<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report January 30, 1997
ORIENTAL FINANCIAL GROUP INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Puerto Rico 001-12647 66-0538893
---------------------------------------------------------------------------
(State or other (Commission File Number) (IRS Employer
Jurisdiction Identification No.)
of Incorporation)
Hato Rey Tower
Suite 503
268 Munoz Rivera Avenue
Hato Rey, San Juan, Puerto Rico 00918
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 787-766-1986
----------------------------------------------------------------
This report consists of 4 pages
<PAGE>
ITEM 5. OTHER EVENTS.
A. HOLDING COMPANY REORGANIZATION
On January 24, 1997 (the "Effective Date"), the bank holding company
reorganization, pursuant to which the Registrant acquired all of the shares of
common stock (except for directors' qualifying shares) of Oriental Bank and
Trust, San Juan, Puerto Rico (the "Bank"), was completed. The shares of the
Bank were registered with the Federal Deposit Insurance Corporation under
Section 12(b) of the Securities Exchange Act of 1934, and were listed for
trading with the New York Stock Exchange (trading symbol: "OBT").
The holding company reorganization was carried out pursuant to an
Agreement and Plan of Merger dated as of June 18, 1996, by and between the
Registrant, the Bank and Oriental Interim Bank. On the Effective Date, each
share of issued and outstanding common stock of the Bank, par value $1.00 per
share, was exchanged for one share of common stock of the Registrant, par value
$1.00 per share, and the Registrant thereby became the holding company of the
Bank.
Registrant filed a registration statement on Form 8-B with the Securities
and Exchange Commission (the "Commission") on January 10, 1997 in order to
register its shares of common stock under Section 12(b) of the 1934 Act, and
pursuant thereto will be required to file all future reports with the
Commission under the 1934 Act. The shares of common stock of Registrant have
also been listed with the New York Stock Exchange (trading symbol: "OFG").
2. SHARE REPURCHASE PROGRAM
The Board of Directors and shareholders of the Bank had approved a share
repurchase program pursuant to which the Bank was authorized: (a) to repurchase
in the open market up to 490,000 shares of the Bank's issued and outstanding
shares of common stock (adjusted to 588,000 shares upon the Bank's six-for-five
stock dividend that was paid on October 17, 1996), (b) to retire from
circulation any shares so repurchased, and (c) to reduce its outstanding
capital by an amount equal to the price paid for any shares so repurchased.
Pursuant to said approvals and the authorization of the Federal Deposit
Insurance Corporation and the Puerto Rico Commissioner of Financial
Institutions, the Bank repurchased in the open market a total of 275,000 of its
shares of common stock prior to the Effective Date of the Reorganization.
The Board of Directors of the Registrant has approved the continuance of
such repurchase program and therefore has adopted
<PAGE>
resolutions authorizing the repurchase by the Registrant in the open market
of up 313,000 shares of its common stock, par value $1.00 per share. The
shares so repurchased shall be either (i) held by the Registrant as treasury
shares or (ii) retired from circulation and canceled immediately upon
repurchase and shall thereupon be considered to be authorized but unissued
shares of common stock of the Registrant.
A copy of the Registrant's press release, dated January 30, 1997,
announcing the continuation of the repurchase program is attached hereto as
Exhibit 7(c)(1) and is incorporated by reference.
C. BANK'S 1996 STOCK OPTION PLAN
The Registrant filed as Exhibit 10.3 to the registration statement on Form
8-B filed with the Commission via EDGAR on January 10, 1997 a copy of the
Bank's 1996 Stock Option Plan (the "1996 Plan"). The filed version of the 1996
Plan contained a mistake in Article 3 of the General Provisions of the 1996
Plan in that it stated that the maximum number of shares authorized to be
issued under the 1996 Plan were 350,000 shares instead of the correct number of
600,000 shares approved by the Board of Directors of the Bank at the meeting
held on November 25, 1996.
A corrected copy of the Bank's 1996 Stock Option Plan is filed herewith as
Exhibit 7(c)(2).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
(1) Press release, dated January 30, 1997, announcing the approval
by the Board of Directors of the Registrant of the repurchase in the
open market of up to 313,000 shares of common stock of the
Registrant, par value $1.00 per share. E-1
(2) Oriental Bank and Trust 1996 Stock Option Plan E-2
<PAGE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ORIENTAL FINANCIAL GROUP INC.
Date: January 30, 1997
By: \S\ RICARDO RAMOS
------------------------
Name: Ricardo Ramos
Title: Senior Vice President
<PAGE>
EXHIBIT 7(C)(1)
PRESS RELEASE
DATE: JANUARY 30, 1997
SAN JUAN, PUERTO RICO-JOSE ENRIQUE FERNANDEZ, President and Chairman of the
Board of Oriental Financial Group Inc., the bank holding company of Oriental
Bank and Trust, announced today that the Board of Directors has approved the
continuance of the share repurchase program of Oriental Bank.
The share repurchase program approved by the Board of Directors and
shareholders of Oriental Bank authorized the Bank to repurchase in the
open market up to 490,000 shares of its issued and outstanding shares of common
stock (adjusted to 588,000 shares upon Oriental Bank's six-for-five stock
dividend that was paid on October 17, 1996) and to retire from circulation any
shares repurchased. Pursuant to the approvals and the authorization of the
Federal Deposit Insurance Corporation and the Puerto Rico Commissioner of
Financial Institutions, Oriental Bank repurchased in the open market a total of
275,000 of its shares of common stock prior to January 24, 1997, the effective
date of the bank holding company reorganization.
The Board of Directors of Oriental Financial Group has approved the
continuance of the repurchase program and adopted resolutions authorizing the
repurchase in the open market of up 313,000 shares of its common stock, par
value $1.00 per share. The shares of common stock so repurchased shall be
either held by Oriental Financial Group as treasury shares or retired from
circulation and canceled upon repurchase. The 313,000 shares of common stock
represent approximately 4.0% of the shares of common stock of Oriental
Financial Group that are currently issued and outstanding.
Oriental Financial Group is a diversified financial services provider
company with $926.7 million in assets under management by Oriental Trust,
$965.9 million in assets owned by Oriental Bank, $385.0 million in assets
gathered by Oriental Financial Services and $457.7 million in loans serviced
to others by Oriental Servicing.
For further information, please contact Ricardo N. Ramos at (787) 766-1986
(extension 1202).
<PAGE>
EXHIBIT 7(C)(2)
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 Adminis
trators". 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.
<PAGE>
-2-
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 600,000
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>
-3-
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
<PAGE>
-4-
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
<PAGE>
-5-
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>
-6-
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
<PAGE>
-7-
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 there
under, 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
<PAGE>
-8-
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 other wise, 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 Adminis
trators 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
<PAGE>
-9-
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 un exercised 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 substan
tial 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>
-10-
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 o 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>
-11-
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 corpora tion, 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>
-12-
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>
-13-
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.
