<PAGE> 1
SCHEDULE 14A
(RULE 14A-1)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant : [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ORIENTAL FINANCIAL GROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
ORIENTAL FINANCIAL GROUP INC.
Hato Rey Tower
Suite 501
268 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
(787) 766-1986
http://www.orientalfinancial.com
NOTICE OF ANNUAL MEETING
To Be Held on October 28, 1999
TO THE STOCKHOLDERS OF ORIENTAL FINANCIAL GROUP INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Oriental Financial Group Inc. (the "Corporation") will be held at Conference
Room 9-A, McConnell Valdes law offices, 270 Munoz Rivera Avenue, Ninth Floor,
Hato Rey, Puerto Rico, on Thursday, October 28, 1999 at 10:00 a.m. for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect four directors to three-year terms expiring at the 2002 Annual
Meeting of Stockholders or until their successors have been duly
elected and qualified;
(2) To consider and approve amendments to the Oriental Financial Group 1998
Incentive Stock Option Plan and the Oriental Bank and Trust 1996
Incentive Stock Option Plan to include, as eligible participants,
independent contractors who perform bona fide services to the
Corporation and/or any of its direct or indirect subsidiaries;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's independent auditors for the fiscal year ending June 30,
2000; and
(4) To transact such other business as may properly come before the 1999
Annual Meeting of Stockholders or at any adjournment thereof. Except
with respect to procedural matters incident to the conduct of the
meeting, management at present knows of no other business to be brought
before the meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. Stockholders of record at the close of business on August 30,
1999 are entitled to notice of, and to vote at, the 1999 Annual Meeting of
Stockholders.
BY ORDER OF THE BOARD OF DIRECTORS
Jose Enrique Fernandez
Chairman, President and
Chief Executive Officer
September 28, 1999
San Juan, Puerto Rico
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE 1999 ANNUAL MEETING OF
STOCKHOLDERS. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN, PROMPTLY, THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. IF
YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY
PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO
THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
<PAGE> 3
ORIENTAL FINANCIAL GROUP INC.
---------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 28, 1999
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Oriental Financial Group Inc. (the "Corporation")
of proxies to be voted at the Annual Meeting of Stockholders of the Corporation
to be held on Thursday, October 28, 1999 (the "Annual Meeting") at 10:00 a.m. at
Conference Room 9-A of the McConnell Valdes law offices located at 270 Munoz
Rivera Avenue, Ninth Floor, Hato Rey, Puerto Rico, and at any adjournment
thereof for the purposes set forth in the Notice of Annual Meeting. The
approximate date on which this Proxy Statement is expected to be mailed to
stockholders is on or about September 28, 1999.
Each proxy solicited hereby, if properly signed and returned to the
Corporation and not revoked prior to its use, will be voted in accordance with
the instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the matters described below. Any stockholder
giving a proxy has the power to revoke it at any time before it is exercised by
(i) filing with the Secretary of the Corporation written notice thereof
(addressed to: Secretary, Oriental Financial Group Inc., Hato Rey Tower, Suite
503, 268 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918), (ii) submitting a
duly executed proxy bearing a later date, or (iii) by appearing at the Annual
Meeting and giving the Secretary notice of his intention to vote in person.
Proxies solicited hereby may be exercised only at the Annual Meeting and any
adjournment thereof and will not be used for any other meeting.
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Corporation to vote the proxy with respect to (i) the
approval of the minutes of the last meeting of stockholders; (ii) the election
of any person as director if any nominee is unable to serve or, for good cause,
will not serve; (iii) matters incident to the conduct of the meeting; and (iv)
upon such other matters as may properly come before the Annual Meeting. Except
with respect to procedural matters incident to the conduct of the Annual
Meeting, management is not aware of any business that may properly come before
the meeting other than those matters described in this Proxy Statement. However,
if any other matters should properly come before the Annual Meeting, it is
intended that proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Corporation.
The Corporation has retained the services of American Stock Transfer & Trust
Company, which also acts as the Corporation's transfer agent and registrar, to
assist the Corporation in the solicitation of proxies for the Annual Meeting.
The fee to be paid to such proxy solicitation firm should not exceed $1,500,
plus reimbursement of all reasonable out-of-pocket expenses. The Corporation
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy material to the
beneficial owners of the Corporation's common stock, $1.00 par value per share
(the "Common Stock"). In addition to solicitations by mail, directors, officers
and employees of the Corporation or any of its subsidiaries may solicit proxies
personally, by telephone or otherwise without additional compensation.
<PAGE> 4
-2-
VOTING STOCK OUTSTANDING
AND VOTE REQUIRED FOR APPROVAL
Only common stockholders of record at the close of business on August
30, 1999 (the "Voting Record Date") will be entitled to vote at the Annual
Meeting. The total number of shares of Common Stock eligible to cast votes at
the Annual Meeting is 12,793,579. On the Voting Record Date, there were
1,340,000 shares of 7.125% Noncumulative Monthly Income Preferred Stock, Series
A, $1.00 par value per share (the "Preferred Stock"), issued and outstanding
(which shares have no voting rights in the Annual Meeting).
The presence, either in person or by proxy, of at least a majority of
the issued and outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Annual Meeting. For purposes of determining
quorum, abstentions and broker non-votes will be treated as shares that are
present and entitled to vote. A broker non-vote results when a broker or nominee
has expressly indicated that it does not have discretionary authority to vote on
a particular matter. Action with respect to Proposal 1: "Election of Directors"
shall be taken by a plurality of the total votes present in person or
represented by proxy at the Annual Meeting and entitled to vote. Therefore,
abstentions and broker non-votes will not have an effect on the election of
directors of the Corporation. Action with respect to Proposal 2: "Amendment of
the 1998 and 1996 Stock Option Plans" shall be taken by the affirmative vote of
a majority of the total votes of the shares eligible to be cast in person or by
proxy at the Annual Meeting. Action with respect to Proposal 3: "Ratification of
Appointment of Independent Auditors" shall be taken by a majority of the total
votes present in person or represented by proxy at the Annual Meeting and
entitled to vote. Therefore, as to Proposals 2 and 3, abstentions and broker
non-votes will have the same effect as a vote against the proposals. Other than
with respect to Proposal 1: "Election of Directors" in which shareholders of the
Corporation have the right to cumulate votes as described below, each share of
Common Stock shall be entitled to one vote for the other proposals to be
considered at the Annual Meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
The By-laws of the Corporation provide that the Corporation's Board of
Directors shall consist of such number of directors as shall be fixed from time
to time by resolution of the Board of Directors. The number of directors as
established by resolution of the Board of Directors is presently nine directors.
The By-laws of the Corporation also provide that the Board of Directors shall be
divided into three classes as nearly equal in number as possible. The members of
each class are to be elected for a term of three years and until their
successors are duly elected and qualified. One class of directors is to be
elected annually.
Other than Mr. Jose Enrique Fernandez's employment agreement with
Oriental Bank and Trust (the "Bank"), a Puerto Rico commercial bank and a
wholly-owned subsidiary of the Corporation, which requires the Board of
Directors of the Corporation to nominate him for election as a director of the
Corporation, there are no arrangements or understandings between the Corporation
and any person pursuant to which such person has been elected a director, and no
director is related to any other director or executive officer of the
Corporation by blood, marriage or adoption (excluding those that are more remote
than first cousin).
Messrs. Pablo I. Altieri, Diego Perdomo, Francisco Arrivi and Mari
Carmen Aponte have been nominated as directors for three-year terms expiring in
2002.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be distributed equally between the four nominees designated by
the Board of Directors or in such other fashion as will most likely ensure
election of the nominees. See "Cumulative Voting in the Election of Directors"
on page 3 below.
<PAGE> 5
-3-
If any person named as a nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for a replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1.
CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS
Pursuant to the By-Laws of the Corporation, holders of Common Stock
have the right to cumulate their votes at annual meetings in which more than one
director is being elected. Cumulative voting entitles each common stockholder to
a number of votes equal to the number of shares of Common Stock held multiplied
by the number of directors to be elected. A common stockholder may cast all or
any number of such votes for one nominee or distribute them among any two or
more nominees as the stockholder may deem fit. Thus, for example, for the
election of the four directors being considered at this Annual Meeting, a
stockholder owning 1,000 shares of Common Stock is entitled to 4,000 votes, and
may distribute such votes equally among the nominees for election, cast them for
the election of only one of such nominees, or otherwise distribute them as the
stockholder may deem fit.
In the absence of any express indication that the shares to be voted
should be cumulated in a particular fashion, the votes represented by executed
proxies will be distributed equally among the four nominees designated by the
Board of Directors or in such other fashion as will most likely ensure election
of the nominees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the Common Stock
beneficially owned, as of the Voting Record Date, by the only person or entity
known to the Corporation to be the beneficial owner of 5% or more of Common
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS OF OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER AS OF AUGUST 30, 1999(1) COMMON STOCK
---------------- ------------------------ ------------
<S> <C> <C>
Jose Enrique Fernandez 2,606,763(2) 20.38%
1717 Lilas San Francisco
San Juan, Puerto Rico 00927
</TABLE>
- ------------------------
(1) Based upon filings made pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act") and information furnished by the
respective individuals and entities.
(2) The amount set forth in the table for Mr. Fernandez includes 100,839
shares that may be received upon the exercise of stock options. While
Mr. Fernandez may be deemed to beneficially own the 100,839 shares
subject to options that may be exercised within 60 days of the Voting
Record Date for purposes of the Exchange Act, as a result of his having
elected to receive qualified stock options pursuant to the stock option
plans of the Bank, under Puerto Rico law the aggregate fair market
value of shares (determined as of the time of grant) for which Mr.
