<PAGE>
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:
/ / 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
ORIENTAL FINANCIAL GROUP INC.
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(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:
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(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
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 December 15, 2000
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 Friday, December 15, 2000 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 three directors to three-year terms expiring at the 2003
Annual Meeting of Stockholders or until their successors
have been duly elected and qualified;
(2) To consider and approve the Oriental Financial Group 2000 Incentive
Stock Option Plan, which would, upon approval, reserve for issuance
400,000 shares of common stock of the Corporation, par value $1.00 per
share, or approximately 3.185% of the Corporation's issued and
outstanding common stock as of the Voting Record Date of November 15,
2000, for issuance pursuant to the terms thereof;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's independent auditors for the fiscal year ending June 30,
2001; and
(4) To transact such other business as may properly come before the 2000
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 November 15,
2000 are entitled to notice of, and to vote at the 2000 Annual Meeting of
Stockholders.
BY ORDER OF THE BOARD OF DIRECTORS
Jose Enrique Fernandez
Chairman, President and
Chief Executive Officer
November 24, 2000
San Juan, Puerto Rico
--------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE 2000 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>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PROXY STATEMENT......................................................................1
SOLICITATION OF PROXIES..............................................................1
VOTING STOCK OUTSTANDING AND VOTE REQUIRED FOR APPROVAL..............................2
PROPOSAL 1: ELECTION OF DIRECTORS...................................................2
CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS.......................................3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................3
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR, DIRECTORS WHOSE TERMS
CONTINUE AND EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS................................5
Nominees for term that expires in 2003..........................................5
Directors whose terms expire in 2002............................................6
Directors whose terms expire in 2001............................................7
Executive Officers Who Are Not Directors........................................7
BOARD MEETINGS AND COMMITTEES........................................................8
EXECUTIVE COMPENSATION..............................................................10
Summary Compensation Table.....................................................10
Option/SAR Grants in Last Fiscal Year..........................................11
Aggregated Option/SAR Exercises in Last Fiscal Year And Fiscal
Year-end Option/SAR Values.....................................................12
Employment Agreements..........................................................12
401k Plan......................................................................14
Certain Transactions...........................................................15
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION......................15
Bonus..........................................................................15
Long-Term Compensation.........................................................16
Fiscal 2000 Results............................................................16
Compensation of Chairman, President and Chief Executive Officer................16
Compensation Committee Interlocks and Insider Participation....................17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.............................17
PERFORMANCE GRAPH...................................................................18
PROPOSAL 2: ADOPTION OF ORIENTAL FINANCIAL GROUP 2000 INCENTIVE STOCK
OPTION PLAN.........................................................................19
General........................................................................19
Description of the 2000 Plan...................................................20
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS....................22
STOCKHOLDERS' PROPOSALS.............................................................22
ANNUAL REPORTS......................................................................23
APPENDIX A --- Oriental Financial Group 2000 Incentive Stock Option Plan
</TABLE>
<PAGE>
ORIENTAL FINANCIAL GROUP INC.
---------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 15, 2000
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 Friday, December 15, 2000 (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 November 24, 2000.
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)
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>
-2-
VOTING STOCK OUTSTANDING
AND VOTE REQUIRED FOR APPROVAL
Only common stockholders of record at the close of business on November 15,
2000 (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 12,556,135. 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 shares 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, "Approval of Oriental Financial
Group 2000 Incentive Stock Option Plan", shall be taken by a majority of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote. Action with respect to Proposal 3, "Ratification of
Appointment of Independent Auditors", shall be taken by a majority of the shares
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 stockholders of the Corporation
have the right to cumulate votes as described below, each share of Common Stock
shall be entitled to one (1) 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 Board of Directors of the
Corporation 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. Jose Enrique Fernandez, Efrain Archilla and Julian Inclan have been
nominated as directors for three-year terms expiring in 2003.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be distributed equally between the three 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.
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.
<PAGE>
-3-
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 three directors being considered at this Annual Meeting, a
stockholder owning 1,000 shares of Common Stock is entitled to 3,000 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 three 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 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, 2001(1) COMMON STOCK
---------------- ------------------------ ------------
<S> <C> <C>
Jose Enrique Fernandez 2,584,0532(2) 20.56%
1717 Lilas San Francisco
San Juan, Puerto Rico 00927
</TABLE>
-----------------
(1) Based upon filings made pursuant to the Securities and 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 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>
-4-
The number of outstanding shares of Common Stock of the Corporation
beneficially owned by the directors, Named Executive Officers (as such term is
defined below) 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(2) 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 ---
</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. () 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
(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.
<PAGE>
-5-
<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(2) PREFERRED STOCK(3)
---- ------------------------ ------------ -------------------- ---------------
<S> <C> <C> <C> <C>
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 ---
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.
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 2003
JOSE ENRIQUE FERNANDEZ (AGE 57) - Director of the Corporation 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. Chairman of the
Board of Directors and President and Chief Executive Officer of the
Corporation since June 1996. Mr. Fernandez 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
---------------------
(11) See note 6.
(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.
(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
<PAGE>
-6-
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. Mr. Archilla 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 served as President of the Puerto Rico Broadcasters Association
from 1988 to 1992, and currently is the Vice President of the organization.
He also served as 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. Mr. Inclan 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. 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 Professor of Medicine
and Physiology at the University of Puerto Rico Medical School. Mr. Altieri
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). Mr. Perdomo 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 55) - Director of the Corporation since 1998. Mr.
Arrivi 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>
-7-
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 Board of Directors of the
National Council of La Raza and of 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 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.
Mr. Diaz 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. He also served
as 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 37) - Executive Vice President of the
Corporation since June 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, Mr. Fernandez
worked in New York, New York and Buenos Aires, Argentina, for the
investment department
<PAGE>
-8-
of The Chase Manhattan Bank. He is a member of the Board of Trustees of the
Sacred Heart University, 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, Mr. Muniz 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. Mr. Soto 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. Previously, 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 DIAZ (AGE 37) - Executive Vice President of the Corporation in
charge of Oriental Mortgage Corporation since October 1999. Previously, 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 Loan Production Specialist 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 Puerto Rico
Association of Realtors.
