<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended June 30, 1999, or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period from to .
----- ------
Commission File No.001-12647
ORIENTAL FINANCIAL GROUP INC.
Incorporated in the Commonwealth of Puerto Rico
IRS Employer Identification No. 66-0259436
Principal Executive Offices:
Monacillos 1000
San Roberto Street
Rio Piedras, Puerto Rico 00926
Telephone Number: (787) 771-6800
--------------------------------------------------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock
($1.00 par value per share)
7.125% Non-cumulative Monthly Income
Preferred Stock, Series A ($1.00 par value per
share, $25.00 liquidation value per share)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports),and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filings pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of August 31, 2000, Oriental Financial Group Inc. (the "Corporation") had
13,805,135 shares of common stock outstanding, including 4,430,540 shares held
by its directors and officers and by the Corporation as treasury stock. The
aggregate market value of the common stock held by non-affiliates of the
Corporation was $123.0 million based upon the reported closing price of $13.125
on the New York Stock Exchange on that date.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE> 2
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ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to each nominee and
director whose term continues.
NOMINEES FOR TERM THAT EXPIRES IN 2003
JOSE ENRIQUE FERNANDEZ (AGE 57) - Director of the Corporation since
1988 (including terms as director of Oriental Bank and Trust, the
Corporation's wholly owned banking subsidiary, referred to as 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 47) - Director of the Corporation 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 52) - Director of the Corporation 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 TERMS EXPIRE IN 2002
DR. PABLO I. ALTIERI (AGE 56) - Director of the Corporation 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 66) - Director of the Corporation 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.
<PAGE> 3
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FRANCISCO ARRIVI (AGE 54) - Director of the Corporation 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.
MARI CARMEN APONTE, ESQ. (AGE 53) - Director of the Corporation 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 TERMS EXPIRE IN 2001
EMILIO RODRIGUEZ, JR. (AGE 52) - Director of the Corporation 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 60) - Director of the Corporation 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 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 (as defined hereinafter) 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 54) - Executive Vice President of the Corporation
since June 1999. 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.
<PAGE> 4
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JOSE RAFAEL FERNANDEZ (AGE 37) - Executive Vice President of the
Corporation since February 1999. Senior Vice President and in charge of
Oriental Financial Services Corp., the Corporation'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 individual retirement account products.
Before joining the Bank in 1991, he worked in New York, New York, and
Buenos Aires, Argentina, for the Investments Department of The Chase
Manhattan Bank. He is a member of the Board of Trustees of the Sacred
Heart University, San Juan, Puerto Rico.
ANDRES MORGADO, CPA (AGE 41) - Former Executive Vice President of the
Corporation from June 1996 to August 17, 2000. Former Senior Vice
President and Trust Officer of the Bank from May 1995 to August 17,
2000. 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.
ANDRES MUNIZ (AGE 44) - 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 63) - Former Senior Vice President of the Corporation
from June 1996 to June 30, 2000. Senior Vice President of the Bank from
July 1995 to June 30, 2000. 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 43) - Principal Financial Officer and
Comptroller of the Corporation and the Bank since June 1999. He was
Senior Vice President-Comptroller of PonceBank, Ponce, Puerto Rico,
from February 1985 to June 1999 and 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.
MARCIAL A. DIAZ (AGE 37) - Executive Vice President of the Corporation
in charge of Oriental Mortgage Corporation since October 1999. He was
Senior Vice President of Oriental Mortgage Corporation from 1997 to
1999, Vice President thereof from 1994 to 1997, and Marketing Manager
thereof from 1989 to 1994. He was also a Mortgage Loan Production
Manager at Banco Central Hispano, San Juan, Puerto Rico, from 1987 to
1989, and Marketing Representative for Doral Mortgage Corporation, San
Juan, Puerto Rico, from 1985 to 1987. Mr. Diaz is a member of the Board
of Directors of the Puerto Rico Association of Realtors, the San Juan
Board of Realtors and the Mortgage Loan Officers Association.
<PAGE> 5
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ITEM 11.