Fernandez may exercise stock options for the first time in any calendar
year cannot exceed $100,000. The amount also includes 2,000 shares
owned by Mr. Fernandez's youngest son, 2,376 shares owned by Mr.
Fernandez through the Bank's 401K Plan (as such term is defined herein)
and 333 shares owned indirectly through commingled investment funds.
<PAGE> 6
-4-
The number of outstanding shares of Common Stock owned beneficially by
the directors, Named Executive Officers (as such term is defined below) and
other executive officers of the Corporation as of August 30, 1999 is as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
AMOUNT AND NATURE OF OF BENEFICIAL
BENEFICIAL OWNERSHIP PERCENT OWNERSHIP PERCENT
OF COMMON STOCK OF OF PREFERRED STOCK OF
NAME AS OF AUGUST 30, 1999(1) COMMON STOCK(2) AS OF AUGUST 30, 1999(1) PREFERRED STOCK(3)
---- --------------------- -------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
DIRECTORS
Dr. Pablo I. Altieri(4) 122,026 --% --%
Efrain Archilla 3,300 -- --
Jose Enrique Fernandez(5) 2,606,763 20.38% 20,000 1.49%
Julian S. Inclan(6) 56,256 -- --
Diego Perdomo, CPA(7) 229,776 1.80% 1,000 --
Alberto Richa Angelini(8) 16,814 -- --
Emilio Rodriguez, Jr.(9) 52,410 -- --
Francisco Arrivi 0 -- --
Mari Carmen Aponte 79,238 -- --
NAMED EXECUTIVE OFFICERS --
Jose Enrique Fernandez(5) 2,606,763 20.38% 20,000 1.49%
Eli E. Diaz 18,484 -- --
Jose Rafael Fernandez(10) 31,298 -- --
George Joyner(11) 4,861 -- --
Andres Morgado, CPA(12) 80,860 -- --
Andres Muniz(13) 27,082 -- --
</TABLE>
- -----------------------
(1) Based on information furnished by the respective individuals. Under
applicable regulations, shares are deemed to be beneficially owned by a
person if he or she directly or indirectly has or shares the power to
vote or dispose of the shares, whether or not he or she has any
economic interest in the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to
the shares, subject in the case of those directors who are married to
the community property laws of the Commonwealth of Puerto Rico. Under
applicable regulations, a person is deemed to have beneficial ownership
of any shares of capital stock which he or she has a right to acquire
within 60 days, including pursuant to the exercise of outstanding stock
options, and to all shares subject to options or other rights of
acquisition acquired in connection with or as a participant in any
transaction involving a change in control. Shares of capital stock
which are subject to stock options or other rights of acquisition are
deemed to be outstanding for the purpose of computing the percentage of
outstanding capital stock owned by such person or group but are not
deemed outstanding for the purpose of computing the percentage of
capital stock owned by any other person or group.
(2) Unless otherwise indicated, each of the persons named in the table
beneficially holds less than 1% of the issued and outstanding Common
Stock of the Corporation.
(3) Unless otherwise indicated, each of the persons named in the table
beneficially holds less than 1% of the issued and outstanding preferred
stock of the Corporation.
(4) The amount set forth in the table for Mr. Altieri includes 333 shares
owned indirectly through a commingled investment fund.
(5) The amount set forth in the table for Mr. Fernandez includes 100,839
shares that may be received upon the exercise of stock options. While
Mr. Fernandez may be deemed to beneficially own the 100,839 shares
subject to options that may be exercised within 60 days of the Voting
Record Date for purposes of the Exchange Act, as a result of his having
elected to receive qualified stock options pursuant to the stock option
plans of the Bank, under Puerto Rico law the aggregate fair market
value of shares (determined as of the time of grant) for which Mr.
Fernandez may exercise stock options for the first time in any calendar
year cannot exceed $100,000. See "Executive Compensation - 1996 Stock
Option Plan" on page 9 below. This amount also includes 2,000 shares
owned by
<PAGE> 7
-5-
Mr. Fernandez's youngest son, 2,376 owned by Mr. Fernandez through the
Bank's 401K Plan and 333 shares owned indirectly through commingled
investment funds.
(6) The amount set forth in the table for Mr. Inclan includes 333 shares
owned indirectly through a commingled investment fund.
(7) The amount set forth in the table for Mr. Perdomo includes 333 shares
owned indirectly through a commingled investment fund.
(8) The amount set forth in the table for Mr. Richa Angelini includes 333
shares owned indirectly through a commingled investment fund.
(9) The amount set forth in the table for Mr. Rodriguez includes 333 shares
owned indirectly through a commingled investment fund.
(10) The amount set forth in the table for Mr. Jose Rafael Fernandez
includes 5,831 shares of Common Stock owned through the Bank's 401K
Plan.
(11) The amount set forth in the table for Mr. Joyner includes 1,257 shares
of Common Stock owned through the Bank's 401K Plan.
(12) The amount set forth in the table for Mr. Morgado includes 4,128 shares
of Common Stock owned through the Bank's 401K Plan.
(13) The amount set forth in the table for Mr. Muniz includes 2,382 shares
of Common Stock owned through the Bank's 401K Plan.
As of the Voting Record Date, all directors, nominees for director,
Named Executive Officers and other executive officers of the Corporation as a
group (16 persons) beneficially owned 3,463,935 shares of Common Stock or
approximately 27.09% of the issued and outstanding Common Stock, and 25,000
shares of Preferred Stock or approximately 1.87% of the issued and outstanding
Preferred Stock.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is certain information with respect to each nominee and
director whose term continues.
NOMINEES FOR TERM THAT EXPIRES IN 2002
DR. PABLO I. ALTIERI (AGE 55) - Director since 1990 (including terms as
director of the Bank). He is a cardiologist with a private practice in
Humacao, Puerto Rico. He is presently a professor at the University of
Puerto Rico Medical School. He is also a member of the Board of
Directors of Corporacion para el Desarrollo Tecnologico de Recursos
Tropicales de Puerto Rico (charitable organization) located in San
Juan, Puerto Rico, and a member of the Board of Directors of Casa Roig
Foundation (charitable organization) in Humacao, Puerto Rico.
DIEGO PERDOMO, CPA (AGE 65) - Director since 1996 (including terms as
director of the Bank). He is a certified public accountant and has been
a partner of Diego Perdomo & Company (an accounting firm), San Juan,
Puerto Rico, since 1968.
FRANCISCO ARRIVI (AGE 54) - Director since 1998. He has been the
President and Chief Executive Officer of Pulte International Caribbean
Corp., a subsidiary of Pulte Corporation (a publicly traded company),
San Juan, Puerto Rico, since March 1999. He was the President and Chief
Executive Officer of Interstate General Properties LP, S.E., a
subsidiary of Interstate General Company LP (a publicly traded
company), San Juan, Puerto Rico, from 1995 to 1999, and Vice President
and Chief Financial Officer of Interstate General Properties LP, S.E.,
San Juan, Puerto Rico, from 1990 to 1995. He was also Vice President
and Manager of the Real Estate Department of The Chase Manhattan Bank,
San Juan, Puerto Rico, from 1977 to 1990. Mr. Arrivi served as Director
of Equus Gaming Co. LP (a publicly traded company), San Juan, Puerto
Rico, from 1994 to 1995 and as director of Interstate General Corp.,
San Juan, Puerto Rico, from 1996 to 1999.
<PAGE> 8
-6-
MARI CARMEN APONTE, ESQ. (AGE 52) - Director since 1998. Ms. Aponte has
practiced law in the District of Columbia for approximately two
decades. Presently, she is member of the Boards of Directors of the
National Council of La Raza and the National Coalition of Hispanic
Social Services and Mental Health Organizations (COSSMHO). She was a
member of the American Bar Association's policy making body, the House
of Delegates, from 1988 to 1992. She presided the Washington, D.C.
Hispanic Bar Association in 1982 and the National Hispanic Bar
Association in 1984. Ms. Aponte was selected as a White House Fellow in
1979.
DIRECTORS WHOSE TERM EXPIRES IN 2000
JOSE ENRIQUE FERNANDEZ (AGE 56) - Director since 1988 (including terms
as director of the Bank). Chairman of the Board of Directors of the
Bank since December 1, 1988 and President and Chief Executive Officer
of the Bank since September 1, 1988, and Chairman of the Board of
Directors, President and Chief Executive Officer of the Corporation
since June 1996. He was President and Chief Executive Officer of Drexel
Burnham Lambert Puerto Rico Incorporated, San Juan, Puerto Rico, from
October 1984 to April 1988. He was President and Chief Executive
Officer of A.G. Becker Puerto Rico from 1978 to September 1984, and
Vice President-Associate Manager of Prudential Bache Securities from
1965 to 1978. Mr. Fernandez also serves as member of the Board of
Trustees and the International Advisory Council of the University of
Notre Dame, South Bend, Indiana. He served from 1997 to 1998 as a
member of the Board of Trustees of Sacred Heart University, San Juan,
Puerto Rico.
EFRAIN ARCHILLA (AGE 46) - Director since 1991 (including terms as
director of the Bank). He is President and General Manager of WYQE-FM,
Radio Yunque 93 FM in Naguabo and Fajardo, Puerto Rico, since 1994. He
is an operations consultant of WALO-AM Radio Oriental, Inc. and Ochoa
Broadcasting Corp. since 1993, and was General Manager of WALO Radio
Station from 1973 to 1994, and Vice President and Treasurer of Ochoa
Broadcasting Corp. and Radio Oriental, Inc. from 1975 to 1994. He also
served as President of the Puerto Rico Broadcasters Association from
1988 to 1992, and currently is the organization's Vice President;
President of the Puerto Rico Numismatic Society from 1983 to 1984;
President of the Eastern Region Arts and Culture Foundation and the
Humacao Chapter of the Puerto Rico Chamber of Commerce in 1992; and
President of the Humacao Rotary Club in 1995.