ANDRES MORGADO, CPA (AGE 41) - Former Executive Vice President of the
Corporation from June 1999 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.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Corporation held thirteen (13) meetings
during the fiscal year ended June 30, 2000. The Corporation has standing audit
and compensation committees (as described below). During fiscal 2000, 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
<PAGE>
-9-
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 2000 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 five (5) times during the fiscal year
ended June 30, 2000.
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 two (2) times
during the fiscal year ended June 30, 2000.
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 (5)
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>
-10-
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
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>
-11-
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>
NAME OPTIONS PERCENT OF TOTAL EXERCISE EXPIRATION DATE POTENTIAL REALIZABLE VALUES
GRANTED OPTIONS GRANTED PRICE AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
-----------------------------
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>
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>
NAME OPTIONS PERCENT OF TOTAL EXERCISE EXPIRATION DATE POTENTIAL REALIZABLE VALUES
GRANTED OPTIONS GRANTED PRICE AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
-----------------------------
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 $145,988
</TABLE>
--------
(1) Pursuant to the terms of the 1996 Plan, Mr. Morgado's stock options
terminated on August 17, 2000, the date he ceased his employment with
the Bank.
<PAGE>
-12-
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
------------------ ---------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED UNEXERCISABLE (#) UNEXERCISABLE ($)
($)
------------------------------------------ ----------------- --------------- ------------------ ---------------------
<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>
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 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
<PAGE>
-13-
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) when 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.
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 of $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.
<PAGE>
-14-
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 that
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.
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) when 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
a 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 of
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.
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
<PAGE>
-15-
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 6,519 shares of Common
Stock of the Corporation to the 401K Plan, valued at $124,270, at the time of
the contribution.
CERTAIN 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 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.
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 to the performance of each of the Corporation's
subsidiaries. In addition, in the event the institutional and individual goals
<PAGE>
-16-
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 2000 RESULTS
Among the results of operations during fiscal 2000 that the Compensation
Committee placed particular emphasis on 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 $24.4 million in core net income during fiscal 2000; (ii) the Corporation
reported fully-diluted core earnings per share (EPS) of $1.67 for fiscal 2000;
(iii) the performance 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 9.8% from $3.85 billion in
fiscal 1999 to $4.22 billion at the end of fiscal 2000.
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 12 of this Proxy Statement under "Executive
Compensation-Employment Agreements."
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
<PAGE>
-17-
2000 (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 (10%) 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 2000, the Corporation's directors, executive officers and persons
who own more than ten percent (10%) of the Common Stock complied in all respects
with the reporting requirements promulgated under Section 16(a) of the Exchange
Act.
<PAGE>
-18-
PERFORMANCE GRAPH
The stock performance graph below compares the cumulative total shareholder
return of the Common Stock of the Corporation from June 30, 1988 to June 30,
2000 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:
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
06/30/88 06/30/89 06/30/90 06/30/91 06/30/92 06/30/93 06/30/94 06/30/95 06/30/96 06/30/97 06/30/98 06/30/99 06/30/00
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oriental 100.00 70.69 57.97 83.09 124.07 250.52 423.05 448.52 575.61 1052.57 1744.60 1551.12 959.42
Financial Group
Inc.
S & P 500 100.00 120.55 140.42 150.81 171.04 194.35 197.08 248.46 313.07 421.71 548.90 673.81 722.66
S & P Financial 100.00 126.05 125.72 131.80 167.47 217.50 218.74 263.79 353.31 537.06 746.25 808.03 740.82
</TABLE>
<PAGE>
-19-
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: ADOPTION OF ORIENTAL FINANCIAL GROUP
2000 INCENTIVE STOCK OPTION PLAN
GENERAL
The Board of Directors of the Corporation adopted on July 7,
2000 the Oriental Financial Group 2000 Incentive Stock Option Plan
(the "2000 Plan"), which is designed to help attract and retain
selected directors, officers-employees, employees and, in certain
circumstances, BONA FIDE independent contractors of the Corporation
and any subsidiary thereof, and provide such persons with an
additional incentive to contribute to the success of the Corporation
and any subsidiary thereof. The 2000 Plan provides for the grant of
qualified and compensatory incentive stock options to directors,
officers-employees and other full-time, key employees of the
Corporation or any subsidiary thereof. The 2000 Plan also provides for
the grant of certain compensatory incentive stock options to
independent contractors that perform BONA FIDE services to the
Corporation or any subsidiary thereof on an exclusive and regular
basis. The 2000 Plan shall become effective upon its approval by a
majority of the shares present in person or represented by proxy at
the Annual
<PAGE>
-20-
Meeting and entitled to vote. Stockholder approval of the 2000 Plan
will satisfy certain New York Stock Exchange market listing and Puerto
Rico tax requirements.
An aggregate of 400,000 shares of Common Stock of the
Corporation has been reserved for future issuance under the 2000 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 400,000 shares of Common Stock
represent approximately 3.185% of the Corporation's issued and
outstanding Common Stock as of the Voting Record Date (taking into
consideration the effect of a four-for-three stock split that is
payable on October 15, 1998 to stockholders of record as of September
30, 1998). The 2000 Plan shall remain in effect for a term of ten (10)
years from the date of adoption by the Board of Directors unless
sooner terminated in accordance with the provisions of the 2000 Plan.
No options may be granted after the date of termination of the 2000
Plan, but such termination will not affect the rights or obligations
of persons holding options granted under the Plan prior to its
termination as permitted by law.
The 2000 Plan will be administered by the Compensation
Committee of the Board of Directors of the Corporation (the "Plan
Administrators"), which is a committee of three members, none of which
is an officer or full-time employee of the Corporation or any
subsidiary thereof. Pursuant to the terms of the 2000 Plan, the Plan
Administrators are given absolute discretion under the 2000 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 2000 Plan and are available for
grants: (i) qualified incentive options (Part I); and (ii)
compensatory incentive options (Part II).
DESCRIPTION OF THE 2000 PLAN
The following description of the 2000 Plan is a summary of its
terms and is qualified in its entirety by reference to the 2000 Plan,
a copy of which is attached hereto as APPENDIX A.
