key employees with
an additional incentive to contribute to the success of the Bank. Options
granted pursuant to this Qualified Plan are intended to constitute "qualified
stock options" pursuant to Section 1046 of the Puerto Rico Internal Revenue
Code of 1994, as amended (the "PRIRC"). This Qualified Plan is Part I of the
Bank's 1996 Plan. Unless any provision herein indicates to the contrary,
this Qualified Plan shall be subject to the General Provisions of the 1996
Plan.
SECTION 2. OPTION TERMS AND CONDITIONS. The terms and conditions of
options granted under the Qualified Plan may differ from one another as the
Plan Administrators shall, in their discretion, determine, as long as all
options granted under the Qualified Plan satisfy the requirements thereof.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of the Qualified Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option
granted under the Qualified Plan expire later than 10 years from the date on
which the option is granted. In addition, each option shall be subject to
early termination as provided in the 1996 Plan.
SECTION 4. PURCHASE PRICE. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any option granted under
the Qualified Plan shall not be less than the fair market value of the shares
on the date of the grant of the option. Fair market value shall be
determined by the Plan Administrators on the basis of such factors as they
deem appropriate; provided, however, that fair market value shall be
determined without regard to any restriction other than a restriction which,
by its terms, will never lapse; and further provided, that if at the time the
determination of fair market value is made, those shares are admitted to
trading on a national securities exchange for which sale prices are regularly
reported, the fair market value of those shares shall not be less than the
mean of the high and low asked or closing sales prices reported for the
<PAGE>
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Common Stock on that exchange on the day or most recent trading day preceding
the date on which the option is granted; provided, further, that if at the
time the determination of fair market value is made, those shares are not
admitted to trading on a national securities exchange, the value of such
shares may not be determined to be less than their book value per share,
calculated pursuant to the financial statements for the immediately preceding
year of the Bank or any parent or subsidiary corporation which authorized
such options. For purposes of this Section 4, the term "national securities
exchange" shall include the National Association of Securities Dealers
Automated Quotation System and the over-the-counter market.
SECTION 5. MAXIMUM AMOUNT OF EXERCISABLE OPTIONS IN ANY CALENDAR YEAR.
The aggregate fair market value (determined as of the time the option is
granted) of the Common Stock with respect to which stock options may be
exercisable for the first time by any employee of the Bank, or of any parent
or subsidiary thereof, during any calendar year (under the terms of this
Qualified Plan and other qualified stock option plans of the Bank and any
parent or subsidiary corporation that meet the requirements of Section 1046
of the PRIRC) shall not exceed $100,000.
SECTION 6. EXERCISE OF OPTIONS. Each option shall be exercisable in
one or more installments during its term, and the right to exercise may be
cumulative as determined by the Plan Administrators. No option may be
exercised for a fraction of a share of Common Stock. The purchase price of
any shares purchased shall be paid in full in cash or by certified or
cashier's check payable to the order of the Bank or by shares of Common
Stock, if permitted by the Plan Administrators, or by a combination of cash,
check or shares of Common Stock, at the time of exercise of the option;
provided that the form(s) of payment allowed the employee shall be
established when the option is granted. If any portion of the purchase price
is paid in shares of Common Stock, those shares shall be tendered at their
then fair market value as determined by the Plan Administrators in accordance
with Section 4 of this Qualified Plan.
SECTION 7. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS.
Notwithstanding the first sentence of Section 6 of this Qualified Plan, in
the event the Bank or its stockholders enter into an agreement to dispose of
all or substantially all of the assets or stock of the Bank by means of a
sale, merger or other reorganization, liquidation, or otherwise, any option
granted pursuant to the terms of the Qualified Plan shall become immediately
exercisable with respect to the full number of shares subject to that option
during the period commencing as of the date of the agreement to dispose of
all or substantially all of the assets or stock of the Bank and ending when
the disposition of assets or stock contemplated by that agreement is
consummated or the option is otherwise terminated in accordance with its
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provisions or the provisions of this Qualified Plan, whichever occurs first;
provided, however, that no option shall be immediately exercisable under this
Section 7 if the transaction meets the requirements of Article 9 of the
General Provisions of the 1996 Plan. In the event the transaction
contemplated by the agreement referred to in this Section 7 is not
consummated, but rather is terminated, cancelled or expires, the options
granted pursuant to the Qualified Plan shall thereafter be treated as if that
agreement had never been entered into.