JULIAN S. INCLAN (AGE 51) - Director since 1995 (including terms as
director of the Bank). President of American Paper Corporation
(distributor of fine papers, office supplies and graphic art supplies)
in San Juan, Puerto Rico, since September 1994. He has served as
Managing General Partner of Calibre, S.E. (a real estate investment
company) since 1991, and as President of Inclan Realty (a real estate
development company), San Juan, Puerto Rico, since 1991. He is also the
President of Inmac Corporation (a leasing and investment company that
is currently inactive), San Juan, Puerto Rico, since 1989, and from
1978 to 1982 he served as Vice President and General Manager of St.
Regis Paper and Bag, a division of Puerto Rican Cement Co., Inc. (a
publicly traded company), San Juan, Puerto Rico.
DIRECTORS WHOSE TERM EXPIRES IN 2001
EMILIO RODRIGUEZ, JR. (AGE 51) - Director since 1992 (including terms
as director of the Bank). He is the President of Milrod Enterprises,
San Juan, Puerto Rico, since May 1998. Mr. Rodriguez was the President
of Almacenes Rodriguez, Inc., Santurce, Puerto Rico, from May 1973 to
May 1998. He has also served as Secretary of the Board of Directors of
E&C Computers, Inc., San Juan, Puerto Rico, since 1982.
ALBERTO RICHA ANGELINI (AGE 59) - Director since 1990 (including terms
as director of the Bank). He has been Director of Development for
Empresas Fonalledas, San Juan, Puerto Rico, since February 1998. He
worked as a consulting engineer for Resort Builders, S.E. (a
construction company), Isla Verde, Puerto Rico, from February 1996 to
February 1998. He served as Executive Vice President and Chief
Operating Officer of Rexach Construction Company, Inc., San Juan,
Puerto Rico, from April 1990 to February 1996, and as
<PAGE> 9
-7-
Executive Vice President - Administration of the same company from 1984
to April 1990. He is a member of the Board of Directors and past
President of the Associated General Contractors of America, Puerto Rico
Chapter.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is supplied with respect to the Named
Executive Officers and other executive officers of the Corporation who do not
serve on the Corporation's Board of Directors. There are no arrangements or
understandings pursuant to which any of the executive officers was selected as
an officer, and no executive officer is related to any other director or
executive officer of the Corporation by blood, marriage or adoption (excluding
those that are more remote than first cousin).
ELI E. DIAZ (AGE 53) - Senior Vice President of the Corporation since
June 1996. Senior Vice President of Branch Administration and Consumer
Loans of the Bank since May 1995. He was Vice President of Branch
Administration and Consumer Loans of the Bank from May 1993 to May
1995. Previously was a private consultant to financial enterprises from
March 1988 to May 1993 and President and Chairman of the Board of
Pioneer Finance Corporation, San Juan, Puerto Rico, from July 1987 to
1992; Senior Vice President of Caguas Central Federal Savings, San
Juan, Puerto Rico, from March 1985 to February 1988; Vice President of
Citicorp Acceptance Corporation, Los Angeles, California, from October
1982 to February 1985, and Vice President of Citibank N.A., San Juan,
Puerto Rico, from April 1979 to October 1982.
JOSE RAFAEL FERNANDEZ (AGE 36) - Senior Vice President of the
Corporation since February 1997. Senior Vice President and Principal of
Oriental Financial Services Corp., the Bank's wholly-owned brokerage
subsidiary, since 1997. He was Vice President of Sales and Marketing of
Oriental Financial Services Corp. from 1993 to 1997. He joined the Bank
in 1991 as Assistant Vice President of the Treasury Department and
during 1992 was in charge of the Bank's sales and marketing efforts for
the Individual Retirement Account Products. Before joining the Bank in
1991, he worked in New York, New York, and Buenos Aires, Argentina, for
the investment department of The Chase Manhattan Bank. He is a member
of the Board of Trustees of the Sacred Heart University, San Juan,
Puerto Rico.
GEORGE JOYNER (AGE 41) - Former Vice President of the Corporation from
June 1996 to August, 1999. Former Senior Vice President of Oriental
Mortgage Corporation, the Bank's wholly-owned mortgage banking
subsidiary, from January 1998 to August, 1999. Former Senior Vice
President of mortgage origination of the Bank from May 1995 to August
1999. He was Vice President of mortgage operations of the Bank from
July 1994 to May 1995. Previously he was the President of Santander
Mortgage Corporation, San Juan, Puerto Rico, from 1992 to July 1994;
Vice President of Citibank, N.A. in the areas of structured and
corporate finance from 1989 to 1992; and, before that, he was the First
Vice President of the Corporate and Municipal Finance Group at Drexel
Burnham Lambert Puerto Rico, Inc.
ANDRES MORGADO, CPA (AGE 40) - Senior Vice President of the Corporation
since June 1996. Senior Vice President and Trust Officer of the Bank
since May 1995. He was Vice President and Trust Officer of the Bank
from February 1990 to May 1995. Previously was Chief Operating Officer
and Trust Officer of Commercial Trust Company, Inc., San Juan, Puerto
Rico, from June 1988 to February 1990; Vice President Investments of
Drexel Burnham Lambert Puerto Rico, Inc., San Juan, Puerto Rico, from
April 1987 to June 1988; and Tax Manager, Deloitte & Touche (formerly
Deloitte, Haskins & Sells), San Juan, Puerto Rico, from 1979 to 1987.
Mr. Morgado is a certified public accountant, certified financial
planner and personal financial specialist. He is also a member of the
American Institute of Certified Financial Planners, the International
Society of Financial Planners and United Way, and the Treasurer of
Centro Comunitario Vida Plena, San Juan, Puerto Rico.
<PAGE> 10
-8-
ANDRES MUNIZ (AGE 43) - Senior Vice President of the Corporation since
February 1997. Senior Vice President of Communications of the Bank
since February 1997. He was Vice President of Marketing of the Bank
from 1993 to January 1997. Before joining the Bank in 1993, he was
Senior Account Executive at De La Cruz and Associates (an advertising
firm), San Juan, Puerto Rico, from 1988 to 1993; Account Executive at
Merced, Benitez and Machin (an advertising firm), San Juan, Puerto
Rico, from 1987 to 1988; Marketing Manager at Caribbean Restaurants
(local Burger King franchisee), San Juan, Puerto Rico, from 1985 to
1987; and Promotion Manager at Colgate Palmolive, San Juan, Puerto
Rico, from 1982 to 1985.
DENNIS SOTO (AGE 62) - Senior Vice President of the Corporation since
June 1996. Senior Vice President of the Bank since July 1995. He was
Vice President of the Bank and Regional Manager (Western Region) from
September 1992 to June 1995. He was Vice President-Investments of the
Bank from February 1990 to August 1992 and Vice President-Branch
Administration of the Bank from January 1989 to January 1990. He was a
private financial consultant from September 1988 to January 1989 and
Senior Vice President-936 Trader of Drexel Burnham Lambert Puerto Rico,
Inc., San Juan, Puerto Rico, from May 1982 to May 1988.
RAFAEL VALLADARES, CPA (AGE 42) - Senior Vice President-Comptroller of
the Corporation and the Bank since June 1999. Previously was Senior
Vice President-Comptroller of PonceBank, Ponce, Puerto Rico, from
February 1985 to June 1999. Senior Auditor of Deloitte and Touche
(formerly Deloitte, Haskins and Sells), San Juan, Puerto Rico, from
1978 to 1984. Mr. Valladares is also a certified public accountant.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Corporation held 10 meetings during the
fiscal year ended June 30, 1999. The Corporation has standing audit and
compensation committees (as described below). During fiscal year 1999, directors
received a fee of $500 for each Board of Directors meeting attended and $200 for
each committee meeting attended. Only directors who are not officers of the
Corporation or the Bank receive fees for attendance at Board of Directors
meetings or committee meetings. No director attended fewer than 75% of the
aggregate of the meetings of the Board of Directors of the Corporation held
during fiscal year 1999 and the total number of meetings held by all committees
of the Board of Directors on which he or she served during the year.
The Audit Committee reviews the reports of the Corporation's
independent auditors, the internal audit procedures and internal data processing
controls. The members of the committee are Messrs. Diego Perdomo, Alberto Richa
Angelini and Efrain Archilla. The committee met 4 times during the fiscal year
ended June 30, 1999.
The Compensation Committee reviews and evaluates on a yearly basis
the salary increases and bonuses of all of the Corporation's executive officers
and makes recommendations to the Corporation's Board of Directors. The
Compensation Committee also administers the various stock option plans of the
Corporation and the Bank and is given absolute discretion under the plans to
select the persons to whom options will be granted and to determine the number
of shares subject to each option. The members of the committee are Messrs.
Alberto Richa Angelini, Emilio Rodriguez, Jr. and Julian S. Inclan. The
committee met 2 times during the fiscal year ended June 30, 1999.
The Board of Directors does not have a standing nominating
committee. Nominations are made by the Board of Directors. Although the Board of
Directors will consider nominees recommended by stockholders, it has not
actively solicited recommendations for nominees from stockholders nor has it
established procedures for this purpose. Article I, Section 13 of the
Corporation's By-laws provides that stockholders entitled to vote for the
election of directors may name nominees for election to the Board of Directors.
Any such nominations must be submitted to the Secretary of the Corporation in
writing at least five days prior to the Annual Meeting. The Corporation is not
required to include nominations of stockholders in its Proxy Statement; however,
if such a nomination is properly made, ballots will be provided for use by
stockholders at the Annual Meeting bearing the name of such nominee or nominees.