STOCK OPTIONS. One or more options may be granted under the
2000 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 of the Corporation 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 will be granted pursuant to Part I
of the 2000 Plan and are intended to constitute "qualified incentive
options" under Section 1046 of the Puerto Rico Internal Revenue Code
of 1994, as amended (the "Puerto Rico Code"). Additional non-qualified
options, which are not subject to the foregoing limitation, may be
granted under Part II of the 2000 Plan. Such options constitute
"compensatory incentive options."
All options granted under the 2000 Plan and all rights
thereunder expire on the date determined by the 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 2000 Plan shall become vested and exercisable at the
rate determined by the Plan Administrators when making an award.
The purchase price for shares of Common Stock of the
Corporation acquired pursuant to an exercise, in whole or in part, of
any "qualified incentive option" granted under Part I of the 2000 Plan
shall not be less than the fair market value of the shares of Common
Stock
<PAGE>
-21-
on the date of the option grant. 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
2000 Plan shall be as determined by the Plan Administrators at the
time of the grant. Each option granted under the 2000 Plan shall be
exercisable in one or more installments during its term, and the right
to exercise may be cumulative as determined by the Plan
Administrators. Payment for shares purchased upon the exercise of
options under the 2000 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 of the Corporation, or by a combination of cash, check or shares
of Common Stock of the Corporation; provided, that the form(s) of
payment allowed to the optionee shall be established by the Plan
Administrators when the option is granted.
Each qualified or compensatory incentive stock option shall be
exercisable at any time on or after it vests in accordance with the
terms thereof and shall be exercisable until its expiration or the
time when the optionee ceases to be a director, officer-employee,
employee or a BONA FIDE independent contractor, if it is a
compensatory incentive stock option, as the case may be, of the
Corporation or any subsidiary thereof; provided that the Plan
Administrators may, at the time an option is granted, allow such
option to be exercised (if it had vested) up to three (3) months
following the date of cessation as director, officer-employee,
employee or BONA fide independent contractor, if it is a compensatory
incentive stock option, as the case may be, of the Corporation or any
subsidiary thereof. If an optionee of a qualified or compensatory
incentive stock option becomes disabled while acting as a director,
officer-employee, employee or BONA FIDE independent contractor, if it
is a compensatory incentive stock option, as the case may be, of the
Corporation or any subsidiary thereof, the Plan Administrators may
allow the option to be exercised, to the extent exercisable at the
time of cessation as director, officer-employee, employee or BONA FIDE
independent contractor, if it is a compensatory incentive stock
option, as the case may be, of the Corporation or any subsidiary
thereof, at any time within one year after the date of cessation due
to disability. If an optionee of a qualified or compensatory incentive
stock option dies while acting as a director, officer-employee,
employee or BONA FIDE independent contractor, if it is a compensatory
incentive stock option, as the case may be, of the Corporation or any
subsidiary thereof, such option shall expire within one (1) year after
the date of death unless it expires sooner by its terms. During such
year or shorter period, such option may be exercised by the person or
persons to whom the optionee's rights under the option shall pass by
will or the laws of descent, but only if the option was vested at the
time of death. In the event of the disposition of substantially all of
the assets or stock of the Corporation or in the event of certain
"changes in control" of the Corporation, all options granted under the
2000 Plan shall become immediately exercisable notwithstanding any
existing installment limitation.
Options granted under the Plan may not be sold, pledged,
assigned or transferred by the optionee in any manner other than by
will or the laws of descent and may be exercised during the lifetime
of an optionee only by such person.
AMENDMENTS. The Plan Administrators may at any time amend or
otherwise revise the terms of the 2000 Plan, including the form and
substance of the options granted thereunder; provided, that no
amendment or revision shall (i) increase the maximum aggregate number
of shares to be sold pursuant to options exercised under the 2000
Plan; (ii) change the minimum purchase price for shares to be sold
upon the exercise of options granted under Part I of the 2000 Plan;
(iii) increase the maximum term established under the 2000 Plan for
any option; and (iv) permit the granting of an option to any person
other than as provided in the 2000 Plan. No amendment or revision of
the 2000 Plan or any option granted thereunder shall, without the
consent of the optionee, alter or impair any of said optionee's rights
or obligations under any option granted under the 2000 Plan prior to
such amendment or revision.
TAX CONSEQUENCES. A recipient of a "qualified incentive
option" within the meaning of Section 1046 of the Puerto Rico Code
(options granted pursuant to Part I of the 2000 Plan are intended to
qualify as such) does not recognize income at the time of the grant of
the option, provided that the market value of the stock at the time of
the grant does
<PAGE>
-22-
not exceed the exercise price of the option. In addition, no income is
recognized at the time a "qualified incentive option" is exercised. On
a subsequent sale or exchange of the shares acquired pursuant to the
exercise of a "qualified incentive option," the optionee may have
taxable gain or loss, measured by the difference between the amount
realized on the disposition of such shares and his or her tax basis in
such shares. Tax basis will, in general, be the amount paid for the
shares by the optionee. The Corporation will not be entitled to a
business expense deduction in respect of the grant of the option or
the exercise thereof.
With respect to the "compensatory incentive options" granted
under Part II of the 2000 Plan, the difference between the fair market
value of the stock on the date of exercise and the option exercise
price generally will be treated as compensation income upon exercise,
and the Corporation will be entitled to a deduction in the amount of
income recognized by the optionee. Upon a subsequent disposition of
the stock, the difference between the amount received by the optionee
and the fair market value of the stock on the option exercise date
will be treated as long-term or short-term capital gain or loss,
depending on whether the shares were held for more than six months.
The above description of tax consequences under Puerto Rico
law is necessarily general in nature and does not purport to be
complete. Moreover, statutory provisions are subject to change, as are
their interpretations and their application may vary in individual
circumstances.
ACCOUNTING TREATMENT. Under certain circumstances, neither the
grant nor the exercise of a "qualified incentive option" or a
"compensatory incentive option" under the 2000 Plan requires a charge
against earnings under generally accepted accounting principles. In
certain circumstances, shares issuable pursuant to outstanding options
under the 2000 Plan might be considered outstanding for purposes of
calculating earnings per share.