Notwithstanding the first sentence of Section 6 of this Qualified
Plan, in the event of a change in control of the Bank or a threatened change
in control of the Bank as determined by a vote of not less than a majority of
the Board of Directors of the Bank, all options granted prior to such change
in control or threatened change of control shall become immediately
exercisable. The term "control" for purposes of this Section 7 shall refer to
the acquisition of ten percent or more of the voting securities of the Bank
by any person or by persons acting as a group within the meaning of Section
13(d) of the Securities Exchange Act of 1934; provided, however, that for
purposes of this Qualified Plan, no change in control or threatened change in
control shall be deemed to have occurred if prior to the acquisition of, or
offer to acquire, ten percent or more of the voting securities of the Bank,
the full Board of Directors of the Bank shall have adopted by not less than a
two-thirds vote a resolution specifically approving such acquisition or
offer. The term "person" for purposes of this Section 7 refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
SECTION 8. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of the Qualified Plan shall be exercised when written notice of that
exercise has been given to the Bank at its principal office by the person
entitled to exercise the option and full payment for the shares with respect
to which the option is exercised has been received by the Bank.
SECTION 9. COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock
shall not be issued with respect to any option granted under the Qualified
Plan unless the exercise of that option and the issuance and delivery of
those shares pursuant to that exercise shall comply with all relevant
provisions of Puerto Rico, state and federal law including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, the requirements of any stock exchange upon which the
shares may then be listed, the Puerto Rico Uniform Securities Act of 1963, as
amended, and the rules and regulations promulgated thereunder, and shall be
further subject to the approval of counsel for the Bank with respect to such
compliance. The Plan Administrators may also require an employee to whom an
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option has been granted under the Qualified Plan ("Optionee") to furnish
evidence satisfactory to the Bank, including a written and signed
representation letter and consent to be bound by any transfer restriction
imposed by law, legend, condition or otherwise, that the shares are being
purchased only for investment and without any present intention to sell or
distribute the shares in violation of any state, federal or Puerto Rico law,
rule or regulation. Further, each Optionee shall consent to the imposition
of a legend on the shares of Common Stock subject to his or her option
restricting their transferability as may be required by law or by this
Section 9.
SECTION 10. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the
Plan Administrators when the option is granted, must agree in writing as a
condition of receiving his or her option, that he or she will remain in the
employ of, or as a director of, the Bank, or any parent or subsidiary
corporation of the Bank, as the case may be, following the date of the
granting of that option for a period specified by the Plan Administrators,
which period shall in no event exceed three years. Nothing in the 1996 Plan
or in any option granted thereunder shall confer upon any Optionee any right
to continued employment by the Bank, or any of its parent or subsidiary
corporations, or limit in any way the right of the Bank or any of its parent
or subsidiary corporations at any time to terminate or alter the terms of
that employment.
SECTION 11. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If an
Optionee ceases as a director of, or to be employed by, the Bank, or any
parent or subsidiary thereof, for any reason other than death or disability,
his or her option shall immediately terminate; provided, however, that the
Plan Administrators may, at the time an option is granted, in their
discretion, allow such option to be exercised (to the extent exercisable on
the date of termination of employment) at any time within three months after
the date of termination of employment, unless either the option or the
Qualified Plan otherwise provides for earlier termination.
SECTION 12. OPTION RIGHTS UPON DISABILITY. If an optionee becomes
disabled (as such term is defined in the PRIRC or the regulations thereunder
or, in the absence of such a definition therein, in Section 22(e)(3) of the
U.S. Internal Revenue Code of 1986, (the "Code")) while employed by the Bank,
or any parent or subsidiary corporation thereof, the option may be exercised,
to the extent exercisable on the date of termination of employment, at any
time within one year after the date of termination of employment due to
disability, unless either the option or the Qualified Plan otherwise provides
for earlier termination.
SECTION 13. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Plan Administrators at the time of the grant of an option, if
an Optionee dies while acting as a
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director or employed by the Bank, or any parent or subsidiary corporation
thereof, or within three months after ceasing to be an employee or director
thereof, his or her option shall expire one year after the date of death
unless by its term it expires sooner. During this one year or shorter period,
the option may be exercised, to the extent that it remains unexercised on the
date of death, by the person or persons to whom the Optionee's rights under
the option shall pass by will or by the laws of descent and distribution, but
only to the extent that the Optionee is entitled to exercise the option at
the date of death.