<PAGE> 11
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EXECUTIVE COMPENSATION
The summary compensation table set forth below discloses
compensation for the Corporation's President and Chief Executive Officer, the
four most highly paid executive officers of the Corporation or its subsidiaries
who were serving as executive officers at the end of the fiscal year ended June
30, 1999 and one former executive officer of the Corporation who served as
executive officer during the fiscal year ended June 30, 1999 (collectively
referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------------------------------------------------------------------
NAME AND OTHER ANNUAL SECURITIES
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)* UNDERLYING OPTIONS (#)
- ------------------------------ --------- --------------- -------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Jose Enrique Fernandez 1999 325,000 365,000 38,400 60,000
President and Chief 1998 310,000 345,000 34,000 10,000
Executive Officer 1997 290,000 320,000 34,000 0
Andres Morgado 1999 150,000 135,000 30,000 12,500
Senior Vice President 1998 98,600 120,000 30,000 10,000
and Trust Officer 1997 82,300 85,000 30,000 8,000
Eli E. Diaz 1999 135,000 120,000 30,000 12,500
Senior Vice President 1998 86,800 95,000 29,000 10,000
Branch Administration and 1997 84,000 85,000 28,000 8,000
Consumer Loans
Jose Rafael Fernandez 1999 130,000 115,000 30,000 12,500
Senior Vice President 1998 78,750 90,000 27,000 10,000
and Principal of Oriental 1997 76,000 77,000 24,000 6,000
Financial Services
Andres Muniz 1999 88,000 68,000 24,000 10,000
Senior Vice President 1998 70,300 56,000 22,000 10,000
Communications 1997 66,500 50,000 19,000 8,000
George Joyner 1999 120,000 105,000 30,000 10,000
Former Senior Vice President 1998 95,900 95,000 30,000 10,000
Mortgage and Leasing 1997 93,000 90,000 30,000 8,000
</TABLE>
- --------------------------------
* Consists of a car allowance.
1996 STOCK OPTION PLAN
This summary does not purport to be comprehensive or definitive and is
qualified in its entirety by reference to the provisions of the 1996 Plan.
The Board of Directors of the Bank adopted the Oriental Bank and Trust
1996 Incentive Stock Option Plan (the "1996 Plan") in order to help attract and
retain qualified officers, directors and full-time key employees of the Bank and
any parent or subsidiary thereof, and provide such officers, directors and
employees with an additional incentive to contribute to the success of the Bank.
The stockholders of the Corporation approved the 1996 Plan at the 1997 Annual
Meeting of Stockholders.
<PAGE> 12
-10-
An aggregate of 630,000 shares of Common Stock has been reserved for
future issuance under the 1996 Plan pursuant to the exercise of stock options,
subject to modification or adjustment to reflect changes in the Corporation's
capitalization as, for example, in the case of a merger, consolidation,
reorganization, stock dividend or stock split, the 630,000 shares of Common
Stock represent approximately 4.9% of the issued and outstanding Common Stock as
of the Voting Record Date.
The 1996 Plan shall remain in effect for a term of ten (10) years from
the date of adoption by the Corporation's Board of Directors unless sooner
terminated in accordance with the provisions of the 1996 Plan. No options may be
granted after the date of termination of the 1996 Plan, but such termination
will not affect the rights or obligations of persons holding options granted
under the 1996 Plan prior to its termination.
Two kinds of options, evidenced by two plans, are contained in the 1996
Plan and are available for grants: (i) qualified incentive stock options (Part
I) that are intended to qualify as "qualified options" under Section 1046 of the
Puerto Rico Internal Revenue Code of 1994, as amended (the "PR Code"), and (ii)
compensatory incentive stock options (Part II). The 1996 Plan is being
administered by the Bank's Compensation Committee (the "1996 Plan
Administrators"), which is a committee of three members of the Bank's Board of
Directors, none of the members of which is an officer or full-time employee of
the Bank. The 1996 Plan Administrators are given absolute discretion under the
1996 Plan to, among other things, select the persons to whom options shall be
granted and to determine the number of shares subject to each option and
determine and establish in each case the conditions and restrictions, if any, to
which the grant and/or exercise shall be subject. In the case of all of the
options that have been granted to date under the 1996 Plan, the 1996 Plan
Administrators established as a restriction to the vesting of such options that
the Bank have certain minimum amounts of "consolidated net income" by the end of
each fiscal year. Notwithstanding such vesting restrictions, the 1996 Plan
Administrators established that all the options granted to date under the 1996
Plan, as well as those that will be granted in the future, will automatically
vest ten (10) years after the date in which they were or are granted.
All options granted under the 1996 Plan and all rights thereunder
expire on the date determined by the 1996 Plan Administrators at the time of the
grant, but in no event shall options granted expire later than ten (10) years
from the date of the grant. The purchase price for shares of Common Stock
acquired pursuant to an exercise, in whole or in part, of any "qualified
incentive option" granted under Part I of the 1996 Plan shall not be less than
the fair market value of the shares of Common Stock at the time of the grant of
the option. The purchase price for shares of Common Stock acquired pursuant to
an exercise, in whole or in part, of any "compensatory incentive option" granted
under Part II of the 1996 Plan shall be as determined by the 1996 Plan
Administrators at the time of the grant.
Each option granted under the 1996 Plan shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative
as determined by the 1996 Plan Administrators. One or more options may granted
under the 1996 Plan to any eligible person; provided that in any calendar year
the aggregate fair market value (determined as of the time the option is
granted) of Common Stock for which "qualified incentive options" are exercisable
for the first time by an eligible person during any calendar year may not exceed
$100,000.
<PAGE> 13
-11-
The table below provides information regarding the options granted to
the Named Executive Officers during the fiscal year ended June 30, 1999 under
the 1996 Plan:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUES
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
NAME OPTIONS PERCENT OF TOTAL EXERCISE EXPIRATION ---------------------------
GRANTED OPTIONS GRANTED PRICE DATE 5% 10%
- --------------------------- ---------- ----------------- ---------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jose Enrique Fernandez 60,000 14.8% $30.00 November 12, 2008 $497,307 $1,098,918
Andres Morgado 12,500 3.1% $25.50 November 12, 2008 $ 88,065 $ 194,600
Eli E. Diaz 12,500 3.1% $25.50 November 12, 2008 $ 88,065 $ 194,600
Jose Rafael Fernandez 12,500 3.1% $25.50 November 12, 2008 $ 88,065 $ 194,600
Andres Muniz 10,000 2.5% $25.50 November 12, 2008 $ 70,452 $ 155,680
George Joyner 10,000 2.5% $25.50 November 12, 2008 $ 70,452 $ 155,680
</TABLE>
The table below provides additional information regarding option
exercises and unexercised option holdings for the Named Executive Officers
during the fiscal year ended June 30, 1999.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
----------------------- ---------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE (#) UNEXERCISABLE ($)
- --------------------------- ------------------------ ------------------ ----------------------- ---------------------
<S> <C> <C> <C> <C>
Jose Enrique Fernandez 137,361 $ 3,091,239.62 100,839/175,462 1,899,461/1,926,788
Andres Morgado 3,498 $ 83,567.75 0/44,660 0/360,825
Eli E. Diaz 12,500 $ 306,100.00 0/44,660 0/360,825
Jose Rafael Fernandez 3,999 $ 83,331.00 0/43,660 0/342,699
Andres Muniz 6,000 $ 135,190.00 0/38,660 0/432,236
George Joyner 2,998 $ 58,086.25 0/55,989 0
</TABLE>
1998 STOCK OPTION PLAN
This summary does not purport to be comprehensive or definitive and is
qualified in its entirety by reference to the provisions of the 1998 Plan.
The Board of Directors of the Corporation adopted on August 18, 1998
the 1998 Plan, which is designed to help attract and retain qualified officers,
directors and full-time key employees of the Corporation and any subsidiary
thereof and provide such officers, directors and employees with an additional
incentive to contribute to the success of the Corporation and any subsidiary
thereof. The 1998 Plan provides for the grant of stock options to officers,
directors and other full-time key employees of the Corporation or any subsidiary
thereof. The 1998 Plan was approved by the stockholders of the Corporation at
the 1998 Annual Meeting of Stockholders. No stock
<PAGE> 14
-12-
options were granted to any of the Named Executive Officers (or to any other
officer, director or employee of the Corporation or the Bank) under the 1998
Plan during the fiscal year ended June 30, 1999.
An aggregate of 750,000 shares of Common Stock has been reserved for
future issuance under the 1998 Plan pursuant to the exercise of stock options,
subject to modification or adjustment to reflect changes in the Corporation's
capitalization as, for example, in the case of a merger, consolidation,
reorganization, stock dividend or stock split. The 750,000 shares of Common
Stock represent approximately 5.9% of the issued and outstanding Common Stock as
of the Voting Record Date.
The 1998 Plan shall remain in effect for a term of ten (10) years from
the date of adoption by the Corporation's Board of Directors unless sooner
terminated in accordance with the provisions of the 1998 Plan. No options may be
granted after the date of termination of the 1998 Plan, but such termination
will not affect the rights or obligations of persons holding options granted
under the 1998 Plan prior to its termination.
The 1998 Plan is being administered by the Corporation's Compensation
Committee (the "1998 Plan Administrators"), which is a committee of three
members of the Corporation's Board of Directors, none of the members of which is
an officer or full-time employee of the Corporation or any subsidiary thereof.
The 1998 Plan Administrators are given absolute discretion under the 1998 Plan
to, among other things, select the persons to whom options shall be granted and
to determine the number of shares subject to each option and 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. Two kinds of options,
evidenced by two separate plans, are contained in the 1998 Plan and are
available for grants: (i) qualified incentive options (Part I), and (ii)
compensatory incentive options (Part II). It is contemplated that the 1998 Plan
will be used by the Corporation to grant options during the fiscal years 2000 to
2003. The 1998 Plan Administrators established that all the options that will be
granted under the 1998 Plan will automatically vest ten (10) years after the
date in which they are granted.