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, 2001, 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 2001
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
<PAGE>
-23-
Tower, Suite 503, 268 Munoz Rivera Avenue, Hato Rey, Puerto Rico
00918, no later than May 30, 2001 for inclusion in the Corporation's
Proxy Statement and Form of Proxy relating to the 2001 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, 2000 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, 2000,
AND A LIST 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
November 24, 2000
San Juan, Puerto Rico
<PAGE>
APPENDIX A
ORIENTAL FINANCIAL GROUP
2000 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The Oriental Financial Group 2000 Incentive Stock Option Plan (the
"2000 Plan") is intended to secure for Oriental Financial Group Inc. (the
"Corporation") its subsidiaries, and its stockholders, the benefits arising from
ownership of its shares of common stock, par value $1.00 per share, by those
selected directors, officers-employees, employees and in certain circumstances,
BONA FIDE independent contractors, of the Corporation and its subsidiaries, who
are responsible for their future growth. The 2000 Plan is designed to help
attract and retain superior personnel for positions of substantial
responsibility with the Corporation and its subsidiaries, and to provide such
persons with an additional incentive to contribute to the success of the
Corporation and its subsidiaries.
2. ELEMENTS OF THE 2000 PLAN. In order to maintain flexibility in the award of
stock benefits, the 2000 Plan is comprised of two parts. The first part is the
Qualified Incentive Stock Option Plan (the "Qualified Plan") and the second part
is the Compensatory Incentive Stock Option Plan (the "Compensatory Plan").
Copies of the Qualified Plan and Compensatory Plan are attached hereto and form
part hereof as Part I and Part II, respectively, of the 2000 Plan. The grant of
an option under one of the plans shall not be construed to prohibit the grant of
an option under the other plan.
3. APPLICABILITY OF GENERAL PROVISIONS. Unless any plan specifically indicates
to the contrary, both plans shall be subject to the General Provisions of the
2000 Plan set forth below.
4. ADMINISTRATION OF THE PLANS. The plans shall be administered and construed by
the Compensation Committee of the Board of Directors of the Corporation. The
plans shall be governed and amended in accordance with their respective terms.
GENERAL PROVISIONS OF THE 2000 PLAN
ARTICLE 1. ADMINISTRATION. The 2000 Plan shall be administered by the
Compensation Committee of the Board of Directors of the Corporation, which is a
committee of three members none of which shall be a full-time officer or
employee of the Corporation or any of its subsidiaries. The committee, when
acting to administer the Plan, is referred to as the "Plan Administrators". Any
action of the Plan Administrators shall be taken by majority vote or the
unanimous written consent of the Plan Administrators. No Plan Administrators or
member of the Board of Directors of the Corporation or any subsidiary thereof,
shall be liable for any action or determination made in good faith with respect
to the 2000 Plan or to any option granted thereunder.
ARTICLE 2. AUTHORITY OF PLAN ADMINISTRATORS. Subject to the other
provisions of the 2000 Plan, and with a view to effecting its purpose, the Plan
Administrators shall have sole authority in their absolute discretion: (i) to
construe and interpret the 2000 Plan; (ii) to define the terms used herein;
(iii) to prescribe, amend, and rescind rules and regulations relating to the
2000 Plan; (iv) to determine the persons to whom options shall be granted under
the 2000 Plan; (v) to determine the time or times at which options shall be
granted under the 2000 Plan; (vi) to determine and establish in each case the
conditions and restrictions, if any, to which the grant and/or exercise of the
options shall be subject; (vii) to determine the number of shares subject to any
option under the 2000 Plan, as well as the exercise price and the duration of
each option, and any other terms and conditions of options; (viii) to amend or
terminate the 2000
<PAGE>
A-2
Plan and any option granted thereunder, and (ix) to make any other
determinations necessary or advisable for the administration of the 2000 Plan
and do everything necessary or appropriate to administer the 2000 Plan. All
decisions, determinations, and interpretations made by the 2000 Plan
Administrators shall be binding and conclusive on all participants in the 2000
Plan and on their legal representatives, heirs and beneficiaries. Provided,
however, that no amendment or revision of the 2000 Plan or any option granted
thereunder shall, without the consent of the optionee, alter or impair any of
said optionee's rights or obligations under any option granted under the 2000
Plan prior to such amendment or revision.
ARTICLE 3. MAXIMUM NUMBER OF SHARES SUBJECT TO THE 2000 PLAN. The maximum
aggregate number of shares of common stock of the Corporation available pursuant
to the 2000 Plan, subject to adjustment as provided in Article 6 hereof, shall
be 400,000 shares. If any of the options granted under the 2000 Plan expire or
terminate for any reason before they have been exercised in full, the
unpurchased shares subject to those expired or terminated options shall again be
available for the purposes of the 2000 Plan.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION. Regular full-time employees of
the Corporation or any subsidiary thereof, including officers, whether or not
directors, directors of any of such corporations, and in certain circumstances,
independent contractors that perform BONA FIDE services to the Corporation or
any subsidiary thereof on an exclusive and regular basis, shall be eligible for
selection by the Plan Administrators to participate in the 2000 Plan.
Notwithstanding any thing to the contrary herein, independent contractors that
perform BONA FIDE services to the Corporation or any subsidiary thereof on an
exclusive and regular basis shall only be eligible for selection by the 2000
Plan Administrators to receive options under Part II (Compensatory Plan) of the
Plan. For purposes of the 2000 Plan, the term "BONA FIDE" shall refer to
services rendered to the Corporation or any subsidiary thereof by an independent
contractor on an exclusive and regular basis.