SECTION 14. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the
terms of the Qualified Plan may not be sold, pledged, assigned or transferred
by the Optionee in any manner otherwise than by will or the laws of descent
or distribution and may be exercised during the lifetime of an Optionee only
by that Optionee.
SECTION 15. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All options granted pursuant to the terms of this Qualified Plan
shall be adjusted in the manner prescribed by Article 6 of the General
Provisions of the 1996 Plan.
PART II
COMPENSATORY INCENTIVE STOCK OPTION PLAN
SECTION 1. PURPOSE. The purpose of this Compensatory Plan is to permit
the Bank to grant options to purchase shares of its Common Stock to selected
directors, officers and other full-time, key employees of the Bank or of any
parent, subsidiary or other affiliate thereof. The Compensatory Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility with the Bank and its subsidiaries, parent company
or other affiliates, if any, and to provide key employees with an additional
incentive to contribute to the success of the Bank. Options granted pursuant
to this Compensatory Plan shall be clearly and specifically designated as not
being "qualified stock options", as defined in Section 1046 of the PRIRC.
This Compensatory Plan is Part II of the Bank's 1996 Plan. Unless any
provision herein indicates to the contrary, this Compensatory Plan shall be
subject to the General Provisions of the 1996 plan.
SECTION 2. OPTION TERMS AND CONDITIONS. The terms and conditions of
options granted under this Compensatory Plan may differ from one another as
the Plan Administrators shall, in their discretion, determine as long as all
options granted under the Compensatory Plan satisfy the requirements of the
Compensatory Plan.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of this Compensatory
<PAGE>
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Plan shall expire on the date determined by the Plan Administrators, but in
no event shall any option granted under the Compensatory Plan expire later
than 10 years from the date on which the option is granted. In addition,
each option may be subject to early termination as provided in the 1996 Plan.
SECTION 4. PURCHASE PRICE. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any option granted under
the Compensatory Plan shall be as determined by the Plan Administrators at
the time of grant on the basis of such factors as they deem appropriate.
SECTION 5. EXERCISE OF OPTIONS. Each option shall be exercisable in
one or more installments during its term and the right to exercise may be
cumulative as determined by the Plan Administrators. No options may be
exercised for a fraction of a share of Common stock. The purchase price of
any shares purchased shall be paid in full in cash or by certified or
cashier's check payable to the order of the Bank or by shares of Common
Stock, if permitted by the Plan Administrators, or by a combination of cash,
check or shares of Common Stock, at the time of exercise of the option. If
any portion of the purchase price is paid in shares of Common Stock, those
shares shall be tendered at their then fair market value.
SECTION 6. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS.
Notwithstanding any other provision of this Compensatory Plan, if the Bank or
its stockholders enter into an agreement to dispose of all or substantially
all of the assets or stock of the Bank by means of a sale, merger or other
reorganization, liquidation, or otherwise, any option granted pursuant to the
terms of this Compensatory Plan shall become immediately exercisable with
respect to the full number of shares subject to that option during the period
commencing as of the date of the agreement to dispose of all or substantially
all of the assets or stock of the Bank and ending when the disposition of
assets or stock contemplated by that agreement is consummated, or the option
is otherwise terminated in accordance with its provisions or the provisions
of this Compensatory Plan, whichever occurs first; provided, however, that no
option shall be immediately exercisable under this Section 6 if the
transaction meets the requirements of Article 9 of the General Provisions of
the 1996 Plan. In the event the transaction contemplated by the agreement
referred to in this Section 6 is not consummated, but rather is terminated,
cancelled or expires, the options granted pursuant to this Compensatory Plan
shall thereafter be treated as if that agreement had never been entered into.