One or more options may be granted under the 1998 Plan to any eligible
person provided that in any calendar year the aggregate fair market value
(determined as of the time the option is granted) of the Common Stock for which
qualified incentive options are exercisable for the first time by an eligible
person during any calendar year may not exceed $100,000. Options subject to the
foregoing limitation are being granted pursuant to Part I of the 1998 Plan and
are intended to constitute "qualified incentive options" under Section 1046 of
the PR Code. Additional non-qualified options, which are not subject to the
foregoing limitation, may be granted under Part II of the Plan and such options
constitute "compensatory incentive options."
All options granted under the 1998 Plan and all rights thereunder
expire on the date determined by the 1998 Plan Administrators at the time of the
grant, but in no event shall options granted expire later than ten (10) years
from the date of the grant. All options granted under the 1998 Plan shall become
vested and exercisable at the rate determined by the 1998 Plan Administrators
when making an award.
The purchase price for shares of Common Stock acquired pursuant to an
exercise, in whole or in part, of any "qualified incentive option" granted under
Part I of the 1998 Plan shall not be less than the fair market value of the
shares of Common Stock on the date of the grant of the option. The purchase
price for shares of Common Stock acquired pursuant to an exercise, in whole or
in part, of any "compensatory incentive option" granted under Part II of the
1998 Plan shall be as determined by the 1998 Plan Administrators at the time of
the grant.
Each option granted under the 1998 Plan shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative
as determined by the 1998 Plan Administrators. Payment for shares purchased upon
the exercise of options under the 1998 Plan must be made in full at the time of
exercise and may be made either in cash, by certified or cashier's check or, if
permitted by the Board of Directors, shares of Common Stock, or by a combination
of cash, check or shares of Common Stock; provided, that the form(s) of payment
allowed to the optionee shall be established by the 1998 Plan Administrators
when the option is granted.
<PAGE> 15
-13-
EMPLOYMENT AGREEMENT
On December 22, 1998, the Bank and Mr. Jose Enrique Fernandez entered
into an employment agreement for a term of three years. The employment agreement
provides for an increase in salary to $340,000 for fiscal year 2000, and further
increases to $360,000 for fiscal year 2001 and to $380,000 for fiscal year 2002,
and an annual automobile and expense allowance of $38,400. The employment
agreement also provides that the Bank will pay for Mr. Fernandez's membership in
such social and business clubs that in his judgment are reasonably necessary for
the performance of his bank-related duties. Also, under the employment
agreement, the Bank will pay for a 10-year term life insurance policy in the
amount of $1,500,000, covering the life of Mr. Fernandez, for the benefit of Mr.
Fernandez' estate. The employment agreement also provides that, during its term,
the Board of Directors will nominate and recommend to the stockholders the
election of Mr. Fernandez as a director at any election of directors in which
his term as a director will expire, and, if elected, the Board of Directors will
name Mr. Fernandez to the position of Chairman. Pursuant to the employment
agreement, the Bank granted to Mr. Fernandez options to purchase 60,000 shares
of Common Stock under the 1996 Plan. The stock options may be exercised by Mr.
Fernandez during a period commencing on the first anniversary and ending on the
tenth anniversary of the employment agreement. Notwithstanding the above
limitations, the stock options will become immediately exercisable if Mr.
Fernandez dies or is disabled, retires from employment with the Bank, or if
there occurs a "change in control" of the Bank.
The employment agreement may be terminated by the Bank for "just cause"
(as such term is defined in the employment agreement) at any time. In the event
employment is terminated for "just cause," Mr. Fernandez will have no right to
compensation or other benefits for any period after such termination. The
employment agreement also provides for payments and other benefits for Mr.
Fernandez if there occurs a "change in control" of the Bank or in the event of
involuntary termination of employment in connection with any "change in control"
of the Bank, as defined therein. The term "change in control" is defined to
include any of the following: (i) a change in control as defined in 12 U.S.C.
ss. 1817(j) and 12 C.F.R. ss. 303.4, or (ii) a change in control that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act; or (iii) during any period of two
consecutive years during the term of the employment 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.
The employment agreement also provides that Mr. Fernandez may terminate
his employment for "good reason," which includes (i) failure by the Bank to
comply with any material provision of the employment agreement, which failure
has not been cured within ten (10) days after notice thereof has been given by
Mr. Fernandez to the Bank and (ii) any purported termination of Mr. Fernandez's
employment which is not effected pursuant to a notice of termination satisfying
certain requirements set forth in the employment agreement.
In the event that there occurs a "change in control," or if Mr.
Fernandez is terminated other than for "just cause" and in connection with a
"change in control," the Bank will pay Mr. Fernandez an amount equal to the
aggregate annual compensation paid or payable to him (including salary, bonus,
car allowance and the value of any other benefits provided to Mr. Fernandez)
during the year in which the termination occurs multiplied by 3.00. The payment
is to be made in a lump sum on or before the fifth (5th) day following the date
of termination. If Mr. Fernandez terminates his employment for "good reason",
the severance payments from the Bank will be equal to the aggregate annual
compensation paid or payable to Mr. Fernandez (including salary, bonus, car
allowance and the value of any other benefits provided to Mr. Fernandez) during
the year in which the termination occurs multiplied by 2.00. The severance
payment is to be made in a lump sum on or before the fifth (5th) day following
the date of termination. If Mr. Fernandez had been terminated for other than
"just cause" as of June 30, 1999, he would have been entitled to a severance
payment of approximately $2,067,000. If Mr. Fernandez had terminated his
employment for "good reason" as of June 30, 1999, he would have been entitled to
a severance payment of
<PAGE> 16
-14-
approximately $1,378,000. The employment agreement does not contain any
provision restricting Mr. Fernandez's right to compete against the Bank upon
termination of employment.
401K PLAN
The 401K Plan covers all officers and employees of the Bank. It offers
eligible participants five investment alternatives: three U.S. mutual funds, a
money-market account, and the Corporation's Common Stock. Contributions made
through payroll deductions not in excess of 10% of annual base salary or $8,000,
whichever is less, may be accumulated per year as before-tax savings. The Bank
contributes 80 cents for each dollar contributed by an employee up to $832. The
Bank's matching contribution is invested in the Corporation's Common Stock. The
401K Plan became effective on January 1, 1992. During fiscal 1999, the Bank
contributed to the 401K Plan 4,186 shares of Common Stock valued at $130,732 at
the time of the contribution.
CERTAIN TRANSACTIONS
During fiscal year 1999, the Corporation and the Bank engaged the legal
services of the McConnell Valdes law firm, San Juan, Puerto Rico, of which Mr.
Carlos O. Souffront, Secretary of the Board of Directors of the Corporation and
the Bank, is a proprietary partner. The amount of fees paid to McConnell Valdes
did not exceed 5% of the law firm's revenues for its last fiscal year.
Certain transactions involving loans and deposits were transacted
during fiscal year 1999 between the Bank and certain directors and executive
officers of the Corporation and the Bank and persons related to or affiliated
with such persons. All such transactions were made in the ordinary course of
business on substantially the same terms, including interest rates, collateral
and repayment terms, as those prevailing at the time for comparable transactions
with other persons and did not involve more than the normal risk of
uncollectability or other unfavorable features. At present, none of the loans to
executive officers or directors of the Corporation and persons related to, or
affiliated with, such persons is non-performing.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Corporation operates in a highly competitive industry where the
quality, creativity and professionalism of its executive officers is of utmost
importance to the success, profitability and growth of the Corporation.
Accordingly, the compensation program of the Corporation, which is managed by
the Compensation Committee, is intended to retain and appropriately reward
experienced and well-trained executive officers, align the long-term interests
of the executive officers with those of the Corporation's shareholders and tie
total compensation opportunities to the achievement of the Corporation's
institutional goals and the achievement of goals for each of the Corporation's
subsidiaries.
The Compensation Committee evaluates the performance of management,
reviews the compensation levels of members of management and evaluates and
reviews all aspects of compensation for the Corporation's and the Bank's
executive officers.
In evaluating the performance and compensation of all of the executive
officers, the Compensation Committee reviews available peer group information
for comparable financial institutions or bank holding companies in Puerto Rico
and the United States and assesses the performance in accordance with the
overall attainment of the Corporation's goals for such fiscal year, which are
set forth in the Corporation's three-year business plan that is updated and
approved by the Corporation's Board of Directors every fiscal year.
<PAGE> 17
-15-
BONUS
The compensation program for the Corporation's executive officers
provides for a bonus whose purpose is to maximize the efficiency and
effectiveness of the operation of the Corporation. The bonus that is paid to the
Corporation's executive officers is linked to the performance of the Corporation
as an institution as well as the performance of each of the Corporation's
subsidiaries. In addition, in the event the institutional and individual goals
are achieved, the amount of the bonus that is generally paid to the
Corporation's executive officers is determined so that the total salary and
bonus compensation paid to the Corporation's and the Bank's executive officers
is competitive with the amounts paid by comparable financial institutions or
bank holding companies in Puerto Rico and the United States.
LONG-TERM COMPENSATION
The compensation program for the Corporation's executive officers also
contemplates long-term incentive compensation in the form of stock options
granted under the Corporation's stock option plans. The Corporation's stock
option plans provide for ownership of the Common Stock which, in turn, creates a
direct relationship between the performance of the Corporation, as reflected by
the market value of the shares of Common Stock, and compensation, and creates a
direct link between the interests of the Corporation's executive officers and
the Corporation's shareholders.