ARTICLE 5. EFFECTIVE DATE AND TERM OF 2000 PLAN. The 2000 Plan shall become
effective upon its adoption by the Board of Directors of the Corporation and its
approval by the stockholders of the Corporation. The 2000 Plan shall be
submitted to the stockholders of the Corporation for approval by a majority of
the total votes of the shares eligible to be cast at a meeting of stockholders,
which vote shall be taken within 12 months of the adoption of the 2000 Plan;
provided, however, that options may be granted under the 2000 Plan prior to
obtaining stockholder approval, but any such options shall be contingent upon
such stockholder approval being obtained and shall not be exercisable prior to
such approval. The 2000 Plan shall continue in effect for a term of 10 years
unless sooner terminated in accordance with its terms. All options granted under
the 2000 Plan shall automatically vest on the dates established by the Plan
Administrators or 10 years after the date in which they were granted, whichever
occurs first.
ARTICLE 6. ADJUSTMENTS. If the shares of common stock of the Corporation as
a whole are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number and
kind of shares as to which options may be granted under the 2000 Plan. A
corresponding adjustment changing the number or kind of shares allocated to
unexercised options or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment in outstanding
options shall be made without change in the aggregate purchase price applicable
to the unexercised portion of the option, but with a corresponding adjustment in
the price for each share or other unit of any security covered by the option. In
making any adjustment pursuant to this Article 6, any fractional shares shall be
disregarded.
<PAGE>
ARTICLE 7. TERMINATION AND AMENDMENT OF 2000 PLAN. The 2000 Plan shall
terminate no later than 10 years from the date of its adoption by the Board of
Directors, or the date such 2000 Plan is approved by the stockholders of the
Corporation, whichever is earlier. No options shall be granted under the 2000
Plan after the date of termination. Subject to the limitation contained in
Article 8 hereof, the Plan Administrators may at any time amend or revise the
terms of the 2000 Plan, including the form and substance of any option granted
thereunder; provided that no amendment or revision shall () increase the maximum
aggregate number of shares that may be sold pursuant to options granted under
the 2000 Plan, except as permitted under Article 6 hereof; () change the minimum
purchase price for shares under Section 4 of Part I and II of the plans; ()
increase the maximum term established under the 2000 Plan for any option; or ()
permit the grant of an option to anyone other than as provided in Article 4
hereof.
ARTICLE 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension or
termination of the 2000 Plan or any option granted thereunder, shall, without
the consent of the person who has received an option, alter or impair any of
said person's rights or obligations thereunder prior to such amendment,
suspension or termination.
ARTICLE 9. REORGANIZATIONS AND OTHER TRANSFERS. In the event of an
acquisition of all or substantially all of the assets or stock of the
Corporation pursuant to a merger, consolidation, separation, reorganization,
liquidation, or other transaction, where persons that were stockholders of the
Corporation immediately before the transaction own fifty percent or more of the
total combined voting power of all classes of stock entitled to vote of the
acquiring or surviving entity immediately after the consummation of such
transaction, and such acquiring or surviving entity assumes the Corporation' s
obligations under options granted pursuant to the 2000 Plan, then all references
in the 2000 Plan to the Corporation, or to shares of common stock of the
Corporation, shall apply to such acquiring or surviving entity and to shares of
common stock of such acquiring or surviving entity.
ARTICLE 10. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of
any options granted pursuant to the terms of the 2000 Plan, no person shall have
any of the rights or privileges of a stockholder of the Corporation in respect
of any shares of stock issuable upon the exercise of his or her options until
certificates representing the shares have been issued and delivered. No shares
shall be required to be issued and delivered upon exercise of any option unless
and until all of the requirements of law and of all regulatory agencies having
jurisdiction over the issuance and delivery of the securities shall have been
fully complied with. No adjustment shall be made for dividends or any other
distributions for which the record date is prior to the date on which such stock
certificate is issued.
ARTICLE 11. RESERVATION OF SHARES OF COMMON STOCK. The Corporation, during
the term of the 2000 Plan, shall at all times reserve and keep available such
number of shares of common stock of the Corporation as shall be sufficient to
satisfy the requirements of the 2000Plan. In addition, the Corporation shall
from time to time, as is necessary to accomplish the purposes of the 2000 Plan,
seek to obtain from any regulatory agency having jurisdiction any requisite
authority in order to issue and sell shares of common stock hereunder. The
inability of the Corporation to obtain from any regulatory agency having
jurisdiction the authority deemed by the Corporation' s counsel to be necessary
to the lawful issuance and sale of any shares of its stock hereunder shall
relieve the Corporation of any liability in respect of the non-issuance or sale
of the stock as to which the requisite authority shall not have been obtained.
ARTICLE 12. TAX WITHHOLDING. The exercise of any option granted under the
2000 Plan is subject to the condition that if at any time the Corporation shall
determine, in its sole discretion, that the satisfaction of withholding tax or
other withholding liabilities under any state, federal or Puerto Rico law is
necessary or desirable as a condition of, or in any connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in such
event, the exercise
<PAGE>
A-4
of the option shall not be effective unless such withholding tax or other
withholding liabilities shall have been satisfied in a manner acceptable to the
Corporation.
ARTICLE 13. EMPLOYMENT. Nothing in the 2000 Plan or in any option granted
thereunder shall confer upon any eligible person any right to continued
employment, appointment or contractual relationship with the Corporation or any
subsidiary thereof, or limit in any way the right of the Corporation or any
subsidiary thereof, at any time to terminate or alter the terms of that
employment, appointment or contractual relationship, as the case may be.
ARTICLE 14. SEVERABILITY. Should any provision of the 2000 Plan be deemed
or held to be unlawful or invalid for any reason, such fact shall not adversely
affect any of the other provisions of the 2000 Plan herein contained and any
options granted thereunder.
PART I
QUALIFIED INCENTIVE STOCK OPTION PLAN
SECTION 1. PURPOSE. The purpose of this Qualified Plan is to promote the
growth and general prosperity of the Corporation by permitting the Corporation
to grant options to purchase shares of its common stock to selected directors,
officers-employees and employees of the Corporation and any subsidiary thereof.
This Qualified Plan is designed to help attract and retain persons for positions
of substantial responsibility with the Corporation and any subsidiary thereof,
and to provide such persons with an additional incentive to contribute to the
success of the Corporation and its subsidiaries. Options granted pursuant to
this Qualified Plan are intended to constitute "qualified stock options"
pursuant to Section 1046 of the Puerto Rico Internal Revenue Code of 1994, as
amended (the "Puerto Rico Code") and the provisions of this Qualified Plan shall
be construed and interpreted in a manner that will effectuate such intent. This
Qualified Plan is Part I of the 2000 Plan. Unless any provision herein indicates
to the contrary, this Qualified Plan shall be subject to the General Provisions
of the 2000 Plan.