EXECUTIVE COMPENSATION
The summary compensation table set forth below discloses compensation
for the Corporation's President and Chief Executive Officer and 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, 2000
(collectively referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------------------------- ---------------------
NAME AND OTHER ANNUAL SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)* OPTIONS (#)
------------------ ---- ---------- --------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
Jose Enrique Fernandez 2000 360,000 260,000 38,400 - 0 -
President and Chief 1999 325,000 365,000 38,400 60,000
Executive Officer 1998 310,000 345,000 34,000 10,000
Andres Morgado 2000 150,000 150,000 30,000 12,500
Former Executive Vice President 1999 150,000 135,000 30,000 12,500
and Trust Officer 1998 98,600 120,000 30,000 10,000
Eli E. Diaz 2000 142,500 130,000 30,000 12,500
Executive Vice President 1999 135,000 120,000 30,000 12,500
Branch Administration and 1998 86,800 95,000 29,000 10,000
Consumer Loans
Jose Rafael Fernandez 2000 130,000 130,000 30,000 12,500
Executive Vice President 1999 130,000 115,000 30,000 12,500
and Principal of Oriental 1998 78,750 90,000 27,000 10,000
Financial Services Corp.
Rafael Valladares 2000 125,000 75,000 24,000 12,500
Principal Financial Officer 1999 87,000 50,000 24,000 12,500
Comptroller 1998 - 0 - - 0 - - 0 - 13,330
</TABLE>
---------------
* Consists of a car allowance.
<PAGE> 6
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The table below provides information regarding the options granted to
the Named Executive Officers during the fiscal year ended June 30, 2000 under
the 1996 Incentive Stock Option Plan (the "1996 Plan"):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUES
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
OPTIONS PERCENT OF TOTAL EXERCISE ---------------------------
NAME GRANTED OPTIONS GRANTED PRICE EXPIRATION DATE 5% 10%
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jose Enrique Fernandez 0 -- -- -- -- --
Andres Morgado(1) 12,500 2.8% $19.13 August 18, 2009 $66,066 $145,988
Eli E. Diaz 12,500 2.8% $19.13 August 18, 2009 $66,066 $145,988
Jose Rafael Fernandez 12,500 2.8% $19.13 August 18, 2009 $66,066 $145,988
Rafael Valladares 0 -- -- -- -- --
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The table below provides information regarding the options granted to
the Named Executive Officers during the fiscal year ended June 30, 2000 under
the 1998 Incentive Stock Option Plan (the "1998 Plan"):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUES
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
OPTIONS PERCENT OF TOTAL EXERCISE ---------------------------
NAME GRANTED OPTIONS GRANTED PRICE EXPIRATION DATE 5% 10%
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jose Enrique Fernandez 0 -- -- -- -- --
Andres Morgado 0 -- -- -- -- --
Eli E. Diaz 0 -- -- -- -- --
Jose Rafael Fernandez 0 -- -- -- -- --
Rafael Valladares 12,500 2.8% $ 19.13 July 29, 2009 $66,066 $145,988
</TABLE>
--------
(1) Pursuant to the terms of the 1996 Plan, Mr. Morgado's stock options
terminated on August 17, 2000, the date he ceased his employment with
the Bank.
<PAGE> 7
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AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
----------------------------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE (#) UNEXERCISABLE ($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jose Enrique Fernandez 0 -- 100,839/175,462 1,029,725/949,323
Andres Morgado 5,833 $ 51,996 0/50,833 0/67,750
Eli E. Diaz 3,330 $ 36,963 2,500/50,830 23,750/67,750
Jose Rafael Fernandez 0 -- 5,330/50,330 33,652/63,000
Rafael Valladares 0 -- 0/38,330 0/0
</TABLE>
401K PLAN
All employees of the Bank are eligible to participate in the Oriental
Bank and Trust Cash or Deferred Arrangement Profit Sharing Plan (the "401K
Plan"). The 401K Plan is qualified under Sections 1165(a) and (e) of the Puerto
Rico Internal Revenue Code of 1994, as amended. The 401K Plan offers eligible
participants six investment alternatives: four 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 shares of common stock of the Corporation. The
401K Plan became effective on January 1, 1992. During fiscal 2000, the Bank
contributed 6,516 shares of common stock of the Corporation, valued at $124,270
at the time of the contribution, to the 401K Plan.
DIRECTOR COMPENSATION
The Board of Directors of the Corporation held 13 meetings during the
fiscal year ended June 30, 2000. The Corporation has standing audit and
compensation committees. During fiscal 2000, directors received a fee of $500
for each meeting of the Board of Directors attended, and $200 for each meeting
of a committee thereof attended. Only directors who are not officers of the
Corporation or any subsidiary thereof receive fees for attendance at such
meetings. No director attended fewer than 75% of the total meetings of the
Board of Directors held during fiscal 2000 and the total number of meetings
held by all committees thereof on which he or she served during the year.