The awards are made by the administrators of the Corporation's
stock option plans, which are the members of the Compensation Committee. The
plan administrators are given absolute discretion to select which of the
eligible persons will be granted stock options and the amount of stock options
to be granted to such persons. In general terms, the plan administrators in
determining such amounts consider total compensation information obtained from
various comparable financial institutions or bank holding companies in Puerto
Rico and the United States that they track, as well as the general trend in
total compensation in the industry. In addition, in the case of options granted
to the Corporation's executive officers during the last fiscal year, the plan
administrators established as a restriction to the vesting of such options that
the Corporation have a certain minimum amount of "consolidated net income" by
the end of a certain time period.
FISCAL 1999 RESULTS
Among the results of operations during fiscal 1999 that the
Compensation Committee placed particular emphasis when it approved the bonuses
paid to the Corporation's and the Bank's executive officers and the options
granted to the Corporation's and the Bank's executive officers, which amounts
are set forth in separate tables in this Proxy Statement, are the following: (i)
the Corporation earned a record $26.6 million in fiscal 1999, which represented
a 24% increase over the $21.4 million earned in fiscal 1998; (ii) the
Corporation reported earnings per share of $1.97 for fiscal 1999, which
represented an increase of 25.5% over the $1.57 (basic) reported in fiscal 1998;
(iii) the Corporation's record volume of mortgage originations, sound
performances by the Bank's brokerage subsidiary and trust division, and tight
control of operating expenses; and (iv) the total financial assets owned or
managed by the Corporation grew approximately 15% from $3.4 billion to $3.9
billion during fiscal 1999.
COMPENSATION OF CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Jose Enrique Fernandez, who serves as President, Chief Executive
Officer and Chairman of the Board of Directors of the Corporation and the Bank,
negotiated the terms of his employment agreement with the Bank at arm's length
with the Board of Directors of the Bank. The current terms of Mr. Fernandez's
employment, including his salary and certain other compensation arrangements,
are described on page 13 of this Proxy Statement under "Executive
Compensation-Employment Agreement."
<PAGE> 18
-16-
Mr. Fernandez's compensation in terms of bonus and any additional
options granted to him under the Bank's stock option plans was determined in
accordance with the Bank's compensation program described above and was based on
considerations of competitive industry practice as well as the overall
performance of the Bank. In making such determination the Compensation Committee
took into consideration the Bank's performance as a whole during fiscal 1999 (as
described above) and the achievement of goals through the years which are geared
to ensure the Bank's continued long-term growth and the enhancement of
stockholder value, such as the further diversification of the Bank's asset base
and the emphasis on expanding sources of the Bank's non-interest income.
This report on executive compensation was submitted by the Compensation
Committee, whose members are Messrs. Julian S. Inclan, Alberto Richa Angelini
and Emilio Rodriguez, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has served as an
officer or employee of the Corporation or any of its subsidiaries.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation is required to identify any director, executive officer
or person who owns more than ten percent of the Common Stock who failed to
timely file with the Securities and Exchange Commission a required report under
Section 16(a) of the Exchange Act. Based solely on the review of such forms
furnished to the Corporation, or written representations from its executive
officers and directors, the Corporation believes that during and with respect
to, fiscal year 1999, the Corporation's directors, executive officers and
persons who own more than ten percent of the Common Stock complied in all
respects with the reporting requirements promulgated under Section 16(a) of the
Exchange Act.
<PAGE> 19
-17-
PERFORMANCE GRAPH
The stock performance graph below compares the cumulative total
shareholder return of the Common Stock from June 30, 1991 to June 30, 1999 with
the cumulative total return of the S&P 500 Composite Stock Index and the S&P
Financial Index. The S&P 500 Composite Stock Index is a broad index which
includes a wide variety of issuers and industries representatives of a cross
section of the market. The S&P Financial Index is an index which includes a wide
array of financial institutions or bank holding companies comparable to the
Corporation:
COMPARISON OF 8 YEAR CUMULATIVE TOTAL RETURN
AMONG ORIENTAL FINANCIAL GROUP INC., THE S&P 500 INDEX
AND THE S&P FINANCIAL INDEX
<TABLE>
<CAPTION>
Cumulative Total Return as of June 30
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997 1998 1999
Oriental Financial Group Inc. 100 149 300 508 539 693 1,269 2,105 1,871
S&P 500 100 113 129 131 165 208 280 364 447
S&P Financial 100 127 165 166 200 268 407 566 613
</TABLE>
The Board of Directors of the Corporation recognizes that the market
price of the Common Stock is influenced by many factors, only one of which is
the Corporation's performance. The stock price performance shown above is not
necessarily indicative of future price performance.
PROPOSAL 2: AMENDMENT OF 1998 AND 1996 STOCK OPTION PLANS
The Corporation and its subsidiaries currently have eight (8)
independent contractors who perform bona fide services to the Corporation or its
subsidiaries on a continuous basis. These contractors provide services that are
essential for the Corporation and its subsidiaries to compete successfully with
other financial companies in Puerto Rico.
The terms of the 1996 and 1998 Plans (collectively, the "Plans") do not
allow independent contractors to participate in the Plans. Participation in the
Plans is currently limited to directors, officers and full-time employees.
Furthermore, Article 7(d) of each Plan prevents the plan administrators from
granting options to anyone other than directors, officers or full-time employees
of the Corporation or any of its direct or indirect subsidiaries.
<PAGE> 20
-18-
The Board of Directors of the Corporation believes that it is necessary
to include qualified independent contractors, who perform bona fide services to
the Corporation and/or any of its direct or indirect subsidiaries, as eligible
participants of the Plans in order to attract and retain such contractors, and
to provide them with an additional incentive to contribute to the continued
success of the Corporation and its subsidiaries. In this light, the Board of
Directors wishes to amend retroactively the Plans in order to allow independent
contractors who perform bona fide services to the Corporation and/or any of its
direct or indirect subsidiaries, now or in the future, to participate in the
Plans.
Attached as Appendix A hereto are the resolutions approved by the Board
of Directors of the Corporation on August 18, 1999, which resolutions contain
the proposed amendments to the Plans. The Board of Directors has directed that
the proposed amendments to the Plans be submitted for approval by the
stockholders of the Corporation at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Corporation has appointed
PricewaterhouseCoopers LLP as independent auditors of the Corporation for the
fiscal year ending June 30, 2000, and has further directed that the selection of
such auditors be submitted for ratification by the stockholders at the Annual
Meeting. The Corporation has been advised by PricewaterhouseCoopers LLP that
neither that firm nor any of its associates has any relationship with the
Corporation or any of its subsidiaries other than the usual relationship that
exists between independent certified public accountants and clients.
PricewaterhouseCoopers LLP will have a representative at the Annual
Meeting who will have an opportunity to make a statement, if he or she so
desires, and who will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended to be presented at the 2000 Annual
Meeting of Stockholders must be set forth in writing and received by the
Secretary of the Corporation, at its principal executive offices located at Hato
Rey Tower, Suite 503, 268 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918, no
later than May 30, 2000 for inclusion in the Corporation's Proxy Statement and
Form of Proxy relating to the 2000 Annual Meeting of Stockholders and in order
to be considered at such Annual Meeting.
ANNUAL REPORTS
A copy of the Corporation's Annual Report to Stockholders for the
year ended June 30, 1999 accompanies this Proxy Statement. Such Annual Report is
not part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE CORPORATION WILL FURNISH TO
ANY STOCKHOLDER WITHOUT CHARGE A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1999, AND A LIST
<PAGE> 21
-19-
OF THE EXHIBITS THERETO REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE EXCHANGE ACT. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO
MR. ANDRES MUNIZ, ORIENTAL FINANCIAL GROUP INC., HATO REY TOWER, SUITE 503, 268
MUNOZ RIVERA AVENUE, HATO REY, PUERTO RICO 00918. THE FORM 10-K IS NOT PART OF
THE PROXY SOLICITATION MATERIALS.
BY ORDER OF THE BOARD OF DIRECTORS
Jose Enrique Fernandez
Chairman, President and
Chief Executive Officer
September 28, 1999
San Juan, Puerto Rico
<PAGE> 22
APPENDIX A
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
ORIENTAL FINANCIAL GROUP INC.
WHEREAS, the Board of Directors of Oriental Bank and Trust (the "Bank")
adopted on November 25, 1996 the Oriental Bank and Trust 1996 Incentive Stock
Option Plan (the "1996 Plan") in order to attract and retain qualified
directors, officers and other key employees of the Bank and any parent or
subsidiary thereof and provide such directors, officers and employees with an
additional incentive to contribute to the success of the Bank;
WHEREAS, on January 24, 1997, Oriental Financial Group Inc. (the
"Corporation") acquired all the shares of common stock of the Bank pursuant to a
bank holding company reorganization;
WHEREAS, the stockholders of the Corporation approved the 1996 Plan at
the 1997 Annual Meeting of Stockholders held on October 21, 1997;
WHEREAS, the Board of Directors of the Corporation adopted on August
18, 1998 the Oriental Financial Group 1998 Incentive Stock Option Plan (the
"1998 Plan") (the 1996 Plan and the 1998 Plan are collectively referred to as
the "Plans") in order to attract and retain qualified directors, officers and
other key employees of the Corporation and any parent or subsidiary thereof and
provide such directors, officers and employees with an additional incentive to
contribute to the success of the Corporation;
WHEREAS, the stockholders of the Corporation approved the 1998 Plan at
the 1998 Annual Meeting of Stockholders held on October 26, 1998;
WHEREAS, the Corporation wishes to attract and retain qualified
independent contractors who perform bona fide services to the Corporation and/or
any of its direct or indirect subsidiaries, and provide such contractors with an
additional incentive to contribute to the success of the Corporation and its
subsidiaries;
WHEREAS, the Board of Directors of the Corporation deems it necessary
and convenient in connection with the conduct of the Corporation's business, and
in the best interests of the Corporation and its stockholders, to amend the
Plans retroactively in order to allow independent contractors, who perform bona
fide services to the Corporation and/or any of its direct or indirect
subsidiaries, to participate in the Plans;
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the 1998 Plan be amended as
follows:
(a) Paragraph 1 is hereby amended to read in its entirety as
follows:
1. PURPOSE. The Oriental Financial Group 1998 Incentive Stock
Option Plan (the "1998 Plan") is intended to secure for Oriental
Financial Group Inc. (the "Corporation"), its subsidiaries and its
stockholders, the benefits arising from ownership of the Corporation's
common stock, par value $1.00 per share (the "Common Stock"), by those
selected independent contractors, directors, officers and other key
employees of the Corporation and/or any of its direct or indirect
subsidiaries who will be responsible for its future growth. The 1998
Plan is designed to help attract and retain superior independent
contractors and personnel for positions of substantial responsibility
within the Corporation and/or any of its direct or indirect
subsidiaries, and to provide such persons with an additional incentive
to contribute to the success of the Corporation and its subsidiaries.