SECTION 2. OPTION TERMS AND CONDITIONS. The terms and conditions of options
granted under this Qualified Plan may differ from one another as the Plan
Administrators shall, in their sole discretion, determine, as long as all
options granted under this Qualified Plan satisfy the requirements hereof.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of this Qualified Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option granted
under this Qualified Plan expire later than 10 years from the date on which the
option is granted. In addition, each option shall be subject to early
termination as provided in the 2000 Plan.
SECTION 4. PURCHASE PRICE. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any option granted under this Qualified
Plan shall not be less than the fair market value of the shares on the date of
the option grant. Fair market value shall be determined by the Plan
Administrators on the basis of such factors as they deem appropriate; provided,
however, that fair market value shall be determined without regard to any
restriction other than a restriction which, by its terms, will never lapse; and
further provided, that if at the time the determination of fair market value is
made, those shares are admitted to trading on a national securities exchange for
which sale prices are regularly reported, the fair market value of those shares
shall not be less than the mean of the high and low asked or closing sales
prices reported for such shares on that exchange on the day or most recent
trading day preceding the date on which the option is granted; provided,
further, that if at the time the determination of fair market value is made,
those
<PAGE>
A-5
shares are not admitted to trading on a national securities exchange, the
value of such shares may not be determined to be less than their book value per
share, calculated pursuant to the financial statements for the immediately
preceding year of the Corporation. For purposes of this Section 4, the term
"national securities exchange" shall include, without limitation, the New York
Stock Exchange, the American Stock Exchange and the National Association of
Securities Dealers Automated Quotation System.
SECTION 5. MAXIMUM AMOUNT OF EXERCISABLE OPTIONS IN ANY CALENDAR YEAR. The
aggregate fair market value (determined as of the time the option is granted) of
the shares of common stock of the Corporation with respect to which stock
options may be exercisable for the first time by a director, officer-employee or
any other employee of the Corporation or any subsidiary thereof during any
calendar year (under the terms of this Qualified Plan and other qualified stock
option plans of the Corporation or any subsidiary thereof that meet the
requirements of Section 1046 of the Puerto Rico Code) cannot exceed $100,000.
SECTION 6. EXERCISE OF OPTIONS. Each option shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative
as determined by the Plan Administrators. No option may be exercised for a
fraction of a share of common stock of the Corporation. The purchase price of
any shares purchased shall be paid in full in cash or by certified or cashier's
check payable to the order of the Corporation or by shares of common stock of
the Corporation, if permitted by the Plan Administrators, or by a combination of
cash, check or shares of common stock of the Corporation, at the time of
exercise of the option; provided that the form(s) of payment allowed the
optionee shall be established when the option is granted. If any portion of the
purchase price is paid in shares of common stock, those shares shall be tendered
at their then fair market value as determined by the Plan Administrators in
accordance with Section 4 of this Qualified Plan.
SECTION 7. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS.
Notwithstanding the first sentence of Section 6 of this Qualified Plan, in the
event the Corporation or its stockholders enter into an agreement to dispose of
all or substantially all of the assets or stock of the Corporation by means of a
sale, merger or other reorganization, liquidation, or otherwise, any option
granted pursuant to the terms of this Qualified Plan shall become immediately
exercisable with respect to the full number of shares subject to that option
during the period commencing as of the date of the agreement to dispose of all
or substantially all of the assets or stock of the Corporation and ending when
the disposition of assets or stock contemplated by that agreement is consummated
or the option is otherwise terminated in accordance with its terms or the terms
of this Qualified Plan, whichever occurs first; provided, however, that no
option shall be immediately exercisable under this Section 7 if the transaction
meets the requirements of Article 9 of the General Provisions of the 2000 Plan.
In the event the transaction contemplated by the agreement referred to in this
Section 7 is not consummated, but rather is terminated, canceled or expires, the
options granted pursuant to the Qualified Plan shall thereafter be treated as if
that agreement had never been entered into.
Notwithstanding the first sentence of Section 6 of this Qualified Plan, in
the event of a change in control of the Corporation or a threatened change in
control of the Corporation as determined by a vote of not less than a majority
of the Board of Directors of the Corporation, all options granted prior to such
change in control or threatened change of control shall become immediately
exercisable. The term "control" for purposes of this Section 7 shall refer to
the acquisition of twenty-five percent or more of the voting securities of the
Corporation by any person or by persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended; provided,
however, that for purposes of this Qualified Plan, no change in control or
threatened change in control shall be deemed to have occurred if prior to the
acquisition of, or offer to acquire, twenty-five percent or more of the voting
securities of the Corporation, the full Board of Directors of the Corporation
shall have adopted by not less than a two-thirds vote
<PAGE>
A-6
a resolution specifically approving such acquisition or offer. The term "person"
for purposes of this Section 7 refers to an individual or a corporation,
partnership, company, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
SECTION 8. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of this Qualified Plan shall be exercised when written notice of that
exercise has been given to the Corporation at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Corporation.
SECTION 9. COMPLIANCE WITH SECURITIES LAWS. Shares of common stock of the
Corporation shall not be issued with respect to any option granted under this
Qualified Plan unless the exercise of that option and the issuance and delivery
of those shares pursuant to that exercise shall comply with all relevant
provisions of Puerto Rico, state and federal law including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, the requirements of any stock exchange where the shares may then be
listed, the Puerto Rico Uniform Securities Act, as amended, and the rules and
regulations promulgated thereunder, and shall be further subject to the approval
of counsel to the Corporation with respect to such compliance. The Plan
Administrators may also require each optionee to furnish evidence satisfactory
to the Corporation, including a written and signed representation letter and
consent to be bound by any transfer restriction imposed by law, legend,
condition or otherwise, that the shares are being purchased only for investment
and without any present intention to sell or distribute the shares in violation
of any state, federal or Puerto Rico law, rule or regulation. Further, each
optionee shall consent to the imposition of a legend on the shares of common
stock acquired upon the exercise of his or her options, restricting their
transferability as may be required by law or by this Section 9.