Notwithstanding the first sentence of Section 5 of this
Compensatory Plan, in the event of a change in control of the Bank, or a
threatened change in control of the Bank as determined by a vote of not less
than a majority of the Board of Directors
<PAGE>
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of the Bank, all options granted prior to such change in control or
threatened change in control shall become immediately exercisable. The term
"control" for purposes of this Section 7 shall refer to the acquisition of
ten percent or more of the voting securities of the Bank by any person or by
persons acting as a group within the meaning of Section 13(d) of the
Securities Exchange Act of 1934; provided, however, that for purposes of this
Compensatory Plan, no change in control or threatened change in control shall
be deemed to have occurred if prior to the acquisition of, or offer to
acquire, ten percent or more of the voting securities of the Bank, the full
Board of Directors of the Bank shall have adopted by not less than a
two-thirds vote a resolution specifically approving such acquisition or
offer. The term "person" for purposes of this Section 6 refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
SECTION 7. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of this Compensatory Plan shall be exercised when written notice of
that exercise has been given to the Bank at its principal office by the
person entitled to exercise the option and full payment for the shares with
respect to which the option is exercised has been received by the Bank.
SECTION 8. COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock
shall not be issued with respect to any option granted under the Compensatory
Plan unless the exercise of that option and the issuance and delivery of the
shares pursuant thereto shall comply with all relevant provisions of Puerto
Rico, state, federal and Puerto Rico law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, the Puerto Rico Uniform Securities Act of 1963, as amended, the
rules and regulations promulgated thereunder and the requirements of any
stock exchange upon which the approval of counsel for the Bank with respect
to such compliance. The Plan Administrators may also require an employee to
whom an option has been granted ("Optionee") to furnish evidence satisfactory
to the Bank, including a written and signed representation letter and consent
to be bound by any transfer restrictions imposed by law, legend, condition or
otherwise, that the shares are being purchased only for investment purposes
and without any present intention to sell or distribute the shares in
violation of any state or federal law, rule or regulation. Further, each
Optionee shall consent to the imposition of a legend on the shares of Common
Stock subject to his or her option restricting their transferability as may
be required by law or by this Section 8.
SECTION 9. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the
Plan Administrators, must agree in writing as a
<PAGE>
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condition of the granting of his or her option, to remain in the employment
of the Bank, or its parent or any of its subsidiaries or affiliates following
the date of the granting of that option for a period specified by the Plan
Administrators, which period shall in no event exceed three years. Nothing
in the 1996 Plan or in any option granted thereunder shall confer upon any
Optionee any right to continued employment by the Bank or any parent,
subsidiary or other affiliate thereof, or limit in any way the right of the
Bank or any parent, subsidiary or other affiliate thereof, at any time to
terminate or alter the terms of that employment.
SECTION 10. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If any
Optionee under this Compensatory Plan ceases to be a director of, or employed
by, the Bank, its parent, or any of its subsidiaries or other affiliates, for
any reason other than disability or death, his or her option shall
immediately terminate; provided, however, that the Plan Administrators may,
in their discretion, allow the option to be exercised, to the extent
exercisable on the date of termination of appointment as a director or
employment, at any time within three months after the date of termination of
appointment as a director or employment, unless either the option or this
Compensatory plan otherwise provides for earlier termination.
SECTION 11. OPTION RIGHTS UPON DISABILITY. If an Optionee becomes
disabled (as such term is defined in the PRIRC or the regulations thereunder
or, in the absence of such a definition therein, in Section 22(e)(3) of the
Code) while employed by, the Bank, or any parent, subsidiary or other
affiliate thereof, the Plan Administrators, in their discretion, may allow
the option to be exercised, to the extent exercisable on the date of
termination of employment, at any time within one year after the date of
termination of employment due to disability, unless either the option or this
Compensatory Plan otherwise provides for earlier termination.
SECTION 12. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Plan Administrators at the time of the grant of an option, if
an Optionee dies while a director of, or employed by, the Bank, its parent,
or any of its subsidiaries or other affiliates, his or her option shall
expire one year after the date of death unless by its terms it expires
sooner. During this one year or shorter period, the option may be exercised,
to the extent that it remains unexercised on the date of death, by the person
or persons to whom the Optionee's rights under the option shall pass by will
or by the laws of descent and distribution, but only o the extent that the
Optionee is entitled to exercise the option at the date of death.
SECTION 13. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the
terms of this Compensatory Plan may not be sold,
<PAGE>
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pledged, assigned or transferred by the Optionee in any manner otherwise than
by will or the laws of descent or distribution and may be exercised during
the lifetime of an Optionee only by that Optionee.
SECTION 14. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All options granted pursuant to the terms of this Compensatory Plan
shall be adjusted in the manner prescribed by Article 6 of the General
Provisions of the 1996 Plan.