(b) Article 4 is hereby amended to read in its entirety as
follows:
ARTICLE 4. ELIGIBILITY AND PARTICIPATION. Independent
contractors who perform bona fide services to the Corporation and/or
any of its direct or indirect subsidiaries, and regular full-
<PAGE> 23
A-2
time employees of the Corporation and/or any direct or indirect
subsidiary thereof, including officers, whether or not directors, and
directors of any such corporations, shall be eligible for selection by
the Plan Administrators to participate in the 1998 Plan.
(c) Article 8 is hereby amended to read in its entirety as
follows:
ARTICLE 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment,
suspension or termination of the 1998 Plan shall, without the consent
of the person who has received an option, alter or impair any of said
person's rights or obligations under any option granted under the 1998
Plan prior to such amendment, suspension or termination.
(d) The first sentence of Article 10 is hereby amended to read as
follows:
ARTICLE 10. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the
exercise of any options granted pursuant to the terms of the 1998 Plan,
no person shall have any of the rights or privileges of a stockholder
of the Corporation with respect to any shares of stock issuable upon
the exercise of his or her options until certificates representing the
shares have been duly issued and delivered.
(e) Article 13 is hereby amended to read in its entirety as
follows:
ARTICLE 13. EMPLOYMENT. Nothing in the 1998 Plan or in any
option shall confer upon any eligible person any right to continued
employment or contractual relationship with the Corporation and/or any
of its direct or indirect subsidiaries, or limit in any way the right
of the Corporation and/or any of its direct or indirect subsidiaries,
as the case may be, at any time to terminate or alter the terms of that
employment or contractual relationship.
(f) The first two sentences of Section 1 of Part I are hereby
amended to read as follows:
SECTION 1. PURPOSE. The purpose of this Qualified Plan is to
promote the growth and general prosperity of the Corporation by
permitting the Corporation to grant options to purchase shares of its
direct or indirect Common Stock to selected independent contractors,
directors, officers and other full-time key employees of the
Corporation and/or any of its direct or indirect subsidiaries. This
Qualified Plan is designed to help attract and retain superior
personnel for positions of responsibility within the Corporation and/or
any of its direct or indirect subsidiaries, and to provide such persons
with an additional incentive to contribute to the success of the
Corporation and its subsidiaries.
(g) Section 10 of Part I is hereby amended to read in its entirety
as follows:
SECTION 10. EMPLOYMENT OF OPTIONEE. Each Optionee, if
requested by the Plan Administrators, must agree in writing as a
condition for the granting of his or her option, that he or she will
remain in the employment of, or as a director or independent contractor
of, the Corporation and/or any of its direct or indirect subsidiaries,
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 1998 Plan or in any
option granted thereunder shall confer upon any Optionee any right to
continued employment by, or contractual relationship with, the
Corporation and/or any of its direct or indirect subsidiaries, or limit
in any way the right of the Corporation or any of its direct or
indirect subsidiaries, as the case may be, at any time to terminate or
alter the terms of that employment or contractual relationship.
<PAGE> 24
A-3
(h) Section 11 of Part I is hereby amended to read in its entirety
as follows:
SECTION 11. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If
an Optionee ceases as a director or independent contractor of, or to be
employed by, the Corporation and/or any direct or indirect 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 appointment, contractual
relationship or employment) at any time within three months after the
date of termination of appointment, contractual relationship or
employment, unless either the option or this Qualified Plan otherwise
provides for earlier termination.
(i) Section 12 of Part I is hereby amended to read in its entirety
as follows:
SECTION 12. OPTION RIGHTS UPON DISABILITY. If an Optionee
becomes disabled (as such term is defined in the PRIRC or the
regulations promulgated thereunder, or, in the absence of such a
definition therein, in Section 22(e)(3) of the U.S. Internal Revenue
Code of 1986, as amended (the "Code")) while employed by, or performing
contractual services for, the Corporation and/or any of its direct or
indirect subsidiaries, the option may be exercised, to the extent
exercisable on the date of termination of employment or contractual
relationship, at any time within one year after the date of termination
of employment or contractual relationship due to disability, unless
either the option or this Qualified Plan otherwise provides for earlier
termination.
(j) The first sentence of Section 13 of Part I is hereby amended
to read as follows:
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
independent contractor of, or employed by, the Corporation and/or any
of its direct or indirect subsidiaries, or within three months after
ceasing to be a director, independent contractor or employee thereof,
his or her option shall expire one year after the date of death unless
by its terms it expires sooner.
(k) The first two sentences of Section 1 of Part II are hereby
amended to read as follows:
SECTION 1. PURPOSE. The purpose of this Compensatory Plan is
to permit the Corporation to grant options to purchase shares of its
direct or indirect Common Stock to selected independent contractors,
directors, officers and other full-time key employees of the
Corporation and/or any of its direct or indirect subsidiaries. This
Compensatory Plan is designed to help attract and retain superior
personnel for positions of substantial responsibility within the
Corporation and/or any of its direct or indirect subsidiaries, and to
provide such persons with an additional incentive to contribute to the
success of the Corporation and its subsidiaries.
(l) Section 9 of Part II is hereby amended to read in its entirety
as follows:
SECTION 9. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested
by the Plan Administrators, must agree in writing as a condition for
the granting of his or her option, that he or she will remain in the
employment of, or as a director or independent contractor of, the
Corporation and/or any of its direct or indirect subsidiaries, 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 1998 Plan or in any option
granted thereunder shall confer upon any Optionee any right to
continued employment by, or contractual relationship with, the
Corporation and/or any of its direct or indirect subsidiaries, or limit
in any way the right of the
<PAGE> 25
A-4
Corporation or any of its direct or indirect subsidiaries, as the case
may be, at any time to terminate or alter the terms of that employment
or contractual relationship.
(m) Section 10 of Part II is hereby amended to read in its
entirety as follows:
SECTION 10. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If
an Optionee ceases as a director or independent contractor of, or to be
employed by, the Corporation and/or any direct or indirect subsidiary
thereof, for any reason other than death or disability, his or her
option shall immediately terminate; provided, however, that the Plan
Administrators may, in their discretion, allow such option to be
exercised (to the extent exercisable on the date of termination of
appointment, contractual relationship or employment) at any time within
three months after the date of termination of appointment, contractual
relationship or employment, unless either the option or this
Compensatory Plan otherwise provides for earlier termination.
(n) Section 11 of Part II is hereby amended to read in its
entirety as follows:
SECTION 11. OPTION RIGHTS UPON DISABILITY. If an Optionee
becomes disabled (as such term is defined in the PRIRC or the
regulations promulgated thereunder, or, in the absence of such a
definition therein, in Section 22(e)(3) of the U.S. Internal Revenue
Code of 1986, as amended (the "Code")) while employed by, or performing
contractual services for, the Corporation and/or any of its direct or
indirect subsidiaries, the Plan Administrators, in their discretion,
may allow the option to be exercised, to the extent exercisable on the
date of termination of employment or contractual relationship, at any
time within one year after the date of termination of employment or
contractual relationship due to disability, unless either the option or
this Compensatory Plan otherwise provides for earlier termination.
(o) The first sentence of Section 12 of Part II is hereby amended
to read as follows:
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 acting as a director or
independent contractor of, or employed by, the Corporation and/or any
of its direct or indirect subsidiaries, his or her option shall expire
one year after the date of death unless by its terms it expires sooner.
FURTHER RESOLVED, that the 1996 Plan be amended as follows:
(a) Paragraph 1 is hereby amended to read in its entirety as
follows:
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 Oriental Financial Group Inc.'s (the
"Corporation") common stock, par value $1.00 per share (the "Common
Stock"), the Bank's holding company, by those selected independent
contractors, directors, officers and other key employees of the Bank
and/or its affiliates who will be responsible for its future growth.
The 1996 Plan is designed to help attract and retain superior
independent contractors and personnel for positions of substantial
responsibility within the Bank, and to provide such persons with an
additional incentive to contribute to the success of the Bank.
<PAGE> 26
A-5
(b) Article 4 is hereby amended to read in its entirety as
follows:
ARTICLE 4. ELIGIBILITY AND PARTICIPATION. Independent
contractors who perform bona fide services to the Bank and/or any
parent or subsidiary thereof, and regular full-time employees of the
Bank and/or any parent or subsidiary thereof, including officers,
whether or not directors, and directors of any such corporations, shall
be eligible for selection by the Plan Administrators to participate in
the 1996 Plan.
(c) Article 8 is hereby amended to read in its entirety as
follows:
ARTICLE 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment,
suspension or termination of the 1996 Plan shall, without the consent
of the person who has received an option, alter or impair any of said
person's rights or obligations under any option granted under the 1996
Plan prior to such amendment, suspension or termination.