EMPLOYMENT AGREEMENTS
JOSE ENRIQUE FERNANDEZ
On December 22, 1998, the Bank and 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 2000, and further
increases to $360,000 for fiscal 2001 and to $380,000 for fiscal 2002, and an
annual automobile and expense
<PAGE> 8
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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 of the
Corporation 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, these 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 Securities Exchange Act of 1934, as
amended (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, 2000, he would have been entitled to a severance
payment of approximately $2,345,910. If Mr. Fernandez had terminated his
employment for "good reason" as of June 30, 2000, he would have been entitled
to a severance payment of approximately $1,563,940. The employment agreement
does not contain any provision restricting Mr. Fernandez's right to compete
against the Bank upon termination of employment.
<PAGE> 9
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RAFAEL VALLADARES
On June 30, 1998, the Bank and Rafael Valladares entered into an
employment agreement for a term of two years. The employment agreement provides
for a minimum base salary to $90,000 for fiscal 1999, and a further increase to
$150,000 for fiscal 2000, and an annual automobile and expense allowance of
$24,000. The employment agreement contains a provision for automatic one year
extensions of said agreement unless terminated by either party. Any salary
increases for this agreement, or extensions thereof, shall be mutually agreed
to by the Bank and Mr. Valladares. The employment agreement also provides that
Mr. Valladares will be entitled to participate in, and receive the benefits of,
any stock option plan, profit sharing plan or other plans, benefits and
privileges given to employees and executives of the Bank for which Mr.
Valladares may qualify. Such benefits will be provided to Mr. Valladares while
he is employed under the terms of the employment agreement or any extension
thereof.
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. Valladares will have
no right to compensation or other benefits for any period after such
termination. The employment agreement also provides for payment and other
benefits for Mr. Valladares 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. s 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. Valladares 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. Valladares to the Bank and (ii) any purported termination of Mr.
Valladares employment which is not affected pursuant to a notice of termination
satisfying certain requirements set forth in the employment agreement.
In the event that there occurs a "change of control," or if Mr.
Valladares is terminated other than for "just cause" and in connection with a
"change in control," the Bank will pay Mr. Valladares 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.Valladares)
during the year the termination occurs multiplied by 2.00. The payment is to be
made in lump sum on or before the fifth (5th) day following the date of
termination. If Mr. Valladares 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. Valladares (including salary, bonus, car
allowance and the value of any other benefits provided to Mr. Valladares)
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. Valladares had been terminated for
other than "just cause", as of June 30, 2000, he would have been entitled to a
severance payment approximately, $455,883.12. If Mr. Valladares had terminated
his employment for "good reason", as of June 30, 2000 he would have been
entitled to a severance payment of approximately, $455,883.12.
The employment agreement contains provisions restricting Mr.
Valladares' ability to engage or participate in, become a director of, or
render advisory or other services to any firm or entity competitive with the
Bank. The employment agreement further contains provisions protecting the
confidential information and trade secrets of the Bank while Mr. Valladares is
employed by the Bank. The employment agreement does not contain any provision
restricting Mr. Valladares' right to compete against the Bank upon termination
of employment.
<PAGE> 10
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ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the shares of common
stock of the Corporation beneficially owned, as of September 30, 2000, by the
only person or entity known to the Corporation to be the beneficial owner of 5%
or more of the Corporation's common stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS OF OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER AS OF SEPTEMBER 30, 2000(1) COMMON STOCK
------------------- --------------------------- ------------
<S> <C> <C>
Jose Enrique Fernandez 2,584,053(2) 20.56%
1717 Lilas San Francisco
San Juan, Puerto Rico 00927
</TABLE>
--------
(1) Based upon filings made pursuant to 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 September
30, 2000 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 and 2,492 shares owned by
Mr. Fernandez through the Bank's 401K Plan (as such term is defined
herein).
<PAGE> 11
-11-
The number of outstanding shares of common stock of the Corporation
beneficially owned by the directors, Named Executive Officers and other
executive officers of the Corporation as of September 30, 2000 is as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT BENEFICIAL OWNERSHIP PERCENT
OF COMMON STOCK OF OF PREFERRED STOCK OF
NAME AS OF SEPTEMBER 30, 2000(1) COMMON STOCK(2) AS OF SEPTEMBER 30, 2000(1) PREFERRED STOCK(3)
------------------------- --------------------------- ----------------- --------------------------- ------------------
<S> <C> <C> <C> <C>
DIRECTORS
Dr. Pablo I. Altieri(4) 122,318 --
Efrain Archilla(5) 3,555 --
Jose Enrique Fernandez(6) 2,584,053 20.56% 20,000 1.49%
Julian S. Inclan(7) 57,562 --
Diego Perdomo, CPA(8) 230,068 1.83% 1,000 ---
Alberto Richa Angelini(9) 17,105 -- 2,500 ---
Emilio Rodriguez, Jr.(10) 34,904 --
Francisco Arrivi 0 --
Mari Carmen Aponte 79,238 --
NAMED EXECUTIVE OFFICERS
Jose Enrique Fernandez(11) 2,584,053 20.56% 20,000 1.49%
Eli E. Diaz 3,063 --
Jose Rafael Fernandez(12) 24,610 --
</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 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 625 shares
that may be received upon the exercise of stock options.