SECTION 10. EMPLOYMENT OF OPTIONEE. Each optionee, if requested by the Plan
Administrators when the option is granted, must agree in writing as a condition
of receiving his or her option, that he or she will remain as a director,
officer-employee or employee of the Corporation or any subsidiary thereof,
following the date of grant of his or her option for a period specified by the
Plan Administrators, which period shall in no event exceed three years. Nothing
in the 2000 Plan or in any option granted thereunder shall confer upon any
optionee any right to continued employment or appointment with the Corporation
or any subsidiary thereof, or limit in any way the right of the Corporation or
any subsidiary thereof to terminate or alter, at any time, the terms of such
employment or appointment, as the case may be.
SECTION 11. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If an optionee
ceases as a director, officer- employee or employee of the Corporation or any
subsidiary thereof, for any reason other than death or disability, his or her
options shall immediately terminate; provided, however, that the Plan
Administrators may, at the time an option is granted allow such options to be
exercised, to the extent such options are exercisable on the date of
termination, at any time within three months after the date of termination,
unless either such options or this Qualified Plan otherwise provides for earlier
termination.
SECTION 12. OPTION RIGHTS UPON DISABILITY. If an optionee becomes disabled
(as such term is defined in the Puerto Rico Code or the regulations thereunder
or, in the absence of such a definition therein, in Section 22(e)(3) of the
United States Internal Revenue Code of 1986, as amended (the "United States
Code") while acting as a director, officer-employee or employee of the
Corporation or any subsidiary thereof, his or her options may be exercised, to
the extent exercisable on the date of termination due to disability, at any time
within one year thereafter, unless either such options or this Qualified Plan
otherwise provides for earlier termination.
<PAGE>
A-7
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, officer-employee or employee of the
Corporation or any subsidiary thereof, or within three months after ceasing to
be a director, officer- employee or employee thereof, his or her options shall
expire one year after the date of death unless by their terms such options
expire sooner. During this one year or shorter period, such options may be
exercised, to the extent that they remain unexercised on the date of death, by
the person or persons to whom the optionee's rights under such options shall
pass by will or by the laws of descent and distribution, but only to the extent
that the optionee is entitled to exercise such options on the date of death.
SECTION 14. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the terms
of this Qualified Plan may not be sold, pledged, assigned or transferred by the
optionee in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an optionee only by
that optionee.
SECTION 15. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED SHARES.
All options granted pursuant to the terms of this Qualified Plan shall be
adjusted in the manner prescribed by Article 6 of the General Provisions of the
Plan, as permitted by law.
PART II
COMPENSATORY INCENTIVE STOCK OPTION PLAN
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
directors, officers-employees, employees and BONA FIDE independent contractors
of the Corporation and any subsidiary thereof. The Compensatory Plan is designed
to help attract and retain superior personnel for positions of substantial
responsibility with the Corporation and any subsidiary thereof, and to provide
such persons with an additional incentive to contribute to the success of the
Corporation and its subsidiaries. Options granted pursuant to this Compensatory
Plan shall be clearly and specifically designated as not being "qualified stock
options," as defined in Section 1046 of the Puerto Rico Code. This Compensatory
Plan is Part II of the 2000 Plan. Unless any provision herein indicates to the
contrary, this Compensatory Plan shall be subject to the General Provisions of
the 2000 Plan.
SECTION 2. OPTION TERMS AND CONDITIONS. The terms and conditions of options
granted under this Compensatory Plan may differ from one another as the Plan
Administrators shall, in their sole discretion, determine as long as all options
granted under this Compensatory Plan satisfy the requirements hereof.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of this Compensatory Plan shall expire on the date
determined by the Plan Administrators, but in no event shall any option granted
under this Compensatory Plan expire later than 10 years from the date on which
the option is granted. In addition, each option may be subject to early
termination as provided in the 2000 Plan.
SECTION 4. PURCHASE PRICE. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any option granted under the
Compensatory Plan shall be as determined by the Plan Administrators at the time
of grant on the basis of such factors as they deem appropriate.
<PAGE>
A-8
SECTION 5. EXERCISE OF OPTIONS. Each option shall be exercisable in one or
more installments during its term and the right to exercise may be cumulative as
determined by the Plan Administrators. No options may be exercised for a
fraction of a share of common stock of the Corporation. The purchase price of
any shares purchased shall be paid in full in cash or by certified or cashier's
check payable to the order of the Corporation or by shares of common stock of
the Corporation, if permitted by the Plan Administrators, or by a combination of
cash, check or shares of common stock of the Corporation, at the time of
exercise of the option. If any portion of the purchase price is paid in shares
of common stock, those shares shall be tendered at their then fair market value.
SECTION 6. ACCELERATION OF RIGHT OF EXERCISE OF INSTALLMENTS.
Notwithstanding any other provision of this Compensatory Plan, if the
Corporation or its stockholders enter into an agreement to dispose of all or
substantially all of the assets or stock of the Corporation by means of a sale,
merger or other reorganization, liquidation, or otherwise, any option granted
pursuant to the terms of this Compensatory Plan shall become immediately
exercisable with respect to the full number of shares subject to that option
during the period commencing as of the date of the agreement to dispose of all
or substantially all of the assets or stock of the Corporation and ending when
the disposition of assets or stock contemplated by that agreement is
consummated, or the option is otherwise terminated in accordance with its
provisions or the provisions of this Compensatory Plan, whichever occurs first;
provided, however, that no option shall be immediately exercisable under this
Section 6 if the transaction meets the requirements of Article 9 of the General
Provisions of the 2000 Plan. In the event the transaction contemplated by the
agreement referred to in this Section 6 is not consummated, but rather is
terminated, canceled or expires, the options granted pursuant to this
Compensatory Plan shall thereafter be treated as if that agreement had never
been entered into.