(d) The first sentence of Article 10 is hereby amended to read as
follows:
ARTICLE 10. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the
exercise of any options granted pursuant to the terms of the 1996 Plan,
no person shall have any of the rights or privileges of a stockholder
of the Corporation with respect to any shares of stock issuable upon
the exercise of his or her options until certificates representing the
shares have been duly issued and delivered.
(e) Article 13 is hereby amended to read in its entirety as
follows:
ARTICLE 13. EMPLOYMENT. Nothing in the 1996 Plan or in any
option shall confer upon any eligible person any right to continued
employment or contractual relationship with the Bank and/or any parent
or subsidiary thereof, or limit in any way the right of the Bank and/or
any parent or subsidiary thereof, as the case may be, at any time to
terminate or alter the terms of that employment or contractual
relationship.
(f) The first two sentences of Section 1 of Part I are hereby
amended to read as follows:
SECTION 1. PURPOSE. The purpose of this Qualified Plan is to
promote the growth and general prosperity of the Bank by permitting the
Corporation to grant options to purchase shares of its Common Stock to
selected independent contractors, directors, officers and other
full-time key employees of the Bank and/or any parent or subsidiary
thereof. This Qualified Plan is designed to help attract and retain
superior personnel for positions of responsibility within the Bank
and/or any parent or subsidiary thereof, and to provide such persons
with an additional incentive to contribute to the success of the Bank
and any parent or subsidiary thereof.
(g) Section 10 of Part I is hereby amended to read in its entirety
as follows:
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 for the granting of his or her option,
that he or she will remain in the employment of, or as a director or
independent contractor of, the Bank and/or any parent or subsidiary
thereof, 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, or contractual relationship with, the Bank
and/or any parent or subsidiary thereof, or limit in any way the right
of the Bank or
<PAGE> 27
A-6
any parent or subsidiary thereof, as the case may be, at any time to
terminate or alter the terms of that employment or contractual
relationship.
(h) Section 11 of Part I is hereby amended to read in its entirety
as follows:
SECTION 11. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If
an Optionee ceases as a director or independent contractor of, or to be
employed by, the Bank and/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 appointment, contractual relationship or employment) at
any time within three months after the date of termination of
appointment, contractual relationship or employment, unless either the
option or this Qualified Plan otherwise provides for earlier
termination.
(i) Section 12 of Part I is hereby amended to read in its entirety
as follows:
SECTION 12. OPTION RIGHTS UPON DISABILITY. If an Optionee
becomes disabled (as such term is defined in the PRIRC or the
regulations promulgated thereunder, or, in the absence of such a
definition therein, in Section 22(e)(3) of the U.S. Internal Revenue
Code of 1986, as amended (the "Code")) while employed by, or performing
contractual services for, the Bank and/or any parent or subsidiary, the
option may be exercised, to the extent exercisable on the date of
termination of employment or contractual relationship, at any time
within one year after the date of termination of employment or
contractual relationship due to disability, unless either the option or
this Qualified Plan otherwise provides for earlier termination.
(j) The first sentence of Section 13 of Part I is hereby amended
to read as follows:
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
independent contractor of, or employed by, the Bank and/or any parent
or subsidiary, or within three months after ceasing to be a director,
independent contractor or employee thereof, his or her option shall
expire one year after the date of death unless by its terms it expires
sooner.
(k) The first two sentences of Section 1 of Part II are hereby
amended as follows:
SECTION 1. PURPOSE. The purpose of this Compensatory Plan is
to permit the Corporation to grant options to purchase shares of its
Common Stock to selected independent contractors, directors, officers
and other full-time key employees of the Bank and/or any parent or
subsidiary thereof. This Compensatory Plan is designed to help attract
and retain superior personnel for positions of substantial
responsibility within the Bank and/or any parent or subsidiary thereof,
and to provide such persons with an additional incentive to contribute
to the success of the Bank and any parent or subsidiary thereof.
(l) Section 9 of Part II is hereby amended to read in its entirety
as follows:
SECTION 9. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested
by the Plan Administrators, must agree in writing as a condition for
the granting of his or her option, that he or she will remain in the
employment of, or as a director or independent contractor of, the Bank
and/or any parent or subsidiary thereof, 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 1998 Plan or in any option granted thereunder shall
confer upon any
<PAGE> 28
A-7
Optionee any right to continued employment by, or contractual
relationship with, the Bank and/or parent or subsidiary thereof, or
limit in any way the right of the Bank or any parent or subsidiary
thereof, as the case may be, at any time to terminate or alter the
terms of that employment or contractual relationship.
(m) Section 10 of Part II is hereby amended to read in its
entirety as follows:
SECTION 10. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If
an Optionee ceases as a director or independent contractor of, or to be
employed by, the Bank and/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, in their discretion, allow such option to be exercised (to the
extent exercisable on the date of termination of appointment,
contractual relationship or employment) at any time within three months
after the date of termination of appointment, contractual relationship
or employment, unless either the option or this Compensatory Plan
otherwise provides for earlier termination.
(n) Section 11 of Part II is hereby amended to read in its
entirety as follows:
SECTION 11. OPTION RIGHTS UPON DISABILITY. If an Optionee
becomes disabled (as such term is defined in the PRIRC or the
regulations promulgated thereunder, or, in the absence of such a
definition therein, in Section 22(e)(3) of the U.S. Internal Revenue
Code of 1986, as amended (the "Code")) while employed by, or performing
contractual services for, the Bank and/or any parent or subsidiary
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 or contractual relationship, at any time
within one year after the date of termination of employment or
contractual relationship due to disability, unless either the option or
this Compensatory Plan otherwise provides for earlier termination.
(o) The first sentence of Section 12 of Part II is hereby amended
to read as follows:
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 acting as a director or
independent contractor of, or employed by, the Bank and/or any parent
or subsidiary thereof, his or her option shall expire one year after
the date of death unless by its terms it expires sooner.
FURTHER RESOLVED, that the foregoing resolutions be submitted to the
stockholders of the Corporation for their approval at the 1999 Annual Meeting of
Stockholders.
FURTHER RESOLVED, that any and all officers of the Corporation
(collectively, the "Authorized Officers"), each acting singly be, and hereby
are, authorized, empowered and directed, in the name and on behalf of the
Corporation, to execute any and all documents in the name and on behalf of the
Corporation as such Authorized Officer may deem necessary, advisable or
appropriate to effect or carry out the foregoing resolutions.
<PAGE> 29
ORIENTAL FINANCIAL GROUP INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON OCTOBER 28, 1999 AND ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of Oriental Financial Group Inc.
(the "Corporation"), hereby authorizes the Board of Directors of the Corporation
or any successors in their respective positions, as proxies with full powers of
substitution, to represent the undersigned at the Annual Meeting of Stockholders
of the Corporation to be held at Conference Room 9-A of the McConnell Valdes law
offices located at 270 Munoz Rivera Avenue, 9th Floor, Hato Rey, Ruerto Rico, on
Thursday, October 28, 1999 at 10:00 a.m. (the "Annual Meeting"), and at any
adjournment of said meeting, and thereat to act with respect to all votes that
the undersigned would be entitled to cast, if then personally present, as
follows:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHOUT AUTHORITY to
(except as marked to the contrary vote for all nominees
below). listed below.
To serve until the 2002 Annual Meeting: Mr. Pablo I. Altieri, Mr. Diego Perdomo,
Mr. Francisco Arrivi and Ms. Mari Carmen Aponte.
INSTRUCTIONS: To withhold authority to vote or to cumulate the votes
for one or more of the above nominee(s), write the name of the
nominee(s) and the manner in which such votes shall be withheld or
cumulated in the space provided below.
<TABLE>
<CAPTION>
NAME NUMBER OF VOTES
(WITHHELD OR CUMULATED, PLEASE SPECIFY)
<S> <C>
- --------------------------------------------------------- -----------------------------------------------------
- --------------------------------------------------------- -----------------------------------------------------
- --------------------------------------------------------- -----------------------------------------------------
- --------------------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE> 30
-2-
2. PROPOSAL: To consider and approve the amendments to the Oriental
Financial Group 1998 Incentive Stock Option Plan and the Oriental Bank
and Trust 1996 Incentive Stock Option Plan to include, as eligible
participants, independent contractors who perform bona fide services to
the Corporation and/or any of its direct or indirect subsidiaries.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL: To ratify the appointment of PricewaterhouseCoopers LLP, as
the Corporation's independent auditors for fiscal 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY MAY BE REVOKED BY THE UNDERSIGNED AT ANY TIME BEFORE IT IS
EXERCISED.
<PAGE> 31
-3-
In their discretion, the proxies are authorized to vote the proxy with
respect to the approval of the minutes of the last meeting of stockholders, the
election of any person as director if any nominee is unable to serve or, for
good cause, will not serve; matters incident to the conduct of the Annual
Meeting; or such other business as may properly come before the meeting. Except
with respect to procedural matters incident to the conduct of the Annual
Meeting, management at present knows of no other business to be brought before
the meeting.
Shares of common stock of the Corporation will be voted as specified.
In the absence of any express indication that the shares to be voted should be
cumulated in a particular fashion, the votes represented by executed proxies
will be distributed equally among the two nominees designated by the Board of
Directors or in such other manner as will most likely ensure the election of the
nominees. If no specification is made above, shares will be voted "FOR" Proposal
1: "Election of Directors"; "FOR" Proposal 2: "Amendment of the 1998 and 1996
Stock Option Plans"; and "FOR" Proposal 3: "Ratification of Appointment of
Independent Auditors". This proxy cannot be voted for any person who is not a
nominee of the Board of Directors of the Corporation.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Oriental Financial Group Inc. called for October 28,
1999 and a Proxy Statement for the Annual Meeting prior to the signing of this
proxy card.
Date: ___________________ , 1999
--------------------------------
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Signatures
Please sign exactly as your name(s)
appear(s) on this proxy. When signing in a
representative capacity, please give title.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