(5) The amount set forth in the table for Mr. Archilla includes 625 shares
that may be received upon the exercise of stock options.
(6) 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 September
30, 2000 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. This amount also includes 2,000
shares owned by Mr. Fernandez's youngest son and 2,492 owned by Mr.
Fernandez through the Bank's 401K Plan.
(7) The amount set forth in the table for Mr. Inclan includes 625 shares
that may be received upon the exercise of stock options.
(8) The amount set forth in the table for Mr. Perdomo includes 625 shares
that may be received upon the exercise of stock options.
(9) The amount set forth in the table for Mr. Richa Angelini includes 625
shares that may be received upon the exercise of stock options.
(10) The amount set forth in the table for Mr. Rodriguez includes 625
shares that may be received upon the exercise of stock options.
(11) See note 6 herein.
(12) The amount set forth in the table for Mr. Jose Rafael Fernandez
includes 5,330 shares that may be received upon the exercise of stock
options.
<PAGE> 12
-12-
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT BENEFICIAL OWNERSHIP PERCENT
OF COMMON STOCK OF OF PREFERRED STOCK OF
NAME AS OF SEPTEMBER 30, 2000(1) COMMON STOCK(2) AS OF SEPTEMBER 30, 2000(1) PREFERRED STOCK(3)
---- --------------------------- --------------- ---------------------------- ------------------
<S> <C> <C> <C> <C>
Andres Morgado, CPA(13) 58,493 --
Rafael Valladares 3,692 --
</TABLE>
As of September 30, 2000, all directors, nominees for director, Named
Executive Officers and other executive officers of the Corporation as a group
(16 persons) beneficially owned 3,319,131 shares of common stock or
approximately 26.41% of the issued and outstanding common stock of the
Corporation, and 27,500 shares of preferred stock or approximately 2.05% of the
issued and outstanding preferred stock of the Corporation.
--------
(13) The amount set forth in the table for Mr. Morgado is as of June 30,
2000. Mr. Morgado ceased his employment with the Bank on August 17,
2000.
<PAGE> 13
-13-
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2000, the Corporation and the Bank engaged the legal
services of McConnell Valdes, San Juan, Puerto Rico, of which 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 2000 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 the Bank, and
persons related to, or affiliated with, such persons is non-performing.
<PAGE> 14
-14-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ORIENTAL FINANCIAL GROUP INC.
By: /S/JOSE E. FERNANDEZ
--------------------
Jose E. Fernandez
Chairman of the Board, President and
Chief Executive Officer Dated: October 27, 2000
By: /S/RAFAEL VALLADARES
---------------------
Rafael Valladares
Comptroller and Principal Financial Officer Dated: October 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.
By: /S/JOSE E. FERNANDEZ
--------------------
Jose E. Fernandez
Chairman of the Board, President and
Chief Executive Officer Dated: October 27, 2000
By: /S/PABLO I. ALTIERI
-------------------
Dr. Pablo I. Altieri
Director Dated: October 27, 2000
By: /S/DIEGO PERDOMO
-----------------
Diego Perdomo
Director Dated: October 27, 2000
By: /S/EFRAIN ARCHILLA
------------------
Efrain Archilla
Director Dated: October 27, 2000
By: /S/JULIAN INCLAN
----------------
Julian Inclan
Director Dated: October 27, 2000
By: /S/EMILIO RODRIGUEZ, JR.
------------------------
Emilio Rodriguez, Jr.
Director Dated: October 27, 2000
By: /S/ALBERTO RICHA
----------------
Alberto Richa
Director Dated: October 27, 2000
By: /S/FRANCISCO ARRIVI
-------------------
Francisco Arrivi
Director Dated: October 27, 2000
By: /S/MARI CARMEN APONTE
---------------------
Mari Carmen Aponte
Director Dated: October 27, 2000