Notwithstanding the first sentence of Section 5 of this Compensatory Plan,
in the event of a change in control of the Corporation, or a threatened change
in control of the Corporation as determined by a vote of not less than a
majority of the Board of Directors of the Corporation, all options granted prior
to such change in control or threatened change in control shall become
immediately exercisable. The term "control" for purposes of this Section 7 shall
refer to the acquisition of twenty-five percent or more of the voting securities
of the Corporation by any person or by persons acting as a group within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended;
provided, however, that for purposes of this Compensatory Plan, no change in
control or threatened change in control shall be deemed to have occurred if
prior to the acquisition of, or offer to acquire, twenty-five percent or more of
the voting securities of the Corporation, the full Board of Directors of the
Corporation shall have adopted by not less than a two-thirds vote a resolution
specifically approving such acquisition or offer. The term "person" for purposes
of this Section 6 refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
SECTION 7. WRITTEN NOTICE REQUIRED. Any option granted pursuant to the
terms of this Compensatory Plan shall be exercised when written notice of that
exercise has been given to the Corporation at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Corporation.
SECTION 8. COMPLIANCE WITH SECURITIES LAWS. Shares of common stock of the
Corporation shall not be issued with respect to any option granted under this
Compensatory Plan unless the exercise of that option and the issuance and
delivery of the shares pursuant thereto shall comply with all relevant
provisions of Puerto Rico, state, federal and Puerto Rico law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, the requirements of any stock exchange where
the shares may then be listed, the Puerto Rico Uniform Securities Act, as
amended, and the rules and regulations promulgated thereunder, and shall be
further subject to the
<PAGE>
approval of counsel to the Corporation with respect to such compliance. The Plan
Administrators may also require an optionee to furnish evidence satisfactory to
the Corporation, including a written and signed representation letter and
consent to be bound by any transfer restrictions imposed by law, legend,
condition or otherwise, that the shares are being purchased only for investment
purposes and without any present intention to sell or distribute the shares in
violation of any state or federal law, rule or regulation. Further, each
optionee shall consent to the imposition of a legend on the shares of common
stock acquire upon the exercise of his or her options, restricting their
transferability as may be required by law or by this Section 8.
SECTION 9. EMPLOYMENT OF OPTIONEE. Each optionee, if requested by the Plan
Administrators, must agree in writing as a condition of the granting of his or
her option to remain as a director, officer, employee or BONA fide independent
contractor of the Corporation or any subsidiary thereof, following the date of
grant of his or her option for a period specified by the Plan Administrators,
which period shall in no event exceed three years. Nothing in the 2000 Plan or
in any option granted thereunder shall confer upon any optionee any right to
continued employment, appointment or contractual relationship with the
Corporation or any subsidiary thereof, or limit in any way the right of the
Corporation or any subsidiary thereof, to terminate or alter, at any time, the
terms of such employment, appointment or contractual relationship.
SECTION 10. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If any optionee
under this Compensatory Plan ceases to be a director, officer-employee, employee
or BONA FIDE independent contractor of the Corporation or any subsidiary
thereof, for any reason other than disability or death, his or her options shall
immediately terminate; provided, however, that the Plan Administrators may allow
such options to be exercised, to the extent exercisable on the date of
termination, at any time within three months after the date of termination
unless either such options or this Compensatory plan otherwise provides for
earlier termination.
SECTION 11. OPTION RIGHTS UPON DISABILITY. If an optionee becomes disabled
(as such term is defined in the Puerto Rico Code or the regulations thereunder
or, in the absence of such a definition therein, in Section 22(e)(3) of the
United States Code) while acting as a director, officer-employee, employee or
BONA FIDE independent contractor of the Corporation or any subsidiary or
affiliate thereof, the Plan Administrators, may allow his or her options to be
exercised, to the extent exercisable on the date of termination due to
disability, at any time within one year thereafter, unless either such options
or this Compensatory Plan otherwise provides for earlier termination.
SECTION 12. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Plan Administrators at the time of the grant of an option, if an
optionee dies while acting as a director, officer-employee, employee or BONA
FIDE independent contractor of the Corporation or any subsidiary thereof, his or
her options shall expire one year after the date of death unless by their terms
such options expire sooner. During this one year or shorter period, such options
may be exercised, to the extent that they remain unexercised on the date of
death, by the person or persons to whom the optionee' s rights under such
options shall pass by will or by the laws of descent and distribution, but only
to the extent that the optionee is entitled to exercise such options on the date
of death.
SECTION 13. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the terms
of this Compensatory Plan may not be sold, pledged, assigned or transferred by
the optionee in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an optionee only by
that optionee.
<PAGE>
A-10
SECTION 14. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED SHARES.
All options granted pursuant to the terms of this Compensatory Plan shall be
adjusted in the manner prescribed by Article 6 of the General Provisions of the
2000 Plan.
<PAGE>
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 DECEMBER 15, 2000 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,
Puerto Rico, on Friday, December 15, 2000 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 / / WITHOUT AUTHORITY to
below (except as marked vote for all nominees
to the contrary below). listed below.
To serve until the 2003 Annual Meeting: Mr. Jose Enrique Fernandez, Mr. Efrain
Archilla, and Mr. Julian Inclan.
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.
NAME NUMBER OF VOTES
(WITHHELD OR CUMULATED,
PLEASE SPECIFY)
--------------------------------- ----------------------------------------
--------------------------------- ----------------------------------------
--------------------------------- ----------------------------------------
(2) PROPOSAL: To consider and approve the Oriental Financial Group
2000 Incentive Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(3) PROPOSAL: To ratify the appointment of PricewaterhouseCoopers LLP,
as the Corporation's independent auditors for fiscal 2001.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY MAY BE REVOKED BY THE UNDERSIGNED AT ANY TIME BEFORE IT IS
EXERCISED.
<PAGE>
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 three nominees designated by the Board of
Directors or in such other fashion 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, "APPROVAL OF ORIENTAL
FINANCIAL GROUP 2000 INCENTIVE STOCK OPTION PLAN"; 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 December 15, 2000
and a Proxy Statement for the Annual Meeting prior to the signing of this proxy
card.
Date: ___________________, 2000
--------------------------------
--------------------------------
Signature(s)
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.
